[00:00:00] Speaker 02:
Case number 24-2277.

[00:00:04] Speaker 02:
Axel Diegerman, Ed Al, the balance.

[00:00:06] Speaker 02:
Mr. Scott Besant, in his official capacity as Secretary of the United States Department of Treasury, Ed Al.

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Mr. Tucci, for the balance.

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Mr. Jemba, for the employees.

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Mr. Tucci, good morning.

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Good morning, your... Excuse me, sorry.

[00:00:23] Speaker 03:
Whenever you're ready, no rush.

[00:00:26] Speaker 04:
May I please the court, my name is Amir Tusi and I represent the appellants in this appeal.

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I would like to reserve two minutes for rebuttal.

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On February 23rd, 2024, the appellants were designated by OFAC to its SDN list for allegedly operating in the metals and mining sector of the Russian Federation economy.

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And based on the law, they should not have been.

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OFAC itself defined the term metals and mining sector of the Russian Federation economy.

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and its designation exceeded the boundaries of what that definition included.

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By their own words, in their brief in this case, they are urging a broad and expansive view that goes beyond the text of the language that is contained in that regulation.

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And specifically, I'm talking about 31 CFR 589 325, which I'll refer to as Section 325.

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for ease of reference.

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First of all, there are a lot of different arguments floating around in this case about the meaning of procure and geographic access and so on.

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I think your best one, and it's a very strong one, is that geological materials means unrefined stuff, not

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bars or diamond rings.

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He didn't make that argument below.

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Actually, you argued the opposite below.

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You used geological materials as shorthand for finished goods.

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I don't believe that we use it for finished goods.

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If you could point me to what you're referring to, I would appreciate it.

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Our entire argument below was that the regulation was based on the production process, distinguishing between the manufacturing of these products and their retail sale.

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And so our argument is within the same thing, within the same vein of argument in terms of what type of activity this includes.

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And you said, I'm getting this from, first of all, there's nothing express in the summary judgment briefs that geological materials means raw is supposed to finish.

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And the way you frame the closest you come is this argument.

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You say there's no allegation purchased any precious metals

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from inside Russia, you use precious metals as a shorthand, which to me sounds much more plausible that that includes finished goods as well as raw materials.

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And then at page six of your reply,

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You say that the whole scheme, the whole reg is focused on the production of geological materials.

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Correct.

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Not their sale.

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So you're saying that the geological material is the gold bar or the diamond ring, and this is all about producing that rather than selling it.

[00:04:00] Speaker 04:
Well, I would disagree with that characterization of what we were saying.

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What we were saying was, in that context, was to the extent that these geological materials are taken out of the ground and then produced for retail sale eventually, we were distinguishing between that activity and what the appellants were engaged in.

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So there is a tail end of the production process, which we've acknowledged, which is the transportation of the finished goods.

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Obviously, the final step in the process of manufacturing is delivering it to the market.

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But the appellants didn't engage in that activity.

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And it's not even alleged.

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It seems like it's a different

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argument from the one here pressing in the blue brief, which is that geological materials means raw materials.

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You clearly make an appeal and you make it forcefully and I find it somewhat persuasive, but it's not in the summary judgment briefs in those terms.

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The reason why the geological materials argument specifically is raised here is in the context that you're talking about, Your Honor, is that the way that the district court construed it to basically remove the predicate, the preparatory language to say,

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procuring geological materials, that was not an argument that was raised by the government in the district court.

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It wasn't something that we had an opportunity to respond to in terms of the court looking at it that way.

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Fair enough.

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And you have that argument which sort of combines the string of gerunds and the geological materials point.

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But

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I mean, you argued below this very distinct and, to me, very unpersuasive argument that procure means the only sensible object of procure is mining equipment, and you lost on that.

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I mean, I'm repeating myself, but didn't make the argument key to geological materials.

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We didn't make that argument specifically, Your Honor, but I would say that that argument is not precluded on a de novo review because it's part and parcel of the overall argument that we were making.

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In terms of the specifics about procuring,

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Yes, we argue that it has an industry-specific meaning to it.

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We continue with that.

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And I do want to respond to that in terms of what the government has pointed out in terms of FAQ 1117.

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But the overarching, the reason why I don't think that the argument that we made below and the argument that we're making here are any different is because they're part and parcel of the same argument that is part of the production process.

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And distinguishing between... They have the same feel, but they treat the phrase geological materials differently.

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And I'm struggling to think, is that close enough for preservation?

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I would argue that it is, your honor, because at the end of the day, the geologic materials, whatever you have in the refined materials that are out at market, at some point, they were the geologic materials.

