CIT Holds Oral Argument on Calculation of Tier 2, Tier 3 Benchmarks for Phosphate Rock
In April 8 oral argument involving a large number of parties, Court of International Trade Judge Jane Restani said she thinks she knows how she’ll rule on a petitioner’s Tier 2 price benchmark question about whether Kazakh natural gas export prices are available to Russian purchasers (Archer Daniels Midland Co. v. United States, CIT # 23-00239).
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She also heard arguments regarding a Tier 3 benchmark dispute in the same case as she dealt with, among other things, the distinction between igneous and sedimentary phosphate rock.
The case contests the results of the Commerce Department’s 2020-21 countervailing duty review on Russian-origin phosphate fertilizers (see 2406060040). U.S. importer Archer Daniels Midland and sole respondent Apatit oppose the Tier 3 benchmark calculation by which Commerce valued an alleged benefit Apatit received from the Russian government’s grant of phosphate rock mining rights. The Mosaic Co. is pushing back against the Tier 2 benchmark calculation to value Apatit’s alleged reception of natural gas for less-than-adequate remuneration.
Restani told Mosaic’s attorney, Stephanie Hartmann, that she seemed to “have a winner” regarding the Tier 2 benchmark issue.
The department can use export prices from a third country -- in this case, Kazakhstan -- as a Tier 2 benchmark so long as that country’s export prices are available to purchasers in the country being examined -- in this case, Russia. Mosaic argued, and Restani seemed to agree, that the Kazakh refined natural gas prices Commerce selected weren’t available to Russian purchasers. Commerce based its choice of Kazakhstan on the fact that Russia’s natural gas energy provider bought raw natural gas from Kazakhstan and refined it, Hartmann said.
The distinction between raw and refined natural gas “means the world to me,” Restani told the government’s attorney, Sosun Bae.
“OK? It means everything to me,” the judge said. “It’s got to be the same product, at least. I mean, I actually think this is crazy.”
At the end of oral argument, she said she thinks she knows how she’s going to rule on “Mosaic’s issue.”
The parties also discussed Commerce’s Tier 3 benchmark calculation. Archer Daniels Midlands and Apatit both argued that the department should have included exports of phosphate rock from Togo and Iran in its calculation.
Commerce rejected the argument, saying that Togo and Iran only export phosphate rock made from sedimentary ore formations, whereas three countries it selected -- Brazil, Finland and South Africa -- export phosphate rock made from igneous ore formations. Had it included all five countries, the department would have calculated an average benchmark price of $77 per metric ton rather than $237 per metric ton, the parties said.
There are at least six different types of phosphate rock -- not two -- and they are produced using various different methods, said Archer Daniels Midland’s attorney, Warren Connelly. But Commerce, when selecting benchmark countries, only distinguished between igneous and sedimentary rock, he said. Production costs for the two are roughly the same, he noted.
Further, the department’s selection only covered .02% of all phophate rock being exported to Europe, said Jonathan Stoel, Apatit’s attorney. Stoel pointed out that CIT Judge Timonthy Stanceu recently ruled in a similar case that Commerce could base a phosphate rock benchmark on only one factor: the rocks’ bone phosphate of lime content, a quality measurement that the parties agreed was the “most important” consideration when comparing phosphate rock exports. It was unclear why Commerce didn’t do the same in this case, Stoel said.
Even if Restani did rule that only those three countries should have been included in the Tier 3 benchmark, Commerce shouldn’t have excluded a Harmonized Tariff Schedule code for South African phosphate rock exports, Stoel argued.
The exports fell under three codes, he said; two of which covered “natural calcium phosphates” and the third of which covered “phosphates of calcium.” He and Restani agreed that the product descriptions “seemed like they overlapped.” The vast majority of South African exports were classified under the third code, 2835.29.60, he said, but weren’t included in the benchmark price because Commerce only used the first two codes.
The two subheadings Commerce did use had already been identified as headings describing the product in question by the U.S. Geological Survey, Hartmann said.
“The problem is, is it different?” Restani asked. “It sounds to me the same. But, you know, I’m not a chemist here -- or a geologist, maybe it’s a geologist. It sounds the same to me. So it can’t just be that Commerce says, ‘Hey, the words are different, therefore we’re throwing it out.’ It must be that it is different in actuality.”
Hartmann said that Apatit had failed to provide record evidence indicating that the three headings were all comparable.
And attorney Maria Arboleda Gonzalez, also representing Apatit, argued that Commerce hadn’t calculated Apatit’s costs properly because it refused to include additional cost and selling expenses for a particular branch of the exporter even though that branch was focused solely on phosphate rock. The expenses could have been allocated to the sales of phosphate rock using the same method the department employed in a similar case involving Moroccan phopshate rock, she said.