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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2008

## Text

Bas
Nos. 0 59 and 07-1078

IN THE

Supreme Court of the Anited States

UNITED STATES OF AMERICA,

Petitioner,
Vv.
EURODIF S.A.., ET AL.,
Respondents,

USEC, INC., ET AL.,
Petitioners,
v.

EuROpDIF S.A., ET AL.,
Respondents.

ON WRITS OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

BRIEF OF TECHSNABEXPORT
AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS

CAROLYN B. LAMM

Counsel of Record
FRANK J. SCHWEITZER
ADAMS C. LEE
JOANNA M. RITCEY-DONOHUE
WHITE & CASE LLP
701 13th Street, NW
Washington, DC 20005
(202) 662-3600

Counsel for Amicus Curiae

ee ee a ce a RR A Re
Wi&LSCN-EPES PRINTING CO. INC — (202) 789-0096 — WasHinGTON.D C 20002

TABLE OF CONTENTS

TABLE OF AUTHORITIES ................:cccccecssesees
INTEREST OF AMICUS CURIAE......................
SUMMARY OF ARGUMENT. ............::cccesssseseeees
FACTUAL BACKGROUND..............ccccssecessseesees

I.
Il.

I.

II.

ITT.

The U.S.-Russia HEU Agreement............

The Russian Uranium Suspension

The Nature of Uranium Trade and the
Short Time Horizon for the HEU
Agreement Limit Any Possible Effect of
The Lower Court’s Decision on the HEU

The Pricing Terms of the HEU
Agreement Independently Deprive
Russia of Any Substantial Incentive to
Reduce HEU Downblending in Favor of
Conventional Enrichment Techniques ....

Concerns About Russia’s Excess LEU
Capacity Are Overstated Because They
Ignore Russia’s Expanding Home-
Market and Third-Country Demand........

I spietesiscsintacetinnistnbomectnciititibenbcennnianniee

(i)

12

15

20

ii
TABLE OF AUTHORITIES

CASES

Eurodif S.A. v. United States, 411 F.3d
Se ls GI SE atten scnniccsecsccscecemetenss

Eurodif S.A. v. United States, 423 F.3d
1275 (Fed. Cir. 2005) .....sscsssssesccsesecsssseeseee

Eurodif S.A. v. United States, 506 F.3d
ee Es SE dette snencvtecssventinnsvccnseses

Powerex Corp. v. Reliant Energy Servs.,
Inc., 127 S.Ct. 2411, 2420 (2007)..............

STATUTES AND REGULATIONS

Se aitlitedetennedttnincisccpniepsinnensennens
BB UE. Be GIG. cvvcccccecescessccccsceseseees
42 U.S.C. § 229Th-1O(D)(S) ..........ceseeeeeeeeeenes
ek BF en

ADMINISTRATIVE MATERIALS

Amendments to the Agreement Suspending
the Antidumping Investigation on

. Uranium from the Russian Federation,
61 Fed. Reg. 56665 (Dep’t of Commerce
i i Te eiehihiniedeniienctaietidinaneiibantininnias

Amendment to the Agreement Suspend-
ing the Antidumping Investigation on
Uranium from the Russian Federation,
73 Fed. Reg. 7705 (Dep’t of Commerce

12

12

nom oO DW

10

A: Weis eat atecinsnnnsnnnsscedsioiesecaunitapin 11, 12, 19

iil
TABLE OF AUTHORITIES—Continued

Antidumping: Uranium from Kazakhstan,
Kyrgyzstan, Russia, Tajikistan, Ukraine,
and Uzbekistan; Suspension of Inves-
tigations and Amendment of Prelimi-
nary Determinations, 57 Fed. Reg. 49220
(Dep’t of Commerce Oct. 30, 1992)........ 2,10, 11

Uranium from Russia, US. Intl Trade
Comm’n Pub. 3872, Inv. No. 731-
TA-539-C (Second Review) (Aug.
SERRE SRS Wnty noe ean ae 13, 17, 18, 19

INTERNATIONAL AGREEMENTS

Agreement Between the Government of
the United States of America and the
Government of the Russian Federation
Concerning the Disposition of Highly
Enriched Uranium Extracted from
Nuclear Weapons, Feb. 18, 1993, Hein’s
No. KAV 3503, State Dep’t No. 93-59,
ee Uae CITED disscicnitinnenisnnecnrcsnnscnincsoneen passim

Amendment No. 008, dated September 4,
1996, to the Initial Implementing
Contract for the Agreement Between the
Government of the United States of
America and the Government of the
Russian Federation Concerning the
Disposition of Highly Enriched Uranium
Extracted from Nuclear Weapons,
executed on January 14, 1994.................. 5,6

iv
TABLE OF AUTHORITIES—Continued

Initial Implementing Contract for the
Agreement Between the Government of
the United States of America and the
Government of the Russian Federation
Concerning the Disposition of Highly
Enriched Uranium Extracted from
Nuclear Weapons, executed on January
IN heed ai dicicsincsihdsimmniidibiceiiiediibnitiniebbeneste

