Amicus Curiae Brief — USEC, Inc. v. Eurodif S.A. (Nos. 07-1078, 07-1059)

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Nos. 07-1059, 07-1078

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IN THE [ 08 OF Tee

Supreme Court of the United States “~—~<CUAT. Tg

UNITED STATES OF AMERICA,

Petitioner,

v.

Evuroprr S.A..,

Respondent.

USEC Inc. and

UNITED STATES ENRICHMENT CORPORATION,

Petitioners,

v.

EuRopIF S.A.; COMPAGNIE GENERALE Des MATIERES

NUCLEAIRES; CoGEmMa, INc.; AD Hoc UTILITIES GROUP;

and UNITED STATEs,

Respondents.

On Waits or CERTIORARI TO THE

UNITED STaTES Court OF APPEALS FOR THE FEDERAL CIRCUIT

--——

— ——

—————_— ee — ————

BRIEF OF THE COMMITTEE TO Support U.S. TraDE Laws

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

JONATHAN P. HIATT Davip A. HARTQUIST*

General Counsel, AFL-CIO Executive Director of the

815 16" St, NW Committee to Support

Washington, DC 20006 U.S. Trade Laws

KATHLEEN W. CANNON

PAUL WHITEHEAD GRACE W. KIM

General Counsel, KELLEY DryE & WaRREN LLP

United Steelworkers 3050 K Street, Suite 400

Five Gateway Center Washington, D.C. 20007

Pittsburgh, PA 15222 (202) 342-8400

Attorneys for Amici Curiae

* Counsel of Record

i

TABLE OF CONTENTS

TABLE OF CITED AUTHORITIES

INTEREST OF AMICI CURIAE ...

SUMMARY OF ARGUMENT ...............

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I. The Federal Circuit Erred In Failing To

Give Chevron Deference To Commerce’s

Finding That The Antidumping Law

Applies To The Imported Goods At Issue

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A. The Federal Circuit Erred in

Concluding that the

Foreign

Producer Was Not Producing a Good

but Was Merely Providing a Service

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The Federal Circuit Elevated Form

Over Substance in Finding that a

Sale of Merchandise Did Not Occur

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The Federal Circuit’s Holding Is

Inconsistent With The Antidumping

Statute, Its Legislative History And

Its Remedial Purpose .............

II. The Federal Circuit’s Decision Creates An

Expansive Loophole To The U.S.

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TABLE OF CITED AUTHORITIES

Page

CASES

Atchison T. & S. F. R. Co. v. Buell,

I i stink on es voce hese cen’ 16

Chaparral Steel Co. v. United States,

901 F.2d 1097 (Fed .Cir. 1990) .............. 15

Chevron, U.S.A., Inc. v. Natural Resources

Defense Council,

ee ED ce iw ccnese concerens passim

F. Lit de Cecco di Filippo Fara S. Martino

S.p.A. v. United States,

216 F.:3d 1027 (Fed. Cir. 2000) ..............- 5

Florida Power & Light Co.. v. United States,

307 F.3d 1364 (Fed. Cir. 2002) .............. 9, 10

Fujitsu Gen. Ltd. v. United States,

88 F.3d 1034 (Fed. Cir. 1996) ............... 5

Gray v. Powell,

ee es voce ce eueseueene 11, 14

Hynix Semiconductor, Inc. v. United States,

424 F.3d 1363 (Fed. Cir. 2005) .............. 15

ICC Indus., Inc. v. United States,

812 F.3d 694 (Fed. Cir. 1987) ............... 17

ale

Wi

Cited Authorities

Kemira Fibers Oy v. v. United States,

61 F:'3d 866 (Fed. Cir. 1995) ................

Koyo Seiko Co. v. United States,

20 F:3d 1156 (Fed. Cir. 1994) ...............

Lasko Metal Prods. v. United States,

43 F.3d 1442 (Fed. Cir. 1994) ...............

Nat'l Cable & Telecomms. Ass'n v.

Brand X Internet Servs.,

cee cescseced

Nucor Corp. v. United States,

414 F.3d 1331 (Fed. Cir. 2005) ..............

Pesquera Mares Australes Ltda. v.

