Usec Inc. v. U.S., SLIP OP. 03-34.

• Decision Date: 25 March 2003
• Docket Number: SLIP OP. 03-34.,Court No. 02-00221.,Court No. 02-00229,Court No. 02-00233.,Court No. 02-00112.,Court No. 02-00219.,Court No. 02-00227.,Court No. 02-00113.,Court No. 02-00114.
• Citation: 259 F.Supp.2d 1310
• Parties: USEC INC. and United States Enrichment Corporation, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

259 F.Supp.2d 1310

USEC INC. and United States Enrichment Corporation, Plaintiffs, v. UNITED STATES, Defendant.

SLIP OP. 03-34.

Court No. 02-00112.

Court No. 02-00113.

Court No. 02-00114.

Court No. 02-00219.

Court No. 02-00221.

Court No. 02-00227.

Court No. 02-00229

Court No. 02-00233.

United States Court of International Trade.

March 25, 2003.

COPYRIGHT MATERIAL OMITTED

Fried, Frank, Harris, Shriver & Jacobson, Washington, DC (David E. Birenbaum, Jay R. Kraemer, Mark Fajfar); Weil, Gotshal & Manges LLP, New York City (Stuart M. Rosen, Gregory Husisian, Jennifer J. Rhodes) for Plaintiffs and Defendant-Intervenors Eurodif S.A., Cogema and Cogema, Inc., Urenco Limited, Urenco Deutschland GmbH, Urenco Nederland B.V., Urenco (Capenhurst) Ltd., and Urenco, Inc.

Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director, Lucius B. Lau, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, David R. Mason, Senior Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, for Defendant United States, of counsel.

Steptoe & Johnson, LLP, Washington, DC (Sheldon E. Hochberg, Richard O. Cunningham, Eric C. Emerson) for Defendant-Intervenors and Plaintiffs USEC Inc. and United States Enrichment Corporation.

Shaw Pittman LLP (Stephen E. Becker, Nancy A. Fischer, Sanjay J. Mullick, Joshua D. Fitzhugh) for Plaintiff-Intervenors Ad Hoc Utilities Group.

Before: POGUE, WALLACH, and EATON, Judges.

OPINION

POGUE, Judge.

Plaintiffs Eurodif, S.A., COGEMA, COGEMA Inc. (collectively, "Cogema"), Urenco Limited, Urenco Deutschland GmbH, Urenco Nederland B.V., Urenco (Capenhurst) Ltd. and Urenco, Inc. (collectively, "Urenco"),¹ challenge the final affirmative antidumping and countervailing duty determinations of the Department of Commerce ("the Department" or "Commerce") with regard to low enriched uranium ("low enriched uranium" or "LEU") from France, Germany, the Netherlands, and the United Kingdom.² Plaintiffs assert that the antidumping and countervailing duty laws do not apply to certain uranium enrichment transactions because the contractual arrangements involve purchases of enrichment services, rather than purchases of LEU as merchandise, and services fall outside the scope of the antidumping and countervailing duty laws. The Ad Hoc Utilities Group ("AHUG"), an association of twenty-two United States utilities that are consumers of low enriched uranium, seeks to intervene as of right in this action. See Mem. Supp. AHUG Mot. Intervene at 1 ("AHUG Intervention Mem."). This Court exercises jurisdiction pursuant to 28 U.S.C. § 1581(c) (2000). For the reasons discussed below, we find that Commerce's determinations are neither supported by substantial evidence in the record nor in accordance with law.

Background

On December 7, 2000, USEC, Inc. and its wholly-owned subsidiary United States Enrichment Corporation (collectively, "USEC"), petitioned the Department of Commerce for initiation of antidumping and countervailing duty investigations into imports of low enriched uranium from France, Germany, the Netherlands, and the United Kingdom. On December 21, 2001, Commerce issued its final affirmative determinations in the antidumping and countervailing duty investigations of LEU from France and in the countervailing duty investigations of LEU from Germany, the Netherlands, and the United Kingdom. See LEU from France, 66 Fed.Reg. at 65,877; Low Enriched Uranium from France, 66 Fed.Reg. 65,901 (Dep't Commerce Dec. 21, 2001) (notice of final affirmative countervailing duty determination); Low Enriched Uranium from Germany, the Netherlands, and the United Kingdom, 66 Fed.Reg. 65,903 (Dep't Commerce Dec. 21, 2001) (notice of final affirmative countervailing duty determinations).

