Case: 19-1213      Document: 49           Page: 1       Filed: 10/15/2020




   United States Court of Appeals
       for the Federal Circuit
                    ______________________

                               POSCO,
                               Plaintiff

                                    v.

                       UNITED STATES,
                          Defendant

       STEEL DYNAMICS, INC., AK STEEL
    CORPORATION, ARCELORMITTAL USA LLC,
     UNITED STATES STEEL CORPORATION,
              Intervenor-Defendants

                  NUCOR CORPORATION,
                Intervenor-Defendant-Appellant

         ---------------------------------------------------------

                 NUCOR CORPORATION,
                    Plaintiff-Appellant

   AK STEEL CORPORATION, ARCELORMITTAL
        USA LLC, UNITED STATES STEEL
                CORPORATION,
               Intervenor-Plaintiffs

                                    v.

                       UNITED STATES,
                       Defendant-Appellee

        HYUNDAI STEEL COMPANY, POSCO,
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 2                                               POSCO v. US




                GOVERNMENT OF KOREA,
                   Intervenor-Defendants
                  ______________________

                        2019-1213
                  ______________________

    Appeal from the United States Court of International
 Trade in Nos. 1:16-cv-00225-MAB, 1:16-cv-00226-MAB,
 Judge Mark A. Barnett.
                ______________________

                 Decided: October 15, 2020
                  ______________________

     ROBERT E. DEFRANCESCO, III, Wiley Rein, LLP, Wash-
 ington, DC, argued for appellant. Also represented by
 TIMOTHY C. BRIGHTBILL, TESSA V. CAPELOTO, LAURA EL-
 SABAAWI, ALAN H. PRICE, ADAM MILAN TESLIK,
 CHRISTOPHER B. WELD.

     KELLY A. KRYSTYNIAK, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, argued for defendant-appellee. Also repre-
 sented by JEFFREY B. CLARK, JEANNE DAVIDSON, PATRICIA
 M. MCCARTHY; EMMA T. HUNTER, Office of the Chief Coun-
 sel for Trade Enforcement & Compliance, United States
 Department of Commerce, Washington, DC.
                   ______________________

     Before REYNA, TARANTO, and STOLL, Circuit Judges.
 REYNA, Circuit Judge.
     This appeal comes to us from the U.S. Court of Inter-
 national Trade. The Trade Court affirmed the U.S. Depart-
 ment of Commerce’s final affirmative determination in the
 countervailing duty investigation on certain cold-rolled
 steel flat products from the Republic of Korea. Plaintiff-
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 POSCO v. US                                                3



 Appellant Nucor Corporation challenges Commerce’s final
 determination, raising two issues: first, whether Com-
 merce’s reliance on a preferential-rate standard to deter-
 mine whether a conferred benefit is a countervailable
 subsidy is contrary to law and, second, whether Com-
 merce’s determination that the Government of Korea did
 not confer a benefit to Korean producers of cold-rolled steel
 flat products for less than adequate remuneration is con-
 trary to law and unsupported by substantial evidence. We
 conclude that Commerce’s final determination is contrary
 to law and unsupported by substantial evidence. We va-
 cate and remand.
                        BACKGROUND
                A. Countervailable Subsidies
      Foreign governments subsidize their domestic indus-
 tries when they provide financial assistance for the produc-
 tion, manufacture, or exportation of goods. 19 U.S.C.
 § 1677(5)(B). Generally, goods that have been provided
 countervailable subsidies are assessed countervailing du-
 ties upon their entry into the U.S. Customs territory.
 19 U.S.C. § 1671(a). A subsidy becomes countervailable
 when an “authority,” or the government of a country or any
 public entity within the territory of the country, provides a
 financial contribution in the form of goods or services that
 results in a “benefit” conferred to the recipient. See
 § 1677(5)(B). The U.S. trade statute provides that a “ben-
 efit shall normally be treated as conferred” when those
 goods or services “are provided for less than adequate re-
 muneration.” § 1677(5)(E)(iv) (emphasis added). The stat-
 ute provides that Commerce determines the “less than
 adequate remuneration” question by evaluating “prevail-
 ing market conditions for the good or service being pro-
 vided” in the country that is subject to the investigation.
 § 1677(5)(E). Prevailing market conditions include “price,
 quality, availability, marketability, transportation, and
 other conditions of purchase or sale.”