United States,

266 F.3d 1372 (Fed. Cir. 2001) ..............

Thai Pineapple Pub. Co. v. United States,

187 F.3d 1362 (Fed. Cir. 1999) ..............

United Gas Improv. Co. v. Cont’l Oil Co.,

en eee eneeu sees

USEC Inc. v. United States,

281 F. Supp. 2d 1334 (Ct. Int’l Trade 2003) ..

13

iv

Cited Authorities

Page

STATUTES

SP QE a Srey cs scaudeuuncscweesae 10

ED cb bv ccncnddcevesbesun 13

4 Cer Tee ree 9

ee Oe ed. oe vacicavhenceaans 9

ACTS

Pension Protection Act,

Pub. L. No. 109-280, § 1632(a),

I ee ore 18

LEGISLATIVE MATERIALS |

Congressional Budget Office, How the

GATT Affects U.S. Antidumping and

Countervailing-Duty Policy (Sept. 1994)

CE Pctvctaehussdcusdenabacencas 16

CRS Report for Congress, “Trade Remedies:

‘New Shipper’ Reviews”,

Order Code RS 22290 (Dec. 18, 2006) ....... 18

H.R. Rep. No. 100-576 at 611 (1988)

I I: aru'n'S b andes ce ce ewhanede 18

Vv

Cited Authorities

Page

S. Rep. No. 103-412 at 82 (1994) .............. 18

S. Rep. No. 96-249 at 37, 39, 87 (1979), reprinted

in, 1979 U.S.C.C.A.N. 381, 428, 473 ........ 15

H.R. Rep. No. 98-725, at 11 (1984), reprinted in

1984 U.S.C.C.A.N. 5127, 5138, H.R. 98-26

SEED vac cveccteceds cbettcsnebndetunvenane 12

1

INTEREST OF AMICI CURIAE

The Amici Curiae in support of petitioners in this case

are the Committee to Support U.S. Trade Laws

(“CSUSTL’) and the following companies and trade

association members of CSUSTL: the American [ron and

Steel Institute, the Coalition for Fair Lumber Imports

Executive Committee, the Cold Finished Steel Bar

Institute, the Copper & Brass Fabricators Council, Inc.,

Corey Steel Company, the Floral Trade Council, Florida

Farmers, Inc., the Kansas Cattlemen’s Association, the

Lake Carriers Association, Lumi-Lite Candle Co., Inc., the

Montana Cattlemen’s Association, Nevada Live Stock

Association, Nevada Committee for Full Statehood, Nucor

Corporation, Steel Manufacturers Association, the

Southern Shrimp Alliance, Specialty Steel Industry of

North America, R-CALF USA, Republic Engineered

Products, South Dakota Stockgrowers Association, the

Timken Company, and the U.S. Business and Industry

Council. !

In addition to the individual companies and trade

associations identified, two other members of CSUSTL

on whose behalf this brief is submitted are the United

Steel, Paper and Forestry, Rubber, Manufacturing,

Energy, Allied-Industrial and Service Workers

International Union (*“USW”) and the American

Federation of Labor and Congress of Industrial

1. No counsel for a party authored this brief in whole or in

part, and no such counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief.

No person other than the amici curiae, or its counsel made a

monetary contribution to its preparation or submission. The

parties have consented to the filing of this brief.

2

Organizations (“AFL-CIO”). The USW is the largest

industrial union in North America with 850,000 active

members manufacturing a broad range of goods, including

tires, steel and pharmaceuticals.” The AFL-CIO is a

voluntary federation of 56 national and international labor

unions representing 10.5 million members. Both the USW

and the AFL-CIO have been actively engaged in using the

U.S. trade laws to ensure that American jobs and industries

are not lost to unfair import competition.

Amici collectively are advocates and beneficiaries

of the antidumping statute and span a wide array of

domestic industries as well as workers. Many of the

CSUSTL individual members have filed petitions and

successfully secured protection against unfair trade. All

of the Amici Curiae are concerned that the U.S.

antidumping law be maintained as a strong and viable

remedial tool to address injurious dumping of imports.

As discussed further in the Argument, the interest of

Amici Curiae in this case stems from the significant

loophole in the antidumping law that would result from

2. The USW was a petitioner in the antidumping

investigation of uranium products imported from the former

Soviet Union and represents over 1,000 highly-skilled workers

employed at the United States Enrichment Corporation, the

sole U.S. uranium producer. That investigation resulted in a

suspension agreement that is now negatively affected by the

appellate court’s decision below. The USW is the successor-in-

interest in that distinct matter. The original petition was

brought by the Oil, Chemical and Atomic Workers International

Union (“OCAW’”) in 1991. In 1999, the OCAW merged with the

United Paperworkers International Union to form the Paper,

Allied-Industrial, Chemical & Energy Workers International

Union (“PACE”). In 2005, PACE merged with the United

Steelworkers of America (“USWA”) to become the USW.

ol

3

the Federal Circuit’s holding in Eurodif S.A. v. United

States, 411 F.3d 1355 (Fed. Cir.) (Pet. App. 8a-28a), aff'd

on reh’g, 423 F.3d 1275 (Fed. Cir. 2005) (Pet. App. 29a-

35a), final judgment, 506 F.3d 1051 (Fed. Cir. 2007)

(Pet. App. la-7a).* The breadth of the industries and

companies that could be affected by the Federal Circuit’s

holding is expansive. Indeed, any domestic industry or

company using the antidumping law could be affected.

