USEC Inc. v. United States

Slip Op. 03-34
United States Court of International Trade
USEC INC. and UNITED STATES
ENRICHMENT CORPORATION, Before: Pogue, Wallach, and
Eaton, Judges
Plaintiffs,
Court No. 02-00112; and Court Nos.
v. 02-00113, 02-00114 and Consol.
Court Nos. 02-00219; 02-00221, 02-
UNITED STATES, 00227, 02-00229, and 02-00233
Defendant. Public Version
{Department of Commerce’s final determinations vacated as
unsupported by substantial evidence on the record and not in
accordance with law, and remanded to Commerce for reconsideration.}
Decided: March 25, 2003
Fried, Frank, Harris, Shriver & Jacobson (David E. Birenbaum, Jay
R. Kraemer, Mark Fajfar); Weil, Gotshal & Manges LLP (Stuart M.
Rosen, Gregory Husisian, Jennifer J. Rhodes) for Plaintiffs and
Defendant-Intervenors Eurodif S.A., COGEMA and COGEMA, Inc., Urenco
Limited, Urenco Deutschland GmbH, Urenco Nederland B.V., Urenco
(Capenhurst) Ltd., and Urenco, Inc.
Robert D. McCallum, Jr., Assistant Attorney General, David M.
Cohen, Director, Lucius B. Lau, Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice,
David R. Mason, Senior Attorney, Office of Chief Counsel for Import
Administration, U.S. Department of Commerce, Of Counsel, for
Defendant United States.
Steptoe & Johnson, LLP (Sheldon E. Hochberg, Richard O. Cunningham,
Eric C. Emerson) for Defendant-Intervenors and Plaintiffs USEC Inc.
and United States Enrichment Corporation.
Shaw Pittman LLP (Stephen E. Becker, Nancy A. Fischer, Sanjay J.
Mullick, Joshua D. Fitzhugh) for Plaintiff-Intervenors Ad Hoc
Utilities Group.
Court No. 02-00112, 113, 114; Page 2
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
OPINION
Pogue, Judge: Plaintiffs Eurodif, S.A., COGEMA, COGEMA Inc.
(collectively, “Cogema”), Urenco Limited, Urenco Deutschland GmbH,
Urenco Nederland B.V., Urenco (Capenhurst) Ltd. and Urenco, Inc.
(collectively, “Urenco”),1 challenge the final affirmative
antidumping and countervailing duty determinations of the
Department of Commerce (“the Department” or “Commerce”) with regard
to low enriched uranium (“low enriched uranium” or “LEU”) from
France, Germany, the Netherlands, and the United Kingdom.2
1
Plaintiffs appear alternatively as Defendant-Intervenors
in actions brought by USEC Inc. and the United States Enrichment
Corporation challenging these final determinations. These
actions have been consolidated as Court Numbers 02-00221, 02-
00227, 02-00229, and 02-00233, and the parties have submitted
cross-motions for judgment on the agency record. The motions
raise certain “general issues” which are addressed here.
Pursuant to this Court’s Scheduling Order of August 5, 2002, the
parties have initially submitted opening briefs on these “general
issues.”
2
The challenged determinations are Low Enriched Uranium
from France, 67 Fed. Reg. 6680 (Dep’t Commerce Feb. 13, 2002)
(notice of amended final determination of sales at less than fair
value and antidumping duty order); Low Enriched Uranium from
France, 66 Fed. Reg. 65,877 (Dep’t Commerce Dec. 21, 2001) (final
determination of sales at less than fair value) (“LEU from
France”); Low Enriched Uranium from France, 67 Fed. Reg. 6689(Dep’t Commerce Feb. 13, 2002) (notice of amended final
determination and notice of countervailing duty order); Low
Enriched Uranium from France, 66 Fed. Reg. 65,901 (Dep’t Commerce
Dec. 21, 2001) (notice of final affirmative countervailing duty
determination); Low Enriched Uranium from Germany, the
Netherlands, and the United Kingdom, 67 Fed. Reg. 6688 (Dep’t
Commerce Feb. 13, 2002) (notice of amended final determinations
and notice of countervailing duty orders); Low Enriched Uranium
from Germany, the Netherlands and the United Kingdom, 66 Fed.
Court No. 02-00112, 113, 114; Page 3
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Plaintiffs assert that the antidumping and countervailing duty laws
do not apply to certain uranium enrichment transactions because the
contractual arrangements involve purchases of enrichment services,
rather than purchases of LEU as merchandise, and services fall
outside the scope of the antidumping and countervailing duty laws.
The Ad Hoc Utilities Group (“AHUG”), an association of twenty-two
United States utilities that are consumers of low enriched uranium,
seeks to intervene as of right in this action. See Mem. Supp. AHUG
Mot. Intervene at 1 (“AHUG Intervention Mem.”). This Court
exercises jurisdiction pursuant to 28 U.S.C. § 1581(c) (2000). For
the reasons discussed below, we find that Commerce’s determinations
are neither supported by substantial evidence in the record nor in
accordance with law.
Background
On December 7, 2000, USEC, Inc. and its wholly-owned
subsidiary United States Enrichment Corporation (collectively,
“USEC”), petitioned the Department of Commerce for initiation of
antidumping and countervailing duty investigations into imports of
low enriched uranium from France, Germany, the Netherlands, and the
United Kingdom. On December 21, 2001, Commerce issued its final
Reg. 65,903 (Dep’t Commerce Dec. 21, 2001) (notice of final
affirmative countervailing duty determinations).
Court No. 02-00112, 113, 114; Page 4
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
affirmative determinations in the antidumping and countervailing
duty investigations of LEU from France and in the countervailing
duty investigations of LEU from Germany, the Netherlands, and the
United Kingdom. See LEU from France, 66 Fed. Reg. at 65,877; Low
Enriched Uranium from France, 66 Fed. Reg. 65,901 (Dep’t Commerce
Dec. 21, 2001) (notice of final affirmative countervailing duty
determination); Low Enriched Uranium from Germany, the Netherlands,
and the United Kingdom, 66 Fed. Reg. 65,903 (Dep’t Commerce Dec.
21, 2001) (notice of final affirmative countervailing duty
determinations).
The antidumping and countervailing duty investigations
initiated upon the petition of USEC covered “all low enriched
uranium (LEU). LEU is enriched uranium hexafluoride (UF6) with a
U235 product assay of less than 20 percent that has not been
converted into another chemical form, such as UO2, or fabricated
into nuclear fuel assemblies, regardless of the means by which the
LEU is produced.” LEU from France, 66 Fed. Reg. at 65,877; see
also Petition for the Imposition of Antidumping and Countervailing
Duties on Low Enriched Uranium from France, Germany, the
Netherlands and the United Kingdom, Jt. App. Tab 2-A at JA-1011-12
(stating the scope of the petition) (“Petition”). Low enriched
uranium is a good, classifiable under headings 2844.20.0020,
2844.20.0030, 2844.20.0050, and 2844.40.00 of the Harmonized Tariff
System of the United States (“HTSUS”). See LEU from France, 66
Court No. 02-00112, 113, 114; Page 5
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Fed. Reg. at 65,877; Petition, Jt. App. Tab 2-A at JA-1012-13. All
parties to this action acknowledge that LEU itself is a good, and
that trade in LEU may be subject to the application of the unfair
trade laws. See, e.g., LEU from France, 66 Fed. Reg. at 65,878
(“{W}e found, and no party disputed, that LEU entering the United
States constitutes a good, the tangible yield of a manufacturing
operation.”); Pls.’ Opening Br. Supp. Mot. J. Agency R. at 14
(“Pls.’ Opening Br.”).3
Low enriched uranium is used to produce nuclear fuel rods,
which are used in nuclear reactors to produce electricity. See LEU
from France, 66 Fed. Reg. at 65,879; Def.’s Resp. Opp’n Pls.’ Mot.
J. Agency R. at 5 (“Def.’s Resp.”). Enrichment is the process by
which the percentage of the fissionable isotope U235 contained in
uranium is increased. See, e.g., Pls.’ Opening Br. at 9-10; Def.’s
Resp. at 4. Natural uranium contains approximately 0.711 percent
of U235; most nuclear utilities in operation require fuel with a U235
3
Title 19 U.S.C. § 1673 authorizes Commerce to impose
antidumping duties where it “determines that a class or kind of
foreign merchandise is being, or is likely to be, sold in the
United States at less than its fair value.” 19 U.S.C. §1673(2000). The language of the statute requires that there be a
sale or likely sale at less than fair value in order for there to
be a final determination. See 19 U.S.C. § 1673d(a)(1) (“{T}he
administering authority shall make a final determination of
whether the subject merchandise is being, or is likely to be,
sold in the United States at less than its fair value.”). The
Department interprets the statute to apply also to investigations
of merchandise entered into the United States for “consumption.”
LEU from France, 66 Fed. Reg. at 65,878. We will assume,
arguendo, that Commerce’s interpretation is a reasonable one.
