Usec Inc. v. United States

Slip Op. 03-121

United States Court of International Trade

USEC INC. and UNITED STATES Before: Pogue, Wallach, and
ENRICHMENT CORPORATION, Eaton, Judges
Plaintiffs, Court No. 02-00112; and Court
Nos. 02-00113, 02-00114 and
v. Consol. Court Nos. 02-00219; 02-
00221, 02-00227, 02-00229, and
UNITED STATES, 02-00233
Defendant.

[Commerce’s remand determination reversed in part and affirmed in
part.]

Decided: September 16, 2003

Fried, Frank, Harris, Shriver & Jacobson (David E. Birenbaum, Jay
R. Kraemer, Mark Fajfar) for Plaintiffs and Defendant-Intervenors
Urenco Limited, Urenco Deutschland GmbH, Urenco Nederland B.V.,
Urenco (Capenhurst) Ltd., and Urenco, Inc.; Weil, Gotshal & Manges,
LLP (Stuart M. Rosen, Gregory Husisian, Jennifer J. Rhodes) for
Plaintiffs and Defendant-Intervenors Eurodif S.A., COGEMA, and
COGEMA, Inc.

Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Stephen C. Tosini, Trial Attorney, Commercial Litigation
Branch, Civil Division, U.S. Department of Justice, David R. Mason,
Senior Attorney, Office of Chief Counsel for Import Administration,
U.S. Department of Commerce, Of Counsel, for Defendant United
States.

Steptoe & Johnson LLP (Sheldon E. Hochberg, Richard O. Cunningham,
Eric C. Emerson) for Defendant-Intervenors and Plaintiffs USEC Inc.
and United States Enrichment Corporation.

Shaw Pittman LLP (Stephan E. Becker, Nancy A. Fischer, Sanjay J.
Mullick, Joshua D. Fitzhugh) for Plaintiff-Intervenors Ad Hoc
Utilities Group.
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OPINION

Pogue, Judge: In USEC Inc. v. United States, 27 CIT __, 259 F.

Supp. 2d 1310 (2003) (“USEC I”),1 this Court remanded aspects of

the final affirmative antidumping and countervailing duty

determinations of the Department of Commerce (“the Department” or

“Commerce”) with regard to low enriched uranium (“low enriched

uranium” or “LEU”) from France, Germany, the Netherlands, and the

United Kingdom.2 The Court instructed Commerce to evaluate the

applicability of its tolling regulation, 19 C.F.R. § 351.401(h), to

determine whether the intervenors (the “utilities,” also the “Ad

Hoc Utilities Group” or “AHUG”) should be designated as producers

of LEU. USEC I, 27 CIT at __, 259 F. Supp. 2d at 1326. The Court

1
Familiarity with the Court’s prior opinion is presumed.
2
The determinations challenged in the original action were Low
Enriched Uranium from France, 67 Fed. Reg. 6,680 (Dep’t Commerce
Feb. 13, 2002) (notice of amended final determination of sales at
less than fair value and antidumping duty order); Low Enriched
Uranium from France, 66 Fed. Reg. 65,877 (Dep’t Commerce Dec. 21,
2001) (notice of final determination of sales at less than fair
value) (“LEU from France”); Low Enriched Uranium from France, 67
Fed. Reg. 6689 (Dep’t Commerce Feb. 13, 2002) (notice of amended
final determination and notice of countervailing duty order); Low
Enriched Uranium from France, 66 Fed. Reg. 65,901 (Dep’t Commerce
Dec. 21, 2001) (notice of final affirmative countervailing duty
determination); Low Enriched Uranium from Germany, the
Netherlands, and the United Kingdom, 67 Fed. Reg. 6,688 (Dep’t
Commerce Feb. 13, 2002) (notice of amended final determinations
and notice of countervailing duty orders); Low Enriched Uranium
from Germany, the Netherlands, and the United Kingdom, 66 Fed.
Reg. 65,903 (Dep’t Commerce Dec. 21, 2001) (notice of final
affirmative countervailing duty determinations).
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further directed that if Commerce found the tolling regulation

applicable, the agency should also (1) reconsider whether

application of the regulation affects the determination as to which

companies are “producers” for the purpose of the industry support

determination, USEC I, 27 CIT at __, 259 F. Supp. 2d at 1328; and

(2) reconsider its application of the countervailing duty laws.

USEC I, 27 CIT at __, 259 F. Supp. 2d at 1329. The Court now

reviews the results of the remand as presented in Commerce’s Final

Remand Determination, USEC Inc. and United States Enrichment

Corporation v. United States (June 23, 2003)(“Remand Determ.”).

Jurisdiction lies under 28 U.S.C. § 1581(c) (2000) and 19 U.S.C. §

1516a(a)(2)(B)(i) (2000).

Background

The antidumping and countervailing duty investigations at

issue here covered all low enriched uranium. Low enriched uranium

is used to produce nuclear fuel rods, which in turn produce

electricity in nuclear reactors. See, e.g., USEC I, 27 CIT at __,

259 F. Supp. 2d at 1314. Uranium enrichment is one of five steps

in the production of nuclear fuel.3 See id.; LEU from France, 66

3
The steps involved in nuclear fuel production are: (1) mining
uranium ore; (2) milling and/or refining the ore into uranium
concentrate, referred to as natural uranium (U3O8); (3) converting
the natural uranium into uranium hexafluoride (UF6), or “feed
uranium;” (4) enriching uranium hexafluoride to create low
enriched uranium; and (5) using the low enriched uranium to
fabricate nuclear fuel rods for use in nuclear reactors. USEC I,
27 CIT at __, 259 F. Supp. 2d at 1314; see also LEU from France,
66 Fed. Reg. at 65,879.
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Fed. Reg. at 65,879. At issue in this proceeding is whether, for

purposes of application of the antidumping and countervailing duty

statutes, the “separative work unit” contracts entered into by the

utilities and the companies that enrich the uranium feedstock (the

“enrichers”) constitute subcontracting arrangements involving the

purchase of services or sales of enriched uranium.

As we more fully explained in USEC I, nuclear utilities employ

two types of contracts for procuring LEU from uranium enrichers.

See, e.g., USEC I, 27 CIT at __, 259 F. Supp. 2d at 1314. One is

a contract for enriched uranium product (“EUP contract”), in which

the utility simply purchases LEU from the enricher. See LEU from

France, 66 Fed. Reg. at 65,878, 65,884. In an EUP contract, the

price paid for the LEU covers all elements of the LEU’s value,

including the feed uranium and the effort expended to enrich it.

Transcript of Dep’t of Commerce Hearing in the Matter of Low

Enriched Uranium from France, Germany, the Netherlands, and the

United Kingdom (Oct. 31, 2001), Jt. App. Tab 6-A at 46 (“Hrg.