CSUSTL and its individual supporting members are

highly concerned that the effect of the appellate court’s

holding would essentially permit injurious dumping,

contrary to the purpose of the law. Accordingly, CSUSTL

and its individual supporting members have a strong

interest in this matter.

SUMMARY OF ARGUMENT

Although recognizing the U.S. Department of

Commerce (“Commerce” or “Commerce Department”)

as the “master of antidumping law,” the Federal Circuit

has failed to accord deference to Commerce’s

determination that the unfairly traded, imported goods

at issue are subject to the antidumping law. The

appellate court held that even though merchandise was

manufactured in a foreign country and imported into

the United States at a dumped price, causing injury to

a competing U.S. industry, the antidumping law does

not apply because the foreign producer is merely

providing a “service” and not producing a “good.”

3. Citations are to the petitioners’ appendix to the United

States’ petition for writ of certiorari in No. 07-1059 (“Pet. App.”).

4

The Federal Circuit’s decision ignores the common and

statutory definitions of services that exclude activities

whose output is a tangible good. The court’s decision also

elevates form over substance, focusing on the technical

transfer of title rather than on the manufacturing

operation that leads to the substantial transformation of

raw materials into a different good for export. Most

egregiously, the Federal Circuit ignores the purpose of the

antidumping statute. The antidumping law’s primary

purpose is to provide a remedy to U.S. industries that are

injured by dumped imports. Instead of deferring to a

statutory interpretation by Commerce that would achieve

that purpose, the appellate court’s decision contravenes

the purpose of the statute and provides a roadmap to

foreign producers seeking to avoid the imposition of

antidumping duties.

Unless overturned by this Court, the Federal Circuit’s

decision has created an expansive loophole to the U.S.

antidumping law affecting domestic industries far beyond

the uranium industry at issue here. A wide variety of

products, including steel, lumber, textiles, brass, and

semiconductors, can be sold at dumped prices into the

United States and injure competing U.S. industries, but

avoid the imposition of antidumping duties based simply

on the terms of their contracts. Indeed, foreign

manufacturers are now provided with a means to engage

in dumping with impunity merely by restructuring their

sales contracts. Given the critical importance of the U.S.

antidumping law as the principal defense available to

domestic manufacturers against unfairly traded imports,

the court’s holding has seriously undermined the viability

of this remedy and has placed in jeopardy all industries

that rely on this law to address unfair trading practices.

5

ARGUMENT

I. The Federal Circuit Erred In Failing To Give

Chevron Deference To Commerce’s Finding That

The Antidumping Law Applies To The Imported

Goods At Issue

In reviewing decisions of the Commerce

Department, the Federal Circuit has long recognized

that the laws that Commerce administers involve

complex economic inquiries and that Chevron deference

should be provided to Commerce’s interpretations of

the statute. Fujitsu Gen. Lid. v. United States, 88 F.3d

1034, 1044 (Fed. Cir. 1996). Indeed, Commerce’s special

expertise makes it the “master of antidumping law.”

Thai Pineapple Pub. Co. v. United States, 187 F.3d 1362,

1365 (Fed. Cir. 1999).* The Supreme Court in Chevron

required the courts to accord deference to a reasonable

interpretation of the statute by an administrative

agency charged with its administration. Chevron,

U.S.A., Inc. v. Natural Resources Def Council, Inc.,

467 U.S. 837, 842-44 (1984). The Federal Circuit, in turn,

has found that it is required to defer to permissible

interpretations of the antidumping statute adopted by

the Commerce Department, as the agency charged with

its administration, in those instances in which the statute

does not address the precise question at issue. Pesquera

Mares Australes Ltda. v. United States, 266 F.3d 1372,

1379-82 (Fed. Cir. 2001) (citing Chevron, 467 U.S. at 843).

4. Seealso F. Lii de Cecco di Filippo Fara S. Martino S.p.A.

v. United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000)

(“Cormerce’s special expertise makes it the ‘master’ of the

antidumping law, entitling its decisions to great deference from

the courts.”) (citations omitted).

6

Despite this recognition, the Federal Circuit failed to

give deference to the Commerce Department’s reasonable

interpretation of the antidumping law in this case, where

the law does not address the precise question at issue.

Indeed, not only is Commerce’s interpretation of the

statute permissible, it is also completely consistent with

the purpose of the statute: to protect domestic industries

from injury caused by unfairly traded goods. Kemira

Fibers Oy v. United States, 61 F-3d 866, 874 (Fed. Cir. 1995).