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 4                                                 POSCO v. US




     When Congress enacted the Uruguay Round Agree-
 ments Act (“URAA”) in 1994, it changed the definition of
 what constitutes a benefit conferred. Pub. L. No. 103-465,
 § 101, 108 Stat. 4809, 4814 (codified as 19 U.S.C. § 3511).
 Prior to the enactment of the URAA, the statute provided
 that an authority conferred a benefit when it provided a
 good or service at a “preferential rate.” § 1677(5)(A)(ii)(II)
 (1988). “Preferential rate” means “more favorable to some
 within the relevant jurisdiction than to others within that
 jurisdiction.” 1 As a result of the Uruguay Round negotia-
 tions and subsequent enactment of the URAA, Congress
 amended the statute and changed the standard for deter-
 mining whether a benefit is conferred by expressly replac-
 ing “preferential rate” with “less than adequate
 remuneration.” See § 1677(5)(E)(iv). Specifically, the
 amended statute provides that “a benefit shall normally be
 treated as conferred” where in the case of goods or services,
 such services (here, electricity) “are provided for less than
 adequate remuneration.”

enactment of the URAA, Commerce sought to de-
 velop a methodology for determining “adequacy of remu-
 neration.” 2 Commerce noted “[p]articular problems . . . in
 applying the [adequate-remuneration] standard when the
 government is the sole supplier of the good or service in the
 country or within the area where the respondent is



     1   Certain Softwood Prods. from Canada, 48 Fed.
 Reg. 24,159, 24,167, 

(Dep’t of Commerce
 May 31, 1983) (final negative countervailing duty determi-
 nation) (Softwood from Canada).
     2   Countervailing Duties: Final Rule, 63 Fed. Reg.
 65,348, 65,377 (Dep’t of Commerce Nov. 25, 1998) (CVD
 Preamble); see also Countervailing Duties: Proposed Rule,
 62 Fed. Reg. 8,818 (Dep’t of Commerce Feb. 26, 1997) (no-
 tice of proposed rulemaking and request for public com-
 ments) (1997 Proposed Rule).
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 POSCO v. US                                                 5



 located.” 3 Commerce found that these problems arise be-
 cause “there may be no alternative market prices availa-
 ble” to use as a benchmark in its analysis. Steel Wire Rod
 from Trinidad and Tobago, 62 Fed. Reg. at 55,006. To ad-
 dress these problems, Commerce developed a three-tier
 methodology to evaluate adequacy of remuneration.
 19 C.F.R. § 351.511. In Tier 1, Commerce compares the
 government price to a market-based price for the good or
 service under investigation in the country in question (a
 “Tier 1” analysis). § 351.511(a)(2)(i). When an in-country,
 market-based price is unavailable, Commerce will compare
 the government price to a world-market price if the world-
 market price is available to purchasers in the country in
 question (a “Tier 2” analysis). § 351.511(a)(2)(ii). When
 both an in-country, market-based price and a world-market
 price are unavailable, Commerce considers “whether the
 government price is consistent with market principles” (a
 “Tier 3” analysis). § 351.511(a)(2)(iii). Under a Tier 3 anal-
 ysis, if Commerce determines that government pricing is
 not consistent with market principles, then “a benefit shall
 normally be treated as conferred.”                19 U.S.C.
 § 1677(5)(E)(iv). Only Tier 3 is at issue in this appeal.
                     B. The Investigation
     On July 28, 2015, Commerce received requests for ini-
 tiation of countervailing duty (“CVD”) investigations on im-
 ports of certain cold-rolled steel flat products (“cold-rolled
 steel” or “CRS”) from several countries including the Re-
 public of Korea (“Korea”). See J.A. 1269. Countervailing
 duty petitions were filed on behalf of AK Steel Corporation,


     3    Steel Wire Rod from Trinidad and Tobago, 62 Fed.
 Reg. 55,003, 55,006–07 (Dep’t of Commerce Oct. 22, 1997)
 (final affirmative countervailing duty determination); Steel
 Wire Rod from Germany, 62 Fed. Reg. 54,990, 54,994 (Dep’t
 of Commerce Oct. 22, 1997) (final affirmative countervail-
 ing duty determination).
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 6                                                POSCO v. US