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So it's not that we're saying that gold is not a metal.

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That's not what we're saying.

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We're not saying that gold didn't emanate from a geological material.

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But in terms of the idea of what is this regulation specifically geared towards, what activities it's specifically geared towards,

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Our overarching argument was that it was geared towards the production process, not the retail sale.

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And that goes to our arguments in terms of FAQ 29 and 1070, where OFAC clearly was distinguishing between retail sale and manufacture.

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So I understand your point.

[00:08:20] Speaker 00:
The OPEC determination does not support that view.

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The OPEC determination is very broad.

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Any person determined pursuant to the executive order to operate or have operated in this sector shall be subject to...operated in the sector.

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That's the broad read, which is what they're acting on.

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And the determination is higher than the questions and answers in terms of the

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It's authority on the books, I think, at least that's where I'd be more inclined to look if I was going to defer to something or get a sense of the government's position.

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That's where I've always gone is for the determination, not the Q&A.

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So with respect to in terms of the breadth of something, yes, the determination allows for the designation of anybody who operated in that sector.

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But that's not the argument here.

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The argument here is specifically when they do define the sector.

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They can say, we're going to sanction anybody in the lumber industry.

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anybody who's operating in the lumber industry but and they don't even they actually don't even need to provide a definition of what it means to operate in the lumber industry but once they do once they do they've confined it to the textual language of what is what it means to operate in that and that's important for market participants to understand what are we allowed to do what are we not allowed to do or have we if we've engaged in that activity before are we subject to sanctioning and what response are we going to take

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So in terms of the breadth, I do not dispute in any way that OFAC has a tremendous amount of authority to craft the rules, to craft them as broadly as they want to.

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But once they do, the text matters, the text of what they've said.

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And what they said in the metals and mining sector was, any act or process or industry of extracting at the surface or underground, and that's a key phrase here,

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ores, coals, precious stones, and any other minerals or geological materials in the Russian Federation.

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And it's been our position from the very beginning that whatever you read on this, it has to emanate from the Russian Federation.

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So for example, it's actually

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difficult to understand exactly what the government is arguing at different points to say whether is it is it Russian individuals who are purchasing metals regardless of where they came from is it is it other people buying Russian materials regardless of where those came from or where the the the defendants the the appellants got them but

[00:11:06] Speaker 04:
At its core, the limitation here is in the Russian Federation and at the surface or underground.

[00:11:13] Speaker 01:
The limitation for in Russian Federation dealing with the materials being there as opposed to who the procurer is or where their location is.

[00:11:21] Speaker 04:
I would argue yes, absolutely.

[00:11:24] Speaker 04:
It's based on where the geological materials are being extracted from.

[00:11:30] Speaker 01:
So when we get to procure it though, that person or entity doesn't have to be in Russia.

[00:11:38] Speaker 01:
Or are you suggesting that they have to be the same materials and the activity?

[00:11:43] Speaker 04:
What I'm arguing is that the procuring relates back, because when we get to that litany of the other processes, or the other, I shouldn't say processes, because processing is one of the words, but when we get to that list, procuring, processing, manufacturing, or refining such geological materials

[00:12:01] Speaker 04:
that such geological materials is referring back to the geological materials in the Russian Federation.

[00:12:08] Speaker 04:
So what we're talking about is procuring those in those in that area and going.

[00:12:15] Speaker 03:
So if there's no evidence that your client buys raw materials.

[00:12:23] Speaker 03:
Right.

[00:12:23] Speaker 03:
The stuff out of the ground.

[00:12:24] Speaker 03:
Right.

[00:12:26] Speaker 04:
I haven't seen the classified record, but based on what I know of the case, let's just assume that.

[00:12:34] Speaker 03:
So there's this threshold issue about geological materials or procuring geological materials.

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If it's unrefined stuff, do you win?

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If it's refined stuff, then we come to this geographic nexus point, which I think Judge Childs was talking to you about.

[00:12:57] Speaker 03:
So you have a buyer in Germany or Lichtenstein or wherever buying gold, finished gold, right?

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Assume that for purposes of the question.

[00:13:12] Speaker 03:
Buying finished gold from Russians

[00:13:18] Speaker 03:
If the gold is in Russia, it seems like this is clearly covered.

[00:13:23] Speaker 03:
If it's coming from... German buyer, Russian in Russia selling gold to German buyer, that's covered.

[00:13:34] Speaker 04:
Yeah, I would concede that it is and I would concede that it's under the transportation.

[00:13:40] Speaker 04:
Because if the person is involved in the transportation out of Russia, then that would be the hook.