The Federal Circuit’s determination, on the other hand,

largely eviscerates the purpose of the law by elevating form

over substance. As such, the Federal Circuit’s decision

should be reversed and Commerce’s reasonable

interpretation of the antidumping law sustained.

A. The Federal Circuit Erred in Concluding that

the Foreign Producer Was Not Producing a

Good but Was Merely Providing a Service

In the underlying antidumping investigation of low-

enriched uranium (“LEU”) from France, Commerce

determined that the antidumping duty law should be

applied to imported merchandise produced through

contract manufacturing based on the substance of the

transaction. See Notice of Final Determination of Sales

at Less Than Fair Value: Low Enriched Uranium From

France, 66 Fed. Reg. 65,877, 65,881 (Dep’t Commerce

Dec. 21, 2001) (hereinafter “Final Determination”) (Pet.

App. 239a). Commerce found that where the U.S. LEU

purchaser supplied or arranged for the supply of raw

materials to the foreign manufacturer, and those or other

similar raw materials were substantially transformed

through a manufacturing process into a different product

that was then imported into the United States at an unfair

7

price, that activity comprised the production of a good not

the provision of a service and, as such, was subject to the

antidumping duty law. Pet. App. 238a-239a.

As Commerce explained, when a “purchaser has

contracted out for a major production process that adds

significant value to the input and that results in the

substantial transformation of the input product into an

entirely different manufactured product,” that

manufacturing process cannot be regarded as merely a

“service” and outside the reach of the antidumping law.

Pet. App. 240a. Indeed, the substance of this transaction

is identical to the typical sales transaction in which a

U.S. purchaser simply pays the foreign manufacturer

to produce merchandise that is imported into the United

States. Had that been the arrangement here, there

would be no dispute that the transaction is subject to

the antidumping law.

Given that the manufacturing activities performed

in both instances are the same, the article produced in

both cases is identical, and the injurious effect on

competing U.S. producers is also the same irrespective

of the structure of the arrangement, Commerce

reasonably concluded that the transaction at issue

involved the production of a good that was sold toa U.S.

buyer and imported into the United States and, as such,

was subject to the antidumping law. Final Remand

Determination, USEC Inc. and United States

Enrichment Corp. v. United States (Dep’t Commerce

June 23, 2003) (hereinafter “Remand Determination”)

(Pet. App. 13la, 134a). Indeed, as Commerce stated, it

has “always considered the output from manufacturing

operations that result in subject merchandise being

8

introduced into the commerce of the United States to

be a good” and subject to the antidumping law. Final

Determination, 66 Fed. Reg. at 65,881 (Pet. App. 240a).

Rather than sustaining Commerce’s permissible

interpretation of the statute, the Federal Circuit

determined that Chevron deference was not warranted

because “the antidumping statute unambiguously

applies to the sale of goods and not services.” Hurodif,

423 F.3d at 1278 (Pet. App. 33a). That conclusion focuses

on the wrong issue. The question is not whether the

antidumping statute applies to the sale of goods and

not services. The question is whether the transaction

here is fairly characterized as the sale of a good rather

than the sale of a service. That question is not

“unambiguously” resolved by the statute and, as such,

Chevron deference should have been accorded to the

agency’s decision.

The antidumping statute does not define the terms

“good” or “service,” so deference under Chevron to the

Commerce interpretations of those terms is warranted.

467 U.S. at 843. Commerce’s distinction between goods

and services is consistent with the common meanings

of those terms. In common parlance, a sale of services

generally refers to professional services, such as legal

or medical services, or to activities such as maintenance,

repair or other types of aid, while a sale of goods refers

to a tangible good. The transaction at issue here involves

the manufacturing of enriched uranium and the output

is unquestionably a tangible good.

Commerce’s determination is also consistent with

the manner in which Congress has defined services

9

in other international trade legislation. In the

International Trade and Investment Act, Congress

defined services for purposes of authorizing the U.S.

Trade Representative to coordinate and implement

policies on the international trade in services. 19 U.S.C.

§ 2114b(5) (2000).° In that context, Congress defined

“services” as “economic activities whose outputs are

other than tangible goods.” Id. (emphasis added).

Examples of services identified in that statute are

activities such as banking, insurance, transportation and

professional services. 7d. Commerce’s finding that a

good rather than a service was involved in this case is

supported by this statutory definition of services as well.

The Federal Circuit’s reliance on its earlier decision

in Florida Power & Light Co. v. United States, 307 F.3d

1364 (Fed. Cir. 2002), to support its conclusion that the

transaction at issue involved the provision of a service

rather than the production of a good was in error. Pet.