 ArcelorMittal USA EEC, Nucor Corporation, Steel Dynam-
 ics, Inc., and United States Steel Corporation (collectively,
 “Petitioners”). See

the Govern-
 ment of Korea provided countervailable subsidies to Ko-
 rean producers of CRS, and that imports of CRS from
 Korea were materially injuring, or threatening material in-
 jury to, an industry in the United States. 4 J.A. 1269. Pe-
 titioners alleged, inter alia, that the Korean government
 conferred a specific benefit on Korean CRS producers
 through the provision of a good or service—electricity—for
 less than adequate remuneration. J.A. 353–76.
      In August 2015, Commerce initiated a CVD investiga-
 tion on CRS from Korea. See J.A. 1269-1274; see also
 J.A. 109, J.A. 346-376. The period of investigation encom-
 passed January 1 to December 31, 2014. J.A. 1269. Com-
 merce selected POSCO and Hyundai Steel Co., Ltd., as
 mandatory “respondents” for the investigation. J.A. 13034.
 Commerce issued questionnaires requesting that the Ko-
 rean government provide information about the Korean
 electricity industry and market, including the Korea Elec-
 tric Power Corporation (“KEPCO”), which is a state-owned



     4    Under U.S. trade law, countervailing duty investi-
 gations are concurrently conducted by Commerce and the
 U.S. International Trade Commission (“ITC”). Generally,
 Commerce determines whether any alleged subsidies are
 countervailable and the extent, if any, of applicable coun-
 tervailing duty rates. See 19 U.S.C. § 1671e(b) (Imposition
 of Duties); § 1677f-1(e) (Determination of Countervailable
 Subsidy Rate). The ITC investigation determines whether
 U.S. industry is materially injured, or threatened with ma-
 terial injury, by reason of imported goods that have been
 deemed subject to countervailing duty rates. See 19 U.S.C.
 § 1675b(a)(1) (Investigation by Commission Upon Re-
 quest). This appeal involves only the Commerce side of the
 investigation.
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 POSCO v. US                                                 7



 entity and the sole provider of electricity in Korea. J.A.
 13075, J.A. 1293, J.A. 12769.
     In its questionnaire responses, the Korean government
 explained that electricity is generated by “[i]ndependent
 power generators, community energy systems, and
 KEPCO’s six subsidiaries.” See J.A. 18. The Korean gov-
 ernment further explained that all electricity generated in
 Korea, including that of private generators, must be sold to
 KEPCO in a wholesale market known as the Korea Power
 Exchange (“KPX”), which is wholly owned by KEPCO and
 its six subsidiaries. J.A. 1300, J.A. 3137. KEPCO then
 sells electricity to end users based on a tariff schedule that
 provides different rates for classes of consumers including
 industrial, residential, agricultural, and business users.
 J.A. 4437-4449. The Korean government noted that the
 prices in KEPCO’s tariff schedule are established in con-
 sultation with other Korean-government agencies, through
 a “lengthy deliberative process” that seeks the approval of
 the Ministry of Trade, Industry, and Energy, the Ministry
 of Strategy and Finance, and the Korea Energy Regulatory
 Commission. J.A. 1296, J.A. 3111. While KEPCO and
 other government entities establish the ultimate prices to
 end users, the basis of these prices is the cost of KEPCO’s
 purchases from the KPX. J.A. 13083. The Korean govern-
 ment reported in its questionnaire response that KPX is a
 wholly owned subsidiary of KEPCO and that all sales of
 electricity in Korea are administered by KPX. See J.A. 18
 n.17 (citing the Korean government’s questionnaire re-
 sponse, Ex. E-3 at 31); see also J.A. 3111 (Ex. E-3, KEPCO
 Form 20-F, explaining that KEPCO “wholly own[s]” KPX).
     In its preliminary determination, Commerce found
 that KEPCO, through its six subsidiaries, generates the
 “substantial majority of the electricity produced in Korea.”
 J.A. 12769. Commerce found that the Korean government
 regulates and approves electricity tariffs charged by
 KEPCO.

that the Korean gov-
 ernment “exercises significant control over KEPCO
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 8                                                  POSCO v. US




 through its majority ownership and pursues government
 policy objectives through KEPCO’s business and opera-
 tions.”

