Petitioner Says CIT Phosphate Fertilizer Remand Ruling Was Wrong

In Feb. 13 remand comments filed in the Court of International Trade, a domestic petitioner said that CIT erred in its ruling remanding a Moroccan phosphate fertilizer exporter’s CVD determination and that this forced the Commerce Department to incorrectly recalculate the exporter’s costs (The Mosaic Co. v. U.S., CIT # 21-00116).

Moroccan exporter OCP received a 19.97% countervailing duty rate in the department’s initial investigation final results and took the U.S. to the Court of International Trade in 2021. Judge Timothy Stanceu remanded Commerce’s determination, taking issue with Commerce’s exclusion of OCP’s selling, general and administrative expenses from its valuation of the exporter’s costs; with the department’s profit calculation for OCP; and with its finding that an alleged subsidy, a Moroccan program that reduced tax fines and penalties, was de facto specific to the company (see 2309150066).

On remand, Commerce lowered OCP’s CVD rate to 7.41% after using the cost calculation method proposed by OCP and revising its earlier profit ratio analysis (see 2401160060). It maintained its de facto specificity determination for the company’s alleged subsidy. Domestic petitioner The Mosaic Company and OCP filed comments Feb. 13 supporting and opposing the changes, respectively.

Commerce had been right to exclude the contested expenses from its calculation of OCP’s overall costs, and the court was mistaken in ruling otherwise, Mosaic said.

Mosaic said Stanceu incorrectly “accepted OCP’s misleading description” of its “HQ/Support and Debt” costs as being SG&A expenses. In doing so, it said that “in effect, the Court (perhaps inadvertently) went beyond its remit and inappropriately made a factual finding.”

As a result, the court “implicitly ruled that it is reasonable and lawful to accept OCP’s proposed allocation methodology,” meaning Commerce’s calculation of OCP’s CVD rate was inaccurate, it added.

In Commerce’s original investigation, Mosaic said, the department didn't find that OCP’s “purported” headquarters, support and debt costs were equivalent to SG&A expenses. OCP’s financials, meanwhile, “describe the ‘head office’ segment as ‘host[ing] the corporate activities and activities of international entities,” which the petitioner said was “contrary” to calling it SG&A.

Even if the headquarters and support segment was accurately categorized as SG&A -- “which it was not” -- CIT was wrong that Commerce had excluded all of OCP’s SG&A expenses, Mosaic said; it explained that the department included “‘site indirect costs’ for OCP’s Gantour and Khouribga mines.”

“These site-specific indirect costs cover the same categories of operating expenses (e.g., purchases consumed, local taxes, personnel expenses) that OCP characterized as SG&A in its proposed allocation of HQ/Support and Debt costs,” it said. “Therefore, if these categories of expenses recorded under OCP’s HQ/Support segment are properly considered SG&A, then the same categories of OCP’s site-specific indirect expenses must necessarily be as well.”

Thus, Mosaic said, the court’s ruling that Commerce had excluded all SG&A costs was “based on a false premise” and the department reasonably could have excluded the contested costs.

“This ruling was erroneous and rested on a misinterpretation of the record evidence and the approach that Commerce took in the investigation,” it said.

Mosaic also said that Commerce hadn't addressed its proposed cost calculation methods upon remand, instead using OCP’s “without any additional assessment or adjustment.” The department, Mosaic claimed, cited lack of time “despite having requested and received a 30-day extension” to file its remand redetermination.

The petitioner also claimed Commerce didn't address its arguments that OCP’s method would “arbitrarily inflate” its costs, as “OCP is a conglomerate that operates nearly 40 JVs and subsidiaries engaged in business lines ranging from hotel acquisition to agricultural entrepreneurship investment” and its head office “provides services to, shares facilities with, and incurs costs associated with these non-production activities.”

Meanwhile, in another brief filed Feb. 13, OCP also provided comments on the remand redetermination. It said in turn that it agreed with the changes Commerce made to the company’s costs calculation, but disagreed with its profit rate and de facto specificity findings.

The company argued against Commerce’s continued de facto specificity finding regarding the Moroccan government's tax fines and penalties. Upon remand, Commerce revised its analysis to find the subsidy was de facto specific not because it was limited to certain recipients, but rather because OCP, the department said, “received a disproportionately large amount of the reductions” as the program’s 10th-largest user.

Commerce failed to consider that OCP was the “largest corporate group” in Morocco, comprising “the entire Moroccan phosphate industry and roughly 5% of Morocco’s GDP,” OCP said.

“Far from demonstrating that OCP received a disproportionately large amount of the reductions, OCP’s ranking as 10th among recipients of the reductions contradicts any determination that OCP received a disproportionately large amount of the reductions,” it said.

Likewise, although Commerce changed its profit ratio calculation on remand, OCP argued the computation was still not lawful because it was not specific to the company’s phosphate rock. The department, it said, instead used a ratio that “included profits for a wide range of goods in addition to phosphate rock,” listing several redacted items.

Revenue record evidence for most of OCP’s categories of rock could support a profit ratio computation, the exporter said. However, it said it didn't have a revenue figure for one category of local rock, meaning Commerce would have to estimate it. It gave Commerce a “detailed calculation” to do so, but the department “declared without record support that the use of a rock-specific profit rate that included such an estimation was ‘inferior’ to a company-wide profit rate for products beyond rock.”

“On the one hand, Commerce has a rock-specific rate which complies with the statutory requirement to measure the adequacy of remuneration ‘for the good or service being provided’ that includes an estimate for one category of rock,” it said. “On the other hand, the agency has a profit rate that is not ‘for the good or service being provided’ and thus violates the law but does not include an estimate.”

The department, it said, failed to “grapple with this legal requirement” and instead “simplistically rejected the rock-specific profit rate because it included an estimate.”

Finally, supporting the department’s new cost calculation, OCP said the alternative method proposed by domestic petitioner The Mosaic Company was “obviously unreasonable” and went against record evidence.

“Notwithstanding this Court’s clear statement that any attempt to segregate HQ, support and debt costs into costs that are related or unrelated to phosphate rock production would be ‘nonsensical,’ Mosaic argued during the remand proceeding that Commerce should adopt precisely that approach,” it said.