Summary
The United States Court of Appeals for the Federal Circuit affirmed the Court of International Trade’s judgment sustaining the Department of Commerce’s imposition of countervailing duties on certain phosphate fertilizer imports from Russia. The court held that Commerce had reasonable flexibility to select a comparator group when determining whether the subsidy was a predominant use subsidy and reasonably determined that Russia provided natural gas at less than adequate remuneration. The court affirmed and assessed costs against Industrial Group Phosphorite, LLC.
Topics
Practice areas
Questions Presented
- Whether 19 U.S.C. § 1677(5A)(D)(iii)(II) requires Commerce to compare an industry's subsidy usage with all users of the subsidy when determining whether the industry is a predominant user.
- Whether Commerce reasonably exercised its discretion by limiting the predominant-usage comparator group to industrial users.
- Whether Commerce's tier-three less-than-adequate-remuneration analysis could consider government-created market distortions when determining whether government prices were consistent with market principles.
- Whether 19 U.S.C. § 1677(5)(E)(iv) required Commerce to adjust the IEA benchmark data for Russia's natural-gas abundance or explain why no adjustment was necessary.
Holdings
- The statute does not require Commerce to compare the subject industry's subsidy usage with all users of the subsidy; Commerce has reasonable flexibility to select the comparator group when assessing predominant usage.
- Commerce reasonably limited its predominant-usage analysis to industrial users because the record showed that Russia treated industrial and nonindustrial natural-gas consumers differently for pricing purposes.
- Commerce may consider government-created market distortions when determining under 19 C.F.R. § 351.511(a)(2)(iii) whether a government price is consistent with market principles; that consideration is not limited to tier-one analysis.
- Section 1677(5)(E)(iv) does not require Commerce to adjust the IEA benchmark data for Russia's natural-gas abundance or to explain why no such adjustment was necessary.
Key quotations
“As such, based on the SAA, we hold that under 19 U.S.C. § 1677(5A)(D)(iii)(II), Commerce has reasonable flexibility in assessing predominant usage.” (11)
“Commerce has flexibility under 19 U.S.C. § 1677(5A)(D)(iii)(II) to determine the comparator group. But that flexibility is not unbounded, nor does it provide Commerce with a loophole for rendering all subsidies de facto specific.” (13)
“In sum, we determine that Commerce’s LTAR determination is in accordance with the tier three framework at 19 C.F.R. § 351.511(a)(2)(iii) and with 19 U.S.C. § 1677(5)(E)(iv).” (16)
Factual background
Commerce investigated whether Russia provided countervailable subsidies to Russian phosphate-fertilizer producers, including natural gas at less than adequate remuneration. Russia supplied data indicating that the agrochemical industry was among the largest industrial consumers of natural gas, while natural-gas prices were regulated differently for industrial and nonindustrial consumers. Commerce found the subsidy de facto specific because the agrochemical industry was a predominant user and used International Energy Agency data as a tier-three benchmark after finding no suitable tier-one or tier-two benchmark. The Trade Court sustained those determinations.
Procedural history
The Mosaic Company petitioned Commerce to investigate alleged countervailable subsidies provided by Russia to producers and exporters of phosphate fertilizers, including the provision of natural gas at less than adequate remuneration. Commerce determined that the natural-gas subsidy was de facto specific and provided at less than adequate remuneration. The Court of International Trade sustained those determinations after remands and redeterminations, and EuroChem appealed. The Federal Circuit affirmed.