Trans.”). As noted in USEC I, all parties to this action agree

that sales of enriched uranium product constitute sales of

merchandise subject to the antidumping and countervailing duty

laws. USEC I, 27 CIT at __, 259 F. Supp. 2d at 1314.

The second type of contract is called a “separative work unit”

or “SWU” contract. A “separative work unit” is a measurement of

the amount of energy or effort required to separate a given
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quantity of feed uranium into LEU and depleted uranium, or uranium

“tails,” at specified assays. See LEU from France, 66 Fed. Reg. at

65,884. Under a SWU contract, a utility purchases separative work

units and delivers a quantity of feed uranium to the enricher. LEU

from France, 66 Fed. Reg. at 65,878, 65,884-85.

As discussed in USEC I, because feed uranium is fungible, the

specific feed uranium provided by a utility need not be used to

produce LEU for that utility. See USEC I, 27 CIT at __, 259 F.

Supp. 2d at 1315 (citing Resp. Br. of USEC, Inc. Opp’n

Cogema/Urenco Mot. J. Agency R. at 16-17 & n.21). Enrichers

maintain inventories of feed uranium, which is not segregated

according to source or ownership, and any uranium held by the

enricher may be used to produce LEU for any customer. Id.

Utilities purchase feed uranium from third parties,4 and prior

to delivering the feed uranium to the enricher, the utilities have

title, risk of loss, power to alienate or sell, and use and

possession of the feed uranium. The utility retains title to feed

uranium supplied to the enricher until the enricher delivers the

LEU ordered by the utility. In addition, at the time of delivery

of the LEU, the enricher recognizes that title to the LEU is also

held by the utility. As stated in one of the contracts in the

record, “[t]itle to the Feed Material shall remain with [the

4
Nothing in the record suggests that the parties from whom
utilities purchase the feed uranium are in any manner related to
the enrichers.
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utility] until the [LEU] Delivery associated with such Feed

Material . . . at which time the Feed Material shall be deemed to

have been enriched; whereupon [the utility] sha[ll] have title to

such [LEU] associated with such Feed Material and title to such

Feed Material will be extinguished.” Uranium Enrichment Services

Contract between [Utility A] and Urenco, Jt. App. Tab 3-F at JA-

1364; see also Uranium Toll Enrichment Services Contract between

[Utility B] and COGEMA, Inc., Jt. App. Tab 3-A at JA-1210; Uranium

Enrichment Services Contract between [Utility C] and COGEMA, Inc.,

Jt. App. Tab 3-E at JA-1302; Uranium Enrichment Services Contract

between [Utility D] and Urenco, Jt. App. Tab 3-G at JA-1399. In

USEC I, we described the SWU transactions as follows:

Pursuant to the SWU contracts, risk of loss or damage to
the feed uranium, as well as use and possession, pass
from the utility to the enricher upon delivery of the
feed uranium to the enricher. However, the enricher does
not obtain title to the feedstock; rather, actual title
is at all times with the utility. Nor does the enricher
have the power to sell a utility’s feedstock to a third
party. Moreover, it appears clear on this record that at
the moment when the LEU is delivered to the utility by
the enricher, the utility has title to and ownership of
the LEU. The feed uranium does not become an asset of
the enricher, nor is it ever reflected as such on the
enricher’s books and records.5

USEC I, 27 CIT at __, 259 F. Supp. 2d at 1315 (internal citations

5
See USEC I, 27 CIT at __, 259 F. Supp. 2d at 1315-16 n.5
(noting that (1) the foreign enrichers’ records, which were
verified by Commerce, did not reflect payments for customer-
provided uranium, (2) USEC requires utilities to pay the property
taxes on customer-provided uranium in USEC’s possession, and (3)
the record does not indicate that the enrichers treated customer-
provided uranium as an asset).
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omitted).

In reaching its original affirmative antidumping and

countervailing duty determinations, Commerce found that under both

LEU and SWU contracts the enrichers were producers of LEU for

purposes of the less-than-fair-value determination.6 The agency

concluded that EUP and SWU contracts were “functionally

equivalent,” in that “the overall arrangement under both types of

contracts is, in effect, an arrangement for the purchase and sale

of LEU.” LEU from France, 66 Fed. Reg. at 65,884-85.

In USEC I, this Court concluded that the circumstances of the

SWU transactions at issue resemble those of earlier cases involving

“tolling” or “subcontracting” arrangements in which Commerce

applied its tolling regulation, 19 C.F.R. § 351.401(h), to

determine that the tollee, rather than the toll manufacturer, or

subcontractor, was the producer of the subject merchandise. The

Court therefore directed Commerce to assess the applicability of

the tolling regulation, and thus, the propriety of designating the

6
To determine whether merchandise is being sold or is likely to
be sold in the United States at less than fair value, Commerce
compares the merchandise’s normal value, or the price at which
the merchandise is first sold for consumption in the exporting
country, to the export price or constructed export price, which
represents the price of the good when sold in or for export to
the United States. See 19 U.S.C. § 1673; 19 U.S.C. § 1677a; 19
U.S.C. § 1677b(a). In making an export price or constructed
export price determination, Commerce first must decide which
company is the producer or exporter of the merchandise. See 19
U.S.C. § 1677a(a)-(b); Taiwan Semiconductor Mfg. Co. v. United
States, 25 CIT __, __, 143 F. Supp. 2d 958, 966 (2001).
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enrichers as producers of LEU and respondents in the antidumping

and countervailing duty investigations. See USEC I, 27 CIT at __,

259 F. Supp. 2d at 1326, 1331. The Court also directed Commerce to

explain why it applied a different definition of the term

“producer” in the context of determining industry support than that

used in the context of calculating the dumping margin. USEC I, 27

CIT at __, 259 F. Supp. 2d at 1328.

In its Remand Determination, Commerce concludes once again

that the enrichers, rather than the utilities, are the producers of

LEU, finding that (1) “the enrichers make the only relevant sales

that can be used for purposes of establishing U.S. price and normal

value,” (2) the enrichers “are the only companies engaged in the

production of LEU,” (3) the enrichers “control the production of

LEU,” and (4) the utilities are “industrial users and consumers of

LEU.” Remand Determ. at 52. Commerce also explained that the

different definitions of the term “producer” are warranted by the

purposes underlying the relevant statutory provisions. Id. at 14-

15, 22-23, 25.

