Supreme Court Reverses Eurodif

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January 30, 2009

United States v. Eurodif involved the application of antidumping duties on low enriched uranium imported into the United States.  The Commerce Department determined that imports of low enriched uranium had been sold at less than fair value.  It imposed this determination on Eurodif S.A. a French company engaged in the business of enriching low enriched uranium.  Eurodif argued that the antidumping law was inapplicable because it engaged in contracts for the sale of uranium enrichment services and not for the sale of uranium itself. The Commerce Department determined that the contract for the sale of uranium enrichment services was equivalent to the sale of uranium.

Commerce based its decision on several factors.  First, it believed that the enrichment process accounted for nearly 60% of the value of low enriched uranium and worked a substantial transformation on uranium feedstock, enrichment created the essential character of low enriched uranium.  Second, enrichers had complete control over the enrichment process and also controlled the level of usage of natural uranium provided.  Third, the utilities themselves took no part in the manufacture of low enriched uranium.  Furthermore, the Commerce Department argued that enrichers took title to low enriched uranium and had their on supply from various sources.

Eurodif S.A. argued that it acted only as a toller or a subcontractor that does not acquire title to the uranium, but merely services it by enriching it.  The Commerce Department argued that the tolling statute only provided guidance as to which price to use in determining the dumping margin, but was not a complete bar to application of antidumping measures.

The Court of International Trade and the Court of Appeals for the Federal Circuit both held that the statute was clear that antidumping duties applied to sale of goods at less than fair value, and not the sale of services.  Therefore the enriched uranium imported did not fall under the scope of 19 U.S.C. §1673.

The Supreme Court determined that the issue was not whether the contracts were for the sale of services and not goods, rather whether the Department of Commerce has authority to interpret 19 U.S.C. § 1673 and its ambiguities and whether the interpretation was reasonable.

According to the Supreme Court, the whole point of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., is to leave the discretion provided by the ambiguities of a statute with the implementing agency. The Court stated that the test first turns on whether the statute clearly excludes a transaction involving mixed payment for low enriched uranium that will be produced from uranium feed distinct from what a utility provides.

The Court held that the statute, namely 19 U.S.C. §1673, is not clear as to whether its scope includes a contract for the sale of services and for the sale of goods.  When the statute’s application is unclear as it is here, courts look to the agency’s decision about the statute’s scope and how the agency applies the statute.  Once such a choice is made by the agency, the only issue for the Court is whether such an application was reasonable.  The Supreme Court held that the Commerce Department’s determination that contracts should be treated as a sale for low enriched uranium was reasonable.  It found that that these contracts provided cash and a fungible commodity that was not tracked.  Furthermore it determined that the enrichment process delivered a substantially transformed product and essentially a new product.  In other words, the characteristics of the enriched uranium reasonably captured a common understanding of the sale of a good and it was reasonable for the Commerce Department to reach this conclusion.  Consequently, it reversed and remanded the Court of Appeal’s decision.

To read the Supreme Court's decision, click here.