Oral Argument Recap: USEC v. Eurodif and US v. Eurodif

Amy Howe discusses yesterday’s oral arguments in Nos. 07-1078 and 07-1059, USEC v. Eurodif and United States v. Eurodif. [Note: As an associate at Steptoe & Johnson from 1998-2000, Amy represented USEC in several proceedings but was not involved in the federal court proceedings in this case.] Additional information and documents are available on the cases’ SCOTUSwiki page, here.

Arguing for petitioner United States of America, Deputy Solicitor General Malcolm Stewart spent most of his first turn at the podium parrying questions about exactly what Commerce’s test was and how it should be applied in a wide variety of cases.  In response to a hypothetical posed by (of course) Justice Breyer, Stewart posited that when a U.S. customer provided grain to an overseas company for milling, the finished produce would be subject to the antidumping laws.  Justice Breyer also expressed concern that importers would not have expected transactions such as the uranium enrichment contracts at issue to be subject to the antidumping laws given Commerce’s prior regulations and decisions. 

Continuing a line of questions about how to apply Commerce’s test, the Chief Justice pressed Stewart on the question whether the test hinged on the fungibility of the raw materials or the substantial transformation of those raw materials.  It is important to make this clear, the Chief Justice explained, “so that business people can know when they are going to be subject to this regime.”  Stewart responded that substantial transformation was the ultimate touchstone in the test, but he also emphasized that the case was made “much easier by virtue of the fact that the enricher dealt with fungible goods and also had substantial discretion to decide” how to produce the contracted-for quantity of uranium.  Addressing another hypothetical – this time from the Chief Justice and involving a diamond carved out of a big rock – Stewart acknowledged that there is a “gray area” regarding whether a change constitutes a substantial transformation, but he emphasized that in this case all of the parties have agreed that there was a substantial transformation.

Finally, Justice Stevens returned to the text of the statute, asking whether the statute’s requirement that the merchandise at issue be “sold” in the U.S. is ambiguous.  Stewart maintained that, at least “at the margins,” it is, and he contended that Congress intended any ambiguity to be resolved by the agency rather than the courts.

Representing petitioner USEC, H. Bartow Farr acknowledged that the uranium transactions at issue “can be thought about reasonably enough in different ways.”  But the question before the Court, he emphasized, was whether Commerce’s interpretation of the statute was reasonable. 

Justice Breyer again reiterated his concern that Commerce’s interpretation represented a change in policy on which importers may have relied.  Farr sought to allay those concerns, noting that in this case in particular utilities and enrichers had conceded that “they did not set up their transactions in this way in order to comply with prior decisions of the Commission.”  And referring to a line of questions regarding the Federal Circuit’s decision in the Florida Power and Light case, in which that court held – at the government’s urging – that the same transactions involved a service rather than the sale of goods, Farr distinguished the FPL case as not presenting a Chevron deference question.

As it did during Stewart’s time at the podium, the Court sought to flesh out the contours of Commerce’s test.  And like the United States, Farr responded that when you have both fungible raw material and a substantial transformation of that material, the antidumping laws apply.  He left open the possibility that with a substantial transformation but no fungible raw material, Commerce might nevertheless retain the discretion to treat it as a sale of goods.

When Caitlin Halligan came to the podium to argue on behalf of respondents Eurodif et al., the Justices focused on what the Chief Justice described as the “substance versus formality question.”  The Chief Justice asked “why should it make a difference whether the domestic company supplies” fungible raw materials to a foreign company” or instead “simply . . .  gives them money and says, buy them yourselves?”  Halligan maintained that the substance of the transaction “squares with the contracts”:  at the end of the day, the enricher gets money and the utilities get enriched uranium.  Justice Scalia was extremely skeptical, repeatedly contending that, as the transactions unfold, there has been a “change of ownership” of the uranium and thus a sale.  Halligan also emphasized that the antidumping statute is limited to the sale of merchandise; the fact that the countervailing duty statute (which seeks to place duties on imports that are sold in the U.S. at low prices as a result of subsidies from foreign governments) applies to both sales of merchandise and services indicates, in her view, that the antidumping statute was not in fact intended to have the broad reach attributed to it by Commerce and USEC.  She also emphasized that, contrary to the government’s arguments that the failure to uphold

Commerce’s interpretation of the statute will create a loophole that importers can easily exploit by changing the structure of their transactions, the antidumping law “is not a boundless license to protect domestic industry from any competition.”

The Court also returned to the question of the fungibility of the uranium feed and the effect of this fungibility on whether there is a transfer of ownership.  Halligan emphasized that, according to the contract, the utility retains title to a discrete amount of unenriched uranium. 

Because the bench was not particularly active, it is difficult to predict the outcome of the case with any certainty.  However, given the Court’s focus during the petitioners’ arguments on how the test would apply more broadly, compared with their skepticism that a contrary interpretation would elevate formality over substance, it seems like that the U.S. and USEC will prevail.