Opinion ID: 212040
Heading Depth: 2
Heading Rank: 2

Heading: The Characterization of Enrichment Contracts

Text: 28 Under the statutory scheme adopted by Congress, the sale of goods (or merchandise) is covered by the antidumping duty statute. See 19 U.S.C. § 1673. The provision of services, however, is not covered by that statute. 29 In a previous case dealing with SWU contracts and the Contract Disputes Act (CDA), we agreed with the government's argument that an SWU contract for the enrichment of uranium is a service contract and, thus, not covered by the CDA. See Fla. Power & Light Co. v. United States, 307 F.3d 1364 (Fed.Cir.2002). The parties dispute the relevance of Florida Power to this case. 30 On appeal, the government and USEC submit that Commerce's finding that SWU contracts are contracts for the sale of goods is supported by substantial evidence and in accordance with law and that the Court of International Trade's holding to the contrary should be reversed. They rely on three principal contentions. 31 First, they argue that this court's precedents in NTN Bearing Corp. of Am. v. United States, 368 F.3d 1369 (Fed.Cir.2004), AK Steel Corp. v. United States, 226 F.3d 1361 (Fed.Cir.2000), and NSK Ltd. v. United States, 115 F.3d 965 (Fed.Cir.1997) support their argument that the SWU contracts in question were sales of merchandise and not arrangements for services. They point to this court's construction of the word sold in NSK as supporting the view that a sale requires both a transfer of ownership to an unrelated party and consideration. See NSK, 115 F.3d at 975. They also cite to our opinions in AK Steel and NTN as supporting this construction. According to the government and USEC, this straightforward interpretation should cover the SWU contracts because those contracts involved a transfer of title to LEU from the enricher to the utilities upon sampling and weighing of the LEU and consideration paid by the utilities to the enrichers. 32 Second, the government and USEC assert that Commerce's characterization of the SWU contracts as contracts for the sale of goods is in keeping with the general purpose of the antidumping statute, which they articulate as provid[ing] domestic producers protection from all dumped imports. 33 Third, the government and USEC point to the deferential standard of review under which we review Commerce determinations as precluding a reversal of Commerce's determination on this issue. They argue that because Commerce's determination that SWU contracts are contracts for the sale of goods is, in their eyes, supported by substantial evidence and in accordance with law, we should affirm it. 34 It is on these grounds, according to the appellants, that Florida Power is inapposite to this case. Because Florida Power dealt with a contractual dispute under the CDA and not an antidumping investigation, it is not, in their view, applicable here. Moreover, they argue that Florida Power stands for the proposition that SWU contracts [fall] into neither [the category of sales of goods nor the category of contracts for services]. As support, they point to language in our opinion in Florida Power that indicates that an SWU contract does not fall neatly into either side of the goods-services divide. See Fla. Power, 307 F.3d at 1373. The government and USEC consider this language sufficient to support Commerce's determination given the deferential standard of review to be applied in this case. 35 The Court of International Trade rejected Commerce's determination that the SWU contracts in this case were contracts for the sale of goods and not services, resting its decision on the fact that the enrichers never obtained ownership of either the feed (unenriched) uranium during enrichment or the final LEU product. USEC II, 281 F.Supp.2d at 1339. Furthermore, according to the court, the SWU contracts between the utilities and the enrichers demonstrated an intention to establish a continuous chain of ownership in the utility while maintaining the enricher's ability to cover its obligations under the contract should it encounter difficulties in producing or providing LEU for a customer. Id. The court also found that nothing in the evidentiary record supports a determination that the enricher has any ownership rights [under the SWU contracts]. Id. at 1340. Agreeing with the Court of International Trade, we reject Commerce's determination that the SWU contracts in this case are contracts for the sale of goods. 