CAFC Says Commerce Can Limit Comparator Group in Finding de Facto Specificity

Applying this standard to the countervailing duty investigation on Russian phosphate fertilizers, Reyna, writing for the court, upheld Commerce's decision to compare the agrochemical industry's use of natural gas only to industrial users, rather than all natural gas users.

The court also upheld the agency's decision to use data from the International Energy Agency (IEA) on the natural gas prices of OECD and EU nations in setting a benchmark for calculating the CVD rate for the Russian natural gas subsidy. Reyna held that Commerce didn't fail to first assess whether Russian state-owned gas supplier Gazprom's prices were set in line with market principles before using the IEA data as a proxy, and that the agency didn't fail to adjust the IEA data "to account for Russia's natural abundance of natural gas."

Industrial Group Phosphorite (EuroChem), one of the respondents in the investigation, contested the CVD investigation on the grounds that Commerce unlawfully found that the provision of subsidized natural gas was de facto specific to the agrochemical sector. Specifically, the respondent challenged whether the agency had the statutory authority to limit its comparison of the agrochemical sector's use of natural gas to all industrial users.

Reyna first held that the plain language of the statute itself, 19 U.S.C. Section 1677(5A)(D)(iii)(II), contains no such explicit requirement that the agency "compare subsidy usage of an industry against all users of the subsidy." The statute doesn't "prescribe any method that Commerce must employ when assessing whether an 'enterprise or industry' is 'a predominant user.'"

Given this plain language, the court then assessed the "legislative purpose of this provision." Turning to the Statement of Administrative Action (SAA) to the Uruguay Round Agreements Act, Reyna said "Congress clearly intended Commerce to have flexibility in determining predominant usage." The SAA notes that the specificity test was meant to "function as a rule of reason" and as an "initial screening mechanism" to preclude broadly available subsidies from CVD proceedings.

Further bolstering the court's "understanding of the statute" is the Federal Circuit's "clear and consistent position that Commerce has reasonable flexibility in carrying out the de facto specificity inquiry," Reyna said. For instance, in AK Steel Corp. v. U.S., the court said that findings of "dominant use are not subject to rigid rules, but rather must be determined on a case-by-case basis taking into account all the facts and circumstances of a particular case."

EuroChem said this reading of the statute would "violate the very purpose of the de facto specificity test," since Russian natural gas consumers are found in "every aspect of the economy." The court rejected this claim, noting that Commerce's flexibility to "determine the comparator group" isn't "unbounded," adding that this flexibility doesn't give the agency a "loophole for rendering all subsidies de facto specific."

Instead, the decision to limit the comparator group must be reasonable, and here, it was, the court said. Reyna noted that while natural gas was consumed "economy-wide," the price "differed between industrial and non-industrial users." In addition, when Commerce asked the Russian government for natural gas prices, it only provided the prices for industrial users, indicating that "Russia understood there to be a difference between industrial and non-industrial users of natural gas."

EuroChem also challenged Commerce's decision to use the IEA data as a "third-tier benchmark" for the natural gas subsidy. The agency opted for this data after finding that "government-created market distortions" ruled out the use of Gazprom's data. The respondent claimed that Commerce can only consider such distortions in assessing whether it can use the market price for the good in question from actual transactions in the country in question, referred to as a "tier one analysis."

The Federal Circuit held that considerations of government-created market distortions aren't limited to tier one analyses. The tier three provision, which Commerce relied on, says the agency can assess whether the government price is in line with market principles and can consider factors such as costs, "the government's price setting methodology, possible price discrimination, or a government price derived from actual sales from competitively run government auctions." The court said these factors aren't exhaustive.

The respondent also said the statute requires Commerce to adjust the IEA data to account for Russia's abundance of natural gas, and if no adjustment was needed, explain why that's the case. Reyna held that the statute "plainly does not require these two steps." The agency's "legal requirement is to broadly consider the adequacy of [remuneration] 'in relation to prevailing market conditions for the good or service' at issue in subject country," Reyna said, adding that the court won't add "specific requirements that find no support in the statute."

(The Mosaic Company v. United States, Fed. Cir. # 24-1593, dated 12/05/25; Judges: Sharon Prost, Jimmie Reyna and Raymond Chen; Attorneys: David Ross of Wilmer Cutler for plaintiff-appellee The Mosaic Company; Jeremy Dutra of Squire Patton for defendant-appellant Industrial Group Phosphorite (aka EuroChem); Augustus Golden for defendant-appellee U.S. government)