Standard of Review

This Court will uphold an agency determination unless it is

“unsupported by substantial evidence on the record, or otherwise

not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
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Discussion

I. Ownership of the Subject Merchandise

Commerce bases its selection of the enrichers as the producers

of LEU primarily on its conclusion that under the terms of the

contracts, the enrichers own all of the LEU that they have produced

but not yet delivered. See Remand Determ. at 52, 59. Commerce

asserts that the enrichers transfer title to and ownership of the

LEU to the utilities upon delivery of the LEU. Id. Therefore,

Commerce argues, the delivery of the LEU effects a transfer of

title and ownership for consideration, which constitutes a sale

under NSK Ltd. v. United States, 115 F.3d 965, 973 (Fed. Cir.

1997), and a relevant sale for the purposes of calculating a

dumping margin. Id. at 59-60.

As we discussed in USEC I, however, the SWU contracts

governing the transactions at issue establish a legal fiction that

the very feed uranium delivered by a utility to an enricher is

enriched and then returned as LEU to the utility. See USEC I, 27

CIT at __, 259 F. Supp. 2d at 1321-22; Oral Arg. Trans. at 33-34,

38, 41. The Court concluded that although the enrichers obtain the

right to use and possess the feedstock, and assume the risk of loss

or damage, there is no evidence that they ever obtain ownership of

either the feed uranium or the final enriched product. USEC I, 27

CIT at __, 259 F. Supp. 2d at 1315, 1323; see also Oral Arg. Trans.

at 30-35, 38, 41. Moreover, the contractual provisions addressing
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the retention of title in the feed uranium and passage of title in

the LEU suggest an intention to establish a continuous chain of

ownership in the utility while maintaining the enricher’s ability

to cover its obligations under the contract should it encounter

difficulties in producing or providing LEU for a customer. See,

e.g, Oral Arg. Trans. at 33-34 (noting that the contractual

provisions specifying that a utility obtains title to LEU are

necessary because “if title to the product material were not

specified clearly in the contract, there could be a question”), 38

(“[The enricher] receives material that it is holding for the

account of the Utility customer, to be enriched and returned. And,

when it is returned in enriched form, title passes to the enriched

product. Title is extinguished in the feed.”); Uranium Enrichment

Services Contract between Cogema, Inc. and [Utility E], App. to

Response of USEC to Dep’t of Commerce’s Remand Determ. of June 23,

2003, Tab 1 at JA-9003 (“USEC Remand App.”); Uranium Enrichment

Services Contract between [a utility] and Urenco, USEC Remand App.

Tab 2 at JA-9074; see also contracts cited supra pp. 5-6. For

example, these provisions enable the utility to claim the amount of

feed uranium delivered, or the value thereof, from the enricher in

the event that the enricher breached the contract. Such a

contractual arrangement, which is apparently beneficial to both

parties, is aided by the essential fungibility of the material at

issue. Parsing the contractual provisions at issue does not lead
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to the conclusion that the enricher obtains ownership over the LEU

and then sells it to the utility. Rather, the contracts delineate

a transaction in which a utility provides raw material to an

enricher, pays for the service of processing the material, and

obtains the finished product after the manufacturing service has

been performed.

Because the enricher does not obtain ownership of the LEU

enriched under SWU contracts, the transfer of LEU by the enricher

to the utility cannot constitute a sale of merchandise under NSK

Ltd. v. United States. See 115 F.3d at 975 (concluding that a sale

“requires both a transfer of ownership to an unrelated party and

consideration”). Nothing in Commerce’s Remand Determination

provides any evidentiary or legal basis for a contrary conclusion.

Commerce’s basic premise in the Remand Determination is that “the

enrichers make the only relevant sales that can be used for

purposes of establishing U.S. price and normal value.” Remand

Determ. at 52. This statement, however, begs the question whether

these transactions can truly be construed as relevant sales of

merchandise. Commerce’s duty is to investigate “sales” at less

than fair value. The agency’s assertion that the enrichers’

transactions with the utilities are the only transactions that

could be such sales, without more, does not establish that there is

an evidentiary or legal basis to conclude that those transactions

constitute sales for purposes of our antidumping statutes.
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Commerce’s subsidiary factual determination is no more well-

founded. Commerce asserts that because the utilities only hold

title to the feedstock at the time prior to delivery, “[t]he

enricher, by contrast, would have rights as to the LEU.” Remand

Determ. at 58. Commerce, however, cannot and does not provide any

evidentiary basis for this supposition; nothing in the record

supports a determination that the enricher has any ownership

rights. Accordingly, Commerce’s determination is unsupported by

substantial evidence and not in accordance with law.

II. Equivalence of EUP and SWU Contracts

In addition to its claim that the enrichers obtain ownership

of the LEU, Commerce also bases its conclusions upon the assertion

that EUP and SWU contracts are fundamentally equivalent. Commerce

states that

the completed product, LEU, is entering the marketplace
through the transactions at issue. Utility customers
cannot obtain LEU by purchasing enrichment alone.
Rather, in every instance in which the utility customer
enters into a SWU transaction, it is obtaining LEU.

Remand Determ. at 61.

Commerce made essentially the same argument in its original

determinations when it stated that “the overall arrangement under

both [EUP and SWU] contracts is, in effect, an arrangement for the

purchase and sale of LEU.” LEU from France, 66 Fed. Reg. at

65,884. This Court dismissed that argument in USEC I when we
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stated that “under any tolling arrangement, the ‘overall

arrangement’ is one for acquisition of a good, usually manufactured

by the toller.” USEC I, 27 CIT at __, 259 F. Supp. 2d at 1324.

Furthermore, the SWU transaction does not account for the full

value of the finished product; rather, it accounts only for the

value of the enrichment processing. Cf. Response to Court Remand,

Taiwan Semiconductor Mfg. Co. v. United States, Jt. App. Tab 7-A at

JA-2604 (Dep’t Commerce June 30, 2000) (“Under the Department’s

practice, the ‘relevant sale’ must be a sale by the company that

owns the merchandise entirely, including all essential components,

can dispose of the merchandise at its own discretion, and, thus,

controls the pricing of the merchandise and not merely the pricing

of certain portions of production. . . . In contrast, a

subcontractor’s or toller’s price does not represent all elements

of value. Rather, the subcontractor or toller merely performs one

or more segments of the manufacturing process at the direction of

another entity. Thus, subcontracted production is distinguishable

from other types of production because the subcontractor does not

bear at least one element of cost which is essential to production

of the subject merchandise.”) (“SRAMS Remand Response”). Here, the

SWU transaction represents approximately 65 percent of the value of

the LEU, and is not equivalent to a sale of the finished product at

its full value. See USEC I, 27 CIT at __, 259 F. Supp. 2d at 1325

(indicating that natural uranium supplies “approximately 35 percent
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of enriched uranium’s total value”).