The antidumping and countervailing duty investigations initiated upon the petition of USEC covered "all low enriched uranium (LEU). LEU is enriched uranium hexafluoride (UF₆) with a U product assay of less than 20 percent that has not been converted into another chemical form, such as UO₂, or fabricated into nuclear fuel assemblies, regardless of the means by which the LEU is produced." LEU from France, 66 Fed.Reg. at 65,877; see also Petition for the Imposition of Antidumping and Countervailing Duties on Low Enriched Uranium from France, Germany, the Netherlands and the United Kingdom, Jt.App. Tab 2-A at JA-1011-12 (stating the scope of the petition) ("Petition"). Low enriched uranium is a good, classifiable under headings 2844.20.0020, 2844.20.0030, 2844.20.0050, and 2844.40.00 of the Harmonized Tariff System of the United States ("HTSUS"). See LEU from France, 66 Fed.Reg. at 65,877; Petition, Jt.App. Tab 2-A at JA-1012-13. All parties to this action acknowledge that LEU itself is a good, and that trade in LEU may be subject to the application of the unfair trade laws. See, e.g., LEU from France, 66 Fed.Reg. at 65,878 ("{W}e found, and no party disputed, that LEU entering the United States constitutes a good, the tangible yield of a manufacturing operation."); Pis.' Opening Br. Supp. Mot. J. Agency R. at 14 ("Pis.' Opening Br.").³ Low enriched uranium is used to produce nuclear fuel rods, which are used in nuclear reactors to produce electricity. See LEU from France, 66 Fed.Reg. at 65,879; Def.'s Resp. Opp'n Pls.' Mot. J. Agency R. at 5 ("Def.'s Resp."). Enrichment is the process by which the percentage of the fissionable isotope U²³⁵ contained in uranium is increased. See, e.g., Pls.' Opening Br. at 9-10; Def.'s Resp. at 4. Natural uranium contains approximately 711 percent of U most nuclear utilities in operation require fuel with a U²³⁵ concentration or "assay" between three and five percent. Pls.' Opening Br. at 9; Def.'s Resp. at 4-5.

The production of nuclear fuel involves: (1) mining uranium ore; (2) milling and/or refining the ore into uranium concentrate, referred to as natural uranium (U₃₀₈; (3) converting the natural uranium into uranium hexafluoride (UF₆), or "feed uranium;" (4) enriching uranium hexafluoride to create low enriched uranium; and (5) using the low enriched uranium to fabricate nuclear fuel rods for use in nuclear reactors. See Pls.' Opening Br. at 9; Def.'s Resp. at 3-5; LEU from France, 66 Fed.Reg. at 65,879. The process of enrichment results in the creation of LEU, with its higher concentration of U, and depleted uranium or uranium "tails." Pls.' Opening Br. at 10; LEU from France, 66 Fed.Reg. at 65,879.

Nuclear utilities employ two types of contracts for procuring LEU from uranium enrichers. One is a contract for enriched uranium product ("EUP contract"), in which the utility simply purchases LEU from the enricher. See LEU from France, 66 Fed.Reg. at 65,878, 65,885; Pls.' Opening Br. at 13; Def.'s Resp. at 5. In an EUP contract, the price paid for the LEU covers all elements of the LEU's value, including the feed uranium and the effort expended to enrich it. Transcript of Dep't of Commerce Hearing (Oct. 31, 2001), Jt. App. Tab 6-A at 46 ("Hrg.Trans."); Pls.' Opening Br. at 13. All parties to this action agree that sales of enriched uranium product are sales of merchandise subject to the antidumping and countervailing duty laws. See, e.g., Pls.' Opening Br. at 14 ("Movants do not question the application of the antidumping and countervailing duty laws to the sale of LEU.").

The second type of contract provides for the purchase of "separative work units" ("SWU") and also provides for the delivery by the utility of a quantity of feed uranium to the enricher. LEU from France, 66 Fed.Reg. at 65,878, 65,884-85; Pls.' Opening Br. at 11-12; Def.'s Resp. at 5. A "separative work unit" is a measurement of the amount of energy or effort required to separate a given quantity of feed uranium into LEU and depleted uranium, or uranium "tails," at specified assays. See LEU from France, 66 Fed.Reg. at 65,884; Pls.' Opening Br. at 10 & n. 15; Def.'s Resp. at 5. In an SWU contract, the precise quantity of LEU purchased is not initially specified. Rather, the contract specifies the general terms of the transaction. Notices given during the contract term specify the quantity of SWUs, the product assay, and the tails assay. These specifications determine the material characteristics of the resultant LEU. LEU from France, 66 Fed.Reg. at 65,884; Pls.' Opening Br. at 11-12; Resp. Br. of USEC, Inc. Opp'n Cogema/Urenco Mot. J. Agency R. at 18 ("USEC Resp."). Specification of the product and tails assays by means of the notices given during the contract term permits the utility to determine how many SWUs it will pay for and how much feed uranium it will provide to the enricher. See Pls.' Opening Br. at 12 & n. 20; USEC Resp. at 18; Hrg. Trans., Jt.App. Tab 6-A at 45-46. This allows the utility to "optimize the relative amounts of money and uranium it must provide for the LEU it will receive." USEC Resp. at 18; see also id. at 7 ("{T}he utility customer, by specifying the product assay and transactional tails assay ... can control the total price it will pay and the amount of natural uranium it will provide."); Hrg. Trans., Jt.App. Tab 6-A at 45-46.

Feed uranium is fungible. See, e.g., USEC Resp. at 17. Therefore, the specific feed uranium provided by a utility customer need not be used to produce LEU for that customer. See id. at 16 & n. 21. Rather, enrichers maintain inventories of feed uranium, which is not segregated according to source or ownership. Any uranium held by the enricher may be used to produce LEU for any customer. Id. at 17; Def.'s Resp. at 5-6.

Utilities purchase feed uranium from third parties,⁴ and prior to delivering the feed uranium to the enricher, the utilities have title, risk of loss, power to alienate or sell, and use and possession of the feed uranium. Title to feed uranium supplied to the enricher remains with the utility customer until the LEU is delivered, at which time title to the LEU is transferred to the utility. One...