MISCELLANEOUS

News Release, Cameco, Cameco Provides
Details of Previously Announced
Uranium Agreement: Companies Amend
Deal for Uranium from Dismantled
Russian Nuclear Weapons (Jun. 16,
2004), available at http://Awww.cameco.
com/media_gateway/news_releases/2004/
news_release.php?id=85 ..............ccceeceeeeeee

News Release, USEC Inc., Governments
Approve New USEC-Russian Agree-
ment: U.S. and Russia Approve New
Market-based Pricing Terms to Convert
Warheads to Nuclear Fuel (June 19,
2002), available at http://findarticles.
com/p/articles/mi_m0EIN/As_2002_June_

kT NTT 8, 9, 15, 16

Press Release, U.S. Department of Com-
merce, United States and Russian Ura-
nium Agreement Reached (Feb. 1, 2008),
available at http://)www.commerce.gov/
NewsRoom/PressReleases_FactSheets/P
ROD0O1_005136?format_for_print=true ...

11

Vv

TABLE OF AUTHORITIES—Continued

Secondary SWU Market Price Estimate
(US$/SWU), NUCLEAR FUEL, Vol. 32,
eR: TI Aly IEE Sctarnnsosennsesensesihicticitminose

Secondary SWU Market Price Estimate
(US$/SWU), NUCLEAR FUEL, Vol. 33,
eee, Fa, A I ee titahtiientitcnccssisissnsnicnscnee

U.S. Department of Energy, Report on
the Effect the Low-Enriched Uranium
Delivered Under the HEU Agreement
Between the Government of the United
States and the Government of the
Russian Federation has on the Domestic
Uranium Mining, Conversion, and
Enrichment Industries and __ the
Operation of the Gaseous Diffusion Plant
(Dec. 31, 2004) available at http://
www.ne.doe.gov/pdfFiles/RptEffectLow-
Enriched%20UraniumDec312004.pdf......

U.S. Department of Energy, Report on
the Effect the Low-Enriched Uranium
Delivered Under the Highly Enriched
Uranium Agreement Between the Gov-
ernment of the United States and the
Government of the Russian Federation
Has On the Domestic Uranium Mining,
Conversion, and Enrichment Industries
and the Operation of the Gaseous Diffu-
sion Plant (Dec. 31, 2006), available at
http://www.ne.doe.gov/pdfFiles/2006_Heu
ENCES EA Fi NET

7,18

8, 16

J
_———

vi

TABLE OF AUTHORITIES—Continued

Page

USEC, Inc. Annual Report (Form 10-K)
ECE Aa ee bear 13

Haruo Maeda, The Global Fuel Market,
Supply and Demand 2005-2030 (World
Nuclear Ass’n 2006) ................ccccccesseeeeeeees 17, 18

Haruo Maeda, The Global Fuel Market,
Supply and Demand 2007-2030 (World
Nuclear Ass’n 2008) .............c0cccceceesenees 13, 17, 18

BRIEF OF TECHSNABEXPORT
AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS

Amicus curiae Techsnabexport (“Tenex”) respect-
fully submits this brief in support of respondents in
this case.’

INTEREST OF AMICUS CURIAE

Amicus curiae Tenex exports uranium products
and uranium downblending and enrichment services
from Russia. Tenex is also the agent of the Russian
Federation’s State Atomic Energy Corporation,
Rosatom (“Rosatom”), the Executive Agent of the
Russian Government under the Agreement Between
the Government of the United States of America and
the Government of the Russian Federation
Concerning the Disposition of Highly Enriched
Uranium Extracted from Nuclear Weapons (“HEU
Agreement”).’ Tenex is filing this brief because it
has an interest in ensuring that the Court has a
proper understanding of the HEU Agreement, the
agreement that suspended the 1992 antidumping
investigation of uranium from Russia,’ and uranium
market conditions.‘

‘Pursuant to Rule 37.6 of this Court, Tenex states that no
counsel for a party authored this brief in whole or in part, and
no person, other than Tenex, made a monetary contribution in-
tended to fund the preparation or submission of this brief. The
parties have consented to the filing of this brief.

* Feb. 18, 1993, Hein’s No. KAV 3503, State Dep't No. 93-59, 1993
WL 152921. The Russian Ministry of Atomic Energy (“Minatom”)
was the original signatory to the HEU Agreement and was
initially designated by the Russian Government as the Execu-
tive Agent with authority for implementation of the Agreement.

* Antidumping; Uranium from Kazakhstan, Kyrgyzstan, Rus-
sia, Tajikistan, Ukraine, and Uzbekistan; Suspension of Investi-
(Continued)

2
SUMMARY OF ARGUMENT

The view that the Federal Circuit’s interpretation
of 19 U.S.C. § 1673 would compromise U.S. foreign
policy, national security and energy policy objectives
by giving Russia incentives to scale back plans to
downblend highly enriched uranium (“HEU”) and
saturate the U.S. market instead with low-enriched
uranium (“LEU”) manufactured through conven-
tional enrichment is both legally irrelevant to this
case and factually wrong. Tenex has no incentive to
stop downblending HEU under the HEU Agreement
in favor of conventional LEU production pursuant to
separative work unit (“SWU”) contracts.

