About the Duties Hurting Farmers
Farmers are facing insecurity and reduced fertilizer supply.
How did it come to this?
The Process
The countervailing duty (CVD) process is a way for the U.S. government to ensure both domestic and foreign industry is competing on a level playing field. If a U.S. producer believes they’re harmed by foreign imports, they can petition the government. If a government investigation finds that the field is unfair or that domestic industry is being harmed, relief is granted to domestic industry in the form of countervailing duties.
The CVD process typically exists in five phases: 1) Petition; 2) Investigation & Examination; 3) Determination; 4) CVD imposed; and 5) Periodic Review.
Below is an overview of how the process has played out to date, and how an imperfect process paired with flawed arguments and the misapplication of the law has resulted in the duties that are hurting American Farmers.
The Petition
In June 2020, the Mosaic Company, one of the largest phosphate fertilizer producer in the world—and the dominant U.S. producer—filed petitions with the U.S. Department of Commerce (DOC) and International Trade Commission (USITC) for an investigation into—and imposition of countervailing duties (CVDs) on—phosphate fertilizer imports from Morocco and Russia. A much smaller U.S. producer supported Mosaic’s petition after it was filed.
In its filing, Mosaic claimed injury from price drops in 2019. The truth is that those price drops were caused by unpredictable shifts in supply and demand from historic flooding and weather events in late 2018 and the first half of 2019, which dramatically reduced planted acreage in 2019 and therefore reduced farmer demand for fertilizer.
The Decision
The DOC made a final decision to impose duties of 19.97% on Moroccan phosphate fertilizers as of April 2021. It also imposed duties on Russian imports. Now, critical sources of imported supply are dramatically reduced. At the same time, after significant concentration of the phosphate fertilizer industry over the last 20 years, only four domestic producers remain and total domestic production has shrunk.
Today, Mosaic dominates with over 70% of U.S. production of phosphate fertilizers.
With China already excluded from the U.S. phosphate market by other U.S. tariffs, Saudi Arabia—which was not included in Mosaic’s petition—is the only other major source of volumes for import into the United States. Notably, Mosaic has a commercial partnership with the major Saudi phosphate fertilizer producer.
THE AFTERMATH
The resulting supply shocks have driven a surge in phosphate fertilizer prices at the farm gate.
In 2020, Mosaic exported 62% of their phosphate fertilizer products at a time when their production had decreased by 20% drop. While they have reduced their exports, the company still exports over 40% of a considerably-reduced total production. Other smaller foreign producers have tried to pick up the slack, but they cannot meet the full need of the U.S. market.
The urgent and increased necessity for reliable supply of quality imports has never been more clear.
the appeal
OCP has appealed the DOC and USITC decisions based on the strong belief that duties were imposed based on incomplete and inaccurate information, faulty arguments, misapplication of the law and a misreading of the dynamics of fertilizer trade in the United States.
OCP is grateful to have the support of those who represent American farmers — producer groups, retailers, members of Congress and others — groups that have strongly and publicly opposed these damaging and unjustified duties. The joint amicus brief from the American Soybean Association, the National Corn Growers Association, the National Cotton Council of America, the National Sorghum Producers and the Agricultural Retailers Association shows just how much American agriculture has been injured by these duties, and the deep flaws in the arguments that led to them.
the court responds
In September 2023, the U.S. Court of International Trade issued a remand order on the U.S. Department of Commerce’s previous determination that Moroccan fertilizer products imported into the United States would be subjected to a CVD rate, with the judge criticizing Commerce for “unreasonable” and “nonsensical” calculations.
That same month, the U.S. Court of International Trade issued a remand order on the International Trade Commission’s deeply flawed determination that imports of phosphate fertilizer from Morocco are injuring the domestic fertilizer industry.
OCP prevailed on its objections to a key Commission finding that, according to the Court, was “factually unsupported” and yet “undergirds the Commission’s determination across all statutory factors.”
However, both the International Trade Commission and the Department of Commerce rejected the Judge’s findings and stood by their earlier findings. The ITC is exptected to respond to the two agencies’ rebuttals later in 2024. However, even if the ITC rejects the agencies’ arguments, the process van be further delayed and drawn out via appeals.
the administrative review
In another aspect of this complex process, the Department of Commerce conducts each year an annual Administrative Review of the duties to see whether new facts can lead them to change the rates retroactively.
In November 2023, the U.S. Department of Commerce announced the results of its first administrative review of the countervailing duty order, which resulted in a reduction in the overall tariff rate on Moroccan phosphate imports from 19.97% to 2.12%.
This new and far lower rate will be the final tariff rate retroactively applied to 2021 imports, and will also serve as the new provisional rate required to be deposited with U.S Customs for imports occurring from November 2023 and onward until the conclusion of the next administrative review in Q4 2024.
At that time, the rate will again be updated. The retroactive impact of these rate adjustments creates enormous uncertainty and financial risk for importers and their U.S. customers. This is not theoretical: a recent hike in the rate applied to a Russian importer left a US company (who as importer of record was liable for the duties) with a duty rate that retroactively tripled, leaving them with a huge additional duty to pay on a cargo they had already received.
the future
OCP continues to believe that there is no justification for any tariffs on its U.S. fertilizer imports.
OCP is grateful to all those voices representing U.S. farmers who continue to speak out loudly in opposition to these duties.
While OCP is eager to return to the U.S. market, given the inherent uncertainty in the CVD appeals and annual review process the company has little to no choice but to continue defending itself and working through the process to its conclusion.
OCP remains eager to resume serving as a reliable, high-quality provider of sustainable phosphate fertilizers that are essential to enabling American farmers to feed their fellow citizens and the wider world.