U.S. Uranium Enrichment Firm Wins Supreme Court Ruling

The U.S. Supreme Court ruled yesterday in favor of an effort by the nation's only uranium enrichment firm to place tariffs on uranium imports from a French competitor (see GSN, April 22, 2008).

The case was brought by USEC Inc., the U.S.-based uranium enricher, which asked the Commerce Department in 2000 to levy tariffs against French enricher Eurodif S.A., which USEC charged was selling uranium to U.S. nuclear power plants at below-cost prices. The department agreed and levied a 20-percent tariff on Eurodif uranium; however, those penalties were reversed in 2002 by the Court of International Trade, a move that was later affirmed by a U.S. Circuit Court.

USEC officials have argued that the Eurodif sales endangered USEC's ability to survive, thereby threatening to interrupt some key U.S. nonproliferation efforts, particularly the Megatons to Megawatts program in which the United States purchases reactor fuel created from former Russian nuclear weapons (see GSN, July 17, 2006).

In yesterday's opinion, written by Justice David Souter, the Supreme Court reversed the previous ruling, declaring that the Commerce Department had acted in an "eminently reasonable" fashion in making its original decision.

The key question centered around whether nuclear utility contracts to buy low-enriched uranium constitute a purchase of "goods" or "services." U.S. law allows for placing tariffs on "foreign merchandise" sold in the United States for "less than fair value," but does not permit such sanctions on the sale of services, according to a court summary. Predictably, USEC argued that the uranium sales were transfers of goods, while Eurodif countered that it was providing services.

Complicating the situation is the nature of many uranium enrichment contracts, which can call for the utilities to provide natural uranium, purchased from a third party, to the enricher for processing. Ownership of the natural uranium is not clearly defined, however, as the enricher is free to use supplies on hand to produce the contracted low-enriched uranium.

Souter's opinion sought to emphasize the uncertainty of the situation.

"A customer who comes to a laundry with cash and dirty shirts is clearly purchasing cleaning services, not clean shirts. And a customer who provides cash and sand to a manufacturer of generic silicon processors is clearly buying chips rather than sand enhancement services," he wrote. "But the line blurs when the facts get more complicated."

"This is the very situation in which we look to an authoritative agency for a decision about the statute's scope ... and once the choice is made we ask only whether the department's application was reasonable," he continued.

Furthermore, allowing uranium enrichment to be considered a service would create a loophole that manufacturers in many industries would exploit, Souter wrote.

"The restructuring would not stop with uranium," he stated. "Contracts for imported pasta would be replaced by separate contracts for wheat and wheat processing services, sweater imports would give way to separate contracts for wool and knitting services, and antidumping duties would primarily chastise the uncreative."

USEC officials praised yesterday's decision.

"Today, the U.S. Supreme Court unanimously ruled in favor of effective U.S. trade laws by holding that the U.S. antidumping law applies to all dumped imports of LEU," USEC counsel Peter Saba said in a release. "By reversing a lower court ruling that would have excluded a large number of dumped imports based solely on the type of contract under which the LEU was sold, the Supreme Court leveled the playing field for domestic producers and their workers competing against these unfairly priced imports" (Greg Webb, Global Security Newswire, Jan. 27).

January 30, 2009

The U.S. Supreme Court ruled yesterday in favor of an effort by the nation's only uranium enrichment firm to place tariffs on uranium imports from a French competitor (see GSN, April 22, 2008).