App. 20a-24a. The Florida Power case did not involve

an interpretation of whether a sale of goods occurred

under the antidumping law or any international trade

statute but rather an interpretation of a contract under

the Contract Disputes Act of 1978, 41 U.S.C. § 601

et. seq., 307 F.3d at 1373. Even in that context, the court

admitted that the transaction at issue did “not fall

neatly” into either the category of a service or a good,

but simply concluded that it was “best characterized”

as one for a service for purposes of the Contract

Disputes Act. Jd. Based on this very different context,

it was erroneous for the Federal Circuit to rely on the

5. Unless otherwise indicated, all references to the United

States Code are to the 2000 edition.

10

Florida Power case to find that the transaction at issue

here was clearly one for a service and, on that basis, to

refuse to accord Chevron deference to the Commerce

decision.® Pet. App. 33a.

B. The Federal Circuit Elevated Form Over

Substance in Finding that a Sale of

Merchandise Did Not Occur Under These Facts

The Federal Circuit also relied heavily on the

statutory reference to a sale of merchandise as somehow

placing the transaction at issue outside the reach of the

antidumping law. In particular, the court cited the

phrase “foreign merchandise is being, or is likely to be

sold” in 19 U.S.C. § 1673(1), and concluded that this

phrase does not encompass the transaction at issue in

this case. 423 F.3d at 1278 (Pet. App. 33a). The

antidumping law, however, does not define the terms

“merchandise” or “sold.” Again, in the absence of plain

statutory language, Chevron deference is due to the

Commerce Department in interpreting these terms in

the antidumping law.

In this case, LEU was produced in France and

exported to a purchaser in the United States. That the

transaction was structured so that the U.S. buyer paid

for the raw materials separately from the production of

the LEU does not mean that a sale of foreign

6. The Federal! Circuit’s decision in this respect is also

inconsistent with the Supreme Court’s recognition that

deference to the agency’s interpretation is appropriate for

ambiguous statutes even when the court has previously

construed the statute. Nat'l Cable & Telecomms. Ass’n v. Brand

X Internet Servs., 545 U.S. 967, 982 (2005).

11 .

merchandise did not occur, as the Federal Circuit found.

Just as is the case where the foreign manufacturer first

purchases the raw materials and manufactures them

into a new product, the foreign manufacturer here

produces and delivers to the customer a new,

substantially-transformed good from raw materials the

customer purchased separately. It would elevate form

over substance to find that the antidumping laws apply

to one form of this transaction but not the other, where

the substance of both transactions is the same.

This Court recognized in United Gas Improv. Co. v.

Cont’l Oil Co. that where a transaction was structured

as a sale of leases instead of a sale of a product (natural

gas), it “would exalt form over substance” and “give

greater weight to the technicalities of contract

draftsmanship” than to the purpose of the governing

statute to fail to treat the transaction as a “sale.” 381

U.S. 392, 400 (1965). Similarly, in Gray v. Powell, the

Court rejected the claim that there had been no “sale

or delivery or offer for sale” by the producers where

the contract was structured as a sale of leases, stating:

“the purpose of Congress, which was to establish the

industry through price regulation, would be hampered

by an interpretation that required a transfer of title, in

the technical sense, to bring a producer’s coal, consumed

by another party, within the ambit of the coal code.” 314

U.S. 402, 416 (1941).

The Supreme Court, therefore, has admonished

against elevating form over substance where a contract

was not technically structured as one for the sale of

goods, as well as against focusing on the technical

transfer of title, in defining a sale when interpreting the

12

reach of a statute. Instead, the Court’s focus has been

on the purpose Congress sought to achieve by the

governing statute. Consistent with the antidumping

statute and its purpose, the transaction at issue in this

case falls squarely within the reach of the antidumping

law. See section [.3, infra.

In reviewing the antidumping law, Congress has also

made clear that the antidumping law covers transactions

that, in substance, are tantamount to sales regardless

of the structure of the transaction. When confronted

with a situation in which transactions were structured

as leases instead of sales, Congress clarified the reach

of the antidumping statute to state that the law applied

to such arrangements:

The addition of language regarding leases is

intended to clarify the applicability of both laws

{the antidumping duty statute and the

countervailing duty statute} to sham leases or

leases which are tantamount to sales. Because

of tax considerations or other business reasons,

leasing arrangements are often utilized to

accomplish what are in effect transfers of

ownership. The Subcommittee intends that the

coverage of both laws extend to such

arrangements if the Department of Commerce

finds them to be equivalent to sales.