Court No. 02-00112, 113, 114; Page 6
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
concentration or “assay” between three and five percent. Pls.’
Opening Br. at 9; Def.’s Resp. at 4-5.
The production of nuclear fuel involves: (1) mining uranium
ore; (2) milling and/or refining the ore into uranium concentrate,
referred to as natural uranium (U3O8); (3) converting the natural
uranium into uranium hexafluoride (UF6), or “feed uranium;” (4)
enriching uranium hexafluoride to create low enriched uranium; and
(5) using the low enriched uranium to fabricate nuclear fuel rods
for use in nuclear reactors. See Pls.’ Opening Br. at 9; Def.’s
Resp. at 3-5; LEU from France, 66 Fed. Reg. at 65,879. The process
of enrichment results in the creation of LEU, with its higher
concentration of U235, and depleted uranium or uranium “tails.”
Pls.’ Opening Br. at 10; LEU from France, 66 Fed. Reg. at 65,879.
Nuclear utilities employ two types of contracts for procuring
LEU from uranium enrichers. One is a contract for enriched uranium
product (“EUP contract”), in which the utility simply purchases LEU
from the enricher. See LEU from France, 66 Fed. Reg. at 65,878,
65,885; Pls.’ Opening Br. at 13; Def.’s Resp. at 5. In an EUP
contract, the price paid for the LEU covers all elements of the
LEU’s value, including the feed uranium and the effort expended to
enrich it. Transcript of Dep’t of Commerce Hearing (Oct. 31,
2001), Jt. App. Tab 6-A at 46 (“Hrg. Trans.”); Pls.’ Opening Br. at
13. All parties to this action agree that sales of enriched
uranium product are sales of merchandise subject to the antidumping
Court No. 02-00112, 113, 114; Page 7
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
and countervailing duty laws. See, e.g., Pls.’ Opening Br. at 14
(“Movants do not question the application of the antidumping and
countervailing duty laws to the sale of LEU.”).
The second type of contract provides for the purchase of
“separative work units” (“SWU”) and also provides for the delivery
by the utility of a quantity of feed uranium to the enricher. LEU
from France, 66 Fed. Reg. at 65,878, 65,884-85; Pls.’ Opening Br.
at 11-12; Def.’s Resp. at 5. A “separative work unit” is a
measurement of the amount of energy or effort required to separate
a given quantity of feed uranium into LEU and depleted uranium, or
uranium “tails,” at specified assays. See LEU from France, 66 Fed.
Reg. at 65,884; Pls.’ Opening Br. at 10 & n. 15; Def.’s Resp. at 5.
In an SWU contract, the precise quantity of LEU purchased is not
initially specified. Rather, the contract specifies the general
terms of the transaction. Notices given during the contract term
specify the quantity of SWUs, the product assay, and the tails
assay. These specifications determine the material characteristics
of the resultant LEU. LEU from France, 66 Fed. Reg. at 65,884;
Pls.’ Opening Br. at 11-12; Resp. Br. of USEC, Inc. Opp’n
Cogema/Urenco Mot. J. Agency R. at 18 (“USEC Resp.”).
Specification of the product and tails assays by means of the
notices given during the contract term permits the utility to
determine how many SWUs it will pay for and how much feed uranium
it will provide to the enricher. See Pls.’ Opening Br. at 12 &
Court No. 02-00112, 113, 114; Page 8
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
n.20; USEC Resp. at 18; Hrg. Trans., Jt. App. Tab 6-A at 45-46.
This allows the utility to “optimize the relative amounts of money
and uranium it must provide for the LEU it will receive.” USEC
Resp. at 18; see also id. at 7 (“{T}he utility customer, by
specifying the product assay and transactional tails assay . . .
can control the total price it will pay and the amount of natural
uranium it will provide.”); Hrg. Trans., Jt. App. Tab 6-A at 45-46.
Feed uranium is fungible. See, e.g., USEC Resp. at 17.
Therefore, the specific feed uranium provided by a utility customer
need not be used to produce LEU for that customer. See id. at 16
& n.21. Rather, enrichers maintain inventories of feed uranium,
which is not segregated according to source or ownership. Any
uranium held by the enricher may be used to produce LEU for any
customer. Id. at 17; Def.’s Resp. at 5-6.
Utilities purchase feed uranium from third parties,4 and prior
to delivering the feed uranium to the enricher, the utilities have
title, risk of loss, power to alienate or sell, and use and
possession of the feed uranium. Title to feed uranium supplied to
the enricher remains with the utility customer until the LEU is
delivered, at which time title to the LEU is transferred to the
utility. One contract states, for example, that “{t}itle to the
Feed Material shall remain with {the utility} until the {LEU}
4
Nothing in the record suggests that the parties from whom
utilities purchase the feed uranium are in any manner related to
the enrichers.
Court No. 02-00112, 113, 114; Page 9
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Delivery associated with such Feed Material . . . at which time the
Feed Material shall be deemed to have been enriched; whereupon {the
utility} sha{ll} have title to such {LEU} associated with such Feed
Material and title to such Feed Material will be extinguished.”
Uranium Enrichment Services Contract between [ ] and
Urenco, Jt. App. Tab 3-F at JA-1364; see also Uranium Enrichment
Services Contract between [ ] and
Urenco, Jt. App. Tab 3-G at JA-1399. Pursuant to the SWU
contracts, risk of loss or damage to the feed uranium, as well as
use and possession, pass from the utility to the enricher upon
delivery of the feed uranium to the enricher. Uranium Enrichment
Services Contract between [ ] and Urenco, Jt. App. Tab 3-F
at JA-1364; see also Uranium Enrichment Services Contract between
[ ] and Urenco, Jt. App. Tab 3-G at JA-1399; Transcript of Oral
Argument at 35 (Feb. 11, 2003) (“Oral Arg. Trans.”). However, the
enricher does not obtain title to the feedstock; rather, actual
title is at all times with the utility. See, e.g., Oral Arg.
Trans. at 34. Nor does the enricher have the power to sell a
utility’s feedstock to a third party. Id. at 35. Moreover, it
appears clear on this record that at the moment when the LEU is
delivered to the utility by the enricher, the utility has title to
and ownership of the LEU. See Uranium Enrichment Services Contract
between [ ] and Urenco, Jt. App. Tab 3-F at JA-1361
(indicating that title to the LEU and all risk of loss or damage to
Court No. 02-00112, 113, 114; Page 10
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
pass from the enricher to the utility customer upon delivery of the
LEU by the enricher); see also Uranium Enrichment Services Contract
between [ ] and Urenco, Jt. App. Tab 3-G at JA-1401. The feed
uranium does not become an asset of the enricher, nor is it ever
reflected as such on the enricher’s books and records.5 See, e.g.,
Oral Arg. Trans. at 38. The contractual arrangement described
above, in which utilities supply feed uranium and pay for the
separative work performed as measured in SWUs, long predates the
initiation of the challenged investigations. See, e.g., Hrg.
Trans., Jt. App. Tab 6-A at 43-45. During the 1960s and 1970s, the
U.S. Department of Energy had a monopoly on enrichment services,
but offered no other services relating to the production of nuclear
fuel. See id. at 43. Consequently, utilities purchased enrichment
services from the Department of Energy, but purchased feedstock
from third parties. Id. at 43-45. In summary, utilities contract
5
Commerce verified the foreign enrichers’ records, which
did not reflect payments for customer-provided uranium. Oral
Arg. Trans. at 38. Furthermore, even though USEC has represented
that, as an enricher, it receives feed uranium as consideration
or “payment-in-kind” for the supply of LEU, USEC has required its
utility customers to pay all property tax on what it views,
correctly, as the “customer’s feed.” See Letter from Weil,
Gotshal & Manges LLP to Hon. Norman Y. Mineta (Dec. 20, 2000) at
Ex. 2, Letter from USEC to Enrichment Customers (Nov. 19, 1998),
Jt. App. Tab 5-B at JA-1885 (“USEC Property Tax Letter”) (“USEC
will report all the property that it owns at the two {gaseous
diffusion plants} and will pay property tax accordingly. USEC
does not intend to report any UF6 to which it does not hold legal
title.”). The record does not indicate that the enrichers
depreciated the customer-owned feed uranium or otherwise treated
it as an asset.
Court No. 02-00112, 113, 114; Page 11
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
for each step of the nuclear fuel production process, including for
enrichment. Id.
Commerce found during its investigations that enrichers were
producers of LEU for purposes of the less-than-fair-value
determination. In reaching its affirmative antidumping and
countervailing duty determinations, Commerce concluded that EUP and
SWU contracts were “functionally equivalent,” in that “the overall
arrangement under both types of contracts is, in effect, an
arrangement for the purchase and sale of LEU.” LEU from France, 66
Fed. Reg. at 65,884-85. The agency found that (1) the enrichment
process is the “most significant manufacturing operation involved
in the production of LEU” and that “it is the enricher who creates
the essential character of LEU,” LEU from France, 66 Fed. Reg. at
65,884; (2) the enrichers fully control the enrichment process,
including the “level of usage of the natural uranium provided by
the utility company,” and therefore “cannot be considered tollers
{or subcontractors} in the traditional sense under the regulation,”
id.; and (3) U.S. utility companies do not maintain production
facilities for the enrichment of uranium. Id.