[00:13:45] Speaker 03:
It might be procurement.

[00:13:47] Speaker 03:
So then the question is, the government says, well, we're focused on buying gold from Russians.

[00:14:07] Speaker 03:
As a legal matter, that's not enough, right?

[00:14:11] Speaker 03:
That's your Alex Ovechkin hypothetical, right?

[00:14:15] Speaker 03:
It's your capital span charge.

[00:14:18] Speaker 03:
I like that.

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I've used Ovechkin before as hypos.

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But why can't they reasonably assume, hypothetically, if someone is regularly buying gold from Russians in substantial quantities, and we don't know a lot, and it's not a one-off from some guy who's in London, can't they reasonably assume that some of it is coming from Russia?

[00:14:48] Speaker 04:
I think that there would be a lot, I practice in New York, I think there would be a lot of people on 47th Street that would be shocked by that assumption because there's a lot of Russian nationals living in this country.

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There's a lot of Russian nationals living in Europe.

[00:15:02] Speaker 04:
And just because they're purchasing gold, because they want to invest in it or for whatever reason, I don't think that it's fair to assume that it's coming from Russia or that there's a Russian nexus under this determination.

[00:15:17] Speaker 04:
I mean, if you took the government's broad reading to its logical conclusion, if I were to have, say, 10 years ago, when the financial markets were collapsing, I wanted to invest in gold to protect my investments, and some of that gold was of Russian origin, I would be subject to sanctioning.

[00:15:38] Speaker 04:
just because I purchased the finished product in another country, even though I had nothing to do with transporting it from Russia or or anything else.

[00:15:47] Speaker 04:
Similarly, if a Russian person living in the United States is going to buy gold, I mean, if we're going to tell the entire market any

[00:15:59] Speaker 04:
Let me put it a different way.

[00:16:01] Speaker 04:
Financial services sector.

[00:16:05] Speaker 04:
OFAC has sanctioned that sector of the Russian Federation economy.

[00:16:09] Speaker 04:
They've defined that sector, right?

[00:16:13] Speaker 04:
But they haven't defined it based, they've never indicated that a Russian national holding a bank account in the United States would be something that would be sanctionable condom or even holding a bank account.

[00:16:24] Speaker 03:
The reasonable lists of the inference might depend on the

[00:16:30] Speaker 03:
nature of the buyers, the extensiveness of the buying, right?

[00:16:35] Speaker 04:
Well, I think then you're talking about something a little bit different.

[00:16:40] Speaker 04:
Because I also recognize that in terms of the deference that this court owes to OFAC, I would argue it's not on their legal interpretation.

[00:16:51] Speaker 04:
It would be in terms of their fact gathering and their analysis of those facts.

[00:16:57] Speaker 03:
Um, but I would say suppose, suppose we say on the law de novo review, we say the standard means the transaction has to involve gold that is in Russia, but then they get deference, they get a degree of deference if they're going to say, well, okay, but we can fairly assume that, you know,

[00:17:24] Speaker 03:
this buying, whatever it is, which we can't talk about and you don't know, supports a reasonable inference that gold is coming from Russia.

[00:17:36] Speaker 04:
I think you would have, if it's based on the nationality, or if it's based simply on the origin, regardless of where it's originating from at that moment, then no, I don't think it's a fair assumption.

[00:17:51] Speaker 04:
If it's originating from Russia, then I think, and it's the finished product, then I would agree that, and if that's what we're dealing with, then that's a different story.

[00:18:01] Speaker 04:
But then I would say that that is within the transportation

[00:18:06] Speaker 04:
to from or within the Russian Federation.

[00:18:09] Speaker 04:
So that's what I think characterizes it.

[00:18:12] Speaker 04:
And to draw the point, I know that the government has drawn a distinction on EO 14068 and the FAQ 1070, but that

[00:18:26] Speaker 04:
They haven't cited any reason to believe that an executive order in another circumstance can't give some sort of guidance on this.

[00:18:35] Speaker 04:
But OFAC specifically said, they specifically have a determination and an executive order that there's not to be importation of gold of Russian origin into the United States.

[00:18:47] Speaker 04:
They've made that distinction.

[00:18:49] Speaker 04:
And they opened it up for,

[00:18:53] Speaker 04:
up until June 22nd, 2022, indicating that that importation and that origin mattered.

[00:19:00] Speaker 04:
And where you were getting it from, where you were specifically buying it from, did matter.

[00:19:07] Speaker 03:
Judge Johns, any questions?

[00:19:11] Speaker 01:
Judge Edwards?