H.R. Rep. No. 98-725, at 11 (1984), reprinted in 1984

U.S.C.C.A.N. 5127, 5138. Commerce was instructed to

consider, in determining whether a lease is equivalent

to a sale for purposes of the antidumping duty law,

“whether the lease transaction would permit avoidance

13

of” antidumping duties. 19 U.S.C. § 1677(19)(F). This

legislative clarification demonstrates Congress’ intent

that arrangements structured as leases in form but

. equivalent to sales in substance are covered by the

antidumping law. Given this broad legislative intent, it

cannot be contended that contracts structured as sales

of “services” that are equivalent to sales of goods would

not be subject to the antidumping law.

Notably, under the facts presented here, it is not

even the case that the raw materials owned by the

purchaser were necessarily the same raw materials from

which the finished product that was imported into the

U.S. market was produced. Remand Determination,

Pet. App. 226a-227a; Final Determination, Pet. App.

133a. The raw material input, uranium, is a fungible

product. As such, the foreign producer manufactured

the LEU from uranium generally, but not necessarily

from the precise raw materials owned by the purchaser.

Id. The LEU purchaser’s claim that it owns material

that was processed by the foreign producer and returned

to it is not technically true but is, as the lower court

recognized, a “legal fiction.” See USEC Inc. v. United

States, 281 F. Supp. 2d 1334, 1424 (Ct. Int’] Trade 2003)

(Pet. App. 43a-44a) (citations omitted). Although

CSUSTL believes that any contract manufacturing

transaction should be considered a sale within the

meaning of the antidumping law, it is particularly

difficult to sustain the Federal Circuit’s conclusion that

no sale of goods was involved under these facts, where

the actual raw materials owned by the purchaser were

not necessarily used in the production of the finished,

imported good.

14

Moreover, whether the finished product was made

from the raw materials supplied by the purchaser is

irrelevant; the foreign producer necessarily acquired an

ownership interest in the LEU when it substantially

transformed the raw materials, regardless of their

source, into a new and different product. That

ownership interest was then transferred to the buyer

when the U.S. purchaser took delivery of the LEU, a

substantially-transformed product.

As the Gray v. Powell court recognized, the transfer

of title should not be the determinative factor in defining

a sale where such a result defeats the purpose Congress

sought to achieve. 314 U.S. at 416. The foreign

manufacturer is engaging in the same production

operations and producing the same product. Indeed,

under these contract manufacturing arrangements, the

difference is often merely which party carries the

financing costs of the raw materials. This arrangement

does not transform the activity of the foreign

manufacturer into that of providing a service rather

than producing a good, does not alter the fact that a

sale of imported merchandise at a dumped price

occurred, and should not permit the parties to avid the

reach of the antidumping law.

7

15

C. The Federal Circuit’s Holding Is Inconsistent

With The Antidumping Statute, Its Legislative

History And Its Remedial Purpose

Not only is Commerce’s decision reasonable given

the language of the statute, it is also fully consistent

with the purpose of the antidumping law. The primary

purpose of the antidumping law is to protect domestic

industries from unfairly traded imports. Kemira Fibers,

61 F.3d at 874; S. Rep. No. 96-249 at 37, 39, 87 (1979),

reprinted in 1979 U.S.C.C.A.N. 381, 423, 473.7 The

Federal Circuit has recognized that the antidumping

statute is a “remedial” law intended to offset the effects

of unfairly traded imports so as to prevent harm to

competing U.S. producers. Chaparral Steel Co. v.

United States, 901 F.2d 1097, 1103-04 (Fed. Cir. 1990).

The law does not operate to preclude subject imports

from entering the U.S. market but rather imposes

remedial duties to neutralize the unfair trading practice.

Nucor Corp. v. United States, 414 F.3d 1331, 1336-37

(Fed. Cir. 2005).

The antidumping statute is fully consistent with

and, indeed, a necessary component of, an equitable

global system of trade. For many years, high tariffs

were imposed to protect industries from competition

with imported products. As succeeding rounds of

—_—_ —-— — —— —_ -

7. See also Koyo Seiko Co. v. United States, 20 F.3d 1156,

1159 (Fed. Cir. 1994) (“The purpose of the antidumping statute

is to protect domestic manufacturing against foreign

manufacturers who sell at less than fair market value.”) (citing

Smith-Corona Group v. United States, 713 F.2d 1568, 1575-76

(Fed. Cir. 1983)); Hynix Semiconductor, Inc. v. United States,

424 F.3d 1363, 1368 (Fed. Cir. 2005).

16

international agreements under the auspices of the

General Agreements on Tariffs and Trade (“GATT”) took

place, tariffs were reduced or eliminated, and

antidumping laws increased in importance as an

important means to prevent injury to domestic

industries from unfairly traded imports. Indeed, some

analysts have recognized that the maintenance of strong

antidumping laws to protect domestic industries from

injurious, unfairly priced imports “may be necessary in

order to maintain political support for an open

international trading system.” Congressional Budget

Office, How the GATT Affects U.S. Antidumping and

Countervailing-Duty Policy, at 23 (Sept. 1994)

{hereinafter “CBO Report” }(citation omitted).

