Eurodif S.A. v. U.S.

• Decision Date: 03 March 2005
• Docket Number: No. 04-1210.,No. 04-1209.,04-1209.,04-1210.
• Citation: 411 F.3d 1355
• Parties: EURODIF S.A., Compagnie Generale Des Matieres Nucleaires, and Cogema, Inc., Plaintiffs-Appellants, and Ad Hoc Utilities Group, Plaintiff-Appellant, v. UNITED STATES, Defendant-Cross Appellant, and USEC Inc. and United States Enrichment Corporation, Defendants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

411 F.3d 1355

EURODIF S.A., Compagnie Generale Des Matieres Nucleaires, and Cogema, Inc., Plaintiffs-Appellants, and Ad Hoc Utilities Group, Plaintiff-Appellant, v. UNITED STATES, Defendant-Cross Appellant, and USEC Inc. and United States Enrichment Corporation, Defendants-Cross Appellants.

No. 04-1209.

No. 04-1210.

United States Court of Appeals, Federal Circuit.

March 3, 2005.

Stuart M. Rosen, Weil, Gotshal & Manges LLP, of New York, New York, argued for plaintiffs-appellants Eurodif S.A., et al. With him on the brief were Gregory Husisian, of Washington, DC, and Jennifer J. Rhodes, of New York, New York.

Nancy A. Fischer, Shaw Pittman LLP, of Washington, DC, argued for plaintiff-appellant AD HOC Utilities Group. With her on the brief were Stephan E. Becker, Sanjay J. Mullick, and Joshua D. Fitzhugh.

Stephen C. Tosini, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-cross appellant United States. On the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and Jeanne E. Davidson, Deputy Director. Of counsel on the brief were John D. McInerney, Chief Counsel, Berniece A. Browne, Senior Counsel, and Robert L. Lafrankie, Senior Attorney, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.

Sheldon E. Hochberg, Steptoe & Johnson LLP, of Washington, DC, argued for defendants-cross appellants USEC Inc., et al. With him on the brief were Richard O. Cunningham, Eric C. Emerson, Matthew S. Yeo, Evangeline D. Keenan, and Alexandra E.P. Baj.

Before BRYSON, Circuit Judge, PLAGER, Senior Circuit Judge, and PROST, Circuit Judge.

PROST, Circuit Judge.

This interlocutory appeal comes to us from the United States Court of International Trade, which certified four separate questions for appeal to this court. The Ad Hoc Utilities Group ("AHUG"), Eurodif S.A. ("Eurodif"), Compagnie Generale des Matieres Nucleaires ("CGMN") and Cogema, Inc. appeal two issues from the Court of International Trade. The United States, USEC, Inc. and the United States Enrichment Corporation (the latter two collectively referred to as "USEC" in this opinion) cross-appeal two issues. We affirm the Court of International Trade's decision affirming the Department of Commerce's ("Commerce") industry support determination. We also affirm the court's decision that uranium enrichment contracts constitute a provision of services, rather than a sale of goods. Finally we reverse the court's decision regarding subsidies, and hold that overpayment for uranium enrichment services by foreign government entities cannot constitute a countervailable subsidy. Because we need not review the court's decision regarding Commerce's application of the tolling regulation in the context of export price determination, we decline to do so.

BACKGROUND

Enriched uranium fuel rods are used by the utility industry to generate nuclear power. The process of producing those rods involves multiple steps. First, uranium ore must be mined. Second, the ore must be milled or refined into concentrated uranium. Third, that concentrated uranium must be converted into uranium hexafluoride. Fourth, that uranium hexafluoride must be enriched into low enriched uranium ("LEU"). Fifth, and finally, LEU is used to fabricate uranium rods. This case involves the fourth step in the process of creating uranium rods — the enrichment of uranium hexafluoride into LEU.

Many utilities in the United States contract to buy uranium from a third-party seller and then contract to have that uranium enriched by a uranium enricher. Only one entity in the United States enriches uranium into LEU — USEC, formerly an arm of the federal government. A variety of foreign enrichers, including Eurodif, CGMN and Cogema, compete with USEC and also enrich the uranium of American utility companies.¹

Contracts for enriched uranium come mainly in two different forms. The first form involves contracts that provide money for the sale of enriched uranium, otherwise known as enriched uranium product, or EUP, contracts. The second form, the form relevant to this appeal, involves the transfer of unenriched uranium by a buyer to an enricher and the purchase of separative work units ("SWU") from the enricher. In these SWU contracts, the enricher enriches the unenriched uranium and delivers LEU to the purchaser. Although the enricher may not necessarily produce a particular utility's LEU from the uranium that utility provides to the enricher, the utility retains title, during the enrichment process, to the quantity of unenriched uranium that it supplies to the enricher.