[00:19:12] Speaker 03:
Yeah.

[00:19:12] Speaker 03:
Okay.

[00:19:13] Speaker 03:
We'll give you your response.

[00:19:14] Speaker 03:
Thank you, Your Honor.

[00:19:28] Speaker 02:
Good morning, Your Honor, and may it please the Court, Sean Janda for the Federal Government.

[00:19:33] Speaker 02:
Under Executive Order 14-024 and the 2023 Sex World Determination, OFAC may designate any individual or entity who has operated in the metals and mining sector of the Russian Federation.

[00:19:44] Speaker 02:
OFAC concluded that Reingold and the Diegelman plaintiffs have so operated in a variety of ways because they've bought and sold precious metal in transactions involving or on behalf of Russia-based persons, have collaborated with Russia-based metals companies to disguise the origin of Russian precious metals, and have assisted Russian persons with laundering funds and circumventing international sanctions.

[00:20:07] Speaker 01:
Is this rule with respect to thinking about the plain meaning of procure and that meaning simply to obtain

[00:20:14] Speaker 01:
Can the rule be too broad sweeping if somebody buys this on the secondary market?

[00:20:20] Speaker 02:
So I don't think so, Your Honor.

[00:20:21] Speaker 02:
Let me say a couple things.

[00:20:22] Speaker 02:
I mean, one, I think procure just means to acquire, maybe to acquire with some degree of effort.

[00:20:27] Speaker 02:
And that's certainly what the plaintiffs here were doing.

[00:20:30] Speaker 02:
In a different case involving someone who is two, three, four steps down the line, if there ever were such a case, the court might

[00:20:38] Speaker 02:
Be able to think more about whether procure necessarily involves have a commercial position rather than sort of a retail secondary down the line acquisition.

[00:20:47] Speaker 02:
There might also be worked on in that sort of case by the necessary nexus to the Russian economy.

[00:20:52] Speaker 01:
At least right now, as you stand in front of us, you're not thinking about that down.

[00:20:57] Speaker 01:
We're trending.

[00:20:58] Speaker 02:
I think for the purposes of this case, all the court used to say is that when you have these precious metals companies, this precious metal firm that is acquiring in these commercial transactions, precious metals.

[00:21:09] Speaker 03:
Precious metals in finished form.

[00:21:13] Speaker 02:
Correct.

[00:21:14] Speaker 02:
I think the court can certainly assume that that's what's happening.

[00:21:17] Speaker 02:
And I can talk about the geological materials argument.

[00:21:20] Speaker 02:
I mean, number one,

[00:21:22] Speaker 02:
I think the court can just focus on that for purposes of the commercial acquisition, which clearly constitutes procurement, and leave for another day.

[00:21:31] Speaker 02:
Again, if OFAC ever were to sanction that sort of downstream person, I don't think the plaintiffs have pointed to anyone who OFAC has actually designated on the basis of those sorts of transactions that might cause concern.

[00:21:41] Speaker 02:
Focusing on the geological materials argument.

[00:21:43] Speaker 03:
Yeah, let's talk about that.

[00:21:44] Speaker 03:
And it's not just geological materials.

[00:21:46] Speaker 03:
It's the entire phrase.

[00:21:49] Speaker 03:
procuring, processing, manufacturing, or refining geological materials, which follows a phrase extracting at the surface or underground.

[00:22:00] Speaker 03:
Do you think that covers gold traders?

[00:22:05] Speaker 03:
Yes.

[00:22:05] Speaker 03:
Do you think we would say, you know, does Tiffany's procure geological materials?

[00:22:12] Speaker 03:
I think so.

[00:22:13] Speaker 03:
It's like a wildly implausible language to me.

[00:22:17] Speaker 02:
So let me say two things.

[00:22:18] Speaker 02:
I mean, number one, I think here you're talking about refined or finished gold.

[00:22:24] Speaker 02:
You're not talking about, as I understand it, gold or silver that has been made into jewelry or watches or retail goods in that way you're talking about.

[00:22:35] Speaker 03:
Right.

[00:22:35] Speaker 03:
But it's not the stuff coming out of the ground.

[00:22:38] Speaker 02:
It's not the stuff that's come immediately out of the ground.

[00:22:40] Speaker 02:
I mean, that's certainly true.

[00:22:42] Speaker 02:
But beyond that, number one, I think when you think about geological materials in combination with precious stones, with coal, with the other items in that list, it's seemingly natural to refer to finished diamonds, cut diamonds, processed diamonds as precious stones.