As an initial matter, the Court’s disposition of
‘this case could have at most only minor, short-term
effects on the HEU Agreement with iiussia. That
Agreement, which commenced in 1993, is nearing the
end of its life and terminates in five years. That is

(Continued)

gations and Amendment of Preliminary Determinations, 57 Fed.
Reg. 49220 (Dep’t of Commerce Oct. 30, 1992), and the amend-
ments thereto (“Suspension Agreement”). Rosatom is the suc-
cessor-in-interest to Minatom, the original party to the Suspen-
sion Agreement with the Department of Commerce.

“Amicus Tenex presents in this brief facts in support of its
arguments and respondents’ position. The General Director of
Tenex certifies that the information contained in this brief is, to
the best of his knowledge, complete and accurate. See e.g., 19
C.F.R. §351.303(g) (the Department of Commerce’s antidumping
regulations requiring “with cach submission containing factual
information” the following certification from “the person offi-
cially responsible for presentation of the factual information: I,
(name and title), currently employed by (person), certify that (1)
I have read the attached submission, and (2) the information
contained in this submission is, to the best of my knowledge,
complete and accurate.”)

3

a very short period within the context of the
international uranium market. Most U'S. utilities
have already locked into long-term purchase
agreements that cover most of their requirements
within or even beyond the remaining term of the
HEU Agreement. Moreover, the United States En-
richment Corporation (“USEC”) controls the distribu-
tion of SWU from the HEU Agreement by deciding
whether its existing long-term contracts with U.S.
and foreign utilities will be supplied using SWU ob-
tained under the HEU Agreement or SWU from other
sources (i.e., self-production or stockpile). Because of
commitments under long-term contracts, the avail-
able uncovered demand from U.S. utilities is limited.
Hence, existing long-term contracts greatly diminish
any incentive Russia might otherwise have to aban-
don HEU downblending and the transactions associ-
ated with the HEU Agreement in favor of commercial
contracts for uranium enrichment.

In any event, even if the HEU Agreement were not
approaching the end of its term, Tenex still would
have no clear incentive to divert even a portion of its
current HEU Agreement transactions with USEC to
potential commercial SWU transactions. The current
price formula by which USEC pays Tenex for SWU
under the HEU Agreement is derived from a calcula-
tion of published market price indicators. Tenex has
every incentive to maximize the market value of the
HEU Agreement transactions rather than risk ex-
porting LEU directly to U.S. customers in a manner
that would drive down market prices and thereby
undercut revenue from the HEU Agreement transac-
tions. Exporting LEU to the United States in quanti-
ties and at prices that would disrupt the U.S. market
also would be contrary to Russia’s interests in con-

4

tinued cooperation with the United States on peace-
ful nuclear energy issues.

Finally, also overstated is the potential threat that
Russia could saturate the U.S. market with LEU.
Russia’s enrichment capacity is substantially com-
mitted to existing long-term contracts and increasing
demand for Russian enrichment services. Demand
for Russian LEU continues to grow in Russia and in
third-country markets at a rate far exceeding that of
the U.S. market. Concerns about Tenex diverting its
enrichment capacity to supply the U.S. market also
cannot be reconciled with the recent amendment to
the Suspension Agreement. Under that amendment,
Russia agreed to export limits equal to about twenty
percent of U.S. market demand for the period 2014
to 2020.

FACTUAL BACKGROUND
I. The U.S.-Russia HEU Agreement

The United States and the Russian Federation con-
cluded the HEU Agreement on February 18, 1993.
HEU Agreement, supra note 2. The Recitals of the
HEU Agreement reflect a mutual desire of both the
United States and the Russian Federation “to ar-
range the safe and prompt disposition for peaceful
purposes of highly enriched uranium extracted from
nuclear weapons resulting from the reduction of nu-
clear weapons in accordance with existing agree-
ments in the area of arms control and disarmament.”
The Agreement provides that, over a 20 year period
between 1993 and 2013, Russia will “downblend” the
HEU in the warheads of approximately 20,000
Soviet-era nuclear weapons and sell SWU, which will
be used by electricity-producing nuclear plants. HEU

5

Agreement, Article I(1).° Under the terms of the
HEU Agreement, “[elach Party shall have the right to
terminate this Agreement upon twelve months writ-
ten notification to the other Party.” HEU Agree-
ment, Article VI(3).

The Parties further specified their respective rights
and obligations pursuant to the HEU Agreement in
the Implementing Contract to the HEU Agreement.’
In September 1996, the Implementing Contract was
amended to give effect to the USEC Privatization
Act.” Amendment No. 008 provided that USEC
would purchase SWU only from Tenex.* Tenex would

* Each Government designated an “Executive Agent” to im-
plement the HEU Agreement: For the United States, the Ex-
ecutive Agent was initially the U.S. Department of Energy
(“DOE”); for Russia, the Executive Agent was initially Minatom.
HEU Agreement, Article III. The United States subsequently
designated USEC as its Executive Agent, in place of the DOE.
USEC was then wholly-owned by the U.S. Government. USEC
was privatized in 1998, pursuant to the USEC Privatization Act,
42 U.S.C. § 2297h et seg. The Government of the Russian Fed-
eration subsequently appointed Tenex to act as Minatom’s agent,
acting on its own behalf but at the direction of and in the interest
of Minatom, for the purposes of performing Minatom’s obligations
as Executive Agent for the implementation the HEU Agreement.