that KEPCO
 is an authority of the Korean government and that the Ko-
 rean government is providing to producers of CRS “a finan-
 cial contribution in the form of the provision of a good or
 service.”

that financial contri-
 bution constitutes a “benefit,” Commerce conducted a
 Tier 3 analysis. J.A. 12772. In its analysis, Commerce
 started by considering KEPCO’s “price-setting philosophy”
 by analyzing “electricity rates charged to the respondents
 to determine whether the price charged is consistent with
 KEPCO’s standard pricing mechanism.”

overall cost, including its “operational
 cost for generating and supplying electricity.”

then turned on whether respondents were
 given preferential treatment:
     If the rate charged is consistent with the standard
     pricing mechanism and the company under inves-
     tigation is, in all other respects, essentially treated
     no differently than other companies and industries
     which purchase comparable amounts of electricity,
     then there is no benefit.

& Alloy Magnesium from Can-
 ada, 57 Fed. Reg. 30,946 (Dep’t Commerce July 13, 1992)
 (Magnesium from Canada)).
      Commerce conducted verification of the Korean gov-
 ernment’s questionnaire responses in March 2016, but it
 did not verify the Korean government’s provision of elec-
 tricity for less than adequate remuneration.          See
 J.A. 13075. Rather, Commerce relied on the verification it
 previously conducted in its investigation of corrosion-re-
 sistant steel (“CORE”) from Korea, which is the subject of
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 POSCO v. US                                                9



 Nucor Corporation’s (“Nucor”) appeal in Nucor Corporation
 v. United States, 

(Fed. Cir. 2019). 5
    In its Final Determination, Commerce determined that,
 “consistent with 19 § CFR 351.511 and Magnesium from
 Canada,” the Korean government provided respondents no
 benefit “because the prices charged to these respondents
 under the applicable industrial tariff were consistent with
 KEPCO’s standard pricing mechanism.” J.A. 13079 (Issue
 and Memorandum Decision accompanying Countervailing
 Duty Investigation of Certain Cold-Rolled Steel Flat Prod-
 ucts from the Republic of Korea, 81 Fed. Reg. 49,943 (Dep’t
 Commerce July 29, 2016) (final affirmative determination,
 2014)). Commerce found no evidence in the record suggest-
 ing that that respondents received preferential treatment
 over other industrial users of electricity that purchase com-
 parable amounts of electricity.

reliance on a preferentiality
 standard despite the amendment of the Trade statute to
 replace preferential rate with adequate remuneration. J.A.
 13079–80. Commerce opined that its regulations regard-
 ing the provision of a good or service, especially 19 C.F.R.
 § 351.511, were enacted as a result of the URAA and with
 reference to the methodology developed in Magnesium
 from Canada.

that the
 CVD Preamble, which cites Magnesium from Canada, ref-
 erences “possible price discrimination” as one factor that
 the department may consider when assessing whether a
 government price is consistent with market principles.
 J.A. 13080. Commerce opined that the URAA’s move away
 from preferentiality merely “flipped the regulatory hierar-
 chy,” promoting in-country, market prices and world-


     5    In Nucor, Commerce did not obtain from the Ko-
 rean government KPX’s cost of generating 

–48. KPX’s costs were therefore not veri-
 fied in the Nucor investigation.
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 10                                                POSCO v. US




 market prices over price discrimination—i.e., the creation
 of Tiers 1–3.

a price discrim-
 ination analysis alone may be sufficient to assess adequate
 remuneration. J.A. 13081.
     Commerce also addressed Petitioners’ allegations that
 Commerce’s analysis of electricity tariffs failed to include
 the full cost of generation, including, e.g., electricity from
 nuclear-power generators. J.A. 13083. Petitioners alleged
 that CRS producers purchase electricity predominantly
 during off-hours when electricity is primarily generated
 from nuclear-generation units. See

it did not request information regarding costs to elec-
 tricity generators because the costs of electricity to KEPCO
 are determined by the KPX.

 relevant only KEPCO’s purchase price from the KPX and
 not the costs underlying KPX’s price.