36 In reviewing the contracts in this case, it is clear that ownership of either the unenriched uranium or the LEU is not meant to be vested in the enricher during the relevant time periods that the uranium is being enriched. While it is correct that a utility may not receive the LEU that was enriched from the exact unenriched uranium that it delivered to the enricher, it is nevertheless true that up until the sampling and weighing of the LEU before delivery, the utility retains title to the quantity of unenriched uranium that is supplies to the enricher. The utility's title to that uranium is only extinguished upon the receipt of title in the LEU for which it contracted. Therefore, the SWU contracts in this case do not evidence any intention by the parties to vest the enrichers with ownership rights in the delivered unenriched uranium or the finished LEU. As a result, the transfer of ownership required for a sale under NSK is not present here. 37 As previously noted, we explicitly dealt with whether or not SWU contracts were contracts for services or goods in Florida Power (albeit in the context of a CDA claim and not in the context of an antidumping investigation). In that case, the government argued that SWU contracts were contracts for services and not goods. There, the government pointed out in its briefs that the SWU contracts in that case consistently referred to enrichment services and that the fundamental purpose of those contracts was the provision of enrichment services. The government further declared that the utilities' argument in that case that the SWU contracts arranged for the sale of goods because title passed between utilities and enrichers rest[ed] on [a] technicality. 2 38 The relevant SWU contract terms in that case are identical to the contract terms in this case. Indeed, the government successfully defeated the CDA claim of the utilities in Florida Power solely on the ground that the SWU contract in that case was a contract for services and not for goods. And while Florida Power is not binding precedent for this case because of the different statutory scheme involved, we find its reasoning and its conclusion persuasive. 39 In addition, while it is true that we stated that SWU contracts [do] not fall neatly into either [a sale of goods or a contract for services], our opinion definitively held that the SWU contract in that case was a contract for the provision of services. Fla. Power, 307 F.3d at 1373. 3 Holdings of this court are no less decisive because they may have been difficult to develop. Indeed, our characterization of the SWU contract in Florida Power, however we may have arrived at it, created the sole basis for denying the utilities in that case relief under the CDA. And even under the deferential standard of review that we apply in this case, we choose not to ignore our previous holdings, particularly where the circumstances in a previous case are nearly identical to the case at hand. 40 Moreover, while the statutory schemes involved in Florida Power and those involved in this case are different, they do not change the essential nature of the transaction involved in this case. Even though the government is correct in arguing that the general purpose of the antidumping statute is not the same as the general purpose of the CDA, it is incorrect in asserting that this dissimilarity of purposes is sufficient to compel a different result in this case. A contract for services of the kind that we discuss here entails a certain set of obligations on the part of contracting parties that do not change with the statutory scheme. Thus, unless Congress specifically gave guidance in the statutory text that certain contracts normally considered service contracts should be considered contracts for the sale of goods in the antidumping context, the different overall purposes of the CDA and antidumping statute are insufficient to alter our analysis here. And nothing in the text of the antidumping statute or its legislative history evidences such a Congressional intent to re-characterize contracts like the SWU contracts at issue in this case for the purposes of antidumping investigations by Commerce. 41 The persuasive power of Florida Power might be mitigated if the government were capable of showing that the contract in that case differed in relevant part from the contracts in this case. No such showing has been made. In Florida Power, we held that an SWU contract was not a contract for the procurement of property under the CDA. 307 F.3d at 1373-74. Though we did say that SWU contracts do not fall neatly either into the category of contracts for services or the category of contracts for the sale of goods, we found that the nature of the contractual pricing scheme ... persuade[d] us that the [SWU] transaction is properly characterized as a service rather than a sale. Id. The pricing scheme in the Florida Power SWU contracts is the same as the pricing scheme in the contracts at issue in this case. In both cases, utilities bought separative work units from enrichers. In both cases, they delivered unenriched uranium and monetary compensation to enrichers in return for enrichment services. In both cases, there were similar title and transfer provisions. And in both cases, the contracts explicitly contemplated the rendering of enrichment services. 42 We therefore conclude that the SWU contracts at issue in this case were contracts for the provision of services and not for the sale of goods. Accordingly, we find that the LEU produced as a result of those contracts is not subject to the antidumping statute and hold that Commerce's contentions to the contrary are not in accordance with law. 43