Mosaic Co. v. United States

647 F.Supp.3d 1358

The MOSAIC COMPANY, Plaintiff,PhosAgro PJSC, JSC Apatit, Consolidated Plaintiff,Industrial Group Phosphorite, LLC,Consolidated Plaintiff and Consolidated Plaintiff-Intervenor, v. UNITED STATES, Defendant,The Mosaic Company, Consolidated Defendant,PhosAgro PSJC, JSC Apatit, Industrial Group Phosphorite, LLC, Defendant-Intervenor

Slip Op. 23-99 Consol. Court No. 21-00117

United States Court of International Trade

July 11, 2023

Patrick James McLain, Wilmer, Cutler, Pickering, Hale and Dorr LLP, of Washington, DC, argued for Plaintiff The Mosaic Company. With him on the brief were David J. Ross, Stephanie Ellen Hartmann, and Natan Pinchas Lyons Tubman.

Ebonie I. Branch, Commercial Litigation Branch, U.S. Department of Justice, of Washington, DC, argued for the Defendant. With her on the brief were Brian M. Boynton, Patricia M. McCarthy, and L. Misha Preheim. Of counsel on the brief was Jared Michael Cynamon, Office of Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.

Jonathan T. Stoel and Cayla D. Ebert, Hogan Lovells US LLP, of Washington, DC, argued for Defendant-Intervenors PhosAgro PJSC and JSC Apatit. With them on the brief were H. Deen Kaplan, Jared Wessel, and Maria A. Arboleda.

Jeremy W. Dutra, Squire Patton Boggs (US) LLP, of Washington, DC, argued for Defendant-Intervenor Industrial Group Phosphorite, LLC. With him on the brief was Peter Koenig.

OPINION AND ORDER

Restani, Judge:

Before the court are the remand results of the United States Department of Commerce ("Commerce") pursuant to the court's order in Mosaic Co. v. United States, 46 CIT —, 589 F. Supp. 3d 1298 (2022), in the countervailing duty ("CVD") investigation of phosphate fertilizers from the Russian Federation ("Russia") covering the period from January 1, 2019, through December 31, 2019. See Redetermination Pursuant to Court Remand Order, ECF Nos. 96-97 ("Remand Results"). Plaintiff The Mosaic Company ("Mosaic") and Consolidated Plaintiff PhosAgro PJSC and JSC Apatit, cross-owned, (collectively, "PhosAgro")¹ challenge the Remand Results as unsupported by substantial evidence or otherwise not in accordance with law. The United States ("Government") asks that the court sustain Commerce's Remand Results.

BACKGROUND

While the court presumes familiarity with the facts as set out in Mosaic, the court briefly summarizes the relevant record evidence for ease of reference. After Mosaic filed a CVD petition on June 26, 2020, concerning imports of phosphate fertilizers from Russia, Commerce initiated the investigation on July 23, 2020. Petitions for the Imposition of Countervailing Duties: Phosphate Fertilizers from Morocco and Russia, P.R. 1-8, C.R. 1-8 (June 26, 2020); Phosphate Fertilizers From the Kingdom of Morocco and the Russian Federation: Initiation of Countervailing Duty Investigations, 85 Fed. Reg. 44,505 (Dep't Commerce July 23, 2020). On August 4, 2020, the U.S. International Trade Administration selected LLC Industrial Group Phosphorite ("EuroChem")² and PhosAgro (collectively, "Mandatory Respondents") as mandatory respondents in this investigation. See Countervailing Duty Investigation of Phosphate Fertilizers from Russia: Respondent Selection, P.R. 55, C.R. 23 (Aug. 4, 2020).

Commerce published its preliminary results on November 30, 2020, see Phosphate Fertilizers From the Russian Federation: Preliminary Affirmative Countervailing Duty Determination, 85 Fed. Reg. 76,524 (Dep't Commerce Nov. 30, 2020), along with the accompanying Decision Memorandum for the Affirmative Preliminary Determination of the Countervailing Duty Investigation of Phosphate Fertilizers from the Russian Federation, C-821-825, POR 1/1/2019-12/31/2019 (Dep't Commerce Nov. 23, 2020).

Commerce published its final determination on April 7, 2021. See Phosphate Fertilizers From the Kingdom of Morocco and the Russian Federation: Countervailing Duty Orders, 86 Fed. Reg. 18,037 (Dep't Commerce Apr. 7, 2021); see also Issues and Decision Memorandum for the Final Affirmative Determination of the Countervailing Duty Investigation of Phosphate Fertilizers from the Russian Federation, C-821-825, POR 1/1/2019-12/31/2019 (Dep't Commerce Feb. 8, 2021) ("IDM").

In Mosaic, the court sustained aspects of Commerce's tier-three benchmark calculation for natural gas. 589 F. Supp. 3d at 1314-15. The court remanded the matter, however, for Commerce to: (1) adjust the final total sales calculation for EuroChem; (2) either remove the added value-added tax ("VAT") and import duties from the natural gas benchmark price or offer further explanation as to why there was no double counting; and (3) either abandon the cut-off date methodology and countervail mining right licenses for phosphate rock or explain what specific reforms justified the market economy cut-off date for valuing mining rights in Russia. Id. at 1315-24.