Commerce states in a footnote that “in a meaningful sense,

enrichment transactions do reflect the full value of the LEU since

the things of value provided by the utility customer to the

enricher (cash and natural uranium) account for the full value of

the LEU received by the customer from the enricher.” Remand

Determ. at 54 n.34. Yet this reasoning could be applied to any

subcontracting case, including some of Commerce’s earlier tolling

cases, in which a tollee provides raw materials to the toll

manufacturer and pays for the manufacturing services. For example,

in SRAMS from Taiwan, the value of the wafer design and design mask

provided by the design house plus the value of the manufacturing

processes performed by the toller, considered together, reflect the

full value of the finished product. In that case, however,

Commerce recognized that the toller was paid only for the actual

manufacturing processes, and that “a subcontractor’s or toller’s

price does not represent all elements of value.” SRAMS Remand

Response, Jt. App. Tab 7-A at JA-2603-04. In Certain Pasta from

Italy, Corex provided the materials to the toller and paid the

toller for its manufacturing services. 63 Fed. Reg. 53,641,

53,642 (Dep’t Commerce Oct. 6, 1998) (preliminary results of new

shipper antidumping duty administrative review). The payment to

the toller was characterized as a “processing fee,” and Commerce

determined that Corex, rather than the toller, was the producer of
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the subject merchandise. Id. Commerce has stated that

“[t]ypically, the subcontracting, or tolling, addressed by [the

tolling regulation] involves a contractor who owns and provides to

the subcontractor a material input and receives from the

subcontractor a product that is identifiable as subject

merchandise.” SRAMS Remand Response, Jt. App. Tab 7-A at JA-2604.

Consequently, we find unpersuasive Commerce’s argument that the

transaction between the tollee and toll manufacturer reflects the

full value of the merchandise produced.7

7
Commerce also cites to Polyvinyl Alcohol from Taiwan for the
proposition that “the sale of subject merchandise may occur in
two distinct transactions,” and “such relevant sales may be
combined to derive, and calculate, the price of the subject
merchandise.” Remand Determ. at 55-56 (citing Polyvinyl Alcohol
from Taiwan, 63 Fed. Reg. 32,810, 32,81[3-14] (Dep’t Commerce
June 16, 1998) (final results of antidumping duty administrative
review)). The transactions in Polyvinyl Alcohol from Taiwan to
which this comment refers are those between Perry and Chang Chun.
Commerce determined that Chang Chun, the toller, was the producer
of the subject merchandise and that the other company, Perry, was
merely an importer and reseller. See Polyvinyl Alcohol from
Taiwan, 63 Fed. Reg. 6,526, 6,527 (Dep’t Commerce Feb. 9, 1998)
(preliminary results of antidumping duty administrative review).
Perry had restructured its contractual arrangement with Chang
Chun after Commerce found that Chang Chun was selling subject
merchandise at less than fair value. See USEC I, 27 CIT at __,
259 F. Supp. 2d at 1320-21 n.11 (citing Polyvinyl Alcohol from
Taiwan, 63 Fed. Reg. at 6,527). Under the restructured contract,
Perry purchased inputs from an affiliate of Chang Chun and
arranged delivery of the inputs to Chang Chun for processing.
USEC I, 27 CIT at __, 259 F. Supp. 2d at 1321 n.11 (citing
Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at 6,527). As we
stated in USEC I, “[t]he crucial finding in Polyvinyl Alcohol
from Taiwan was that, under the circumstances, Perry had simply
restructured its payments to Chang Chun in an effort to
circumvent the antidumping duties.” USEC I, 27 CIT at __, 259 F.
Supp. 2d at 1321 n.11. By contrast, in considering DuPont’s
relationship with Chang Chun in the same case, Commerce held that
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III. The Tolling Regulation, 19 C.F.R. § 351.401(h)

In the Remand Determination, Commerce again concludes that the

tolling regulation does not apply in this case to designate the

utilities as producers of LEU for purposes of calculating export

price or constructed export price. See Remand Determ. at 47, 52.

As in its original determinations, Commerce concludes that the

enrichers are the producers of LEU. Id. at 45, 52, 56-57.

In explaining its decision, Commerce reasons that the tolling

regulation “does not purport to address all aspects of an analysis

of tolling arrangements,” and that the agency looks at the totality

of the circumstances in making its determination. Remand Determ.

at 49 (quoting Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at

32,813). Commerce distinguishes the prior tolling cases cited by

DuPont was the producer of the subject merchandise because DuPont
manufactured the primary input, shipped it to Taiwan for
processing by Chang Chun according to specifications supplied by
DuPont, and exported it from Taiwan back to the United States and
to third countries. See USEC I, 27 CIT at __, 259 F. Supp. 2d at
1320 (citing Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at
6,527).
The instant case is more similar to the contract between
DuPont and Chang Chun than to the contract between Perry and
Chang Chun. First, in the course of managing the sequential
steps in the production of nuclear fuel, the utility purchases
uranium feedstock from a third party and pays the enricher to
process it into LEU. See, e.g., USEC I, 27 CIT at __, 259 F.
Supp. 2d at 1314-15. Second, the utility does not merely import
and resell LEU. Finally, the contractual arrangement here long
predates the initiation of unfair trade investigations. See,
e.g., Hrg. Trans., Jt. App. Tab 6-A at 43-45; Oral Arg. Trans. at
42. Unlike the contract referred to in the Remand Determination,
the SWU contracts here are not simply restructured purchase
contracts.
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the Court in USEC I on the grounds that in each of those cases, the

agency “faced a choice of respondents, based upon its analysis of

the sales made by two entities - the toller on the one hand, and

the tollee on the other.” Remand Determ. at 48. Commerce argues

that in each of the earlier cases,

the tollee sold the subject merchandise, as contemplated
by the regulation. Second, in nearly all of these cases,
and in particular where the Department was required to
examine the totality of the circumstances to determine
the producer, the tollee engaged in manufacturing or
processing operations. In no instance did the Department
determine an entity was a producer based solely upon its
purchase of an input and the designation of product
specifications.

Remand Determ. at 62-63. The agency says that in this case, by

contrast, the tollees did not sell the completed merchandise. As

the utilities made no sales of the subject merchandise, Commerce

claims that they cannot be designated as respondents for the

purpose of establishing export price or constructed export price.

Therefore, Commerce concludes, “the tolling regulation cannot be

applied to the facts and circumstances of this case without

defeating the purpose of the regulation and the statutory

provisions that the regulation is designed to implement.” Remand

Determ. at 47. Commerce asserts that the tolling regulation does

not contemplate the circumstances of this case, and that “the

statutory provisions governing the establishment of U.S. price are

silent” as to how to calculate U.S. price in such circumstances.