[00:23:00] Speaker 03:
Precious stones is the best term you have.

[00:23:05] Speaker 03:
The gerunds all seem like they're focused on taking stuff out of the ground and then processing it into usable goods.

[00:23:15] Speaker 03:
And some of the nouns, oars and coals, are the stuff you take out of the ground.

[00:23:22] Speaker 03:
The overall focus of this just does not seem like it covers

[00:23:27] Speaker 02:
And I think then you get to transporting it, which I think even from the podium, my friend on the other side acknowledged that transporting processed or finished or refined goods, geological materials counts.

[00:23:38] Speaker 03:
And so at that point, I mean, once- Well, transporting them, which raises the question what the them is, which takes us back to the geological materials.

[00:23:49] Speaker 02:
Maybe I'm wrong.

[00:23:50] Speaker 02:
I understood my friend on the other side to say from the podium today that he thinks that after the refiner refines the gold and then transports it, that transporting is covered, which again, I mean, sort of drawing a distinction.

[00:24:01] Speaker 03:
Just work with me.

[00:24:02] Speaker 03:
Suppose I think them is just a pointer back at geological materials.

[00:24:07] Speaker 02:
Well, I think that

[00:24:09] Speaker 02:
If, you know, plaintiffs acknowledge that transporting them refers to transporting finished products and them just referred back to geological materials, I don't know how you cut off the reference back or limit the geological materials in the section plus.

[00:24:22] Speaker 03:
I'm just trying to figure out the best reading rather than something that's driven either by a concession at the podium here or by a possible district court forfeiture.

[00:24:36] Speaker 02:
And then the other thing I'll say is, I think, just taking a step back, the sort of bottom line question is whether the plants have operated in the metals and mining sector of the economy.

[00:24:46] Speaker 02:
And the definition here is not... I have two reactions to that.

[00:24:50] Speaker 03:
One is you've conceded below that

[00:24:56] Speaker 03:
The meaning of that comes from this 31 CFR 589.

[00:25:00] Speaker 03:
Right.

[00:25:00] Speaker 02:
I don't think that the sort of list of activities in the regulatory definition is meant to be exclusive.

[00:25:09] Speaker 02:
I mean, it says includes these things.

[00:25:11] Speaker 02:
It's not only these things.

[00:25:14] Speaker 02:
And so just again, at the kind of initial step, the question is whether

[00:25:20] Speaker 02:
buying, selling, transporting gold, sort of gold bars, silver bars, whatever it is, constitutes operating in the metal sector?

[00:25:29] Speaker 02:
I think the answer just has to be yes.

[00:25:31] Speaker 03:
And your district court papers say as a baseline, the parties agree about the scope of activity that falls within the phrase operator have operated in the metals and mining sector.

[00:25:44] Speaker 03:
There's a description in 31 CFR.

[00:25:46] Speaker 02:
I mean, I don't think we have ever conceded and we certainly wouldn't intend to concede that the activities are exclusive.

[00:25:53] Speaker 02:
And the FAQ 1117 that's discussed in the briefs, which talks about the provision of goods to

[00:26:00] Speaker 02:
sort of companies operating in that sector, also potentially constituting operating in that sector.

[00:26:05] Speaker 02:
I think it's very clear that OFAC doesn't understand that the activities listed in the definition are exclusive.

[00:26:12] Speaker 03:
I think you can argue that the

[00:26:19] Speaker 03:
Plain meaning or sense of the defined term, which is metals and mining sector, can influence how we read the definition.

[00:26:26] Speaker 03:
But I'm not sure how much that helps you.

[00:26:28] Speaker 03:
Metals and mining sector in the singular likewise seems focused on something coming out of the ground.

[00:26:38] Speaker 03:
And I still have my linguistic intuition that he wouldn't say that Tiffany's operates in any metals and mining sector.

[00:26:49] Speaker 02:
I don't know exactly what Tiffany's does.

[00:26:51] Speaker 03:
Someone who's buying polished, final, you know, shiny gold bars or beautiful diamonds or things like that.

[00:27:02] Speaker 02:
I think certainly look, Tiffany's is buying gold bars, is procuring gold bars from Russia.

[00:27:07] Speaker 02:
The operating act of procuring gold bars from Russia, in our view, would constitute operating in the metal sector of the Russian economy.

[00:27:16] Speaker 02:
I think the other piece of this is the definition and the designation have to be interpreted in the context of the purpose of the sanctions regime, which is to isolate Russia from the international economy.

[00:27:30] Speaker 02:
And if the sanctions could be so easily circumvented, if Russia could access the international economy by refining the gold first and then selling it internationally, I mean, that would just be an entirely self-defeating sanctions regime.