* Initial Implementing Contract for the Agreement Between
the Government of the United States of America and the Gov-
ernment of the Russian Federation Concerning the Disposition
of Highly Enriched Uranium Extracted from Nuclear Weapons
(“Implementing Contract”), executed on January 14, 1994.

"The USEC Privatization Act privatized USEC and estab-
lished the annual amount of natural uranium that can be sold
in the United States pursuant to the HEU Agreement
transactions. 42 U.S.C. § 2297h et seq.

*The Implementing Contract originally provided that USEC
would purchase the natura! uranium component as well as the
(Continued)

6

deliver LEU to USEC, but simultaneous with this
delivery, USEC would deliver to Tenex’s account (by
book transfer) natural uranium that was deemed of
Russian origin and of an amount equal to the natural
uranium component of the LEU delivered by Tenex to
USEC.

Given that USEC’s delivery of the deemed-Russian
natural uranium occurred at the same time as
Tenex’s delivery of LEU to USEC, and payment un-
der Amendment No. 008 is designated for SWU only,
USEC was paying only for the SWU component of the
delivered LEU. Implementing Contract, Amendment
No. 008, Sections 2(a} and 2(d). The Russian-origin
natural uranium could be sold in the U.S. market
pursuant to annual quota limits set forth in the
USEC Privatization Act. 42 U.S.C. § 2297h-10(b)(5).
Russia, however, has not sold to the U.S. market the
maximum amounts of natural uranium permitted
under this quota because of its obligation to down-

(Continued)

SWU component of the LEU derived from HEU. Complications
related to the terms of compensation for the natural uranium
component of LEU delivered in the early years of the HEU
Agreement led to the renegotiation of the terms of sale. Under
Amendment No. 008, USEC no longer had any obligation to pay
for the natural uranium component of any LEU delivered
by Tenex pursuant to the HEU Agreement transactions.
Amendment No. 008, dated September 4, 1996, to the Imple-
menting Contract for the Agreement Between the Government
of the United States of America and the Government of the
Russian Federation concerning the Disposition of Highly
Enriched Uranium Extracted from Nuclear Weapons, executed
on January 14, 1994, Section 2(a) (“USEC shall have no
obligation to pay for the natural uranium component of any
LEU delivered after calendar year 1996.”).

7
blend HEU and deliver LEU to the United States in
accordance with the terms of the HEU Agreement.’

USEC estimates that the HEU Agreement program
will result in payments of approximately $8 billion by
USEC to Tenex for SWU over the 20-year life of the

* Tenex retained a portion of this return natural uranium
feed, while another portion was sold to Cameco, Cogema (now
Areva), and Nukem (collectively “the Western Companies”) pur-
suant to the March 1999 Commercial Feed Agreement. In June
2004, Tenex and the three Western Companies announced an
amendment to the Commercial Feed Agreement whereby the
Western Companies waived options to purchase the HEU return
feed in order to ensure that Russia would have sufficient natu-
ral uranium to blend down HEU for the remaining term of the
HEU Agreement. U.S. Department of Energy, Report on the
Effect the Low-Enriched Uranium Delivered Under the HEU
Agreement Between the Government of the United States and the
Government of the Russian Federation has on the Domestic Ura-
nium Mining, Conversion, and Enrichment Industries and the
Operation of the Gaseous Diffusion Plant, at 4 (Dec. 31, 2004)
(“DOE 2004 HEU Agreement Effects Report”) (stating that the
HEU Commercial Feed Agreement was amended to ensure Rus-
sia had sufficient uranium to meet its obligations under the
HEU Agreement to blend down weapon-grade HEU and “in
light of Russia's rising requirements for uranium to fuel their
expanding nuclear plant construction program within Russia
and abroad”), available at http//www.ne.doe.gov/pdfFiles
/RptEffectLow-Enriched%20 UraniumDec312004.pdf); see also
News Release, Cameco, Cameco Provides Details of Previously
Announced Uranium Agreement: Companies Amend Deal for
Uranium from Dismantled Russian Nuclear Weapons (Jun. 16,
2004) (stating that the Western companies waived their option
rights to purchase uranium returned to Russia pursuant to and
for the remainder of the HEU Agreement, effectively withhold-
ing for Russia’s use 74 million pounds of uranium that other-
wise could have been sold to the Western companies), available
at http//www.cameco.com/media_gateway/news_releases/2004/
news_release.php?id=85.

8

HEU Agreement.” Through 2006, the Department of
Energy reported that 53.4 million SWU had been
purchased, which had been derived from approxi-
mately 11,673 dismantled warheads, generating 292
metric tons of HEU." For the remainder of the term
of the HEU Agreement, Russia will sell 5.5 million
SWU annually to USEC, see USEC Inc. News Re-
lease, which represents approximately 40 percent of
the estimated U.S. annual SWU requirements of al-
most 14 million SWU. DOE 2006 HEU Agreement
Effects Report at 6 (reporting that U.S. demand for
2006 is estimated to be nearly 14 million SWU). The
DOE report noted that SWU prices in 2006 started
the year at $116 per SWU and had increased over 15
percent to $135 per SWU by the end of the year. Id.
For 2007, the reported month-end price range for
SWU ranged from $128 to $143 per SWU.”

