USEC Inc. v. United States

2003 CIT 34

• Court: United States Court of International Trade
• Decided: March 25, 2003
• Docket: 02-00112,113,114 Consol. & 02-00219, 221, 227, 229, 233
• Status: Published

Opinion

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.,

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

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

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.