The U.S. International Trade Commission (ITC), in response to an August 2007 remand order from the U.S. Court of International Trade (CIT), has upheld its earlier decision that the revocation of antidumping duty orders on solid urea from Russia and Ukraine would likely lead to a continuation or recurrence of material injury to the domestic urea industry within a reasonably foreseeable time.
The decision was the result of a review process that began when CIT Judge Judith Barzilay in August remanded certain parts of the ITC’s original 2005 sunset review decision back to the ITC for clarification and reconsideration. Judge Barzilay’s remand order came after an appeal launched by the defendants in the case, Russian urea producers Nevinnomysskiy Azot, Novomoskovsk Azot JSC, JSC MCC Eurochem, Kuybyshevazot JSC, JSC “Azot” Berezniki, and JSC “Azot” Kemerovo.
In its Nov. 26 response to Judge Barzilay’s remand order, four of the ITC’s six commissioners voted to affirm the antidumping duty orders, while two commissioners dissented. In its original 2005 sunset review decision, the ITC was split in its affirmative ruling, with three commissioners supporting the decision and three dissenting. Two of those commissioners have since left the ITC, and the two newer members both ruled in the affirmative for the remand decision.
The Nov. 26 decision is a victory for the “defendant-interveners” in the case, which include Agrium U.S. Inc. and the Ad Hoc Committee of Domestic Nitrogen Producers (Committee). Urea-producing members of the Committee include CF Industries Holdings Inc. and PCS Nitrogen Inc.
The Agricultural Retailers Association, one of several agribusiness and commodity organizations that had lobbied to have the antidumping duty orders dropped, expressed frustration with the decision. ARA and a coalition of state and regional associations sent letters on Aug. 15 and Nov. 8 – the first to Carlos Gutierrez, Secretary of the U.S. Department of Commerce, and the second to the ITC – urging support for the removal of the antidumping duties (GM Sept. 10, p. 15; Nov. 26, p. 12).
“We are disappointed in the ITC decision,” Jack Eberspacher, ARA president and CEO, told Green Markets last week. “It is a shame that they only looked at the old data and didn’t take into consideration today’s market dynamics that are causing fertilizer allocations and record high prices. We will continue to work to eliminate this outdated tariff policy.”
The ITC responded specifically to each of Judge Barzilay’s questions about its 2005 affirmative decision, including concerns that the commission had not provided an adequate analysis of the impact of third-country trade barriers on the likely export patterns of the subject imports; the impact of non-subject imports on domestic urea pricing in the market; and the improved financial condition of the domestic industry.
Regarding the first, the ITC cited several third-country barriers that it reasoned were likely to shift urea exports from the subject countries into the U.S. if the antidumping duty orders were revoked, including Mexican antidumping measures on Ukrainian urea, European Union antidumping measures on Russian urea, and additional import restrictions imposed by China.
“We also affirm the Commission’s original finding that the trade patterns exhibited in response to these measures?Ǫhelp establish that the subject producers are likely to be able to shift exports rapidly between countries in response to changing conditions in particular markets,” the ITC said, adding that it also believes the volume of urea imports from the subject countries would likely be significant if the antidumping duty orders were revoked.
As to the impact of non-subject imports on domestic urea pricing, the ITC said the “record evidence, viewed as a whole, indicates that the subject imports are likely to significantly undersell both the domestic like product and non-subject imports.” The ITC said “it is a fundamental economic principle that the addition of significant additional supply into a market will generally place significant downward pressure on prices…Accordingly, we would expect that revocation of the orders and the entry of these likely significant volumes of low-priced subject imports into the market will have such an effect on prices, regardless of the extent to which non-subject imports have affected prices.”
In addressing the financial condition of the domestic industry over the period of review, the ITC said several economic indicators, particularly the domestic industry’s loss of market share, “outweigh the improvements in the industry’s profitability, pricing and productivity levels over the period of review. Accordingly, we find that the industry’s position in the market has weakened to such an extent that it is vulnerable to the likely impact of the subject imports upon revocation.”
The ITC noted that the domestic urea industry had shrunk to just seven producers by 2005, down from 12 at the end of the first sunset reviews in the late 1990s and down from 24 during the original investigations. “Although the industry may have been able to maintain its profitability and productivity levels while reducing its capacity levels in 2003 and 2004, its situation was much more precarious by the end of 2005,” the ITC said.
The ITC also revisited its stance on the effect of high domestic natural gas costs. “The addition of a large source of low-priced subject urea in the market, which is likely to occur if the orders were revoked, will make it increasingly difficult for the industry to maintain its prices at levels that will allow it to recoup its costs and make a profit, particularly since the industry will no longer be able to use hedging strategies to mitigate effectively its natural gas costs,” the ITC said. “Given this, we find it unlikely that the industry will be able to maintain its profits in the face of these costs if the orders were revoked.”
Both the plaintiffs and the defendant-interveners now have until Dec. 28 to submit responses to the CIT. According to a trade source, the CIT can then either affirm the ITC decision or remand it back to the ITC if Judge Barzilay has additional questions or feels her original questions were not answered satisfactorily. Although rare, there have been instances when the CIT has simply reversed an ITC decision after a number of remands.
A final option for the plaintiffs, should the CIT affirm the ITC decision, would be an appeal to the U.S. Court of Appeals for the Federal Circuit.