News Release, USEC Inc., Governments Approve New
USEC-Russian Agreement; U.S. and Russia Approve New Mar-
ket-based Pricing Terms to Convert Warheads to Nuclear Fuel
(June 19, 2002) (“USEC Inc. News Release”), available at
http-//findarticles.com/p/articles/mi_m0EIN/is_2002_June_19/ai
_87452712.

"U.S. Department of Energy, Report on the Effect the Low
Enriched Uranium Delivered Under the Highly Enriched Ura-
nium Agreement Between the Government of the United States
and the Government of the Russian Federation has on the Do-
mestic Uranium Mining, Conversion, and Enrichment Industries
and the Operation of the Gaseous Diffusion Plant at 2 (Decem-
ber 31, 2006) (“DOE 2006 HEU Agreement Effects Report”),
available at http//www.ne.doe.gov/pdfFiles/2006_HeuReport.pdf .

"NUCLEAR FUEL, Secondary SWU Market Price Estimate
(US$/SWU)(Platts/McGraw Hill Companies, New York, N.Y.),
Vol. 32, No. 4, Feb. 12, 2007 and Vol. 33, No. 2, Jan. 28, 2008
(reporting $128-$143 per SWU (Trade Tech) and $135-$143 per
SWU (Ux Consulting) for 2007).

9

In June 2002, the Implementing Contract between
USEC and Tenex was amended again to provide for a
market-based pricing structure for the SWU pur-
chased by USEC for the remaining term of the HEU
Agreement (i.e., through 2013)." Previously, USEC
had purchased SWU from Tenex pursuant to a price
escalation formula for a specified period. Under the
new SWU pricing terms, USEC’s purchase price was
calculated using a discount from an index of pub-
lished market price indices widely used in industry
practice. | Because the current price formula by
which USEC pays Tenex for SWU under the HEU
Agreement is derived from a calculation of market
prices, Tenex has every incentive to maximize the
market value of the HEU Agreement transactions
and to avoid pricing that would drive down market
prices and thereby undercut revenue from the HEU
Agreement transactions.

II. The Russian Uranium Suspension Agree-
ment

In addition to the HEU Agreement, the Suspension
Agreement is also relevant to the regulation of Rus-
sian uranium products imported into the United
States.‘ The Suspension Agreement covers imports

See USEC Inc. News Release, supra note 10. USEC in-
sisted that the price terms be renegotiated to include a multi-
year retrospective market price index to minimize the disruptive
effect of short-term market price swings and to include a dis-
count component that allows USEC to purchase Russian SWU
at below-market prices and resell at market prices. Id.

“On December 5, 1991, Commerce initiated an antidumping
duty investigation of imports of uranium (including uranium
ore, uranium concentrate, and enriched uranium) from the Un-
ion of Soviet Socialist Republics (“USSR”). Following the

(Continued)

10

of Russian LEU produced through commercial en-
richment. However, nothing in the Suspension
Agreement prevents exports pursuant to the HEU
Agreement. Suspension Agreement, section M.1, 57
Fed. Reg. at 49237 (“This Agreement in no way pre-
vents the Russian Federation from selling directly or
indirectly any or all of the HEU in existence at the
time of the signing of this Agreement and/or low
enriched uranium (‘LEU’) produced in Russia from
this HEU to [USEC]”).

Throughout the duration of the Suspension Agree-
ment, exports of Russian uranium products to the
United States consisted of (i) HEU Agreement trans-
actions in which Tenex sold SWU to USEC,” (ii) re-
export quota transactions in which Russian uranium
was imported for further processing into fuel rods in
the United States and then re-exported for non-U:S.
consumption, or (iii) for a brief time, limited quanti-
ties of SWU, inventory materials or uranium sold

(Continued)

USSR’s dissolution on December 25, 1991, Commerce continued
the antidumping investigation as to each of the newly independ-
ent states, and eventually entered into separate agreements
with six of the countries, including the Russian Federation, to
suspend the antidumping investigations. Suspension Agree-
ment, 57 Fed. Reg. at 49220-49261.

Suspension Agreement, section M.1, 57 Fed. Reg. at 49237.
The October 3, 1996 amendment to the Suspension Agreement
provided that exports of Russian-origin uranium products de-
rived from the down-blending of HEU under the HEU Agree
ment would not be counted against the export limits of the Sus-
pension Agreement. Amendments to the Agreement Suspending
the Antidumping Investigation on Uranium from the Russian
Federation, 61 Fed. Reg. 56665 (Dep’t of Commerce Nov. 4,
1996).