In most of the transactions relevant to this case, AHUG and American utilities entered into SWU contracts with European enrichers. These utilities compensated enrichers to process unenriched uranium into LEU. In another critical transaction, a partially public French utility, Electricite de France ("EdF"), entered into an SWU contract with French enricher Eurodif. In that contract, EdF allegedly paid Eurodif greater than adequate compensation for the enrichment of uranium.

On December 7, 2000, USEC petitioned Commerce to undertake an antidumping and countervailing duty investigation focusing on LEU coming from France, Germany, the Netherlands, and the United Kingdom. On December 21, 2001, Commerce issued its final determinations in that investigation. Those determinations focused on two main issues: (1) whether SWU contracts were contracts for the sale of goods and not services and, therefore, subject to U.S. antidumping and countervailing duty statutes, and (2) whether domestic utilities or foreign enrichers were "producers" of LEU for the purposes of determining whether or not there was sufficient industry support to begin an antidumping and countervailing duty investigation in the first place. In its final determinations, Commerce concluded that SWU contracts are contracts for the sale of goods and not services. It also decided that the foreign enrichers of uranium, and not the domestic utilities, were "producers" of LEU.

AHUG and the foreign enrichers party to this case appealed Commerce's determination to the Court of International Trade, arguing that a uranium enrichment contract is a contract for the provision of services and not the sale of goods and, therefore, not subject to federal antidumping and countervailable subsidy statutes. AHUG also disputed Commerce's contention that only the foreign enrichers are "producers" for domestic industry support determination purposes, arguing that Commerce's determination that foreign enrichers were "producers" of LEU was inconsistent with its prior decisions. AHUG further contended that if the domestic utilities are considered producers of LEU, Commerce would not have sufficient domestic industry support to commence an investigation pursuant to 19 U.S.C. § 1673a(c)(4).

The Court of International Trade agreed with AHUG and determined that Commerce's characterization of the enrichment contracts between AHUG and foreign enrichers as contracts for the sale of goods was not sustainable. USEC Inc. v. United States, 259 F.Supp.2d 1310, 1324-26 (Ct. Int'l Trade 2003) ("USEC I"). It also found that Commerce's determination that the foreign enrichers were "producers" of LEU was against the weight of the evidence and inconsistent with prior Commerce decisions. Id. at 1317-26. As a result, the court remanded the case to allow Commerce to reconsider its determinations.

In its remand determination, Commerce reiterated its original positions. Final Remand Determination, USEC Inc. and United States Enrichment Corp. v. United States (June 23, 2003) ("Remand Determination"). AHUG and the foreign enrichers then appealed that remand determination to the Court of International Trade. In its second consideration of Commerce's determinations, the court concluded that (1) Commerce's interpretation of the word "producer" in the context of making an industry support determination was reasonable and in accordance with law; (2) uranium enrichment contracts were contracts for services and not for goods; (3) payment by a foreign government entity of more than adequate remuneration to a foreign enricher for enrichment services qualified as a countervailable subsidy; and (4) Commerce's interpretation of the word "producer" for the purposes of making an export price determination was inconsistent with its previous determinations in other cases and thus not in accordance with law. USEC Inc. v. United States, 281 F.Supp.2d 1334 (Ct. Int'l Trade 2003) ("USEC II").

Because the resolution of the issues decided by the court in USEC II are potentially dispositive of this entire case, the Court of International Trade certified four specific questions for appeal to this court. The four certified questions are:

(1) Whether Commerce's decision not to apply its tolling regulation to determine whether American utilities should be considered "producers" of low enriched uranium (LEU) for the purposes of determining whether there was enough domestic industry support to proceed with an investigation is in accordance with law. (Commerce determined that foreign enrichers and not domestic utilities were "producers" of LEU for the purposes of determining domestic industry support. Remand Determination at 6-36.)

(2) Whether Commerce's decision that the enrichment of uranium feedstock pursuant to separative work unit (SWU) contracts constitutes a sale of goods instead of services is supported by substantial evidence and in accordance with law. (Commerce determined that SWU contracts like EUP contracts are contracts for the sale of goods. Remand Determination at 70-81.)

(3) Whether Commerce's decision that payment of more than adequate remuneration for enrichment services by partially public foreign entities to foreign enrichers constitutes a countervailable subsidy is in accordance with...