Plaintiffs argue that SWU contracts are transactions in
services and therefore not subject to the antidumping and
countervailing duty laws. See, e.g., Pls.’ Opening Br. at 7-9.
Plaintiffs further assert that the petitions were not filed on
behalf of the United States industry. Id. at 9. AHUG joins the
Court No. 02-00112, 113, 114; Page 12
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
plaintiffs in these assertions. See AHUG Intervention Mem. at 5-6;
AHUG Opening Br. Supp. Mot. J. Agency R. at 7-8(“AHUG Opening
Br.”). AHUG also claims that it is entitled to intervene as of
right because its members are producers of LEU. AHUG Intervention
Mem. at 5.
Standard of Review
This Court will sustain Commerce’s determinations unless they
are “unsupported by substantial evidence on the record, or
otherwise not in accordance with law.” 19 U.S.C. §
1516a(b)(1)(B)(i).
“Substantial evidence” is “such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.”
Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (internal
citation omitted); Micron Tech., Inc. v. United States, 117 F.3d
1386, 1393 (Fed. Cir. 1997). “{T}he possibility of drawing two
inconsistent conclusions from the evidence does not prevent an
administrative agency’s finding from being supported by substantial
evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).
A decision will be reviewed on the grounds invoked by the agency,
see SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), and the Court
may “uphold a decision of less than ideal clarity if the agency’s
path may reasonably be discerned.” Bowman Transp., Inc. v. Ark.-
Best Freight Sys., Inc., 419 U.S. 281, 286 (1974). The Court’s
Court No. 02-00112, 113, 114; Page 13
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
function is not to re-weigh the evidence, but to ascertain whether
the agency’s determination is supported by substantial evidence on
the record. Matushita Elec. Indus. Corp. v. United States, 750
F.2d 927, 936 (1984).
Discussion
I. The Tolling Regulation, 19 C.F.R. § 351.401(h), and
Commerce’s Prior Decisions Related Thereto6
Title 19 U.S.C. § 1673 provides that antidumping duties may be
imposed on imported merchandise where “a class or kind of foreign
merchandise is being, or is likely to be, sold in the United States
at less than fair value” and imports, sales, or likely sales of
that merchandise result in injury or the threat of injury to the
domestic industry, or in the material retardation of the
establishment of the domestic industry. 19 U.S.C. § 1673.7 In
6
Commerce argues that the issue of the applicability of the
Department’s tolling regulation is not a “general issue” and
should therefore be postponed to a later stage in the proceeding.
As we made clear in the Scheduling Order for this matter, issues
which are not general include “challenges to the Department of
Commerce’s calculation results and methods.” Scheduling Order at
5. While the initial applicability of the tolling regulation
also has implications for the Department’s calculation results
and methods, it is more appropriately addressed as a general
issue affecting the Department’s threshold determinations.
Accordingly, we address it here.
7
The statute states that antidumping duties shall be
imposed where
(1) . . . a class or kind of foreign merchandise is
being, or is likely to be, sold in the United States at less
Court No. 02-00112, 113, 114; Page 14
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
order to determine whether merchandise is being sold or is likely
to be sold in the United States at less than fair value, Commerce
compares the merchandise’s normal value, or the price at which the
merchandise is first sold for consumption in the exporting country,
to the export price or constructed export price, which represent
the price of the good when sold in or for export to the United
States.8 See 19 U.S.C. § 1673; 19 U.S.C. § 1677a; 19 U.S.C. §
than fair value, and
(2) the Commission determines that —
(A) an industry in the United States —
(i) is materially injured, or
(ii) is threatened with material injury,
or
(B) the establishment of an industry in the
United States is materially retarded,
by reason of imports of that merchandise or by reason
of sales (or the likelihood of sales) of that
merchandise for importation.
19 U.S.C. § 1673. “The purpose underlying the antidumping laws
is to prevent foreign manufacturers from injuring domestic
industries by selling their products in the United States at less
than ‘fair value,’ i.e., at prices below the prices the foreign
manufacturers charge for the same products in their home
markets.” Torrington Co. v. United States, 68 F.3d 1347, 1352
(Fed. Cir. 1995).
8
"Export price" is defined as
the price at which the subject merchandise is first sold
(or agreed to be sold) before the date of importation by
the producer or exporter of the subject merchandise
outside of the United States to an unaffiliated purchaser
in the United States or to an unaffiliated purchaser for
exportation to the United States.
19 U.S.C. § 1677a(a). “Constructed export price" is defined as
the price at which the subject merchandise is first sold
Court No. 02-00112, 113, 114; Page 15
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
1677b(a). In order to determine export price or constructed export
price, Commerce must determine which company is the producer or
exporter of the merchandise. See Taiwan Semiconductor Mfg. Co. v.
United States, 25 CIT __, __, 143 F. Supp. 2d 958, 966 (2001) (“In
order to make a less-than-fair-value determination, Commerce must
first determine the exporter or producer of the subject merchandise
who controls the export price (or constructed export price) that
Commerce compares to normal values to determine dumping margins.”).
In determining who is the producer or exporter of subject
merchandise, one factor Commerce considers is whether the
merchandise is manufactured under a tolling or subcontracting
arrangement. Title 19 C.F.R. § 351.401(h) states that Commerce
“will not consider a toller or subcontractor to be a manufacturer
or producer where the toller or subcontractor does not acquire
ownership, and does not control the relevant sale, of the subject
merchandise or foreign like product.”9 19 C.F.R. § 351.401(h).
(or agreed to be sold) in the United States before or
after the date of importation by or for the account of
the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter, to a
purchaser not affiliated with the producer or exporter.
19 U.S.C. § 1677a(b).
9
“Relevant sale” is “the first sale in the distribution
chain by the company that is in a position to set the price of
the product, and by doing so, to sell at less than fair value in
or to the U.S. market.” Taiwan Semiconductor, 143 F. Supp. 2d at
966 (quoting Response to Court Remand, Taiwan Semiconductor Mfg.
Corp., Ltd. v. United States (Dep’t Commerce June 30, 2000)).
Court No. 02-00112, 113, 114; Page 16
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
The regulation sets out “certain conditions under which {the
agency} will not find that a toller or subcontractor is the
producer of the subject merchandise.” Polyvinyl Alcohol from
Taiwan, 63 Fed. Reg. 32,810, 32,813 (Dep’t Commerce June 16, 1998)
(final results of antidumping duty administrative review). “{T}he
purpose of the tolling regulation is to identify the seller of the
subject merchandise for purposes of establishing export price,
constructed export price, and normal value.” LEU from France, 66
Fed. Reg. at 65,878. As observed by this Court, “Commerce’s
construction of ‘producer,’ as memorialized in {the regulation},
emphasizes three factors: (1) ownership of the subject merchandise;
(2) control of the relevant sale . . . ; and (3) control of
production of the subject merchandise.” Taiwan Semiconductor Mfg.
Co., 25 CIT at __, 143 F. Supp. 2d at 966. Thus, under the
regulation, Commerce will not find tollers or subcontractors to be
producers where such toller or subcontractor does not acquire
ownership and does not control the relevant sale of the subject
merchandise or foreign like product. The regulation “does not
provide a basis to exclude merchandise from the scope of an
investigation,” LEU from France, 66 Fed. Reg. at 65,878, and “does
not purport to address all aspects of an analysis of tolling
arrangements.” Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at
32,813. In making its producer determination, Commerce is “not
restricted to the four corners of the contract” and will “look at
Court No. 02-00112, 113, 114; Page 17
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
the totality of the circumstances presented.” Id.
Commerce has noted that “{t}ypically, the subcontracting, or
tolling, addressed by this practice involves a contractor who owns
and provides to the subcontractor a material input and receives
from the subcontractor a product that is identifiable as subject
merchandise.” Response to Court Remand, Taiwan Semiconductor Mfg.
Corp., Ltd. v. United States, Jt. App. Tab 7-A at JA-2604 (Dep’t
Commerce June 30, 2000) (“SRAMS Remand Response”). The basis for
treating the toller or subcontractor as a service provider and not
the producer of the good is that the toller’s price represents only
the price for “some processing of the subject merchandise,” not the
“full cost of manufacturing.”10 Polyvinyl Alcohol Mem., Jt. App.
Tab 7-F at JA-2730 (stating that Commerce prefers not to use
10
Commerce stated that
Continuing to base the margin methodology on a toller’s
prices and/or costs for tolling only raises the issue as
to whether such comparisons are consistent with the
statute in determining the appropriate bases for normal
value and export price, the definition of subject
merchandise, and how we calculate dumping margins. The
statute requires that we base comparisons on the price of
the subject merchandise sold in the U.S. to the price of
the subject merchandise sold to the home or third country
markets, not the price of some processing of the subject
merchandise. Where cost of production and/or constructed
value analysis is necessary, the statute requires that we
calculate the full cost of manufacturing, not part of the
cost of manufacture of the subject merchandise.
