CIT Upholds Commerce's Decision Not to Countervail Provision of Mining Rights in Morocco

Upholding parts and remanding parts of the 2020-21 CVD review on phosphate fertilizers from Morocco, Judge Timothy Stanceu also sustained Commerce's use of adverse facts available for OCP's failure to report a payroll tax refund and the agency's ability to request information from OCP on unspecified "other benefits" the company received. The judge only sent back Commerce's finding that Morocco's program for relief from tax fines and penalties is specific to OCP.

The lone issue to be remanded concerned the Moroccan tax program, through which the Moroccan government generally grants reductions in tax fines and penalties to taxpayers. OCP received reductions under the program, which Commerce found to be specific countervailable subsidies, on the theory that the company received a "disproportionately" large amount of the subsidy. The respondent received a share of reductions around 900 times larger than the average amount received by Moroccan firms.

OCP said the reductions are not specific, since it's a massive company and it merely received reductions to its tax burden that are proportionate to its size. Noting a separate CIT decision rejecting a "highly similar" specificity finding, Stanceu said Commerce "must distinguish between subsidies that are provided to or used by discrete segments of the economy and those, such as the program at issue, that distribute a benefit throughout the entire economy."

The agency's rejection of OCP's "relative size" arguments "defies logic and common sense," the court said. The agency failed to cite any evidence to back its claim that a "company’s total reduction in tax fines or penalties has no relationship to the total amount of its revenue or to the total taxes for which it is liable," the court said.

The Mosaic Co., the petitioner of the review, brought two main challenges of the review, one of which contested Commerce's finding that the provision of mining rights for phosphate rock didn't confer a benefit. In assessing this program, Commerce sought to assess whether the government price is in line with market principles, though it couldn't find a market price for mining rights or phosphate ore. Instead, the agency turned to market prices for beneficiated phosphate rock, an intermediate product OCP makes in the process of producing phosphate fertilizer.

The agency constructed a price at which OCP would have sold the beneficiated phosphate rock by performing a "build-up" made of OCP's direct production costs; its selling, general and administrative expenses; and profit, the court noted. Commerce then compared the constructed price with a calculated benchmark world market price, ultimately finding there to be no benefit to OCP.

Mosaic argued that Commerce should have excluded all, or nearly all, of OCP's "Headquarters, Support, and Debt costs" from the calculation, since they are "unrelated to phosphate rock mining and beneficiation." The agency described the HQ and support costs as being for insurance, HQ personnel who provide training to industrial personnel at the mines and electronic equipment. The agency said the debt costs are for the financing costs that are "routinely an essential part" of the capital-intensive activity of mining.

The petitioner claimed that these costs were unlawfully included in OCP's cost build-up. Stanceu said Mosaic "mischaracterizes" Commerce's actions, which only included in the build-up "an allocated portion of those costs." The judge noted that while OCP implied that these costs relate to phophate rock production in the "same proportion as did direct costs," which is an imprecise measure, "this shortcoming, standing alone, does not mean that the allocation method was unreasonable."

While Mosaic said Commerce should have put the burden on OCP to justify how each line item it sought to include in the build-up was relevant to phosphate rock production, Stanceu said this claim also "mischaracterizes" the agency's decision. Commerce didn't accept all of the costs and "allowed only an allocated portion of them," based on its finding that "certain costs that were recorded on a company-wide basis" were shown to be related to the production of beneficiated phosphate rock, and that company-wide "Headquarters, Support, and Debt costs" couldn't be segregated individually with respect to phosphate rock production -- meaning, an allocation method was required.

The court also found Mosaic guilty of engaging in speculation, when it claimed that some of the costs were incurred by separate legal entities that share an HQ address with OCP. The claim is "contradicted by the evidence that the costs at issue were recorded in OCP’s audited books and records," the judge added. Stanceu also said Mosaic engaged in speculation in claiming that the allocation "significantly overstates" OCP's debt costs by "omitting financial income."

Mosaic also argued that Commerce erred in calculating the world market price for beneficiated phosphate rock. To get this figure, the agency averaged price data from China, Syria and Egypt after finding that the bone phosphate of lime (BPL) content from these countries' beneficiated phosphate rock compared with the same product from Morocco.

The petitioner said the data from China and Syria was "distorted" due to steps from the Chinese government to restrict exports of phosphate rock and sanctions on the Syrian phosphate industry. Mosaic added that the Egyptian phosphate rock is of a lower quality, pointing to its inferior "minor element ratio." Stanceu rejected these claims, first finding that the arguments regarding the Chinese and Syrian data are entirely unsupported by record evidence. Similarly, the court said Mosaic failed to show that variances in minor element ratio levels required the agency to reject the Egyptian data.

Mosaic also argued that Commerce erred in not including data from Togo and Jordan, pointing to evidence on OCP's website showing it made phosphate rock with BPL levels comparable to those found in phosphate rock from Togo and Jordan. Stanceu again rejected the petitioner's claim, finding that "Commerce reasonably chose to rely upon the reported and verified data from the review rather than the website information," which was not tied to the review period.

Stanceu then upheld Commerce's decision not to countervail the provision of port services by Agence Nationale des Ports, the Moroccan port authority. The agency reviewed the methodology the authority uses when selling concession fees and found that the authority accounts for its "costs, revenues, and profits when it sets its prices." The court said the evidence Mosaic cites to the contrary doesn't "come close to demonstrating" that the authority didn't consider costs, revenues and profits in setting the fees for the concessions or in refuting evidence that OCP was the one operating three of the ports during the review period.

The court also rejected the respondent's claim that Commerce unlawfully used AFA for the exporter's failure to report a payroll tax refund it received. OCP said its failure to initially report the refund as a "recurring benefit" was an "inadvertent mistake" and should be characterized as a "minor correction." Stanceu held that the agency was on firm footing in finding the information to not be minor and in using AFA due to the company's failure to respond to the best of its ability.

(The Mosaic Co. v. United States, Slip Op. 25-34, CIT Consol. # 23-00246, dated 04/01/25; Judge: Timothy Stanceu; David Ross of Wilmer Cutler for plaintiff The Mosaic Company; William Isasi of Covington & Burling for plaintiff OCP S.A.; Jonathan Zielinski of Cassidy Levy for defendant-intervenor Moroccan government; Sosun Bae for defendant U.S. government)