11

under “matched sales contracts.” Russia and Com-
merce recently signed an amendment to the Suspen-
sion Agreement, effective February 1, 2008, granting
Tenex the immediate right to enter into contracts for
the sale of Russian uranium products directly to U.S.
utilities in the United States. Amendment to the
Agreement Suspending the Antidumping Investiga-
tion on Uranium from the Russian Federation, 73
Fed. Reg. 7705, 7706 (Dep’t of Commerce Feb. 11,
2008). Exports of Russian uranium pursuant to
these commercial contracts would not begin until
2011 and would be subject to limits that increase
each year, which from 2014 through 2020 are set at
20 percent of the estimated nuclear fuel market de-
mand for the U.S. market. Id. at 7706; Press Re-
lease, U.S. Department of Commerce, United States
and Russian Uranium Agreement Reached (Feb. 1,
2008) (“The Agreement, which has been under nego-
tiation for two years, permits Russia to supply 20
percent of U.S. reactor fuel until 2020”).”

Finally, the Amendment further provides that
“(Commerce] will abide by the Eurodif decisions in its
determination of the likelihood of continued or recur-
ring dumping” and that the Suspension Agreement

” The original Suspension Agreement provided for quotas for
multi-year contracts (Section [V.C.2 (“Appendix A” contracts));
the exportation of Russian uranium pursuant to grand-fathered
(Continued) contracts (Section [V.K (“Appendix C” contracts));
exports pursuant to inventory materials (Section IV.E.); and
exports of Russian uranium that were entered for processing in
the United States and subsequent re-export within 12 months of
entry for consumption outside the United States (Sections IV.G.,
IV.H). 57 Fed. Reg. at 49236-37.

" Available at http//www.commerce.gov/NewsRoom/Press
Releases_FactSheets/PROD01_005136?format_for_print=true.

12

will terminate on December 31, 2020. 73 Fed. Reg.
at 7707.
ARGUMENT

I. The Nature of Uranium Trade and the
Short Time Horizon for the HEU
Agreement Limit Any Possible Effect of
The Lower Court’s Decision on the HEU

Agreement

The view that affirmance of the decision below”
would give Russia an incentive to stop downblending
HEU under the HEU Agreement in favor of conven-
tional LEU production, and that this would harm
U.S. national security, foreign policy, and energy
policy is both legally irrelevant” and factually incor-
rect. The HEU Agreement will terminate in 2013.
That fact, combined with the prevalence of long-term
contracts in the uranium industry, would sharply
limit any effect that this Court’s decision could have
on Russia’s performance under that agreement.

“ Eurodif S.A. v. United States, 411 F.3d 1355 (Fed. Cir.
2005) (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). Citations (“Pet. App.”) are to the
petitioners’ appendix to the United States’ petition for writ of
certiorari in Case No. 07-1059.

* These policy considerations relate to neither the underlying
factual record nor the administrative proceeding giving rise to
the case now before the Court. Nor are such policy concerns in
any way germane to the legal issues presented in this case,
which concern the interpretation of a trade statute of general
application. Finally, the Court should not disregard the literal
terms of the statute and expand the scope of the antidumping
law because of perceived “undesireable consequences.” See
Powerex Corp. v. Reliant Energy Servs., Inc., 127 S.Ct. 2411,
2420 (2007) (a statute’s perceived “undesireable consequences”
is a “policy debate that belongs in the halls of Congress, not in
the hearing room of this Court”).

13

Long-term contracts have already locked up much
of the market for the remaining five years of the
HEU Agreement. As the U.S. International Trade
Commission (“ITC”) documented in 2006, long-term
contracting dominated the U.S. uranium market for
the previous five years. Uranium from Russia, U.S.
Int] Trade Comm’n Pub. 3872, Inv. No. 731-TA-539-
C (Second Review) at II-4, Table II-1 (Aug.
2006)(“ITC Second Sunset Determination”\reporting
that 93.9% of SWU was purchased pursuant to long-
term contracts from 2000 through 2005). It is indis-
putable that this remains the case today, and expec-
tations are that long-term contracts will dominate
the market for SWU transactions for the foreseeable
future. See e.g., Haruo Maeda, The Global Fuel Mar-
ket, Supply and Demand 2007-2030, at 8 (World Nu-
clear Ass’n 2008) (““WNA, The Global Fuel Market,
2007”) (“Most uranium continues to be traded on the
basis of multi-annual contracts, based on perceived
utility requirements”).” Indeed, if anything, “both
the percentage of utility fuel requirements being pur-
chased pursuant to long term contracts and the
length of the contract is increasing.” ITC Second
Sunset Determination at 42 (dissenting views of
Commissioner Lane). In particular, U.S. utilities
purchase uranium usually under long-term purchase
contracts that run three to seven years, or longer. Id.

” The Global Fuel Market, Supply and Demand is a leading
source of market information. See, e.g., ITC Second Sunset De-
termination at 26 n. 167 (citing The Global Fuel Market, Supply
and Demand for its calculation of U.S. nuclear reactor uranium
requirements); USEC, Inc. Annual Report (Form 10-K) at 57
(Feb. 26, 2008) (citing The Global Fuel Market, Supply and De-
mand 2005-2030 projections that globally 107 reactors will be
added and 42 may be shut down by 2020, representing about a
22 percent net increase).

