US Phosphate Fertilizer Producer Launches Challenge of CVD Findings

A domestic producer initiated a challenge to the Commerce Department's countervailing duty determination on phosphate fertilizers from Morocco, in the Court of International Trade, arguing that the agency failed to properly consider four subsidy programs from the Moroccan government (GOM). In a May 12 complaint, The Mosaic Co., said it wants the court to grant relief on a slew of mistakes made by Commerce in the investigation, including its determination that value-added tax exemptions, the provision of the phosphogypsum waste disposal program and VAT refunds did not constitute benefits to the mandatory respondent in the CVD investigation.

OCP S.A. served as the sole mandatory respondent. In the investigation, Commerce considered whether four different alleged subsidy programs actually conferred a benefit to OCP. The programs were the provision of phosphate mining rights for less than adequate remuneration (LTAR), VAT refunds, VAT exemptions for capital goods, machinery and equipment, and the provision of a phosphogypsum waste disposal program. Commerce found that the mining rights for LTAR was a countervailable benefit because the GOM granted OCP exclusive mining rights to extract ore from government-owned phosphate reserves, but the remaining three programs were not, to Mosaic's chagrin.

In determining that the exclusive rights were countervailable, Commerce conducted a "tier three" analysis of the adequacy of sales to calculate the amount of benefit received under the program. Under this analysis, Commerce must examine whether the government price is "consistent with market principles," but since there were no benchmarks for exclusive mining rights, the agency looked at the world market price for phosphate rock. In picking the world market price, Commerce selected prices from Egyptian phosphate rock, which Mosaic claims is low quality. Mosaic also faults Commerce for not adjusting the world market benchmark price to include international freight, customs duties and VAT in its calculation.

On the other three programs Commerce considered, Mosaic concluded that the agency erred in not finding any of them countervailable. For instance, OCP is owed 20.5 billion Morrocan dirham in VAT based on the goods it has sold. To finance this, the GOM entered into "financing agreements" with Moroccan banks, yet Commerce found that this did not constitute a benefit. The agency said "the credits accumulated under Morocco’s VAT regime are based on the amount of taxes paid by OCP on its input purchases, and there are no additional credits granted."

With regard to the phosphogypsum waste disposal program, Mosaic claims that OCP and the GOM confirmed that the exporter dumps phophogypsum waste in Morocco's coastal waters. The GOM does not enforce Moroccan laws banning this practice, resulting in a conferred benefit, Mosaic argues. "Commerce stated further with respect to the program as a potential subsidy in the form of revenue foregone that 'the GOM explains that it has not yet issued the decree to establish laws, regulations, or policies to enforce the limits on liquid discharges because the process of conducting technical studies and consultations with all relevant ministries and with the private sector has not yet concluded,' and therefore it continued to find that OCP did not use this program," Mosaic said.