Dep’t of Commerce Mem. from Team to Barbara R. Stafford,
Treatment of DuPont’s Sales of Polyvinyl Alcohol Tolled by Chang
Chun Jt. App. Tab 7-F at JA-2730 (Aug. 8, 1995) (“Polyvinyl
Alcohol Mem.”).
Court No. 02-00112, 113, 114; Page 18
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
tollers as respondents where a toller’s price for the good does not
“capture all the costs of production for producing the subject
merchandise, as required by the statute”). Rather, the producer of
the merchandise must be the company that “bears all essential costs
from the inception of production through the time of the sale to
the first customer. Because its pricing represents all elements of
value, . . . this entity functions as the ‘price setter’ or
potential price discriminator.” SRAMS Remand Response, Jt. App.
Tab 7-A at JA-2604.
In Static Random Access Memory Semiconductors from Taiwan, 63
Fed. Reg. 8,909 (Dep’t Commerce Feb. 23, 1998) (notice of final
determination of sales at less than fair value) (“SRAMS from
Taiwan”), a foundry manufactured SRAM wafers using a design and
design mask supplied by a design house. The design house developed
the design, which was the crucial element in the production of the
SRAM wafer; retained ownership of the design as intellectual
property; “arrange{d} and pa{id} for the production of” the design
mask; and “{told} the foundry what and how much to make.” SRAMS
from Taiwan, 62 Fed. Reg. 51,442, 51,444 (notice of preliminary
determination of sales at less than fair value). Commerce
concluded that the foundry, TSMC, was a toller, or subcontractor,
rather than the producer of the SRAMS. Pursuant to this Court’s
instruction to explain why it treated the foundry in SRAMS from
Taiwan as a service provider and not the producer of the
Court No. 02-00112, 113, 114; Page 19
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
merchandise, Commerce stated that
although a subcontractor may deliver to the contractor a
product which, based on its characteristics, is subject
merchandise, the price paid to the subcontractor may not
represent the entire value of the subject merchandise,
but merely represents a portion of that value. In fact,
in most subcontracting arrangements, the contractor
already owns an essential portion of the product, and
thus the price paid is only for the work performed by the
subcontractor; that is, the sale by the subcontractor is
only a sale of the service it performed (and any inputs
provided). Under these circumstances, we find that it is
not appropriate to equate the price of a subcontractor’s
services (and material inputs) with the price of subject
merchandise in a dumping analysis. Indeed, we do not
consider the “sale” between the subcontractor and such a
contractor to be a sale of subject merchandise at all.
Rather, it is a sale of certain inputs and subcontracting
services. It is the contractor’s subsequent sale which is
the relevant sale because that party owns the merchandise
in its entirety and thus its sales price represents the
full value of the subject merchandise.
SRAMS Remand Response, Jt. App. Tab 7-A at JA-2604. The agency
noted that “the price from TSMC did not include an essential
component of the product. Consequently, TSMC did not sell subject
merchandise, but rather only sold inputs and fabrication services.”
Id. at JA-2605. The “essential component” not present in TSMC’s
pricing was the cost of the wafer design and design mask, which
were provided to TSMC by the contractor. Id. at JA-2604-05.
Commerce further stated in the SRAMS Remand Response that
we believe that the entity controlling the wafer design
in effect controls production in the SRAMS industry. The
design house performs all of the research and development
for the SRAM that is to be produced. It produces, or
arranges and pays for the production of, the design mask.
At all stages of production, it retains ownership of the
design and design mask. The design house then
subcontracts the production of processed wafers with a
Court No. 02-00112, 113, 114; Page 20
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
foundry and provides the foundry with the design mask.
It tells the foundry what and how much to make. The
foundry agrees to dedicate a certain amount of its
production capacity to the production of the processed
wafers for the design house. The foundry has no right to
sell those wafers to any party other than the design
house unless the design house fails to pay for the
wafers. Once the design house takes possession of the
processed wafers, it arranges for the subsequent steps in
the production process. The design of the processed
wafer is not only an important part of the finished
product, it is a substantial element of production and
imparts the essential features of the product. The
design defines the ultimate characteristics and
performance of the subject merchandise and delineates the
purposes for which it can be used.
SRAMS Remand Response, Jt. App. Tab 7-A at JA-2603. Commerce
stated that it considered the foundry to be a subcontractor because
“it did not acquire ownership of the SRAM design or the design
mask, nor did it control the subsequent sale of the wafers.” Id.In Polyvinyl Alcohol from Taiwan, Commerce determined that
under one contractual arrangement, the manufacturer of the subject
merchandise, Chang Chun, was engaged as a toller or subcontractor,
and therefore was not the producer of the subject merchandise for
purposes of calculating export or constructed export price. The
contractor, DuPont, manufactured the primary input, shipped it to
Taiwan for processing by Chang Chun according to specifications
supplied by DuPont, and exported it from Taiwan back to the United
States and to third countries. See Polyvinyl Alcohol from Taiwan,
63 Fed. Reg. 6,526, 6,527 (Dep’t Commerce Feb. 9, 1998)
(preliminary results of antidumping duty administrative review);
Court No. 02-00112, 113, 114; Page 21
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Polyvinyl Alcohol Mem., Jt. App. Tab 7-F at JA-2727. Commerce
determined that under these circumstances, DuPont was the producer
of the subject merchandise. Polyvinyl Alcohol from Taiwan, 63 Fed.
Reg. at 6,527. Like the design house in SRAMS from Taiwan, DuPont
(1) coordinated all aspects of the production of the good and (2)
supplied materials to the subcontractor to be used in the
manufacturing process.11 See Polyvinyl Alcohol from Taiwan, 63 Fed.
Reg. at 6,527 (preliminary results of antidumping duty
administrative review); Polyvinyl Alcohol from Taiwan, 63 Fed. Reg.
at 32,817 (final results of antidumping duty administrative
review); Polyvinyl Alcohol Mem., Jt. App. Tab 7-F at JA-2727.
Finally, in Certain Forged Stainless Steel Flanges from India,
58 Fed. Reg. 68,853 (Dep’t Commerce Dec. 29, 1993) (notice of final
11
Notably, in a second contractual setting in Polyvinyl
Alcohol from Taiwan, Commerce determined that the same
manufacturer, Chang Chun, was the producer of the subject
merchandise, while the other company, Perry, was determined to be
an importer and reseller. See Polyvinyl Alcohol from Taiwan, 63
Fed. Reg. at 6,527. The contractual arrangement under which
Perry purchased and supplied input materials to Chang Chun was
altered only after a finding of sales at less-than-fair-value by
Chang Chun. Id. Perry purchased the inputs from a Chang Chun
affiliate and arranged for their delivery to Chang Chun. Id.
Perry did not and had never manufactured any chemicals or
chemical inputs; it was merely an importer and reseller. Id.
The crucial finding in Polyvinyl Alcohol from Taiwan was that,
under the circumstances, Perry had simply restructured its
payments to Chang Chun in an effort to circumvent the antidumping
duties. This is distinguishable from the instant case because
here the utility purchases the feedstock from a party unrelated
to the enricher, and therefore the purchase of the feedstock
confers no economic benefit on the enricher. The contract here
is not simply a restructured purchase contract.
Court No. 02-00112, 113, 114; Page 22
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
determination of sales at less than fair value), Commerce
determined that Akai, a contractor that did not engage in
manufacturing operations, was the producer of the subject
merchandise. Id. at 68,855. Akai “purchase{d} and maintaine{d}
title (during the entire course of production) to the raw materials
used for the production of the vast majority of the flanges,” and
also “direct{ed} and control{led} the manufacturing process” by
providing specifications for the finished merchandise. 58 Fed.
Reg. at 68,856. Commerce noted that “for the vast majority of the
flanges produced . . . Akai controls the costs for all elements
incorporated in the production of the flanges.” Id.
The circumstances of the instant case largely resemble the
tolling or subcontracting arrangements seen in these earlier
determinations. Like Akai in Certain Forged Stainless Steel
Flanges from India, the utilities direct and control the process of
producing the merchandise, i.e. nuclear fuel. See, e.g., Hrg.
Trans., Jt. App. Tab 6-A at 44-45. Using contractors at each step,
they coordinate the production of uranium, LEU, and fuel rods. Id.
As in Polyvinyl Alcohol from Taiwan, where the contracting company
provided the material to be processed, the utilities provide the
feed uranium to the enrichers and pay separately for the work
performed, measured in SWUs. The utilities, by supplying the feed
uranium, accept the risk of fluctuations in the price of UF6 and
can make the decision as to how much UF6 versus how many SWUs to
Court No. 02-00112, 113, 114; Page 23
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
purchase in a given transaction. See Pls.’ Opening Br. at 13 n.22
& sources cited therein. The contracts require the utility
customer to provide the quantity of feed necessary to produce the
desired quantity and assays of LEU. See, e.g., French CVD
Verification Exhibit C-1 (Oct. 23, 2001), [
], Jt.
