CIT Upholds One Benchmark, Remands Another in Russian Fertilizer CVD Review
The Commerce Department properly set a global benchmark for measuring countervailing duty respondent JSC Apatit's purchases of subsidized natural gas, though it failed to support its benchmark for measuring a subsidy from the provision of phosphate ore mining rights, the Court of International Trade held on Feb. 6.
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In the 2020-21 administrative review of the CVD order on Russian phosphate fertilizers, Commerce found that the provision of phosphate ore mining rights and the provision of natural gas constituted countervailable subsidies.
For the phosphate ore mining rights program, the agency initially opted to use a tier-three, or global, benchmark, by comparing Apatit's "phosphate rock cost buildup to world market igneous phosphate rock export prices." For the natural gas subsidy, Commerce initially used a "tier-two benchmark" consisting of Kazakh natural gas export prices to measure the subsidy.
Judge Jane Restani previously remanded both benchmark selections (see 2505060055). The judge first held that Commerce unreasonably limited its phosphate rock benchmark to "phosphate rock from igneous ore reserves because Commerce failed to demonstrate that the phosphate rock market price is significantly driven by the difference in beneficiation processes of sedimentary and igneous phosphate rock."
On remand, Commerce stuck with its global benchmark and cited evidence purportedly showing that the costs to make phosphate rock from igneous and sedimentary ore reserves "differ significantly" (see 2508050059). Specifically, the agency relied on export prices from the Global Trade Atlas for Finland, Brazil and South Africa, and evidence from a report by Dr. Graham Davis and a book by professor Petr Ptacek.
Commerce said the Davis and Ptacek reports show that differences in "development costs of phosphate rock could result in significant differences in lease bonuses" and that Russian mining lease bonuses can't be compared with Jordan lease bonuses because Russian deposits are igneous and Jordanian deposits are sedimentary. In addition, the agency said the reports show that "calcination and organic acid leaching beneficiation processes are applicable to sedimentary with calcareous gangue ore but not to igneous ores."
The agency "extrapolated" from this evidence that major costs differ between the igneous and sedimentary production process and that these pricing differences will "logically impact" world market prices for phosphate rock.
Restani disagreed, finding that contrary to what Commerce said, "costs and profitability are not relevant for a tier-three, price-based benchmark if the price is driven by another factor." It's prices, "not costs per se," that's at issue, the judge noted. If the world market prices are driven by the bone phosphate of lime (BPL) content of beneficiated rock, then only BPL content differences matter in picking a benchmark, Restani said.
Much of Commerce's arguments center on the "relative costs to beneficiate igneous and sedimentary ore," but they "never get to the core issue" of BPL content differences.
Even assuming the cost to make igneous and sedimentary phosphate rock differs, "Commerce has not pointed to evidence on this record that these purported cost differences significantly drive the export prices of phosphate rock on the world market," the judge said. The agency didn't cite to any "significant record evidence that phosphate rock with similar BPL levels produced from igneous and sedimentary ore reserves have different export prices," Restani noted. It's not a "logical conclusion" from the evidence that higher costs of production necessarily means a good will sell at a higher price on the market, the judge said.
Restani also previously remanded Commerce's benchmark for Apatit's natural gas purchases. Originally, the agency used a tier-two benchmark based on Kazakh natural gas export prices, which the court remanded on the basis that Commerce failed to show that the "benchmark third-party sales it used were comparable to sales of gas into Russia." The judge added that Commerce didn't show that "sales to a government entity that distorts the natural gas market were within the intended meaning of 'purchaser' in the regulation."
On remand, the agency found that the raw natural gas exported by Kazakhstan isn't comparable to the "refined natural gas available in the Russian market" that Apatit bought from Russian government authorities during the review period. Commerce switched to using a global benchmark based on the "regional European Organization for Economic Cooperation and Development natural gas price from the International Energy Agency."
In one paragraph of analysis, Restani said Commerce "reasonably" found that the "raw natural gas imported from Kazakhstan was not comparable to JSC Apatit’s natural gas purchases." The result was that the CVD rate for the natural gas subsidy program jumped to 22.13%, and that Apatit's final CVD rate was increased to 49.64%.
(Archer Daniels Midland v. United States, Slip Op. 26-10, CIT # 23-00239, dated 02/06/26; Judge: Jane Restani; Attorneys: Warren Connelly of Trade Pacific for plaintiff Archer Daniels Midland Co.; Harold Kaplan of Hogan Lovells for plaintiff-intervenor Joint Stock Company Apatit; Sosun Bae for defendant U.S. government; Alexandra Maurer of WilmerHale for defendant-intervenor The Mosaic Co.)