did not review quality, availability, marketabil-
 ity, transportation, or other conditions affecting KEPCO’s
 purchase or sale of electricity from KPX.
    Nucor appealed Commerce’s final determination to the
 Trade Court. J.A. 13132-13181.
            C. U.S. Court of International Trade
     On appeal, Nucor argued that Commerce’s final deter-
 mination is unlawful for three reasons. First, Nucor con-
 tended that Commerce erred in using preferentiality to
 determine whether a benefit was conferred to Korean pro-
 ducers of CRS. J.A. 13154. Second, Nucor argued that
 Commerce unreasonably excluded cost recovery when in-
 terpreting “adequate remuneration.” J.A. 13160. Third,
 Nucor alleged that Commerce ignored arguments and evi-
 dence (e.g., that Commerce failed to account for KPX’s role
 in setting KEPCO’s tariff schedule) demonstrating that Ko-
 rean electricity-price setting does not follow market princi-
 ples. J.A. 13168-13174.
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 POSCO v. US                                               11



     The trial court rejected all three challenges and found
 that Commerce’s CVD determination was supported by
 substantial evidence and otherwise not contrary to law.
 J.A. 5–81. This appeal ensued. We have jurisdiction under
 28 U.S.C. § 1295(a)(5).
                         DISCUSSION
     We review decisions of the Trade Court de novo. Boom-
 erang Tube LLC v. United States, 

, 912 (Fed.
 Cir. 2017). We apply the same standard of review used by
 the Trade Court in reviewing Commerce’s determinations.
 See 19 U.S.C. § 1516(a)(b)(1)(B); Union Steel v. United
 States, 

, 1106 (Fed. Cir. 2013). We therefore
 review Commerce’s final determination to assess whether
 it is supported by substantial evidence or otherwise con-
 trary to law. Union 

.
    We address two issues on appeal: first, whether Com-
 merce erred as a matter of law when it based its benefit-
 conferred analysis on a preferential-rate standard, and sec-
 ond, whether substantial evidence supports Commerce’s
 finding that the Korean government does not provide a
 countervailable subsidy to respondents. Because Com-
 merce’s final determination is unsupported by substantial
 evidence and contrary to law, we vacate and remand.
                 A. Adequate Remuneration
    Commerce failed to properly measure less-than-ade-
 quate remuneration under post-URAA principles.
     In Nucor, we addressed essentially the same issues
 raised in this appeal, including Commerce’s reliance on the
 pre-URAA preferential-rate standard. 

. We
 rejected Commerce’s “broad theory” that “if the foreign gov-
 ernment authority engaged in a uniform, non-discrimina-
 tory, tariffed practice of charging a price so low that the
 authority consistently lost large sums of money in a way no
 private seller could sustain, sales pursuant to that practice
 would not be properly viewed as for ‘less than adequate
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 12                                                   POSCO v. US




 remuneration.’”

We concluded that the plain
 language of § 1677(5)(E), its context within the overall stat-
 utory scheme, its legislative history, and our related prec-
 edent did not support Commerce’s reliance on a
 preferential-rate standard.

We held that
 Commerce’s “position is beyond any reasonable interpreta-
 tion of the statute, or of its implementation regulation.”

     Our decision in Nucor issued on June 21, 2019, after the
 parties filed their briefs in this appeal. On June 26, 2019,
 Commerce filed a citation of supplemental authority advis-
 ing the court of the Nucor decision and explaining that
 “Nucor’s opening brief filed in this appeal is substantially
 identical to Nucor’s opening brief filed in [Nucor].” ECF
 No. 39. Commerce also explained that the Nucor decision
 “pertains to nearly the entirety of [its] brief filed in this ap-
 peal on March 29, 2019.”

Nucor clari-
 fied that the issue of “whether Commerce may lawfully
 apply an analysis of ‘preferential rates’ to measure ‘ade-
 quate remuneration’” is identical in both cases. ECF
 No. 40. We conclude that Commerce’s position on prefer-
 entiality here is identical to its position in Nucor and that
 our decision in Nucor rejecting Commerce’s use of the pref-
 erentiality standard applies to this appeal.
    As in Nucor, Commerce’s use of the pre-URAA prefer-
 ential-rates standard in this case is inconsistent with the
 adequate-remuneration standard under § 1677(5)(E)(iv).
 Commerce cannot rely on price discrimination to the exclu-
 sion of a thorough evaluation of fair-market principles to
 determine whether a recipient is receiving an unlawful
 benefit. See 