App. Tab 4-A at JA-1507. As noted above, the utility customer
retains title to the feed uranium until it is enriched. See, e.g.,
Uranium Enrichment Services Contract between [ ] and
Urenco, Jt. App. Tab 3-F at JA-1364; USEC Property Tax Letter, Jt.
App. Tab 5-B at JA-1885-86 (noting that the utility customer is
responsible for paying property taxes due on feed uranium stored by
USEC on the utility’s behalf). Upon enrichment and delivery of
LEU, the title to the feed is considered extinguished and the
customer gains title to the LEU. Significantly, the contracts for
LEU state that once the separative work is performed and the LEU is
delivered, “the Feed Material shall be deemed to have been
enriched; whereupon {the utility customer} sha{ll} have title to
such {LEU} associated with such Feed Material and title to such
Feed Material will be extinguished.” Uranium Enrichment Services
Uranium Enrichment Services Contract between [ ] and
Urenco, Jt. App. Tab 3-F at JA-1364; see also Uranium Enrichment
Services Contract between [ ] and Urenco, Jt. App. Tab 3-G at JA-
Court No. 02-00112, 113, 114; Page 24
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
1399.12 These contractual provisions acknowledge the fungible
nature of feed uranium while establishing a legal fiction that the
enrichment process will be performed on the uranium provided by the
customer. The SWU contracts indicate that the provision of feed
uranium is not treated by the parties as a payment in kind, but the
provision of specific material, owned by the customer, to be
enriched. Accordingly, the contractual provisions, without more,
do not support Commerce’s interpretation that the provision of feed
uranium is substantively a payment in kind. See LEU from France,
66 Fed. Reg. at 65,884-85 (indicating that while Commerce
recognized that the provision of feed uranium under SWU contracts
“may not be a payment-in-kind in the formal sense,” it is
substantively a payment in kind and is part of an “arrangement
between buyer and seller . . . dedicated to the delivery of LEU”).
The designation by the utilities of particular assays for the
LEU and for uranium tails is analogous to DuPont’s provision of
specifications to Chang Chun in Polyvinyl Alcohol from Taiwan, and
to Akai’s control of the specifications in Certain Forged Stainless
Steel Flanges from India. The designation of quantities and assays
is based on (1) the design of the core reactor, which determines
12
Defendant United States cites NSK Ltd. v. United States,
115 F.3d 965, 975 (Fed. Cir. 1997), for the proposition that a
sale exists when there is “a transfer of ownership to an
unrelated party and consideration.” NSK Ltd., 115 F.3d at 975;
Def.’s Resp. at 58-59. As there is no finding that the
enrichers’ rights rise to the level of ownership, NSK is
inapplicable.
Court No. 02-00112, 113, 114; Page 25
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
the level of U235 needed by that reactor,13 and (2) the utility’s
needs at a particular time, depending on its operating cycle and
the amount of fuel that has been spent. See, e.g., AHUG
Intervention Mem. at 11. The utilities provide these
specifications to the enricher, which then produces LEU in the
required quantities and assays.
Commerce has previously indicated that control over the
specifications of the final product was sufficient control to be
considered a producer. Companies that did not engage in actual
manufacturing processes have previously been held to be producers
of subject merchandise. In SRAMS from Taiwan, discussed supra, the
design house subcontracted the manufacturing of the wafer to a
foundry. The design house created the design, retained ownership
of the design throughout the production process, and provided
manufacturing specifications to the foundry. SRAMS from Taiwan, 63
Fed. Reg. at 8,918 (“The design house . . . subcontracts the
production of processed wafers with a foundry and provides the
foundry with the design mask. It tells the foundry what and how
much to make.”) (quoting internal decision memorandum); see also
text pp. 18-20, supra. Commerce found that the design house was
13
AHUG states that “{t}he specific level of U235 needed is
determined by each utility, based on the reactor core design it
develops for its own reactors. In developing this design, the
utility determines the number of fresh fuel assemblies and
corresponding enrichment level necessary to produce the energy it
needs until the next scheduled refueling date.” AHUG
Intervention Mem. at 11.
Court No. 02-00112, 113, 114; Page 26
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
the producer of the wafers. Id. at 8,918-19.
In Certain Forged Stainless Steel Flanges from India, the
petitioners claimed that Akai, a company that did not engage in
manufacturing operations, could not be the producer of the subject
merchandise. 58 Fed. Reg. at 68,855. Commerce disagreed, stating
that Akai was the producer of the subject merchandise because in
addition to purchasing and retaining title to the raw materials
used to produce the “vast majority” of the flanges, Akai also
“direct{ed} and control{led} the manufacturing process insofar as
it determines the quantity, size, and type of flanges to be
produced.” 58 Fed. Reg. at 68,856. Commerce noted that “for the
vast majority of the flanges produced . . . Akai controls the costs
for all elements incorporated in the production of the flanges.”
Id. Similarly, in Certain Pasta from Italy, 63 Fed. Reg. 53,641,
53,642 (Dep’t Commerce Oct. 6, 1998) (preliminary results of new
shipper antidumping duty administrative review), Commerce
determined that the producer was a company that purchased all
inputs, paid the subcontractor a processing fee, and maintained
ownership of both the inputs and the final product at all times, as
well as marketed the product and conducted product testing and
marketing research.
Accordingly, if the text of 19 C.F.R. § 351.401(h) and
Commerce’s prior decisions were applied to the evidence on this
record, the SWU contracts would be treated as contracts for the
Court No. 02-00112, 113, 114; Page 27
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
performance of services, and the enrichers would be treated as
tollers and the utilities as the producers of LEU. Here, however,
Commerce determined that the enrichers were the producers, offering
three primary reasons for distinguishing this case from its prior
decisions in cases involving tolling services. First, the agency
asserted that “the enrichment process is such a significant
operation that it establishes the fundamental character of LEU.”
LEU from France, 66 Fed. Reg. at 65,884. Yet in earlier cases
involving tolling, it has also been the toller that created the
“essential character” of the finished good by transforming the raw
materials or inputs into the subject merchandise. In Polyvinyl
Alcohol from Taiwan, the subcontractor Chang Chun transformed the
material provided by DuPont into the final good, polyvinyl alcohol.
See 63 Fed. Reg. at 6,527 (“DuPont . . . produces the main input,
vinyl acetate monomer (‘VAM’), which it then ships to Taiwan.
Under contract with Chang Chun, the VAM is then converted into
subject merchandise.”). In Certain Pasta from Italy, the toller
manufactured the subject pasta from the inputs supplied by the
producer. See 63 Fed. Reg. at 53,642 (“Corex reports that it: (1)
purchases all of the inputs, (2) pays the subcontractor a
processing fee, and (3) maintains ownership at all times of the
inputs as well as the final product.”). Here, the enricher
transforms feed uranium into LEU. Yet, as in the earlier cases,
while its operations do create the “essential character” of LEU,
Court No. 02-00112, 113, 114; Page 28
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
the enricher does not acquire ownership over either the feed or the
final product, and neither its operations nor its pricing account
for the full value of the finished LEU.
Second, Commerce distinguished the instant case from prior
cases on the ground that “the enrichers control the production
process to such an extent that they cannot be considered tollers in
the traditional sense under the regulation.”14 LEU from France, 66
Fed. Reg. at 65,884. However, tollers normally, and in prior
cases, control the operational process by which they perform the
tolling services. Like the contractor Akai in Certain Forged
Stainless Steel Flanges from India, the utility controls the
specifications of the final product. See 58 Fed. Reg. at 68,856
(“{W}e have determined that Akai is the producer of this
merchandise. . . . Akai purchases and maintains title . . . to the
raw materials used for the production of the vast majority of the
14
Commerce based this distinction in part on its conclusion
that “{t}he most important factor in determining whether the
contract is fulfilled is whether the utilities receive the
precise amount of LEU that results from the application of the
SWU equation that is explicitly spelled out and agreed upon in
the SWU contract.” LEU from France, 66 Fed. Reg. at 65,884. In
fact, the substantive provisions of the contracts are fulfilled
by the purchase of the designated quantities of SWU, the
enrichment of the uranium to the specified assay, and delivery of
the LEU. See, e.g., Contract for Uranium Conversion and
Enrichment Services between [ ] and
Cogema, Inc., Jt. App. Tab 3-C at JA-1255-58; Contract for
Uranium Enrichment Services between [ ] and
Cogema, Inc., Jt. App. Tab 3-E at JA-1297, JA-1299, JA-1301, JA-
1303-05; Uranium Enrichment Services Contract between [
] and Urenco, Jt. App. Tab 3-F at JA-1356.
Court No. 02-00112, 113, 114; Page 29
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
flanges, and . . . directs and controls the manufacturing process
insofar as it determines the quantity, size, and type of flanges to
be produced.”). As in Certain Forged Stainless Steel Flanges from
India, the actual processes of creating the product are left within
the control of the toller. See id.
