On Remand, Commerce Lowers CVD Rate on Moroccan Phosphate Fertilizer
The Commerce Department lowered all Moroccan phosphate fertilizer exporters’ countervailing duty rates from 19.97% to 7.41% in its final redetermination on remand of the final determination in a CVD investigation. However, it refused to reverse a finding that a Moroccan government program granting reductions in tax fines and penalties was de facto specific to the investigation’s sole respondent (The Mosaic Co. v. U.S., CIT Consol. # 21-00116).
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OCP, the only respondent in the investigation, took the U.S. to the Court of International Trade to challenge several aspects of Commerce’s initial investigation results. In September, CIT remanded Commerce’s determination that the Moroccan government provided OCP phosphate mining rights for less-than-adequate remuneration (see 2309150066), as well as its finding that a Moroccan government program allowing relief from tax fines was de facto specific to OCP.
During its initial investigation on OCP’s alleged LTAR mining rates, Commerce didn't include OCP’s headquarters, support and debt costs when calculating the company’s mining processing cost. CIT ordered Commerce to either use OCP’s proffered method or find an alternative “satisfactory” way to calculate OCP’s costs; the department chose the former option, saying “we find OCP’s allocation methodology reasonable.”
CIT also took issue with Commerce’s method of determining OCP’s profit rate in its LTAR mining rights analysis, which the department calculated by dividing OCP’s income before taxes by the company’s operating expenses. The court required Commerce to explain or reconsider the inconsistency between the numerator and denominator in that calculation -- the denominator was limited only to operating expenses, which excluded selling, general and administrative expenses, so the most rational equivalent in the numerator would have been OCP’s reported operating income, the court said.
Commerce hadn't used OCP’s overall costs in the denominator in its initial profit rate calculation because OCP hadn't reported them, the department said. However, the department recalculated OCP’s profit rate by changing the denominator to “costs at the level of income before tax,” a number it said was functionally equivalent to OCP’s overall costs and included all of its operating and net financial expenses.
However, Commerce refused to reverse the specificity determination it reached in its analysis of the Moroccan government’s program for tax fines and penalties reductions. It said it respectfully disagreed with CIT, arguing it “believes there is sufficient evidence to continue to find the program is used by a limited number of actual recipients based on the record evidence.”
CIT remanded Commerce’s finding made under section 771(5A)(D)(iii)(I) of the Tariff Act, so Commerce reanalyzed and reached the same conclusion under section 771(5A)(D)(iii)(III), it said.
“Commerce has re-examined the information on the record and used a reasonable methodology for analyzing whether OCP was a disproportionate user of this program consistent with its normal practice,” the department said. “Specifically, based on the year OCP received benefits under this program (2019), we compared the benefits (reductions in fines and penalties) received by OCP to the average amount of benefits received by other companies in Morocco that used the program, and found that OCP was a disproportionate user of this program because it received a share of reductions that was roughly 82.87 times larger than the average amount.”