Following remand, Commerce: (1) adjusted the total sales calculation for EuroChem;³ (2) removed the added VAT and import duties from the natural gas benchmark; and (3) countervailed recurring subsidies from phosphate rock mining licenses prior to April 1, 2002, after dropping the cut-off date, under protest. Remand Results at 1-2.

At issue in this case is the calculation of the benefit received by Mandatory Respondents for two inputs: natural gas and phosphate rock. The Remand Results do not adequately address all of the court's concerns in Mosaic and the Remand Results are not supported by substantial evidence. Accordingly, the court once again remands with further instructions.

JURISDICTION & STANDARD OF REVIEW

The court's jurisdiction continues pursuant to 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C. § 1581(c). The court sustains Commerce's final redetermination results unless they are "unsupported by substantial evidence on the record, or otherwise not in accordance with law[.]" 19 U.S.C. § 1516a(a)(2)(B)(i). "The results of a redetermination pursuant to court remand are also reviewed for compliance with the court's remand order." U.S. Steel Corp. v. United States, 41 CIT —, —, 219 F. Supp. 3d 1300, 1307 (2017) (internal quotations and citations omitted).

DISCUSSION

I. Tier-Three Natural Gas Benchmark

To calculate the benefit for the ad valorem subsidy rate, Commerce utilized a tier-three benchmark to assess the unsubsidized value of natural gas used by EuroChem and PhosAgro. See IDM at 53. Commerce adopted Mosaic's proposed International Energy Agency ("IEA") data regarding European countries' natural gas prices to calculate the benchmark. See IDM at 53-54; see also Letter from Wilmer Cutler Pickering Hale and Dorr LLP to Sec of Commerce Pertaining to Mosaic Benchmark Submission, Mosaic Russia at Ex. 14, Part II.B, P.R. 245 (Nov. 2, 2020) ("Petitioner's Benchmark Submission"). The IEA data included EU export VAT in the proposed benchmark price data. Id. Because the government of Russia ("GOR") reported that natural gas imports would be subject to a 20% VAT and 5% import duty, Commerce added those same escalators to the benchmark price. IDM at 57.

The court sustained much of Commerce's determination, but remanded Commerce's adjustments that added Russian VAT and import duties that reflected duties that would be imposed on natural gas imported into Russia. Mosaic, 589 F. Supp. 3d at 1315. The court was concerned that Commerce may have double counted VAT because the IEA data included European export VAT, and Commerce added an additional import-specific 20% VAT and 5% import duty. See id.; see also Petitioner's Benchmark Submission at Ex. 14; IDM at 57. Further, the court observed that 19 C.F.R. § 351.511(a)(2)(iv), the regulation authorizing Commerce to add "delivery charges and import duties" to a benchmark price, expressly applied only to tier-one and tier-two benchmarks. See Mosaic, 589 F. Supp. 3d at 1315. As a result, the court remanded to Commerce to either remove the added VAT and import duties or explain why it was reasonable to add the duties and confirm that there was no double counting. Id.

On remand, Commerce explained that the regulations do not prescribe a specific methodology for tier-three benchmarks because different methodologies might be necessary to fit different fact patterns. Remand Results at 10-11. Because Commerce was using the IEA data as a proxy for a market-determined price, Commerce continued to find that it would be appropriate to include VAT and import duties when they would be applied if the respondent imported the natural gas from the world market. Remand Results at 11. Commerce, however, removed the VAT and import duties because the IEA data already included European export VAT and other taxes in order for Commerce to avoid the possibility of double counting. Remand Results at 11. Specifically, Commerce found that the "total price" data included "total tax" figures that were "VAT and, in some cases, other taxes such as excise taxes." Remand Results at 17. Thus, Commerce concluded that the reasonable approach to address the ambiguity was to remove the import-specific 20% VAT and 5% import duty to avoid potential double-counting taxes. Remand Results at 18.

A foreign government's provision of goods to a respondent for LTAR constitutes a benefit. 19 U.S.C. § 1677(5)(E)(iv). In such circumstances, Commerce determines the amount of the subsidy by comparing remuneration actually paid to a market-determined price for the goods or services, under "a three-tiered hierarchy" employed by Commerce "to determine the appropriate remuneration benchmark." Changzhou Trina Solar Energy Co. v. United States, 42 CIT —, —, 352 F. Supp. 3d 1316, 1332 (2018); see 19 C.F.R. § 351.511(a)(2)(i)-(iii).

In the absence of a tier-one benchmark, Commerce turns to a tier-two benchmark "by comparing the government price to a world market price where it is reasonable to conclude that such price would be available to purchasers in the country in question." 19 C.F.R. § 351.511(a)(2)(ii). "In measuring adequate...