This Court has held that remedial statutes are to

be broadly interpreted consistent with their purpose.

Atchison T. & S. F R. Co. v. Buell, 480 U.S. 557, 571

(1987) (citing Urie v. Thompson, 337 U.S. 163, 180

(1949)). A broad interpretation of the antidumping law

is appropriate because “{t}he purpose of the

{antidumping law} is to prevent dumping, an activity

defined in terms of the marketplace.” Lasko Metal

Prods. v. United States, 43 F.3d 1442, 1446 (Fed. Cir.

1994). The effect on the marketplace, rather than the

terms of a contract, therefore, is the appropriate context

in which to consider whether the imports at issue are

subject to the antidumping duty law.

Given that the primary purpose of the antidumping

law is to provide remedial relief to domestic industries

injured by unfairly traded imports, the statute should

not be interpreted in such a way as to make it more

difficult for domestic industries to obtain such relief. The

17

holding of the Federal Circuit, unfortunately, does

precisely that. The appellate court’s holding, in fact,

provides a major loophole to foreign producers seeking

to evade the reach of the U.S. antidumping law.

It is noteworthy that when Congress has had an

opportunity to amend the antidumping duty law, it has

generally done so to strengthen it and expand its reach.

The first major amendment to the antidumping law

under the Trade Act of 1974 “significantly expanded the

coverage of U.S. antidumping law.” CBO Report at 25

(citing 19 U.S.C. § 2101, 88 Stat. 1978). Similarly, the

three subsequent, major amendments to the trade laws

— the Trade Agreements Act of 1979, the Trade and

Tariff Act of 1984, and the Omnibus Trade and

Competitiveness Act of 1988 — all “had provisions that

continued the Congress’ long push for stronger AD/CVD

protection for U.S. firms.” Jd. at 27 (citations omitted).

Congress has amended the antidumping law, in

particular, to address actions by foreign producers and

importers that seek to circumvent an antidumping order.

In 1979, Congress enacted a statutory provision

designed “‘to deter exporters whose merchandise is

subject to an investigation from circumventing the

intent of the law by increasing their exports to the

United States during the period between initiation of

an investigation and a preliminary determination by

{Commerce}’” ICC Indus., Inc. v. United States, 812

F.2d 694, 700 (Fed. Cir. 1987) (quoting H.R. Rep. No. 96-

.317 at 63 (1979)). In 1988, Congress further amended

this provision to develop “an improved critical

circumstances procedure {that} will significantly

strengthen antidumping and countervailing duty

18

procedures. ...” H.R. Rep. No. 100-576 at 611 (1988)

(conference report). In 1994, Congress amended the

anti-circumvention provisions in the statute, stating that

it “expects and intends that the new standard will be

less difficult to meet, thereby improving our ability to

prevent circumvention {of the antidumping law}.”

S. Rep. No. 103-412 at 82 (1994). In 2006, Congress

amended the antidumping law to prevent foreign

producers from exploiting a loophole in the “new

shipper” provision that was undercutting the intended

remedial effect of the law. Pension Protection Act, Pub.

L. No. 109-280, § 1632(a), 120 Stat. 780, 1165; see also

CRS Report for Congress, “Trade Remedies: ‘New

Shipper’ Reviews,” Order Code RS22290 at 3-4 (Dec.

18, 2006).

In sum, Congress has repeatedly revised the

antidumping law to strengthen that law and to ensure

that the Commerce Department is able to address a wide

array of activities that would circumvent its terms and

defeat its purpose of protecting U.S. industries from

harm caused by dumped imports. In light of this

legislative intent and the purpose of the antidumping

law, Commerce properly concluded in this case that

parties should not be able to avoid the reach of the law

merely by structuring their transactions in a particular

manner. As Commerce stated:

the unfair trade laws must be applicable

to merchandise produced through contract

manufacturing, just as they are applicable to

merchandise manufactured by a single entity.

To do otherwise would contravene the intent

of Congress by undermining the effectiveness

19

of the {antidumping duty} laws, which are

designed to address practices of unfair trade

in goods, as well as have profound

implications for the international trading

systems as a whole. To the extent that

contract manufacturing can be used to

convert trade in goods into trade in so-called

“manufacturing services,” the fundamental]

distinctions between goods and services

would be eliminated, thereby exposing

industries to injury by unfair trade practices

without the remedy of the {trade} laws.

Final Determination, 66 Fed. Reg. at 65,881 (Pet. App.

239a).