Id. at 51; see also id. at 47 (“A fundamental requirement upon
Court No. 02-00112, 113, 114; Page 18
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which the tolling regulation is premised is that merchandise

produced through a tolling operation is sold to a party in the

United States. . . . In promulgating the tolling regulation, the

Department did not contemplate the situation in which the tollee

makes no sales of subject merchandise.”). Commerce thus proceeds

to evaluate “the totality of the circumstances in order to select

the appropriate respondents.” Remand Determ. at 50.

It is certainly true that the tolling regulation does not

“address all aspects of an analysis of tolling arrangements,”

Remand Determ. at 49 (quoting Polyvinyl Alcohol from Taiwan, 63

Fed. Reg. at 32,813), and that the agency may look at the totality

of the circumstances in making a determination. See, e.g.,

Stainless Steel Bar from India, 66 Fed. Reg. 13,496, 13,496 (Dep’t

Commerce Mar. 6, 2001) (preliminary results of new shipper

antidumping duty administrative review) (“In determining whether a

company that uses a subcontractor in a tolling arrangement is a

producer pursuant to 19 C.F.R. [§] 351.401(h), we examine all

relevant facts surrounding a tolling agreement.”); Polyvinyl

Alcohol from Taiwan, 63 Fed. Reg. at 32,813 (“[W]hen determining

whether a party is a producer or manufacturer of subject

merchandise, we look at the totality of the circumstances

presented.”). Nonetheless, we find Commerce’s continuing attempts

to distinguish its earlier tolling cases from the instant case

unpersuasive.
Court No. 02-00112, 113, 114; Page 19
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In support of its assertions, Commerce relies primarily on

SRAMS from Taiwan and Polyvinyl Alcohol from Taiwan, in which the

tollees participated in manufacturing or processing operations.

See SRAMS Remand Response, Jt. App. Tab 7-A at JA-2603, JA-2605

(finding that the tollee design house engaged in research and

development, thereby producing the intellectual property that was

“one of the primary determinants of the value of individual

products”); Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at 6,527;

Polyvinyl Alcohol from Taiwan, 63 Fed. Reg. at 32,817 (concluding

that DuPont was the producer of the subject merchandise, because it

manufactured the primary input and shipped it to a toller for

further manufacturing).

In a number of other cases, however, it appears that the

tollee did not engage in manufacturing or processing operations,

and was determined to be a producer based on procurement and

continued ownership of inputs or raw materials, payment of

processing fees to subcontractors for manufacturing, and overall

control of the series of processes (such as purchasing inputs,

procuring manufacturing services, and marketing and sales services)

involved in creating the final product. In Certain Pasta from

Italy, Commerce determined that Corex was the producer of the

subject pasta because Corex “(1) purchase[d] all of the inputs, (2)

pa[id] the subcontractor a processing fee, and (3) maintain[ed]

ownership at all times of the inputs as well as the final product.”
Court No. 02-00112, 113, 114; Page 20
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See 63 Fed. Reg. at 53,642. Corex also was “solely responsible for

the marketing and sales of the product and any freight

arrangements.” Id. Corex’s involvement in the production of the

subject merchandise apparently involved not manufacturing or

processing, but managing the successive steps in production of the

subject merchandise by procuring and maintaining ownership of the

material inputs and subcontracting the manufacturing processes. In

Certain Forged Stainless Steel Flanges from India, Commerce found

respondent Akai the producer of the subject merchandise, even

though Akai did not own the machinery used in producing flanges and

apparently did not engage in the actual manufacturing processes.

58 Fed. Reg. 68,853, 68,855-56 (Dep’t Commerce Dec. 29, 1993)

(notice of final determination of sales at less than fair value).

Instead, Commerce’s conclusion was premised on the following facts:

Akai purchase[d] and maintain[ed] title (during the
entire course of production) to the raw materials used
for the production of the vast majority of the flanges,
and . . . direct[ed] and control[led] the manufacturing
process insofar as it determine[d] the quantity, size,
and type of flanges to be produced. . . . Akai
control[led] the costs for all elements incorporated in
the production of the flanges.

Id. at 68,856. In explaining its conclusion, Commerce stated that

“[t]he Department is required to capture all the costs involved in

the production of the subject merchandise, and must therefore look

to the company that controls the costs of production of the

merchandise.” Id.; see also Dep’t of Commerce Mem. from Joseph A.

Spetrini to Troy Cribb, Issues and Decision Memorandum for the
Court No. 02-00112, 113, 114; Page 21
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Final Determination in the Antidumping Duty Investigation of

Stainless Steel Butt-Weld Pipe Fittings from Italy at 3 (Dec. 27,

2000) (unpublished), at www.ia.ita.doc.gov/frn/index.html

(concluding that a company that “perform[ed] all marketing and

selling functions,” “purchased the raw material,” and “maintained

ownership of all materials sent . . . for further production” was

the producer of subject merchandise, while the two companies that

actually performed manufacturing operations were tollers and not

producers); Stainless Steel Bar from India, 65 Fed. Reg. 59,173,

59,174 (Dep’t Commerce Oct. 4, 2000) (preliminary results of new

shipper antidumping duty administrative review) (finding a company

the producer of the subject merchandise where it “(1) [p]urchase[d]

all of the inputs, (2) pa[id] the subcontractor a processing fee,

and (3) maintain[ed] ownership at all times of the inputs as well

as the final product”).

In other cases, it appears that the tollee did engage in

manufacturing or processing operations, but this fact was not

crucial to Commerce’s determination that the tollee was the

producer. See, e.g., Dep’t of Commerce Mem. from Joseph A.

Spetrini to Faryar Shirzad, Issues and Decision Memorandum for the

Administrative Review of Certain Stainless Steel Wire Rod from

India for the Period of Review (“POR”) Covering December 1, 1999

through November 30, 2000 at 5 (May 29, 2002) (unpublished), at

www.ia.ita.doc.gov/frn/index.html (“[T]he sub-contractor is not the
Court No. 02-00112, 113, 114; Page 22
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producer of the wire rod, because the companies of the [tollee]

Viraj Group retain ownership of the material and control the sale

of the subject merchandise; therefore, [the Viraj companies] are

producers of subject merchandise.”). As we stated in USEC I,

“‘Commerce’s construction of “producer,” as memorialized in [the

regulation], emphasizes three factors: (1) ownership of the subject

merchandise; (2) control of the relevant sale . . . ; and (3)

control of production of the subject merchandise.’” USEC I, 27 CIT

at __, 259 F. Supp. 2d at 1318 (quoting Taiwan Semiconductor Mfg.

Co. v. United States, 25 CIT at __, 143 F. Supp. 2d at 966).