14

at 23 (majority views) and II-15 (reporting that U.S.
utilities purchased the majority of the processing,
e.g., SWU, through long-term contracts, which are
purchases made three or more years prior to use of
the purchased service). Moreover, USEC decides
whether it will fulfill existing long-term contracts
with utilities using SWU obtained under the HEU
Agreement or SWU from other sources (i.e., self-pro-
duction or stockpile).

Both suppliers and customers desire and benefit
from predictability and market stability. Utilities
want dependable and diverse supply sources of en-
richment services and LEU. Suppliers like Tenex
want diversity of customers as well as relative sta-
bility in sales revenues. Accordingly, suppliers need
to maintain goodwill within the industry to achieve
stability and predictability. Consistent with basic
commercial and economic considerations, Tenex’s
near- and long-term interests lie in being perceived
as a reliable supplier of the market. Avoiding poten-
tial litigation associated with the disruption of long-
term contracts is also a relevant consideration. The
view that Tenex is motivated solely by short-term
economic opportunism is inconsistent with the com-
plexities of uranium trade and Tenex’s commercial
interests.

As a practical matter, therefore, the vast majority
of U.S. utilities’ supply requirements have already
been locked in under existing long-term contracts for
the remaining five years of the HEU Agreement.
Given this context, even if the Russian Government/
Rosatom chose to exercise the right to terminate the
HEU Agreement with one year’s notice (HEU Agree-
ment, Article VI(3)), the available demand from U.S.
utilities would be limited because U.S. utilities are

15

already committed to purchasing their requirements
under pre-existing long-term contracts.

II. The Pricing Terms of the HEU Agreement
Independently Deprive Russia of Any
Substantial Incentive to Reduce HEU
Downblending in Favor of Conventional
Enrichment Techniques

Even apart from the temporal considerations dis-
cussed above, affirmance of the decision below still
would not give Russia an incentive to scale back
transactions dependent on downblending HEU in fa-
vor of conventional uranium enrichment, because
doing so would deprive Russia of the higher revenues
it otherwise stands to earn under the HEU Agree-
ment.

The price that USEC pays Russia for SWU under
the HEU Agreement is derived from the calculation
of published market price indicators. USEC Inc.
News Release, supra note 10. Hence, in order to
maximize the market value of the SWU sold to USEC
pursuant to the HEU Agreement, Russia rationally
would try to avoid making sales at commercial prices
that would drive the markc* prices down.” This
would then be reflected in the indexed price USEC
pays Russia for the HEU Agreement Russian SWU.
As noted in USEC Inc. News Release, for the remain-
der of the term of the HEU Agreement, Russia will
sell 5.5 million SWU annually to USEC, which repre-
sents approximately 40 percent of the estimated U.S.

* Revenue from Russia’s sales pursuant to the HEU Agree-
ment go to the Russian state, whereas the Russian state only
receives monies in the form of taxes paid by Tenex on revenue
derived from conventional uranium enrichment pursuant to
Tenex’s non-HEU, commercial transactions.

16

annual SWU requirements of almost 14 million SWU.
DOE 2006 HEU Agreement Effects Report at 6 (re-
porting that U.S. demand for 2006 is estimated to be
nearly 14 million SWU). As also noted, DOE calcu-
lated SWU prices at $116 to $135 per SWU for 2006.
Id. Throughout 2007, uranium industry publications
reported SWU prices were between $128 and $143
per SWU. NUCLEAR FUEL, supra note 12. Even un-
der the pricing formula that was amended in 2002 to
allow USEC to purchase at a discount to a historical
index of long-term and short-term U.S. and interna-
tional market prices, see USEC Inc. News Release,
the amount of revenue generated solely from the
SWU sales is significant. Using the lower-end DOE
SWU price, which is known to be conservative, 5.5
million SWU at $116 per SWU would be $638 million

per year.

In this context, it would not be economically ra-
tional for Russia to divert even a portion of the SWU
volume under the HEU Agreement to pursue new
commercial contracts for any of the smaller remain-
ing amount of open U.S. market demand in a manner
that would adversely affect the pricing on this large
volume of sales to USEC. Tenex has economic disin-
centives to price aggressively low on new contracts
because any underselling on new commercial con-
tracts would ultimately drive down the price of the
SWU sold to USEC under the HEU Agreement as the
pricing formula is derived from published market
price indicators. The large volume of HEU Agree-
ment sales to the U.S. market — and the revenue
stream associated with those sales — would deter a
strategy aimed at pursuing below-market sales that
would drive down prices under the HEU Agreement
and ultimately reduce the revenue Russia derives
from sales under that Agreement.