The Federal Circuit’s holding that the transaction

at issue is not subject to the U.S. antidumping law, by

contrast, contravenes the purpose of the statute and

permits dumped imports to injure a U.S. industry

without legal recourse. The appellate court’s decision

is inconsistent with the legislative intent of Congress to

protect domestic industries from unfairly traded

imports and fails to recognize the broad reading of the

statute that is appropriate given its remedial purpose.

20

II. The Federal Circuit’s Decision Creates An

Expansive Loophole To The U.S. Antidumping Law

The effects of the appellate court’s holding are not

limited to the uranium industry but have sweeping

implications for all domestic industries that rely upon

the U.S. trade laws as a remedy against unfairly traded

imports. The Federal Circuit’s decision in Ewrodif has

created a major loophole to the antidumping law and

provided a roadmap to its circumvention that extends

well beyond uranium. Foreign producers are now on

notice that they may avoid the imposition of antidumping

duties simply by structuring their contracts with U.S.

purchasers in the manner used by the French uranium

producer.

The broad holding by the Federal Circuit means that

where dumped merchandise is imported into the United

States and causes injury to a U.S. industry, no remedial

action is possible under the antidumping statute if the

parties set up a contract manufacturing arrangement.

Under such an arrangement, a purchaser may acquire

raw materials and deliver those materials to the foreign

producer to be substantially transformed into a

completely different article of commerce. Alternatively,

a foreign producer may produce and deliver the finished

product to the customer under the contract processing

arrangement even before the customer has supplied the

raw material and without using the actual raw materials

purchased by the U.S. buyer. Pet. App. 133a, 226a-227a.

Nonetheless, by structuring their sales in these

contractual terms, foreign producers can insulate

themselves from the reach of the antidumping law.

7

21

Various products, including steel and other metal

products, chemicals, and textiles, often are sold under

contract manufacturing arrangements. A U.S. brass

purchaser, for example, in lieu of purchasing brass sheet

and strip, could restructure the contract with the foreign

producer so that the purchaser acquires and takes title

to the raw material, copper, initially, and then transfers

the copper to the foreign producer to be manufactured

into brass sheet and strip. Similarly, purchasers of

imported pasta could supply wheat to be transformed

into pasta, purchasers of semiconductors could supply

sand to be processed into semiconductors, and

purchasers of bedroom furniture could supply wood to

be manufactured into furniture. So long as the contracts

are structured to have the purchaser retain title to the

input, the overseas manufacturing operation — no matter

how significant that operation and no matter that it

substantially transformed the raw materials into another

product that is then exported to the United States —

would be considered by the Federal Circuit as a

“service” and the resultant imported merchandise would

escape the reach of the antidumping law.

It should not be the case that merely by structuring

the terms of the transaction in a particular manner

foreign producers can escape the payment of

antidumping duties that would otherwise be owed.

Congress could not have intended that the very parties

that are the targets of the antidumping law could so

easily evade that law simply by restructuring their sales

terms. Such a result essentially vests in the parties

seeking to avoid the reach of the antidumping law the

ability to opt out of the law’s application through their

contractual terms. The Federal Circuit’s decision,

22

permitting foreign sellers to avoid the application of a

remedy intended to protect U.S. industries based simply

on the structure of their contracts, reflects an absurd

interpretation of this remedial statute.

Nor should it be the case that domestic industries

that are injured by reason of these dumped imports

have no recourse under the law where contract

manufacturing arrangements exist. The opportunity for

mischief and evasion of the antidumping law under the

Federal Circuit’s holding is extensive. Based on the

court’s roadmap for avoiding the antidumping law, the

protection that had been afforded in the antidumping

law to U.S. producers and workers injured by unfairly

traded imports is in serious jeopardy.

The trade remedy laws, including in particular the

antidumping laws, are the only defense available to U.S.

manufacturers against unfairly traded imports. The

loophole to the antidumping law created by the Federal

Circuit’s decision dramatically undermines the viability

of this remedial too] to domestic industries injured by

dumped imports.

23

CONCLUSION

The judgment of the U.S. Court of Appeals for the

Federal Circuit should be reversed and the Commerce

Department’s determination upheld.

Respectfully submitted,

Davip A. Harrquist*

Executive Director of the

Committee to Support

U.S. Trade Laws

KATHLEEN W. CANNON

Grace W. KIM

KELLEY DrrE & WARREN LLP

3050 K Street, Suite 400

Washington, D.C. 20007

(202) 342-8400

JONATHAN P Hiatr

General Counsel, AFL-CIO

815 16" St, NW

Washington, DC 20006

PAUL WHITEHEAD

General Counsel,

United Steelworkers

Five Gateway Center

Pittsburgh, PA 15222

Attorneys for Amici Curiae

* Counsel of Record