In the production of LEU, the utilities manage the successive

processes in the production of nuclear fuel, using contractors that

perform mining and milling of uranium, conversion of uranium into

uranium hexafluoride, enrichment of uranium hexafluoride to obtain

LEU, and fabrication of nuclear fuel rods. See, e.g., USEC I, 27

CIT at __, 259 F. Supp. 2d at 1314, 1322. The utilities manage the

entire process of creating nuclear fuel in order to manage costs

and assure a steady and reliable supply of fuel. See USEC I, 27

CIT at __, 259 F. Supp. 2d at 1316; Oral Arg. Trans. at 47, 53-54.

Enrichment is merely one step in this process, and the utilities

obtain it by providing a raw material to a subcontractor and paying

for the service of enrichment. As discussed in USEC I, the

utilities’ management of the process of producing nuclear fuel and

their relationship with the enrichers under SWU contracts render
Court No. 02-00112, 113, 114; Page 23
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this case very similar to the tolling arrangements seen in earlier

cases. Consequently, the fact that the utilities do not

subsequently sell the finished product, but rather consume it in

the production of electricity, does not render the tolling

regulation inapplicable. Moreover, as noted in section I, supra,

nothing in the record provides a basis for determining that the

tolling arrangements at issue here constitute sales that may be

considered equivalent to the full-value sale of a finished product.

Accordingly, Commerce’s determination that its tolling regulation

is inapplicable to this case is neither supported by substantial

evidence nor in accordance with law.

IV. Definitions of “Producer” in the Contexts of Industry Support
and the Determination of Export Price or Constructed Export
Price

In USEC I, the Court directed Commerce to assess whether the

definition of “producer” in the industry support context should

differ from the definition applied in the context of determining

export price or constructed export price. See USEC I, 27 CIT at

__, 259 F. Supp. 2d at 1328. In addition, the Court directed that

“[i]f Commerce finds that the tolling regulation applies here, the

agency must consider whether those entities determined to be

‘producers’ under the tolling regulation are also ‘producers’ for

purposes of the industry support determination.” Id.

In its Remand Determination, Commerce concludes that in order

to qualify as the producer of a good for the purposes of industry
Court No. 02-00112, 113, 114; Page 24
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support, a company must have a “stake” in the domestic industry,

which the agency interpreted to mean that a company must be engaged

in the “actual production of the domestic like product” in the

United States. Remand Determ. at 13 (quoting S. Rep. No. 96-249 at

47 (1979)), 15-16. Commerce reasoned that “[w]hether a company is

at risk from unfairly traded imports depends on the nature and

extent of its operations in the United States. It stands to reason

that a company may be injured by unfairly traded imports where it

is in the business of producing the domestic like product.” Id. at

14. Commerce further reasoned that the tolling regulation is

inapplicable in the industry support context because its

application could lead to the inclusion of companies within the

domestic industry that would not be adversely affected by unfairly

traded imports of merchandise. See Remand Determ. at 16. Commerce

claims that such an outcome would defeat the purpose of the unfair

trade laws, which exist to aid domestic producers adversely

affected by unfair trade. See id. at 16-17; see also Torrington

Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995) (“The

purpose underlying the antidumping laws is to prevent foreign

manufacturers from injuring domestic industries by selling their

products in the United States at less than ‘fair value,’ i.e., at

prices below the prices the foreign manufacturers charge for the

same products in their home markets.”); Tung Mung Dev. Co. v.

United States, 26 CIT __, __, 219 F. Supp. 2d 1333, 1338-39 (2002).
Court No. 02-00112, 113, 114; Page 25
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In the context of the less than fair value determination,

Commerce maintains that the purpose and intent of the statute

warrants application of a different definition of “producer” than

is used in the industry support context. Commerce explains that 19

U.S.C. §§ 1677a and 1677b focus on the price of a good, rather than

on its manufacture. Remand Determ. at 22-23. Section 1677a refers

to the “producer or exporter” of a good in connection with

selecting an appropriate respondent and sale price. Id. at 22; 19

U.S.C. § 1677a(a)-(b). Commerce explains that in this context, it

may be appropriate to select a toller as the producer when that

company, although it may not actually manufacture the good, is

responsible for setting the price “at which the merchandise is

first sold (or agreed to be sold) before the date of importation.”

19 U.S.C. § 1677a(a)-(b); Remand Determ. at 23-24 & n.21.

Absent application of the tolling regulation to the industry

support context, Commerce again concludes, as it did in the

original determinations, that USEC is the sole domestic producer of

LEU. Remand Determ. at 18-20. The agency concludes that for

purposes of the industry support determination, the utilities are

industrial users and purchasers of LEU, rather than producers,

because they do not actually produce LEU in the United States and

they do not maintain any manufacturing operations or facilities for

the production of LEU. Id. at 19-20 (noting also that the

“business interest” of the utilities, “like that of any industrial
Court No. 02-00112, 113, 114; Page 26
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user, lies in obtaining lower priced LEU in an effort to keep the

cost of producing electricity down”). Consequently, as Commerce

concludes that USEC is the sole domestic producer of LEU, the

agency finds that the petitions had support within the domestic

industry as required by 19 U.S.C. § 1673a(c)(4). See id.

In explaining why it applies the tolling regulation in

establishing export or constructed export price, but not in the

industry support determination, Commerce has articulated reasons

that are consistent with the purposes of the two sections of the

statute. In accordance with Commerce’s reasoning, we acknowledge

that in this case, the utilities would benefit from, rather than be

injured by, the availability of lower-priced LEU or enrichment

services provided by foreign companies. Consequently, the Court

finds Commerce’s application of different definitions of “producer”

in these two contexts is reasonable and therefore in accordance

with law. See Pesquera Mares Australes Ltda. v. United States, 266

F.3d 1372, 1382 (Fed. Cir. 2001); Chevron U.S.A. Inc. v. Natural

Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984). As the Court

upholds Commerce’s reasons for declining to apply the tolling

regulation in the industry support context, we also uphold the

agency’s finding that USEC is the sole member of the domestic

industry for the purposes of satisfying the industry support

requirement and permitting the investigation to proceed. See 19

U.S.C. §§ 1673a(b)(1), 1673a(c)(4)(A).
Court No. 02-00112, 113, 114; Page 27
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V. Applicability of the Countervailing Duty Statute

