Uranium enrichment and USEC Case

This complex consolidated international trade case has to do with whether uranium enriched by a French enricher (there are also German, English and Dutch enrichers) and sold into the United States under a certain type of contract known as an SWU (see below) are subject to our "antidumping" law, which penalizes foreign merchandisers from selling goods in this country below the "fair value" of the goods. The cases here are consolidated because they present two separate issues in the one larger case. The first case has to do with whether the Court of Federal Appeals mistakenly overruled the Commerce Department's determination that the SWU was subject to the antidumping law. The second deals with the standard of deference that ought to be accorded to the Commerce Department's determination. All of this, so far, is like speaking Finnish to people outside of that country, I suppose, so let's begin at the beginning. Indeed, this essay will only take us to the beginning of the issue; I derive most of what follows from the Petition for Certiorari in the USEC case.

The Law At Issue

The antidumping statute, first passed during the Great Depression in 1930, provides in relevant part:

"If -

(1) the administering authority determines that a class or kind of foreign merchandise is being, or is likely to be, sold in the United States at less than its fair value, and
(2) 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 an antidumping duty, in addition to any other duty imposed, in an amount equal to the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise," 19 USC sec 1673.

The Department of Commerce makes the determination of whether foreign goods are being sold in the US at less than its fair value; the US International Trade Commission determines whether a domestic industry producing a product like the imported merchandise has been materially threatened or injured. If the answer is "yes" in both instances, Commerce issues an antidumpting duty order.

In its investigation, Commerce calcuates a "dumping margin" based on the "normal value," which is determined by reference to the prices at which the producer or exporter sells the same goods in its home market or in third-country markets. A dumping margin is the amount by which the normal value exceeds the US price of the merchandise.

So, the big issue in the case is whether the SWU in the following description is "dumping."

Relevant Facts regarding Uranium Enrichment

I didn't know the following about uranium enrichment. Did you?

"Nuclear power plants generate approximately 20% of the electricity consumed in the United States each year. The fuel for these plants is fabricated from low enriched uranium (“LEU”), which typically is produced through a process of enrichment. Enrichment involves increasing the level of fissionable U235 from 0.711% (the percentage by weight found in natural uranium) to levels that will sustain a chain reaction needed to generate electricity (generally 3-5%). Uranium in which the U235 content has been enriched to a level of 20% or more is weapons-grade material and is referred to as “highly enriched uranium” or “HEU," Petition at 6.

The US has only one plant that engages in producing LEU for nuclear fuel (USEC). Companies that produce LEU such as USEC and European counterparts, such as Eurodif S.A. are called "enrichers." Contracts between utilities and enrichers involve two types of arrangements. In the first, the EUP ("enriched uranium product"), the utility pays a cash price that covers the entire value of the LEU. That is, it just orders a certain quantity of enriched uranium, the (usually foreign) company provides it and then the utility in the US pays for it with cash. All agree that this type of contract is covered by tne antidumping statute.

The second type of contract, the subject of this litigation, is an SWU contract ("separative work unit"). It differs from the EUP in that under an SWU the purchasing utility supplies its unenriched uranium to the enricher and then pays for the enriching process and not both the enriching process and the unenriched uranium (as in EUP). The question is whether the SWU enrichment process constitutes a "service," which would take it outside of the antidumping provision bolded above, or is a sale, which would mean that the antidumping law applies.

The uranium enriched by the enricher under a SWU contract is not necessarily the same uranium supplied by the utility. Since unenriched uranium is a fungible commodity, it could very well be that the enricher already has a supply of enriched uranium "on hand" by the time that the utility gets around to shipping its unenriched uranium. In this way, the "turn around time" can be very quick, indeed. I only mention this because it might be important in a court's determination regarding ownership of the uranium from the beginning to end of the process. If, for example, a court concluded that the legal fiction prevailed that, for an SWU contract, ownership of the uranium never left the supplying utility, then it could easily conclude that what the European enricher did to the uranium was only to provide an "enrichment service"--not within the antidumping statute. If, however, the "ownership" of the uranium to be enriched rested with the enricher, then one could see the entire process of enrichment and sale to the utility as a "sale" and, hence, subject to the antidumping statute.

Conclusion

It would take quite some time to review the lower court determinations here, but you now know the central issue. But we ought to have one other issue in mind, too. As the briefs say, this case has implications not simply for this case but also for our relationship with Russia, whose nuclear weapons we are helping to dismantle. The Commerce Department (US) claim is that if the Supremes affirm the Federal Circuit, which held that the SWU is not subject to the antidumping law, that our contracts with Russia will be in jeopardy. I can't evaluate that here, but it is one other factor to throw into the hopper in this case. It would seem, after my study of the case, that the antidumping law ought to cover both aspects of uranium enrichment...

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United States v. Eurodif S.A. USEC v. Eurodif S.A.

United States v. Eurodif S.A.
USEC v. Eurodif S.A.