Third, Commerce stated that “utility companies do not maintain
production facilities for the purpose of manufacturing subject
merchandise.” LEU from France, 66 Fed. Reg. at 65,884. Yet under
the circumstances of this case, the fact that the utilities do not
maintain enrichment facilities does not appear to be significant.
Commerce itself acknowledged the expense and technological
sophistication involved in building and maintaining enrichment
facilities. See id. (noting that each of the two technologies for
enriching uranium feedstock, gaseous diffusion and centrifuge,
“requires a huge financial investment in facilities and a
technically skilled workforce. In fact, the centrifuge technology
has been years in the making and has required millions of dollars
in research. So highly specialized is it, and so expensive to
develop, that three major European governments combined their
resources to develop the technology and create Urenco.”).
Moreover, we note that the producers in SRAMS from Taiwan, Certain
Pasta from Italy, and Certain Forged Stainless Steel Flanges from
India did not maintain manufacturing facilities, and this fact did
not prohibit the application of the tolling regulation. See SRAMS
Court No. 02-00112, 113, 114; Page 30
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Remand Response, Jt. App. Tab 7-A at JA-2603; Certain Pasta from
Italy, 63 Fed. Reg. at 53,642; Certain Forged Stainless Steel
Flanges from India, 58 Fed. Reg. at 68,855. Finally, while the
enricher invests in the research and development necessary to
develop and maintain separation facilities, we note that the
foundry in SRAMS from Taiwan “conduct{ed} research and development
related to process technology,” but that this fact was not
“controlling to {Commerce’s} analysis.” SRAMS Remand Response, Jt.
App. Tab 7-A at JA-2606 n.3.
Commerce asserted in its final determination that “the overall
arrangement, even under the SWU contracts, is an arrangement for
the purchase and sale of LEU.” LEU from France, 66 Fed. Reg. at
65,884. However, under any tolling arrangement, the “overall
arrangement” is one for acquisition of a good, usually manufactured
by the toller. Yet Commerce has previously distinguished toll-
produced goods on the grounds that the toller does not acquire
ownership, and the toller’s price for its work does not represent
the full value of the good. See, e.g., SRAMS Remand Response, Jt.
App. Tab 7-A at JA-2603-04.
We cannot reconcile Commerce’s prior distinctions between
tolling services and sale of goods with the agency’s statements in
this case that EUP and SWU contracts are “functionally equivalent,”
and that “{i}t does not matter whether the producer/exporter sold
subject merchandise as subject merchandise, or whether the
Court No. 02-00112, 113, 114; Page 31
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
producer/exporter sold some input or manufacturing process that
produced subject merchandise, as long as the result of the
producer/exporter’s activities is subject merchandise entering the
commerce of the United States.” LEU from France, 66 Fed. Reg. at
65,879, 65,885. Commerce’s claim that the sole difference between
enrichment transactions and sales of LEU under EUP contracts is the
way such transactions are structured fails to take into account a
critical difference between the two transactions: what is
purchased.
Under EUP contracts, enrichers purchase their own uranium feed
and enrich it for sale to the utilities as a complete product.
Utilities pay the seller a price that reflects all elements of the
value of the LEU: the value of the natural uranium and the amount
of enrichment services, or SWU, performed.
Under SWU contracts, by contrast, the purchase price does not
include the full value of the merchandise involved. Most
significantly, such contracts do not include the cost or
responsibility for providing the uranium feed, and no payment for
the uranium is recognized on the enricher’s financial statements,
as would be the case if the enricher merely bought the uranium.15
15
The apparent reason for this structure is to allow a
utility to control costs by determining how much feedstock it
supplies, versus how many SWUs it pays for. See, e.g., Pls.’
Opening Br. at 10-12; AHUG Opening Br. at 11-12; Oral Arg. Trans.
at 50, 57-58. No benefit flows to the enricher from the
utility’s supplying the feedstock.
Court No. 02-00112, 113, 114; Page 32
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
These types of transactions thus do not contemplate the sale of a
complete product. Instead, enrichment contracts specify that the
only payment to be made by the utility is for the enrichment
services to be provided, on a price-per-SWU basis.16 While the SWU
prices may include certain incidental costs, they do not include
the significant cost of the natural uranium, which is approximately
35 percent of enriched uranium’s total value. See Petition, Jt.
App. Tab 2-A at JA-1016. Commerce has recognized that where the
16
For example, the Uranium Enrichment Services Contract
between [ ] and Urenco specifies as follows:
[
]
Uranium Enrichment Services Contract between [ ] and
Urenco, Jt. App. Tab 3-F at 1366. Further, the [ ]
under a Cogema enrichment contract provides as follows:
12.3 [
]
Uranium Enrichment Services Contract between [
] and Cogema, Inc., Jt. App. Tab 3-E at JA-1308.
Court No. 02-00112, 113, 114; Page 33
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
price paid for subject merchandise does not include the entire
value of such merchandise, but instead only that portion of the
value added by the services performed, there is no cognizable sale
under the antidumping duty law.17 Commerce’s decision in the SRAMS
Remand Response confirms this position. The statute requires a
comparison of “the price of the subject merchandise sold in the
U.S. to the price of the subject merchandise sold to the home or
third country markets, not the price of some processing of the
subject merchandise.” Polyvinyl Alcohol Mem., Jt. App. Tab 7-F at
JA-2730.
While Commerce correctly states that 19 C.F.R. § 351.401(h)
does not “exempt merchandise from {antidumping} proceedings,” LEU
from France, 66 Fed. Reg. at 65,880, the regulation is applicable
in determining who is the producer in order to determine export
price or constructed export price. Thus, a determination that the
enricher provides a tolling service would mean that the price
charged by the enricher to the utility for the enrichment cannot
form the basis of the export price for the purpose of determining
dumping margins.
It is well established that Commerce is authorized to depart
17
The record does not indicate that Commerce analyzed the
pricing provisions of the SWU contracts, or the structure of SWU
transactions, in order to distinguish them from the pricing or
transactional patterns found in the earlier cases involving
subcontracting or tolling arrangements and in which 19 C.F.R. §
351.401(h) was found to apply.
Court No. 02-00112, 113, 114; Page 34
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
from its prior practice as long as the agency articulates a
“reasoned analysis” which demonstrates that the departure is
supported by substantial evidence and in accordance with law.
Allegheny Ludlum Corp. v. United States, 24 CIT __, __, 112 F.
Supp. 2d 1141, 1147 (2000) (quoting Motor Vehicles Ass’n v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); see also
Asociacion Colombiana de Exportadores de Flores v. United States,
22 CIT 173, 184-85, 6 F. Supp. 2d 865, 879-80 (1998) (“Commerce has
the flexibility to change its position providing that it explain
the basis for its change and providing that the explanation is in
accordance with law and supported by substantial evidence.”).
Here, Commerce’s decision not to apply the tolling regulation to a
case that appears similar to earlier tolling cases, including SRAMS
from Taiwan and Polyvinyl Alcohol from Taiwan, represents a
departure from the practice authorized by a regulation “having the
force and effect of law.” Allied Signal Aerospace Co. v. United
States, 28 F.3d 1188, 1191 (Fed. Cir. 1994). As such, Commerce’s
decision requires a more persuasive explanation than provided in
the agency’s determinations.
In summary, Commerce’s determination that enrichers are
producers and not tollers is against the weight of the evidence on
the record and inconsistent with both the agency’s regulations and
its prior decisions involving tolling services. Commerce’s reasons
for distinguishing the instant case, and consequently for declining
Court No. 02-00112, 113, 114; Page 35
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
to apply the tolling regulation, are not persuasive. Thus,
Commerce’s decision to treat these contracts as contracts for sales
of a good is neither supported by substantial evidence nor in
accordance with law.
II. Industry Support
In determining that the antidumping and countervailing duty
petitions regarding low enriched uranium had the requisite industry
support, Commerce determined that enrichers, but not utilities,
were producers of the subject merchandise.18 See Low Enriched
18
19 U.S.C. § 1673a(b)(1) provides that
{a}n antidumping proceeding shall be initiated whenever
an interested party described in subparagraph (C), (D),
(E), (F), or (G) of section 1677(9) of this title files
a petition with the administering authority, on behalf
of an industry, which alleges the elements necessary
for the imposition of the duty imposed by section 1673
of this title . . . .
19 U.S.C. § 1673a(b)(1).
19 U.S.C. § 1677(9) defines “interested party” as:
(A) a foreign manufacturer, producer, or exporter, or
the United States importer, of subject merchandise
or a trade or business association a majority of
the members of which are producers, exporters, or
importers of such merchandise,
. . . .