[00:27:42] Speaker 02:
I don't think there's any reason to think that OFAC

[00:27:44] Speaker 02:
would have intended to construct a sanctions regime that can be sort of circumvented in that very easy way.

[00:27:51] Speaker 01:
And I'm just trying to figure out how far you're going beyond the raw materials for geologic materials.

[00:27:56] Speaker 01:
Are you extending it to something after refining or after resale?

[00:28:02] Speaker 01:
What's that category that we're supposed to capture here?

[00:28:05] Speaker 01:
Because I just want to make sure that we're coming within any type of limiting principle.

[00:28:10] Speaker 02:
So as I understand it, what we're talking about in this case is materials that have been processed or refined, but they have not been made into retail consumer goods.

[00:28:20] Speaker 02:
So we're not talking about jewelry or watches.

[00:28:23] Speaker 02:
We're talking about gold bars or silver in processed or refined form.

[00:28:27] Speaker 02:
I would caution the court against saying that

[00:28:29] Speaker 02:
is the outer limits of what the definition reaches.

[00:28:32] Speaker 02:
I think OFAC has not attempted ever to exhaustively document the outer reaches of this definition, and the court doesn't need to go there.

[00:28:41] Speaker 02:
But certainly, in this case, we're focused on materials, metals that have been refined, but that are not further processed into those sorts of consumer goods.

[00:28:52] Speaker 02:
And so the court thinks that that distinction is relevant or could be relevant, because certainly,

[00:28:56] Speaker 02:
I believe on the table, the question about, you know, if Tiffany's is buying gold watches, whether that would count, but the acquisition of even process or refined goods, I think certainly with the purpose within the exceedingly expansive definition, I mean, I think the definition is meant to.

[00:29:14] Speaker 02:
A, saying food, so it's not meant to be exhaustive, and B, talks about any other geological materials, which is meant to be an expansive phrase, and is meant to capture, I think, a wide variety of geological materials.

[00:29:27] Speaker 02:
And again, I think the forfeiture point here, too, is exceedingly persuasive, and this argument is just nowhere in the district court papers.

[00:29:34] Speaker 01:
And I want to take you to that next category of two from or within Russia.

[00:29:39] Speaker 01:
So I want to see how attenuated you think that nexus needs to be with Russia.

[00:29:44] Speaker 01:
So let's think about if there was, with this cover, a Swiss trader buying Russian gold from a Dubai intermediary.

[00:29:54] Speaker 02:
I think it would depend on the particular facts and circumstances.

[00:29:57] Speaker 02:
I mean, there are two things I want to say.

[00:29:59] Speaker 02:
One is, as I said before, I don't think that the list of activities is meant to be exclusive.

[00:30:02] Speaker 02:
And so I don't think sort of routing your transactions through Dubai intermediary is going to get you out of the procurement of the gold from Russia.

[00:30:13] Speaker 02:
That being said, again, it would probably depend on exactly, if you're thinking about what their accounts is transporting from, that would probably depend on exactly what the trader is doing.

[00:30:22] Speaker 02:
If the trader is saying, you know,

[00:30:24] Speaker 02:
I want you to ship it to this person and ship it to me.

[00:30:26] Speaker 02:
I suspect that OFAC would think that that counts.

[00:30:31] Speaker 02:
I think certainly in this case, I can't talk in too much detail about the specifics, but I don't think there's any question here that there's a substantial and direct nexus to Russia.

[00:30:40] Speaker 02:
And so at that point, I don't think the court needs to, again, sort of exhaustively document how attenuated the connection could get while still constituting operating within the relevant sector of the Russian.

[00:30:51] Speaker 03:
But as a substantive matter,

[00:30:55] Speaker 03:
Are you saying you are focusing us on transacting in finished gold with Russian nationals?

[00:31:10] Speaker 03:
And that seems to me not necessarily the same as transactions involving gold in the Russian Federation, which is the regulatory term.

[00:31:25] Speaker 03:
I think you need an inference from one to the other.

[00:31:28] Speaker 02:
Number one, I don't think the regulatory term is talking only about transactions in the Russian Federation.

[00:31:33] Speaker 02:
I think even the plaintiffs will concede that if the Russian national takes the raw unrefined gold and takes it across the border to Belarus and then sells it to the refinery in Belarus,

[00:31:49] Speaker 02:
Russian refinery is procuring the geological materials and operating within the relevant sector of the Russian economy, even though it's not the one that transported the gold or even if the gold wasn't in Russia at the precise moment that the Russian refinery acquired it.

