                           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