(C) a manufacturer, producer, or wholesaler in the
United States of a domestic like product,
(D) a certified union or recognized union or group of
workers which is representative of an industry
engaged in the manufacture, production, or
wholesale in the United States of a domestic like
product,
Court No. 02-00112, 113, 114; Page 36
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Uranium from France, Germany, the Netherlands, and the United
Kingdom, 66 Fed. Reg. 1,080, 1,081 (Dep’t Commerce Jan. 5, 2001)
(notice of initiation of antidumping duty investigations)
(“Antidumping Initiation Notice”). Consequently, Commerce
determined that petitioner USEC, as the sole domestic producer of
LEU, “established industry support representing over 50 percent of
total production of the domestic like product,” and therefore the
industry support requirement was fulfilled. Id.Commerce employed a six-factor test used by the International
Trade Commission to determine whether a company may be considered
a “member of the domestic industry.” Dep’t Commerce Mem. from
Melissa G. Skinner to Holly A. Kuga, Determination of Industry
Support for the Antidumping and Countervailing Duty Petitions on
. . . .
(F) an association, a majority of whose members is
composed of interested parties described in
subparagraph (C), (D), or (E) with respect to a
domestic like product . . . .
19 U.S.C. § 1677(9).
In order to determine that a petition has the requisite
industry support, Commerce must find that
(i) the domestic producers or workers who support
the petition account for at least 25 percent of the
total production of the domestic like product, and
(ii) the domestic producers or workers who support
the petition account for more than 50 percent of the
production of the domestic like product produced by
that portion of the industry expressing support for or
opposition to the petition.
19 U.S.C. § 1673a(c)(4)(A).
Court No. 02-00112, 113, 114; Page 37
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Low Enriched Uranium from France, Germany, the Netherlands, and the
United Kingdom, Jt. App. Tab 1-A at JA-0007-08 (Dec. 27, 2000)
(“LEU Industry Support Mem.”). The test “focuses upon ‘the overall
nature’ of production-related activities in the United States, to
determine whether production operations are sufficient for a
company to be considered a member of the domestic industry.” Id.
at JA-0008.
Commerce determined that the utilities were not producers of
LEU because
{t}hese companies do not engage in any type of
manufacturing activities related to the production of
LEU: they make no claim to have any LEU manufacturing
operations; no capital investment in production
facilities; they add no value to the product through the
performance of any manufacturing operations; and have no
employees dedicated to manufacturing.
Id. (citing Brother Industries, Ltd. v. United States, 16 CIT 1106(1992) aff’d, 1 F.3d 1253 (Fed. Cir. 1993)). Rather, Commerce
determined that the utility companies are “purchasers and
industrial users of LEU.” Id.Commerce further asserted that the tolling regulation, 19
C.F.R. § 351.401(h), does not apply to determine who is a producer
for the purposes of industry support. See LEU Industry Support
Mem., Jt. App. Tab 1-A at JA-0006. Commerce stated that
we do not interpret section 351.401(h) . . . to be
applicable to our determinations on industry support.
Instead, . . . we find that section 351.401, including
subsection (h) on tolling, was intended to “establish
certain general rules that apply to the calculation of
export price, constructed export price, and normal
Court No. 02-00112, 113, 114; Page 38
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
value,” and not for purposes of determining industry
support. . . . Our interpretation that the tolling
regulation is intended for purposes of calculating
antidumping margins is further supported by the absence
of any parallel provision on tolling in the CVD
regulations.
Id. (internal footnotes omitted).
Commerce further noted that
In practice, moreover, the Department has never applied,
nor relied upon, section 351.401(h) to determine industry
support, with good reason. The purpose of the tolling
regulation is to identify the party responsible for
setting the price of subject merchandise sold to the
United States. . . . By contrast, to determine industry
support, the Department seeks to identify the entity or
entities (or workers) that are engaged in the production
or manufacture of the identical merchandise set forth in
the petition. Thus, identifying the seller for purposes
of respondent selection and identifying the domestic
producers for purposes of industry support are separate
questions that require different examinations for
different purposes.
Id. at JA-0007.
Commerce’s decision not to apply the tolling regulation to
determine who is a producer in connection with its industry support
determination is based on the agency’s assessment of the purpose
and context of the regulation. The Court acknowledges that the
purpose of the tolling regulation is accurate calculation of export
or constructed export price, and that the regulation does not arise
in connection with the industry support determination. However, it
is unclear from Commerce’s explanation why the definition of
“producer,” a term that is not statutorily defined, should differ
between one subsection of the statute and another. Furthermore, it
Court No. 02-00112, 113, 114; Page 39
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
appears incongruous that Commerce may determine that the utility
companies are not producers of LEU for the purpose of the industry
support determination, but subsequently may determine, as a result
of applying the tolling regulation, that the same companies are
producers for the purpose of determining export price or
constructed export price.19 Where a term appears in multiple
subsections within a statute, we “presume that Congress intended
that the term have the same meaning in each of the pertinent
sections or subsections of the statute, and we presume that
Congress intended that Commerce, in defining the term, would define
it consistently.” SKF USA Inc. v. United States, 263 F.3d 1369,
1382 (Fed. Cir. 2001). Commerce is permitted to apply different
definitions of such a statutory term only if it provides “an
explanation sufficient to rebut this presumption.” Id.Consequently, as the Court is remanding the Department’s
19
When making an industry support determination, Commerce
identifies the producers that make up the domestic industry. 19
U.S.C. § 1673a(c)(4); 19 U.S.C. § 1677(4)(A) (“The term
‘industry’ means the producers as a whole of a domestic like
product, or those producers whose collective output of a domestic
like product constitutes a major proportion of the total domestic
production of the product.”). When Commerce identifies the
producer of subject merchandise for the purpose of determining
export price or constructed export price and calculating the
dumping margin, the agency is identifying a seller in the
ordinary course of trade. See 19 U.S.C. § 1677b. Although we do
not reach this issue, it would seem that if the word "producer"
were to have a different definition in the context of the
industry support determination than in the context of the export
price determination, the industry support definition should be
the more inclusive, not the more exclusive, because the purpose
of the provision is to identify the industry as a whole.
Court No. 02-00112, 113, 114; Page 40
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
determination for reconsideration of its decision not to apply the
tolling regulation, Commerce also will have the opportunity to
reconsider the effect of the tolling regulation on its industry
support determination. If Commerce finds that the tolling
regulation applies here, the agency must consider whether those
entities determined to be “producers” under the tolling regulation
are also “producers” for purposes of the industry support
determination. Should Commerce determine that this is not the
case, and that, in effect, a different definition of “producer”
applies in the industry support context than in the context of the
export price calculation, the agency is directed to articulate an
appropriate basis for such a conclusion.
III. Applicability of the Countervailing Duty Statute
In deciding to apply the countervailing duty law to the
subsidies it found to have benefitted Plaintiffs during the period
of investigation, Commerce, relying on the same rationale it
employed in applying the antidumping duty law, determined that
because LEU was entering the United States for consumption, that
merchandise was subject to countervailing duties:
Similarly, in conducting countervailing duty
investigations, {19 U.S.C. § 1671(a)(1)} requires the
Department to impose duties if, inter alia, “the
administering authority determines that the government of
a country or any public entity within the territory of a
country is providing, directly or indirectly, a
countervailable subsidy with respect to the manufacture,
Court No. 02-00112, 113, 114; Page 41
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
production, or export of a class or kind of merchandise
imported, or sold (or likely to be sold) for importation,
in the United States.” We believe the statute is clear
that, where merchandise from an investigated country
enters the commerce of the United States, the law is
applicable to such imports.
LEU from France, 66 Fed. Reg. at 65,879. Commerce went on to note
that “under the countervailing duty law, {19 U.S.C. §
1677(5)(E)(iv)} defines as a benefit the purchase of goods for more
than adequate remuneration. Because we have determined that SWU
contracts involve the purchase of LEU, we determine that these
transactions constitute the purchase of goods.” Id. at 65,883
n.7; see also 19 U.S.C. § 1677(5)(E)(iv).
We have already determined that Commerce’s determination
regarding the “functional equivalency” of EUP and SWU contracts is
not supported by the record. Accordingly, we cannot sustain the
Department’s determination that for the purposes of applying the
countervailing duty statute, SWU contracts involve the purchase of
LEU. Upon remand, the Department will have the opportunity to
reconsider the application of its tolling regulations to the
transactions at issue here. The Department therefore must
reconsider its countervailing duty determinations in that context.
IV. Intervention of the Ad Hoc Utilities Group
Intervention in antidumping and countervailing duty actions
“is governed by Rule 24 of the Rules of this Court subject to the
Court No. 02-00112, 113, 114; Page 42
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
limitations in 28 U.S.C. § 2631(j).”20 Rhone Poulenc, Inc. v.
United States, 14 CIT 364, 365, 738 F. Supp. 541, 542 (1990)
(citing Manuli Autoadesivi, S.p.A. v. United States, 9 CIT 24, 25,
602 F. Supp. 96, 97-98 (1985)). Title 28 U.S.C. § 2631(j)(1)
provides that “{a}ny person who would be adversely affected or
aggrieved by a decision in a civil action pending in the Court of
International Trade may, by leave of court, intervene in such
action.” However, subsequent subparagraphs limit this right.