[00:32:04] Speaker 02:
So I don't think the goal has to be in Russia at that moment.

[00:32:08] Speaker 02:
I think there certainly has to be enough of a nexus to the Russian economy that you can fairly say that the individual or the entity is operating in the relevant sector of the Russian economy.

[00:32:21] Speaker 02:
And here, there's just so much of a commercial.

[00:32:24] Speaker 01:
Well, is the act of disguising those materials still an act of procuring?

[00:32:30] Speaker 02:
I think, I'm not sure that disguising is procuring.

[00:32:33] Speaker 02:
I think certainly the disguising and collaborating with the Russian-based metals company to disguise the origin of the metals constitutes, again, sort of working in the relevant sector of the economy.

[00:32:45] Speaker 02:
And this gets back again.

[00:32:46] Speaker 02:
The list of terms in the regulatory definition, it really is not meant to be exclusive.

[00:32:51] Speaker 02:
And so providing goods and services to particularly the sorts of specialized.

[00:32:56] Speaker 01:
But did you also claim that appellants here disguised it?

[00:33:01] Speaker 02:
What we have said publicly is that the appellants collaborated with Russian-based metals companies to disguise the origin of Russia precious metals.

[00:33:11] Speaker 01:
Right, that's what I'm trying to get at about disguising if you're telling that is the curing.

[00:33:17] Speaker 02:
I think certainly the collaboration on the disguising can be part of the act of procuring.

[00:33:23] Speaker 02:
And again, even if I think this is a really important point that I do want to get across, even if all someone was doing, imagine you have a fully Russian, Andy, and their whole business was working with

[00:33:35] Speaker 02:
Russian refineries to disguise the origin of Russian precious metals.

[00:33:39] Speaker 02:
They're not buying them, they're not selling them, but they're providing that service of helping to disguise them.

[00:33:44] Speaker 02:
I think we would say that counts as operating within the metals and mining sector of the Russian economy, even though it's not buying, procuring, selling, transporting.

[00:33:52] Speaker 02:
It's providing these sorts of specialized services to the entities operating in that part of the economy.

[00:33:58] Speaker 02:
And to the extent the court's looking for, again, a place to get that aspect of the definition, I think the FAQ 1117, which talks about how it may constitute operating within the sector to provide goods and services to the people doing the procuring, the buying, the selling.

[00:34:16] Speaker 02:
And here, that's in addition to procuring themselves, that's exactly what you have.

[00:34:23] Speaker 03:
And that's enough to give me a minute or two on the forfeiture point.

[00:34:30] Speaker 03:
I agree with you that.

[00:34:32] Speaker 03:
They did not raise below an argument that the phrase geological materials includes refined metals as opposed to unrefined metals.

[00:34:49] Speaker 03:
But they did make an argument that

[00:34:53] Speaker 03:
The word procuring connected, the gerund procuring connected with all of the other gerunds, extraction, processing, manufacturing, refining, all center on production rather than sale.

[00:35:07] Speaker 03:
Why isn't that, you know, it's linguistically different on what bucket geological materials is going in, but substantively, it's the same thing they're saying here, which is this is directed at

[00:35:22] Speaker 03:
something sort of close to the mine and not sale of finished goods.

[00:35:28] Speaker 02:
Yeah, and I do think it is linguistically quite differently focused.

[00:35:31] Speaker 02:
It was just, I mean, a different sexual argument.

[00:35:34] Speaker 03:
But very similar in general thrust, or this is going to sound pejorative, but vibe.

[00:35:41] Speaker 02:
I think that the response to the argument, sort of frame that argument, which again, I think is a different argument, is that

[00:35:48] Speaker 02:
sort of you're talking about the processing or finding then the procuring at the end of the day, the procuring the finished product, I think, and that fits in with transporting, which again, I think everyone agrees that transporting can include transporting the finished product.

[00:36:04] Speaker 02:
And so procuring, I think also could include the finished product.

[00:36:07] Speaker 02:
And so I think to make the argument have the sort of legs that are trying to make it have in this court really require shifting to the definition of geological materials, which is just nowhere in the district court.

[00:36:18] Speaker 02:
And I would point the court to the extent that

[00:36:22] Speaker 02:
I think the plaintiff's main justification for the shift in argument is they think that the district court adopted some interpretation of procure that we didn't advance.

[00:36:30] Speaker 02:
And I would point the court to pages 13 and 14 of our primary summary judgment brief in district court, it's docket number 18, which makes sort of exactly the plain text meaning of procure argument the district court adopted.