Title 19 U.S.C. § 1671 provides that Commerce may impose

countervailing duties where it determines that a government or

public entity within a country is providing a countervailable

subsidy8 “with respect to the manufacture, production, or export of

a class or kind of merchandise imported, or sold (or likely to be

sold) for importation, into the United States,” and imports of that

merchandise injure or threaten to injure a domestic industry.9 In

8
A “countervailable subsidy” is a “financial contribution” or
“any form of income or price support” that confers a benefit. 19
U.S.C. § 1677(5).
9
19 U.S.C. § 1671(a) states that
If -
(1) the administering authority determines that
the government of a country or any public entity within
the territory of a country is providing, directly or
indirectly, a countervailable subsidy with respect to
the manufacture, production, or export of a class or
kind of merchandise imported, or sold (or likely to be
sold) for importation, into the United States, and
(2) in the case of merchandise imported from a
Subsidies Agreement country, the Commission determines
that–
(A) an industry in the United States–
(i) is materially injured, or
(ii) is threatened with material injury,
or
(B) the establishment of an industry in the
United States is materially retarded,

by reason of imports of that merchandise or by
reason of sales (or the likelihood of sales) of
that merchandise for importation,

then there shall be imposed upon such merchandise a
countervailing duty . . . equal to the amount of the
Court No. 02-00112, 113, 114; Page 28
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its Remand Determination, as in its original determinations,

Commerce concludes that the countervailing duty provisions are

applicable to both EUP purchase contracts and SWU enrichment

contracts.

In the Remand Determination, Commerce notes that “the scope of

the CVD law is clearer [than the scope of the antidumping law] in

that the plain language of the statute provides that the law is

applicable where the merchandise is either imported, or sold for

importation, into the United States.” Remand Determ. at 84. The

agency “interpret[s] the CVD law to apply whenever a foreign

government provides subsidies with respect to a class or kind of

merchandise that is imported into the United States,” and states

that “[a]ccordingly, we conclude that the law is applicable to all

imports of LEU from the respective countries under investigation.”

net countervailable subsidy.

19 U.S.C. § 1671(a). “Subsidies Agreement country” is defined in
19 U.S.C. § 1671(b) to mean countries that are WTO members or as
to which the United States has undertaken certain obligations.
In the case of non-Subsidies Agreement countries, no
determination of injury or threat of injury to the domestic
industry is required. 19 U.S.C. § 1671(c). France, Germany, the
Netherlands, and the United Kingdom are Subsidies Agreement
countries. See Membership of the World Trade Organization, WTO
Doc. No. 95-2450, WT/L/51/Rev.4 (Aug. 18, 1995), at
http://docsonline.wto.org; Agreement Establishing the World Trade
Organization, Apr. 15, 1994, 33 I.L.M. 1144, 1144 (1994)
(providing that multilateral agreements included in Annex 1,
which includes the Subsidies Agreement, are binding on all WTO
members).
Court No. 02-00112, 113, 114; Page 29
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Id. at 85.10

The language of the countervailing duty provisions states that

duties may be imposed where (1) merchandise is imported and (2) a

countervailable subsidy has been provided “with respect to the

manufacture, production, or export” of that merchandise. 19 U.S.C.

§ 1671(a)(1). Thus, no sale of the subject merchandise is required

for the application of the countervailing duty statute. Moreover,

in the countervailing duty context, the enricher may be considered

to “manufacture” or “produce” LEU by performing the processing

operations that transform feed uranium into enriched uranium.11

See, e.g., Oxford English Dictionary at www.oed.com (defining the

10
Commerce also states that “based up [its] analysis” that the
enrichers “own and hold title to the complete LEU product . . .
and transfer ownership and title to the utility customers for
consideration . . . these [SWU contract] sales are also relevant
for purposes of the CVD law.” Remand Determ. at 83-84. As
discussed above, we find incorrect Commerce’s conclusion that
pursuant to the SWU contracts the enrichers own and transfer
ownership in the complete LEU. Consequently, contrary to its
statement in the Remand Determination, Commerce’s conclusion that
SWU transactions are sales of subject merchandise cannot lend
support to Commerce’s countervailing duty finding. See id.
11
We concluded in section III, supra, that Commerce’s tolling
regulation applies in the antidumping context to designate the
utilities as “producers” of LEU. That regulation, which is
applicable in the context of determining export price or
constructed export price in order to assess a dumping margin,
does not apply in the countervailing duty context. Consequently,
for purposes of the countervailing duty determination, the
tolling regulation does not prohibit recognition of a
subcontractor or toll manufacturer as a producer of a good.
Thus, the tolling regulation does not contradict the conclusion
that the enrichers are “producers” of LEU for purposes of a
countervailing duty determination.
Court No. 02-00112, 113, 114; Page 30
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verbs “produce” as, inter alia, “[t]o bring forth, bring into being

or existence. . . . [t]o bring (a thing) into existence from its

raw materials or elements, or as the result of a process; to give

rise to, bring about, effect, cause, make (an action, condition,

etc.) and “manufacture” as, inter alia, “[t]o make (a product,

goods, etc.) from, (out) of raw material; to produce (goods) by

physical labour, machinery, etc.” and “[t]o make up or bring (raw

material, ingredients, etc.) into a form suitable for use; to work

up as or convert into a specified product”) (emphasis supplied).

Consequently, we find Commerce’s interpretation that the

statutory countervailing duty provisions are applicable to imports

of LEU under both EUP purchase contracts and SWU enrichment

contracts reasonable.

There remains the question whether purchases of enrichment

services for more than adequate remuneration may constitute

countervailable subsidies. Title 19 U.S.C. § 1677(5)(E)(iv)

provides that a subsidy which confers a benefit exists “in the case

where goods or services are provided, if such goods or services are

provided for less than adequate remuneration, and in the case where

goods are purchased, if such goods are purchased for more than

adequate remuneration.” Thus, while the statute explicitly

provides a remedy for the provision of subsidies in the form of

goods or services, it also explicitly limits purchases that may

constitute subsidies to purchases of “goods.” 19 U.S.C. §
Court No. 02-00112, 113, 114; Page 31
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1677(5)(E)(iv).

As in its original determinations, Commerce concludes in the

Remand Determination that the state-owned French electric utility,

EdF, purchased a good from and provided a subsidy to the French

enricher Eurodif. See Remand Determ. at 86; see also Low Enriched

Uranium from France, 66 Fed. Reg. 65,901, 65,902 (Dep’t Commerce

Dec. 21, 2001) (notice of final affirmative countervailing duty

determination); Dep’t of Commerce Mem. from Bernard T. Carreau to

Faryar Shirzad, Issues and Decision Memorandum: Final Affirmative

Countervailing Duty Determination: Low Enriched Uranium from France

– Calendar Year 1999 at 3-5 (Dec. 21, 2001) (unpublished), at

www.ia.ita.doc.gov/frn/index.html. Commerce first bases this

conclusion on its finding that SWU transactions constitute sales of

LEU, because the enricher obtains ownership of the LEU and

transfers ownership to the utility for consideration. See Remand

Determ. at 86-87. As discussed above, the Court has found this

conclusion incorrect. See supra pp. 11-12.