(reasoning that “the
 existence of a ‘benefit’ of an unjustifiably low price . . . can-
 not depend on [a] finding that the producer is being dis-
 criminatorily favored compared to others in the exporting
 country”).
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 POSCO v. US                                              13



     In Nucor, we highlighted the Statement of Administra-
 tive Action, which provides that preferentiality be replaced
 with the new standard of less-than-adequate renumera-
 

(citing Uruguay Round Agreements
 Act, Statement of Administrative Action, H.R. Doc. No.
 103–316, vol. 1, at 927 (1994) (“SAA”)). We noted that
 “[t]his authoritative interpretation confirms what the stat-
 utory language, in its ordinary and in-context meaning, en-
 tails. It makes clear that the new standard rests on a
 concept different from mere lack of preferentiality.”

used in the statute, understood in their
 ordinary sense, make it unreasonable that lack of discrim-
 ination is sufficient to establish adequacy of remuneration.
 See

    Consistent with our holding in Nucor, we hold that
 Commerce’s reliance on a preferential-rate standard is in-
 consistent with the Trade statute, in particular with the
 less-than-adequate-remuneration requirement, and is
 therefore contrary to law.
                      B. Cost Recovery
     Commerce’s cost-recovery analysis is limited to a dis-
 cussion of KEPCO’s costs. See J.A. 13081–83. The limited
 analysis does not support its conclusion that electricity
 prices paid to KEPCO by respondents are consistent with
 prevailing market conditions because Commerce failed to
 evaluate KPX’s impact on the Korean electricity market.
     In Nucor, Plaintiff Nucor argued that Commerce erred
 by limiting the analysis to the prices that KEPCO charged
 in relation to its costs, which included the price paid to
 KPX, instead of considering the adequacy (less-than-ade-
 quate remuneration) of the prices that KPX charged in re-
 lation to its 

. We agreed with the
 Trade Court’s determination that Nucor’s argument was,
 “in substance, a contention that KPX is part of KEPCO as
 the ‘authority’ whose prices Commerce had to analyze.”

however, concluded that Nucor “failed to
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 14                                               POSCO v. US




 exhaust this argument at the agency level.”

 the Trade Court affirmed Commerce’s final determination
 on this point. We agreed that Nucor failed to exhaust its
 KPX-related arguments and, as a result, our decision also
 did not address the KPX issue.

Nucor again argues that Commerce
 erred by failing to consider KPX’s impact on KEPCO’s pric-
 ing. See Appellant Br. 36–47; see also J.A. 71–73 (Trade
 Court opinion rejecting Nucor’s argument); J.A. 12898–914
 (Nucor’s Case Brief to Commerce addressing KPX’s impact
 on KEPCO’s electricity pricing). The government does not
 raise an exhaustion argument in this case, and we conclude
 that Nucor preserved this issue for appeal. Cf. Novosteel
 SA v. United States, 

, 1274 (Fed. Cir. 2002)
 (applying the waiver doctrine but explaining that a party
 preserves an issue for appeal where it exhausts that issue
 before an administrative agency “so as to give a court the
 proper basis to review that issue on appeal”).
     Here, the administrative record does not support Com-
 merce’s determination that KEPCO is the only relevant en-
 tity for purposes of analyzing costs. J.A. 13083. To the
 contrary, evidence in the record suggests that KPX has a
 significant impact on KEPCO’s pricing, and that Com-
 merce failed to adequately investigate and consider KPX’s
 impact on the Korean electricity market. For example, the
 record shows that all electricity generated in Korea must
 be sold to KEPCO by KPX (J.A. 1300, 3137); KPX is wholly
 owned by KEPCO and its six electricity-generation subsid-
 iaries (id.); KEPCO bases its prices on the cost of its pur-
 chases from the KPX (see J.A. 13083); and KPX’s pricing
 accounts for upwards of 90% of KEPCO’s total cost (see Nu-
 

