UNITED STATES COURT OF INTERNATIONAL TRADE

Slip Op. 25-33

Before the Court in Mosaic Co. v. United States, Court No. 23-00246, Slip Op. 25-34 (April 1, 2025) was a consolidated action by plaintiff and defendant-intervenor contesting a final determination of the International Trade Administration, U.S. Department of Commerce. Plaintiff, The Mosaic Company and defendant-intervenor, OCP S.A., both producers of phosphate fertilizer, contested the agency’s determination that concluded an administrative review of countervailing duty order on phosphate fertilizers from the Kingdom of Morocco. The Government of the Kingdom of Morocco was also a defendant-intervenor in this case. The U.S. Court of International Trade (CIT) addressed whether judgment could be entered on the agency’s record. It concluded that the contested determination was partly contrary to law and remanded the order for Commerce’s review.

Commerce issued the countervailing duty order on phosphate fertilizers from the Kingdom of Morocco (the “Order”) in 2021. Commerce issued preliminary results of the first review (the “Preliminary Results”) in May 2023, where it calculated a preliminary net subsidy rate of 14.49% ad valorem for OCP. Prelim. Results, 88 Fed. Reg. at 29,090. For the Final Results, Commerce determined a combined net subsidy rate of 2.12% ad valorem for OCP. The rate included individual ad valorem subsidy rates for five government programs, as follows: “Government Loan Guarantees,” 0.02%; “Tax Incentives for Export Operations,” 0.71%; “Reductions in OCP’s Tax Fines and Penalties,” 0.01%; “Revenue Exclusions for Minimum Tax Contributions,” 0.06%; and “Customs Duty Exemptions for Capital Goods, Machinery, and Equipment,” 0.05%. These five subsidy rates totaled 0.85%. The remainder of the 2.12% combined subsidy rate, 1.27%, resulted from the Department’s determining that OCP untimely reported a “payroll tax refund” and thereby failed to respond timely to a request for information. Commerce rejected OCP’s position that Commerce should have accepted the reporting of the refund as a “minor correction.” As a result, Commerce imposed the 1.27% subsidy rate as “facts otherwise available” under section 776(a) of the Tariff Act of 1930, as amended (“Tariff Act”), 19 U.S.C. § 1677e(a), with an “adverse inference” under section 776(b) of the Tariff Act, 19 U.S.C. § 1677e(b). In 2023, plaintiffs sued in the CIT.

The CIT reviewed this case pursuant to its jurisdiction under section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1581(c), pursuant to which the court reviews actions commenced under section 516A of the Tariff Act, 19 U.S.C. § 1516a, including an action like these, contesting a final determination that Commerce issues to conclude an administrative review of a countervailing duty order. As to countervailing duties, Moisaic claimed on several grounds that Commerce erred in determining that OCP received “no measurable benefit” from the Government of Morocco’s provision of mining rights for phosphate ore. It also claimed that Commerce impermissibly decided not to countervail the Moroccan government’s provision to OCP of what it describes as “port services and infrastructure” subsidies. OCP further claimed that Commerce unlawfully rejected its reporting of the payroll tax refund and the resulting use of facts otherwise available, with an adverse inference, to impose the 1.27% subsidy rate for this refund. OCP’s Mot. 15–26. It also claimed that Commerce unlawfully determined that the program of the Moroccan government providing relief from tax fines and penalties satisfies the “specificity” requirement of the Tariff Act. Lastly, it claimed that Commerce overstepped its authority in requesting from OCP information on unspecified “other benefits.”

In the countervailing duty investigation culminating in the issuance of the Order, Commerce determined that the Moroccan government provided the phosphate mining rights to OCP for less than adequate remuneration and thereby conferred a benefit upon OCP, calculating a subsidy rate of 18.42% for the provision of the mining rights, since the Moroccan government owns all mineral reserves and granted OCP a monopoly to mine phosphate. Agreeing with OCP’s claim that Commerce had made certain errors in calculating the subsidy rate, this Court initially ordered Commerce to reconsider that calculation. The Court found certain errors previously in Mosaic II, 49 CIT at __, 744 F. Supp. 3d. There, the Court reasoned that the Department’s specificity determination was “a decision of a type disapproved by the Statement of Administrative Action (“SAA”) accompanying the Uruguay Round Agreements Act,” H.R. Rep. No. 103–316, at 929–30 (1994).  Under the guiding principle addressed in the SAA, Commerce must distinguish between subsidies that are provided to or used by discrete segments of the economy and those, such as the program at issue, that distribute a benefit throughout the entire economy. The Court recognized in Mosaic II that the benefit of the program was not limited to corporations, or to enterprises in general, and that “[n]either the group consisting of all taxpayers (the potential beneficiaries), nor the actual beneficiaries (those taxpayers receiving some form of penalty relief) constitute a ‘discrete segment of the economy.’”

In that case, the Court set aside a determination by Commerce highly similar to that contested in this case, ruling that the program for reduction of tax fines and penalties did not satisfy the de facto specificity requirement of subparagraph (III) of 19 U.S.C § 1677(5A)(D)(iii). According to the Court, Commerce did not reach a valid factual finding that OCP was a “disproportionate” user of the program within the meaning of 19 U.S.C § 1677(5A)(D)(iii)(III).  By contrast, OCP pointed to record evidence that it and its consolidated companies were Morocco’s largest corporate group by annual revenue in 2021, with sales equivalent to 6.6% of Morocco’s GDP [gross domestic product]. OCP also cited record evidence that tax fines and penalties are generally assessed based on a percentage of the taxes or fees owed, and that OCP received only a miniscule percentage of the total value of the reductions. Yet, Commerce dismissed these “relative size” arguments here as it did in the prior investigation, concluding that the size of the company relative to other companies receiving penalty reductions was irrelevant. The Court disagreed with the agency’s logic, especially because the agency failed to support its dismissal of these arguments by evidence to show that a company’s total reduction in tax fines or penalties has no relationship to the total amount of its revenue or to the total taxes for which it is liable. Moreover, Commerce did not make any attempt to demonstrate that OCP got some preferential treatment or other atypical benefit from the Moroccan government’s administration of the widely available tax fine and penalty relief program.

The Court remanded to Commerce in this case, finding similar errors made and remanded the Final Results to Commerce for reconsideration of its de facto specificity determination for any subsidy OCP received from Morocco’s tax fines and penalties reduction program. The Court explained that the Department’s specificity determination did not accord with the limiting principle that a broad-based, nationwide program such as Morocco’s procedure allowing relief from tax fines and penalties is not the type of program that satisfies the specificity requirement in the statute. The Court held that Commerce’s analysis was disproportionate as it wrongfully ignored highly probative evidence of OCP’s relative size. For this reason, the Court set aside the specificity determination and remanded it for reconsideration and corrective action.