U.S. Deems POSCO’s Electricity Rates a Subsidy, Raising Trade Risk for Batteries and Chemicals
An exterior view of POSCO Center in Gangnam-gu, Seoul. (Photo provided by POSCO Holdings)
The United States government has effectively judged POSCO’s industrial electricity rate system and Emissions Trading System (ETS) as a ‘subsidy’ and has finalized the imposition of countervailing duties (CVD). Analyses suggest that the electricity rates and carbon policies applied to the South Korean steel industry are themselves becoming targets of US trade regulations.
According to the steel industry and the US Federal Register on May 19, the US Department of Commerce recently finalized the imposition of countervailing duties on carbon and alloy steel cut-to-length (CTL) plate products exported by POSCO to the United States.
Through a final determination notice on May 14, the Department of Commerce finally determined that POSCO received subsidies subject to countervailing duties from the South Korean government during the period of investigation (Jan. 1 of 2023 to Dec. 31 of 2023) and exported them to the US market. The finalized countervailing duty rate for POSCO is 3.70%.
The US Department of Commerce finally recognized South Korea’s industrial electricity rate system and Emissions Trading System (ETS) as subsidies subject to countervailing duties. This means that, beyond whether POSCO received individual support, it judged South Korea’s electricity rate system and ETS themselves to have the nature of subsidies with cost-reduction effects.
This tax rate is equally applied to affiliates such as POSCO Holdings, POSCO Mobility Solution, POSCO M-Tech, and POSCO-Nippon Steel RHF Joint Venture. POSCO International is not assigned a separate tax rate, and the same rate is applied to the export volume of POSCO-produced products. The other tax rate based on non-reviewed companies is 3.72%.
This determination is drawing attention in that it came while the US court’s review process surrounding the existing export volume is underway. Previously, a lawsuit filed by POSCO and the South Korean government in objection to the countervailing duty rate of 0.87% for the 2021 export volume (POR 2021), which the Department of Commerce finalized in December 2023, is ongoing.
The United States Court of International Trade (CIT) accepted the Department of Commerce’s recalculation results that did not recognize the specificity of the electricity rate subsidies in a related ruling on April 17 this year, but ordered the Department of Commerce to review the ETS specificity part.
However, the Department of Commerce maintained its existing stance by recognizing the electricity rates and ETS as subsidies again in this POR 2023 administrative review, which is a separate procedure from POR 2021 where the lawsuit is ongoing. Although a simple comparison between the 0.87% of POR 2021 and the 3.70% of this POR 2023 is difficult as they are the results of administrative reviews for separate years, it has also been confirmed that the Department of Commerce’s stance on determining electricity rates and ETS as subsidies is continuing.
The deadline for this investigation was extended several times due to the aftermath of the US federal government’s budget passage delay (shutdown) and an electronic administrative system backlog. The Department of Commerce extended the administrative deadline by 47 days in November last year due to the shutdown aftermath, and extended it by an additional 21 days due to the electronic system backlog. Afterwards, it went through an additional 51-day extension in February this year and reached a final conclusion on November 8.
After verifying the data submitted by POSCO in March and reviewing related sales and accounting records and original documents, the Department of Commerce finalized and announced the final results.
A trade industry official said, “As the US Department of Commerce’s regular administrative reviews are repeated every year, the scope in which South Korean government policies such as electricity rates and ETS are considered subsidies is gradually widening,” and added, “Rather than the tax rate figure, the consolidation of such a determination stance itself is a factor that pressures the South Korean steel industry’s export environment to the US.”
Inside and outside the steel industry, as the US Department of Commerce is expanding South Korea’s power supply structure and carbon reduction policies into the realm of subsidy judgment, the possibility is also being discussed that the logic of trade regulations will spread to energy-intensive industries such as batteries and chemicals.
Jung Min-hee
댓글
0