(Reyna, J., dissenting) (citing
 J.A. 8316, Letter from Yoon & Yang LLC to Sec’y Com-
 merce, re: Countervailing Duty Investigation: Certain Cor-
 rosion-Resistant Steel Products (CORE) from the Republic
 of Korea: Response to 2nd Supplemental Questionnaire
 (Oct. 15, 2015))). That KPX’s pricing constitutes a
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 POSCO v. US                                               15



 significant portion of KEPCO’s total cost makes it implau-
 sible that Commerce adequately investigated Korea’s pre-
 vailing market condition for electricity without a thorough
 understanding of the costs associated with generating and
 acquiring that electricity.
     Yet, Commerce did not request information regarding
 KPX’s cost of electricity generation such as variable fuel
 prices, the construction and maintenance costs of a stand-
 ard electricity generation unit, and the fixed costs of pro-
 ducing electricity (e.g., constructing facilities to generate
 electricity). Instead, Commerce determined that only the
 costs to KEPCO, not the costs associated with the genera-
 tors themselves, were relevant to price because KEPCO
 purchases electricity through KPX, which purchases from
 the generators. See J.A. 13083. Commerce’s determina-
 tion that KPX was not relevant to its analysis leaves unre-
 solved whether a benefit was conferred by way of the price
 charged by KPX to KEPCO. See § 1677-1; see also SAA at
 927.
     The government argues that “[n]othing in the statute
 requires Commerce to consider how the authority acquired
 the good or service that was later provided to respondents.”
 Appellee Br. 35 (citation and internal quotation marks
 omitted). We disagree. Commerce has an affirmative duty
 to investigate any appearance of subsidies related to the
 investigation that are discovered during an investigation.
 See 19 U.S.C. § 1677d; Allegheny Ludlum Corp. v. United
 States, 

, 1150 (Ct. Int’l Trade 2000).
 Section 1677(5) requires Commerce to evaluate subsidies
 “without regard to whether the subsidy is provided directly
 or indirectly on the manufacture, production, or export of
 merchandise,” and it requires Commerce to consider the
 adequacy of remuneration “in relation to prevailing market
 conditions.” § 1677(5)(C), (E). Here, Commerce failed to
 investigate an appearance of a potential subsidy that was
 disclosed during the investigation within the Korean
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 16                                               POSCO v. US




 government’s own questionnaire responses. See 19 U.S.C.
 § 1677d.
     The government’s argument assumes that KPX is not,
 itself, an authority of the Korean government. That as-
 sumption, however, is unsupported by the evidence. Under
 § 1677(5)(B)(iii), an authority is defined as “a government
 of a country or any public entity within the territory of the
 country.” In Guangdong Wireking Housewares & Hard-
 ware Co. v. United States, the Trade Court affirmed Com-
 merce’s      determination      that     certain     wire-rod
 manufacturers under investigation were authorities under
 § 1677(5)(b) where the government of China held a major-
 ity ownership position in those wire-rod manufacturers.
 

, 1376–78 (Ct. Int’l Trade 2013). The
 court explained that § 1677(5)(B)’s “public entity” provision
 includes entities that are majority owned by a government
 and it relied on “Commerce’s longstanding practice of treat-
 ing most government-owned corporations as the govern-
 ment itself.”

(internal quotation marks
 omitted). Here, the Korean government’s questionnaire re-
 sponse clarifies that KPX is a wholly owned subsidiary of
 KEPCO. J.A. 3111. There is no dispute that KEPCO is a
 state-owned entity and the sole provider of electricity in
 Korea. This evidence strongly suggests that KPX, like
 KEPCO, is an authority under § 1677(5)(B). Commerce
 disregarded this evidence when it assumed that it ade-
 quately accounted for KPX via the price paid by KEPCO.
 KPX is an authority. And Commerce’s failure to treat KPX
 as an authority—or, at a minimum, investigate whether it
 is an authority—constitutes error as a matter of law. Be-
 cause the role of KPX in the Korean electricity market re-
 mains unaddressed, Commerce’s final determination is not
 supported by substantial evidence.
                        CONCLUSION
    We have considered the government’s remaining argu-
 ments and find them unpersuasive. Because Commerce
Case: 19-1213    Document: 49     Page: 17    Filed: 10/15/2020




 POSCO v. US                                               17



 improperly based its benefit-conferred analysis on a “pref-
 erential price” standard, we conclude that Commerce’s fi-
 nal determination is contrary to law.            In addition,
 Commerce’s failure to investigate and include KPX’s gen-
 eration costs in its analysis renders its final determination
 unsupported by substantial evidence. We vacate and re-
 mand for further proceedings consistent with this opinion.
                VACATED AND REMANDED
                            COSTS
     Costs to Appellant.