Trade Court Says ITC 'Assumed Facts' Based on Shoddy Evidence in Fertilizer Injury Finding

The International Trade Commission failed to support its "central" underselling analysis as part of the injury investigation on phosphate fertilizers from Morocco and Russia, the Court of International Trade ruled in a Sept. 19 opinion. Judge Stephen Vaden said that since the commission's underselling theory "undergirds" the remaining statutory considerations in the proceeding -- volume, price and impact -- the ITC must revisit its findings on these factors as well should it continue to find that the imports were undersold. The underselling theory "contaminat[ed]" these remaining findings, the opinion said.

"Judge Vaden’s decision is thoughtful, thorough and compelling," Peter Koenig, counsel for plaintiff EuroChem, said in an email. "After re-examining the record in light of the Court’s opinion, I’m hopeful that the Commission will render the negative determination that is long overdue.”

The judge touched off his review of the case by identifying two key developments in the phosphate fertilizer industry: the shuttering of major U.S. fertilizer production facilities throughout 2017-19, the period of review; and abnormally high rainfall during this time leading to massive flooding and closures along the Mississippi River area, stranding fertilizer barges and leading to delayed, destroyed or abandoned plantings.

In its injury investigation, the commission was drawn to the fact that import levels remained high despite these negative effects on the fertilizer market. The ITC said that since exporters kept coming despite the lowered demand, the oversupply was responsible for "price depression." However, the exporters, led by Moroccan exporter OCP, told the commission that its goods were not a reflection of any harm it meant to do the domestic industry but rather existed because they had been ordered earlier based on "normal demand projections," adding that it is "cost prohibitive" to reship the fertilizer from the flooded areas to the high demand regions around the U.S.

Vaden found that the ITC's overselling analysis and its conclusion that reshipment was economically feasible were not supported by evidence. The court noted how the single piece of evidence the ITC used to show that it was possible to reship domestic inventories from their original place to higher demand locations, a testimony from the president of EuroChem, was actually undercut by the full context of that testimony.

The court said the evidence "simply does not show what" the ITC claims, adding that "intermodal delivery" -- something the ITC alludes to -- is "distinct from reshipment" of goods that have already reached their destination. To meet the statutory evidentiary requirement, "it was incumbent on the domestic industry to place evidence on the record showing that domestic reshipment of fertilizer from inventories had occurred as a normal business practice," the opinion said. "It failed to do so. It is easy to see why: A practice that is uneconomical will not be adopted by an industry as part of its conditions of competition."

Vaden said that the commission's theory "rests like an inverted pyramid on an unsupported finding regarding what might be possible if economics did not matter." The court added that given the structure of the ITC's analysis, the volume, price and impact findings must also be reconsidered should the commission further explain its oversupply theory. On the volume finding, the court said that past precedent established the principle that imported volumes may not be significant if the imported quantities fill the demand the domestic industry is unable to meet due to incapability or lack of viability.

The court ultimately sent back the commission's findings, which it said assumed facts "for which there is insufficient evidence."

(OCP v. United States, Slip Op. 23-136, CIT Consol. #21-00219, dated 09/19/23; Judge: Stephen Vaden; Attorneys: Shara Aranoff of Covington & Burling for plaintiff OCP; Peter Koenig of Squire Patton for consolidated plaintiff EuroChem North America Corporation; Paul Rosenthal of Kelley Drye for plaintiff-intervenors led by Phosagro; Courtney S. McNamara for defendant U.S. government; Stephanie Hartmann of WilmerHale for defendant-intervenor Mosaic Co.; Stephen Vaughn of King & Spalding for defendant-intervenor the J.R. Simplot Co.; John Magnus of TradeWins for amici curiae led by American Soybean Association)