Commerce also states, however, that even if the SWU

transactions do not constitute sales of merchandise, EdF’s purchase

of enrichment from Eurodif still constitutes a countervailable

subsidy. The agency argues that “[f]irst, there is no question

that EdF obtains LEU in a series of purchase transactions (i.e.,

the purchase of natural uranium, the purchase of conversion, and

the purchase of enrichment).” Id. at 87. Accordingly, Commerce
Court No. 02-00112, 113, 114; Page 32
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argues, EdF’s “payment of more than adequate remuneration to

Eurodif is made in connection with the major step in the process by

which EdF is ‘purchasing goods.’” Id. Second, Commerce argues

that

the fundamental purpose of the [countervailing duties]
provision is to address subsidization of manufacturing
operations that produce subject merchandise. In this
context, the purchase of manufacturing or processing is
a necessary component of the good. As a practical
matter, goods include any manufacturing or processing
that is necessary to produce the article. Thus, the sale
of manufacturing or processing, which is a necessary
component of the good, pertains to the purchase of goods,
and does not constitute the purchase of a “service” in
this context.

Remand Determ. at 87.

We find Commerce’s first argument unpersuasive. We have

found that the enrichment transaction here does not constitute a

sale of subject merchandise, and the mere fact that enrichment is

“purchased” as part of a series of transactions in the nuclear fuel

production process simply does not constitute a basis for

concluding that the purchase of enrichment processing is tantamount

to the purchase of a good. Moreover, it appears from the record

that under SWU contracts, Eurodif performs only the enrichment

portion of the nuclear fuel production process. Commerce stated in

its preliminary countervailing duty determination that “[f]or

purposes of this determination, we accept Eurodif’s assertion that

its operations are no different from those of USEC.” Low Enriched

Uranium from France, 66 Fed. Reg. 24,325, 24,327 (Dep’t Commerce
Court No. 02-00112, 113, 114; Page 33
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May 14, 2001) (notice of preliminary affirmative countervailing

duty determination and alignment with final antidumping duty

determination). If, under SWU contracts, Eurodif performs only the

uranium enrichment, then EdF must contract with third parties for

the other steps in the production of nuclear fuel, including

procuring feed uranium and fabricating LEU into nuclear fuel rods.

See supra note 3 (listing the five steps in the production of

nuclear fuel). The fact that the utility contracts with third

parties, rather than with the enricher, to complete four of the

five steps in the nuclear fuel production process renders even less

plausible the claim that enrichment is merely part of an overall

goods transaction between the utility and enricher.

Commerce’s second argument posits that operations resulting

in or leading to the production of a good do not constitute

“services” for the purpose of the countervailing duty statute.

Remand Determ. at 87 (“[T]he sale of manufacturing or processing,

which is a necessary component of the good, pertains to the

purchase of goods, and does not constitute the purchase of a

“service” in this context.”). The agency bases this conclusion on

its understanding that “the fundamental purpose of the [statutory

countervailing duties] provision is to address subsidization of

manufacturing operations that produce subject merchandise.” Id.

The countervailing duty provisions are “intended to offset any

unfair competitive advantage enjoyed by foreign manufacturers or
Court No. 02-00112, 113, 114; Page 34
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exporters over domestic producers as a result of subsidies.” S.

Rep. No. 103-412, at 88 (1994). To realize this legislative

intent, Commerce interprets the countervailing duty statute to

reach subsidies that help to defray the costs of manufacturing

subject merchandise. Noting that the statute does not define

“service,” the agency distinguishes manufacturing services, or

operations that result in the production of a good, from other

types of services which do not result in the production of a good.

See Remand Determ. at 87-88 (“The term ‘service’ is not defined in

the statute. Under its ordinary meaning, consistent with the

purpose of [19 U.S.C. § 1677(5)(D)], we interpret the term to mean

‘[t]he sector of the economy that supplies the needs of the

consumer but produces no tangible goods, as banking and tourism.’”)

(internal citation omitted). Under this interpretation, the agency

concludes that even transactions “solely for contract

manufacturing” are covered by 19 U.S.C. § 1677(5)(D), because the

manufacturing operations lead to the production of a good. Remand

Determ. at 88. Essentially, Commerce states that because

manufacturing operations are integral to the good produced,

subsidization of those operations constitutes subsidization of the

good itself. See id. at 89.

Commerce’s distinction between manufacturing processes that

lead to the production of subject merchandise and other services

that do not produce tangible goods is consistent with the language
Court No. 02-00112, 113, 114; Page 35
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and purpose of the countervailing duty statute. It is consistent

with the statute’s language because it preserves a real distinction

between “goods” and “services.” It is consistent with the

statute’s purpose because subsidization of a process essential to

the manufacture of a good lowers the manufacturer’s cost of

producing that good, which may enable the manufacturer to gain a

competitive advantage over an unsubsidized competitor.

In the case of enrichment processing, subsidization would

lower an enricher’s production costs, enabling the enricher to sell

enrichment processing at lower prices than an unsubsidized

enricher. This is the type of “unfair competitive advantage” the

statute is intended to counter, and therefore, Commerce’s

interpretation of the statute is reasonable and in accordance with

law. Consequently, we affirm Commerce’s determination that

purchase of enrichment for more than adequate remuneration may

constitute a countervailable subsidy.

Conclusion

In summary, we find Commerce’s explanation of its industry

support determination is in accordance with law, and we sustain

this portion of the Remand Determination. We also sustain

Commerce’s determination that the countervailing duty law may apply

to imports of LEU under either LEU purchase contracts or SWU

enrichment contracts, as well as the agency’s determination that

the purchase of enrichment for more than adequate remuneration may
Court No. 02-00112, 113, 114; Page 36
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constitute a countervailable subsidy. Because this opinion is

limited to general issues, see Scheduling Order at 4-5 (Aug. 5,

2002), we do not decide here the question whether the LEU imported

from the subject countries benefitted from countervailable

subsidies.

We also find Commerce’s determinations that LEU and SWU

contracts are equivalent and that the antidumping provisions are

applicable to SWU transactions are neither supported by substantial

evidence nor in accordance with law. Accordingly, with respect to

these conclusions, we find that Commerce’s Remand Determination is

unlawful and we reverse.

The parties are ordered to consult with each other and with

the Clerk of the Court and to file a revised scheduling order

within sixty days of the date of entry of this opinion.

________________________
Donald C. Pogue
Judge

________________________
Evan J. Wallach
Judge

________________________
Richard K. Eaton
Judge
Dated: September 16, 2003
New York, New York