[00:36:41] Speaker 02:
So I think they were certainly on notice that that was how we understood the regulation to work.

[00:36:45] Speaker 02:
And if they thought at that point that geological materials didn't encompass or sort of cut off at some point in the refining process,

[00:36:52] Speaker 02:
Um, they clearly that argument then they do it.

[00:36:57] Speaker 03:
Judge childs, anything else?

[00:36:58] Speaker 03:
Judge Edwards.

[00:37:00] Speaker 03:
Thank you.

[00:37:08] Speaker 04:
Mr. to see rebuttal.

[00:37:09] Speaker 04:
Thank you, your honor.

[00:37:11] Speaker 04:
And I want to return to the question about transportation.

[00:37:15] Speaker 04:
You made a comment about a concession at the podium.

[00:37:19] Speaker 03:
I'm not sure you made it, but I'll give you a chance to clean it up.

[00:37:22] Speaker 04:
No, I want a chance to clean it up because I was sitting there.

[00:37:25] Speaker 04:
I had a chance to think about it.

[00:37:26] Speaker 04:
And honestly, just candidly, a gear got shifted because I thought you were suggesting something to me that would be news to me.

[00:37:34] Speaker 04:
And I was thinking about that.

[00:37:36] Speaker 04:
But I do think that that's them refers back to geological materials.

[00:37:40] Speaker 04:
And what I would argue is that if you look at FAQ 1029, that reading is confirmed.

[00:37:50] Speaker 04:
Because the 1029 asks the question, how did the prohibitions of Executive Order 14.024 and other Russian-related sanctions impact gold-related transactions and persons participating in the gold market?

[00:38:04] Speaker 04:
And as it goes through,

[00:38:06] Speaker 04:
It delineates, you can actually see it tracking the language in EO 14.024 as to what types of activity are prohibited.

[00:38:18] Speaker 04:
But it's not saying, it does not say that any transaction of gold coming out of Russia is prohibited.

[00:38:26] Speaker 04:
What it says is it may be, and it says maybe if

[00:38:30] Speaker 04:
If it's designed to evade U.S.

[00:38:32] Speaker 04:
sanctions, that is part of EO 14.024.

[00:38:36] Speaker 04:
A person can be designated for evading U.S.

[00:38:41] Speaker 04:
sanctions.

[00:38:43] Speaker 04:
The next bullet is financial services.

[00:38:45] Speaker 04:
That was already a designated sector at that time.

[00:38:52] Speaker 04:
it's indicating if you operate in that financial services sector through this transfer of gold, then you are subject to sanctioning.

[00:38:59] Speaker 04:
And I don't want to go through every single bullet because I don't want to take up all of the time.

[00:39:02] Speaker 04:
But if you look at 1029, what you see is that it is everything that they are basically saying every single other reason why buying gold out of Russia, the finished product out of Russia is not per se

[00:39:18] Speaker 04:
sanctionable, but rather might be sanctionable for some other reason that has already been stated.

[00:39:26] Speaker 04:
And it doesn't matter that this FAQ came out before the determination because, and you can see it, they update these FAQs to reflect new guidance.

[00:39:38] Speaker 04:
So why wouldn't they have, they could have easily amended this to say, hey, you know what,

[00:39:44] Speaker 04:
We just had this new determination about the metals and mining sector, and 1029 is inoperative.

[00:39:51] Speaker 04:
Any purchase now is per se sanctionable.

[00:39:54] Speaker 04:
They did not say that, and they very easily could have.

[00:39:58] Speaker 04:
So going back to the question of whether the mere purchase out of Russia would be sanctionable conduct, I would say no, Your Honor, because I do think that the them refers back to the geological materials.

[00:40:11] Speaker 03:
Any questions?

[00:40:13] Speaker 03:
I'll give you a sentence or two if you want.

[00:40:17] Speaker 03:
Please wrap up.

[00:40:25] Speaker 04:
Just on this point of 1117.

[00:40:31] Speaker 04:
This goes to our procurement argument, which I gather is not a winning favor.

[00:40:37] Speaker 04:
But my entire point about 1117 is that goods and services, the procurement of goods and services, that is why they put out that guidance.

[00:40:46] Speaker 04:
They carved out a specific exception for safety because the procuring in this section was actually related to that.

[00:40:55] Speaker 04:
But that being said,

[00:40:57] Speaker 04:
We rest on the arguments in the brief.

[00:41:00] Speaker 04:
Thank you very much for your time.

[00:41:02] Speaker 04:
Thank you counsel.

[00:41:03] Speaker 04:
The case is submitted.