17

Ill. Concerns About Russia’s Excess LEU
Capacity Are Overstated Because They
Ignore Russia’s Expanding Home-Market
and Third-Country Demand

Russia’s enrichment capacity is substantially com-
mitted to existing long-term contracts and increased
demand for Russian enrichment services in Russia
and in third countries. ITC Second Sunset Determi-
nation at [V-19 (Rosatom statement to the ITC). The
Global Fuel Market, Supply and Demand estimated
that Russia’s uranium requirements for nuclear reac-
tors will increase by 23 percent from 2005 to 2010 be-
cause of three new reactors planned for start-up by
2010. Haruo Maeda, The Global Fuel Market, Supply
and Demand 2005-2030, at 50 and 81 (World Nuclear
Ass’n 2006) (“WNA, The Global Fuel Market, 2005”).
Russian companies supply all of the uranium fuel re-
quired by Russian nuclear reactors, and these re-
quirements are expected to increase with the planned
construction of new nuclear power plants in Russia.
Id.; WNA, The Global Fuel Market, 2007 41-42 (Rus-
sia plans to build 42 new nuclear reactors by 2030)
and 155 (“it is clear that the Russian system now has
its own rising demand for fuel, and this must be sat-
isfied first, so the fuel exports will likely fall substan-
tially”).

In addition, Russia’s substantial sales of LEU and
SWU to third country markets are substantial and
projected to experience significant growth.” This

™ WNA, The Global Fuel Market, 2005 at 43, 46, 163 and 172
(“Given that (China and India} do not have abundant low-cost
uranium reserves, it appears realistic to proceed on the assump-
tion that if Russia supplies the reactor technology, it will also
supply the fuel”); WNA, The Global Fuel Market, 2007 at 152

(Continued)

18

trend is consistent with the fact, as noted, see supra
at 6-7, that Russia’s uranium sales in the U.S. market
are below quantities permitted under U.S. law. To
meet substantial demand, including to ensure that
Russia would have sufficient natural uranium to
blend down HEU for the remaining term of the HEU
Agreement, Tenex requested agreement by the
Western Companies to waive their options to
purchase HEU feed, i.e., natural uranium, returned
to Russia pursuant to the USEC Privatization Act
and the HEU Commercial Feed Agreement.” Russia

(Continued)

(stating that nuclear reactors in Russia, the former Soviet re-
publics and in India and China are Russian-built and it is as-
sumed Russia will supply these reactors for the foreseeable fu-
ture). World-wide prices for LEU, SWU and natural uranium
are at historic highs because of significant global demand and
tight supply. WNA, The Global Fuel Market, 2005 at 99 (“[A
strong market reaction] started in 2003 with a strong upward
movement in world uranium prices (the spot market price tri-
pled by the middle of 2005)”); WNA, The Global Fuel Market,
2007 at 97 (“The extent of the [spot market] price rise (a more
than tenfold increase since early 2003, from $10/b to over
$135/b in mid-2007) took the uranium market to historic levels
in both real (inflation adjusted) and nominal terms”); ITC Sec-
ond Sunset Determination at Figure V-2 (citing Ux Weekly
2002-2006). Projections are that global demand will outpace
global supply by around 2016. WNA, The Global Fuel Market,
2007 at 166, Fig. 5.9.

™ DOE 2004 HEU Agreement Effects Report at 4 (“In June
2004, Russia and the Western Consortium announced an
amendment to the Commercial Feed Agreement...in light of
Russia’s rising requirements for uranium to fuel their expand-
ing nuclear plant construction program within Russia and
abroad...The removal of 74 million pounds of uranium and con-
version from the uranium and conversion markets may have an
effect due to the reduction in supply in markets that are cur-
(Continued)

19

also is re-enriching depleted uranium to produce
LEU, even though this is a relatively uneconomic
process, because of the substantial demand for LEU
in its home market and third country markets. [TC
Second Sunset Determination at 27-28 and IV-17
(noting that The Global Nuclear Fuel Market reports
that Russia is the world’s largest re-enricher of
depleted uranium); WNA, The Global Nuclear Fuel
Market, 2007 at 3 (“it is known that substantial spare
Russian enrichment capacity has been used to re-
enrich depleted uranium”).

Finally, as noted, in the most recent amendment to
the Suspension Agreement that became effective in
February 2008, Russia agreed to annual export limits
from 2014 to 2020 equal to twenty percent of U.S.
market demand. Suspension Agreement, 73 Fed.
Reg. at 7706. Even though Russia’s SWU sales to
USEC pursuant to the HEU Agreement currently ac-
count for more than twenty percent of U.S. market
annual demand, Russia agreed to a lower share of the
U.S. market through commercial sales directly to the
U.S. utilities after the HEU Agreement expires.
Given the projected increased demand in Russia,
Asia and Eastern Europe and other non-U.S. mar-
kets, Russia was willing to agree to lower U.S. mar-
ket share in order to achieve a more balanced and di-
versified sales portfolio.

(Continued)

rently in supply/demand balance”). Rosatom has stated that
“(tlo help Russia meet its internal requirements for natural
uranium...it plans to take back additional quantities of UF, that
it receives under the HEU Agreement.” ITC Second Sunset De-
termination at [V-18.

26
CONCLUSION

For the foregoing reasons, the judgment of the
United States Court of Appeals for the Federal Cir-
cuit should be affirmed.

Respectfully submitted,

CAROLYN B. LAMM

Counsel of Record
FRANK J. SCHWEITZER
ADAMS C. LEE
JOANNA M. RITCEY-DONOHUE
WHITE & CASE LLP
701 13th Street, N.W.
Washington, DC 20005
(202) 626-3600

Attorneys for Amicus Curiae Tenex

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0068%3A20. Public record. Not legal advice.