Title 28 U.S.C. § 2631(j)(1)(B) provides that, “in a civil action
under section 516A of the Tariff Act of 1930, only an interested
party who was a party to the proceeding in connection with which
the matter arose may intervene, and such person may intervene as a
matter of right.” Additionally, under section 2631, “‘interested
party’ has the meaning given such term in section 771(9) of the
Tariff Act of 1930.” 28 U.S.C. § 2631(k)(1). That section defines
“interested party” as, inter alia, “a trade or business association
a majority of whose members manufacture, produce, or wholesale a
domestic like product in the United States.” 19 U.S.C. §
1677(9)(E).
Intervention in an action before this Court implicates the
20
USCIT Rule 24 provides, inter alia, that a party may
intervene as of right in an action when it “claims an interest
relating to the property or transaction which is the subject of
the action and . . . the disposition of the action may as a
practical matter impair or impede the applicant’s ability to
protect that interest, unless the applicant’s interest is
adequately represented by existing parties.” USCIT R. 24(a).
Court No. 02-00112, 113, 114; Page 43
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Court’s jurisdiction and authority. Consequently, it is the Court
that determines who is an “interested party” for the purpose of
intervention. As noted in Zenith Radio Corp. v. United States,
“{t}here is no presumption of standing in an area where Congress
has provided explicit instructions on the subject.” 5 CIT 155, 156
(1983) (internal citation omitted). Furthermore, as the Court
observed, Commerce’s decision to permit a party to participate in
its investigative process, “even if done in terms of recognizing
them as ‘interested parties,’ cannot control the Court’s
understanding of a matter primarily related to the invocation of
its powers of judicial review.” Id. “The agenc{y’s} receptiveness
to participation by various parties does not generate standing for
judicial review.” Id. (internal citation omitted). This Court’s
decision as to whether AHUG’s members are “interested parties” for
purposes of intervention in the instant action does not depend upon
the administrative determination as to the same question.21
21
The government directs the Court’s attention to Rhone
Poulenc, Inc. v. United States, 14 CIT 364, 738 F. Supp. 541(1990) in support of the proposition that this Court “is divided
with respect to the question whether the agencies or the Court
determines who is an ‘interested party who was a party to the
proceeding.’” Def.’s Resp. Opp’n AHUG Mot. Intervene at 11. In
Rhone Poulenc, the Court determined whether a party was “an
interested party who was a party to the proceeding,” as required
by 28 U.S.C. § 2631(j)(1)(B), by referring to Commerce’s
regulations governing who was a “party to the proceeding.” Rhone
Poulenc, 14 CIT at 365, 738 F. Supp. at 542. In Zenith Radio
Corp., the Court denied a motion for intervention after
determining that the applicants did not meet the statutory and
regulatory definitions of interested parties. 5 CIT at 157. The
applicants claimed that because the administrative agency had
Court No. 02-00112, 113, 114; Page 44
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
AHUG participated in the administrative proceedings at issue
here pursuant to 19 C.F.R. § 351.312, which permits “industrial
users” of subject merchandise to submit “relevant factual
information and written argument” to Commerce. 19 C.F.R. §
351.312(b).22 However, no provision of the statutes or regulations
accepted their participation in its proceeding, they had standing
to intervene in the action before the Court. The Court’s
decision in Zenith clarifies that, while the Court will look to
the relevant statutes and regulations in determining who is
eligible to bring or intervene in an action, the actions of the
agency cannot bind the Court in connection with its determination
of standing and the exercise of its jurisdiction. Consequently,
there is no conflict between the Court’s decisions in Rhone
Poulenc and in Zenith Radio Corp.
22
Section 351.312 permits industrial users to “submit
relevant factual information and written argument” under §§
351.218(d)(3)(ii), (d)(3)(vi), and (d)(4), addressing sunset
reviews; §§ 351.301(b), (c)(1), and (c)(3), addressing time
limits; §§ 351.309(c) and (d), which permit “any interested party
or U.S. Government agency” (emphasis supplied) to submit written
argument in antidumping and countervailing duty proceedings; and
§ 351.309(e), which permits comments in connection with expedited
sunset reviews. 19 C.F.R. § 351.312(b). The most pertinent
section here is § 351.309, but it appears from the language of
the regulation that AHUG would have to be an “interested party”
within the meaning of the antidumping and countervailing duty
statutes in order to make a submission. However, it is unclear
why § 351.312 would grant the right to participate to “industrial
users,” who presumably are not “interested parties,” and yet
cross-reference another subsection requiring interested party
status.
As USEC points out in its brief, USEC did not object to
AHUG’s participation in the administrative proceeding as an
industrial user. See Resp. Br. of USEC Opp’n AHUG Mot. Intervene
at 5. Additionally, the briefs submitted by both USEC and the
Department of Justice in connection with AHUG’s motion to
intervene appear to assume that AHUG properly appeared in the
administrative proceeding below. As the regulation is unclear,
the Court will assume that AHUG properly participated in the
administrative proceeding under 19 C.F.R. § 351.312.
Court No. 02-00112, 113, 114; Page 45
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
indicates that participation in the administrative proceeding as an
“industrial user” is sufficient to meet the requirement of “party”
to the proceeding under 28 U.S.C. § 2631.
Furthermore, we note that even if AHUG is considered to have
been a “party” to the administrative proceeding within the meaning
of 28 U.S.C. § 2631(j)(1)(B), the association still must meet the
definition of “interested party,” as required by 28 U.S.C. §§
2631(j)(1)(B), 2631(k)(1). As noted earlier, “interested party” in
this context is defined as, inter alia, “a trade or business
association a majority of whose members manufacture, produce, or
wholesale a domestic like product in the United States.” 19 U.S.C.
§ 1677(9)(E); see also 28 U.S.C. § 2631(k)(1).
Although Commerce acknowledged that the utility companies were
“purchasers and industrial users of LEU,” the agency determined
they were not producers of LEU for purposes of industry support.
LEU Industry Support Mem., Jt. App. Tab 1-A at JA-0008. Yet as we
are remanding to Commerce the question of the applicability of the
tolling regulation, the question whether AHUG’s members are
“producers” of LEU within the meaning of the statute remains
unresolved. Moreover, as discussed earlier in this opinion,
application of the tolling regulation would result in a finding
that the utilities are producers of LEU. See supra text at 26-35;
19 C.F.R. § 351.401(h). Accordingly, AHUG’s members may be
“producers” within the meaning of 19 U.S.C. § 1677(9)and 28 U.S.C.
Court No. 02-00112, 113, 114; Page 46
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
§ 2631(k)(1).
Significantly, AHUG members, as purchasers and users of LEU,
could be adversely affected by a decision in the instant case. 28
U.S.C. § 2631(j). The association has actively participated, to
the extent permitted, throughout the administrative investigation,
and the views and concerns of AHUG’s members may offer valuable
insights in this litigation. Finally, AHUG’s claims raise
questions of law and fact common to those raised by the plaintiffs,
who are mandatory parties here.
As noted above, a decision by Commerce regarding a party’s
status for purposes of participation in the agency’s investigative
process “cannot control the Court’s understanding of a matter
primarily related to the invocation of its powers of judicial
review.” Zenith Radio Corp., 5 CIT at 156. Under the facts
presented in this case, because AHUG’s members may be “producers”
of LEU within the meaning of 19 U.S.C. § 1677(9) and 28 U.S.C. §
2631(k)(1), and therefore entitled to intervene as of right, we
will grant AHUG’s motion to intervene as an “interested party who
was a party to the proceeding in connection with which the matter
arose.” 28 U.S.C. § 2631(j)(1)(B).
Court No. 02-00112, 113, 114; Page 47
Consol. Court Nos. 02-00219, 221, 227, 229, and 233
Conclusion
In summary, we find that Commerce’s decision not to apply
the tolling regulation to the SWU contracts between enrichers and
utilities, as well as its industry support determination, were
neither supported by substantial evidence nor in accordance with
law. The Court remands these matters to Commerce for further
proceedings consistent with this opinion. Remand results are due
seventy-five days from the date of this decision. All parties
may file responses thereto within twenty days after the filing
thereof. All parties may reply to any responses within seven
days after the filing thereof. Finally, AHUG’s motion to
intervene in the instant action is granted.
________________________
Donald C. Pogue
Judge
________________________
Evan J. Wallach
Judge
________________________
Richard K. Eaton
Judge
Dated: March 25, 2003
New York, New York
ERRATUM
USEC Inc. v. United States, Court No. 02-00112; and Court Nos. 02-00113, 02-00114 and
Consol. Court Nos. 02-00219; 02-00221, 02-00227, 02-00229, and 02-00233, Slip Op.
03-34, dated March 25, 2003.
Page 1: The headnote summary should read as follows:
{Department of Commerce’s final determinations unsupported by substantial evidence on the
record and not in accordance with law, and remanded to Commerce for reconsideration.}
March 27, 2003.