CIT Rejects Commerce's Benchmarks for Phosphate Rock Mining Rights, Natural Gas Subsidies
The Commerce Department's selection of benchmarks in assessing the provision of phosphate rock mining rights and natural gas for less than adequate remuneration programs weren't supported by substantial evidence, the Court of International Trade held on May 6. Judge Jane Restani held that Commerce improperly excluded sedimentary phosphate rock in constructing the benchmark for the phosphate rock mining rights program and failed to show Kazakh natural gas would be available to Russian purchasers.
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In the decision, Restani sustained parts and remanded parts of the 2020-21 review of the countervailing duty order on phosphate fertilizer from Russia. The judge upheld Commerce's reliance on evidence from the 2021 calendar year in setting the phosphate rock benchmark and the agency's calculation of respondent Joint Stock Company Apatit's phosphate rock cost of sales plus profit by using the company's profit before tax calculation as opposed to its gross profit calculation.
The judge also sustained Commerce's use of adverse facts available on the question of whether Apatit's natural gas suppliers were government authorities due to the Russian government's failure to respond to questions on Apatit's reported suppliers.
Apatit contested the agency's tier three phosphate rock benchmark, which Commerce calculated by comparing the actual per-unit cost buildup for Apatit's beneficiate phosphate rock with a world market price for comparable rock. The agency said that the production process for phosphate rock from sedimentary reserves differs from the process for rock from igneous reserves, basing this conclusion on a report from a professor that identifies different steps to "mine and beneficiate each type of ore."
The court noted that this report "only spoke to the difference in the mining processes, not the difference in costs associated with mining the two kinds of phosphate rock."
Commerce only relied on export data from the Global Trade Analysis database for Brazil, South Africa and Finland, excluding data from the Eurostat database or for Togo and Iran due to the presence of phosphate rock made from sedimentary reserves.
While Restani said Commerce didn't illicitly fail to rely on all of the relevant necessary factors, the agency wasn't supported in differentiating the data by whether it came from sedimentary or igneous reserves. Commerce set a benchmark "that reflected only a tiny percentage of global phosphate rock exports," since it only looked at sedimentary rock.
While the size alone isn't the issue, the U.S. "failed to point to any record evidence to suggest that the phosphate rock market is driven by the difference between sedimentary and igneous rock." Instead of properly relying on evidence, the agency "constructed a chain of inferences without cited support to reach its conclusion that the benchmark should include only igneous rock," Restani said.
The judge also sent back the benchmark for the natural gas for LTAR program. The agency calculated a tier two benchmark using Kazakh natural gas data. Petitioner The Mosaic Co. pointed to three pieces of evidence showing that Kazakh natural gas "was not 'available' to purchasers in Russia within the meaning of Commerce's regulations," arguing that the gas Kazakh entities sold to the sole buyer in Russia, the state-owned Gazprom, wasn't the same type of gas bought by Apatit.
Restani held that the U.S. failed to show its benchmark was properly supported. The judge said it "does not seem reasonable to infer from the sale of Kazakh natural gas to a single government-owned entity -- the very entity that Commerce found distorts Russia’s domestic natural gas market in the first place -- that Kazakh natural gas would be available to 'purchasers'" in Russia.
The agency was instructed to address questions about the "comparability of the benchmark third-party sales and the sales into Russia," and why sales to a government entity that "distorts the market was within the meaning of 'purchaser' in the regulation."
Restani sustained the remaining issues in the case, which included Apatit's challenge to the agency's benchmark data only for 2021 despite the fact that the review period covered two months of 2020. The judge said Commerce's general practice is only to rely on "one year's worth of data when the POR extends into a second year by less than two months," adding that Apatit failed to point to any "persuasive reason why Commerce improperly relied on record evidence from only the 2021 calendar year."
The judge also upheld the use of AFA to find that Apatit's natural gas suppliers were government authorities in light of the Russian government's failure to submit information about them. While Apatit submitted information about its suppliers, this attempt to fill the "evidentiary gap" didn't "speak to each level of ownership between the supplier and its ultimate ownership." The Russian government failed to respond to the best of its ability, particularly in light of its only response to the agency's information request, which said that the Russian government is "trying" to get the information.
(Archer Daniels Midland Co. v. United States, Slip Op. 25-55, CIT # 23-00239, dated 05/06/25; Judge: Jane Restani; Attorneys: Warren Connelly of Trade Pacific for plaintiff Archer Daniels Midland Co.; Jonathan Stoel of Hogan Lovells for plaintiff-intervenor Joint Stock Company Apatit; Sosun Bae for defendant U.S. government; Stephanie Hartmann of Wilmer Culter for defendant-intervenor The Mosaic Co.)