[00:00:02] Speaker 02: Good morning, everyone. [00:00:04] Speaker 02: The first argued case this morning is number 17-2618, ITG Vama Corporation against the International Trade Commission. [00:00:15] Speaker 02: Let's see. [00:00:16] Speaker 02: Mr. Stell, are you first? [00:00:19] Speaker 02: Yes, ma'am. [00:00:19] Speaker 02: Proceed. [00:00:37] Speaker 04: May it please the court, this appeal concerns the unlawful application by the United States International Trade Commission of the Trade Preferences Extension Act of 2015, or TPEA. [00:00:49] Speaker 04: The Congress passed the TPEA on June 29, 2015, as the commission was in the final stages of its passenger vehicle and light truck tires from China, final injury determinations. [00:01:00] Speaker 05: Are you arguing on appeal that [00:01:03] Speaker 05: There was an error here because the ITC didn't request comments from the TPA, or is that an argument that you no longer raise? [00:01:16] Speaker 04: Your Honor, I don't think this appeal is about whether the commission requested comments. [00:01:20] Speaker 04: The question is whether the commission applied the TPA lawfully. [00:01:25] Speaker 04: And our position, Your Honor, is that it clearly did not. [00:01:30] Speaker 05: What about the Doctrine of Exhaustion of Administrative Remedies? [00:01:33] Speaker 05: You had the opportunity to raise questions about the TPEA factors before the agency, and you didn't do that. [00:01:41] Speaker 05: You didn't file any comments about it. [00:01:44] Speaker 05: So why wouldn't that be a bar? [00:01:47] Speaker 04: There's a few factors here that are relevant. [00:01:49] Speaker 04: One is that the TPEA was passed on June 29, 2015. [00:01:53] Speaker 04: The commission then in its July 2nd report indicated that it would not be applying the TPEA. [00:01:59] Speaker 04: The only opportunity that we had to provide comment, Your Honor, were comments on the factual record, which were due on July 10. [00:02:06] Speaker 04: In terms of the administrative exhaustion argument, Your Honor, as the commission and my colleagues at the bar from the petitioner side pointed out, the petitioner actually raised the question of whether the TPA was in fact applicable. [00:02:19] Speaker 04: Having raised it, that, Your Honor, thus satisfies the administrative exhaustion requirement. [00:02:23] Speaker 04: If you look, for example, Your Honor, at Zao King Tifo, a case before the CIT, it was exactly the same posture as this case. [00:02:30] Speaker 04: The petitioner in that case raised an issue, and that issue was decided upon by the agency. [00:02:35] Speaker 04: In that case, it was the Commerce Department. [00:02:37] Speaker 04: The respondent then raised that same issue on appeal, and the government argued in fact, Your Honor, that there should be an exhaustion of remedies. [00:02:45] Speaker 04: And the CIT explained, citing several cases from both the DC Circuit and the Ninth Circuit, Your Honor, that since the other party had raised the issue below, there was no exhaustion of administrative remedies, Your Honor. [00:02:57] Speaker 05: Okay, but you've made, neither you nor anyone else made any argument as to how these factors should lead to a different result. [00:03:08] Speaker 05: before the ITC in terms of material injury, right? [00:03:12] Speaker 04: No, Your Honor, but as I said, one of the parties did... That's correct, isn't it? [00:03:16] Speaker 04: Yes, that's correct, Your Honor, but one of the parties did in fact say that the statute should apply. [00:03:20] Speaker 04: The statute required the Commission to evaluate five new impact factors, and those factors include the ability to service debt and also the question of the return on assets, Your Honor. [00:03:32] Speaker 02: I thought that's critical, isn't it, as to whether it would have changed the result [00:03:37] Speaker 02: because it was apparent that you were prepared. [00:03:40] Speaker 02: The legislation had been enacted. [00:03:42] Speaker 02: It had gone through both houses. [00:03:44] Speaker 02: It was ready for the president, and it was signed. [00:03:47] Speaker 02: And according to the record, apparently, you were prepared to respond to those aspects, however, in the end, they weren't relied on. [00:03:58] Speaker 02: But if you're not arguing that the result would have been different, would most likely have been different, [00:04:07] Speaker 02: Then what are you asking for? [00:04:09] Speaker 04: No, Your Honor, I do think the result would have been different. [00:04:11] Speaker 04: Let me address you very clearly. [00:04:13] Speaker 04: Four of the five factors, there wasn't fact information on the record. [00:04:17] Speaker 04: Four of the factors that are new strongly favor our client's position. [00:04:22] Speaker 04: And we believe it should have been addressed and addressed more fully. [00:04:24] Speaker 05: But you didn't argue that in your brief, did you? [00:04:27] Speaker 05: I mean, I don't see anything in your brief about how it would make a difference if they'd address these factors. [00:04:32] Speaker 04: That's not right, Your Honor. [00:04:33] Speaker 04: I don't know if you mean our briefs to the court or our briefs to the agency. [00:04:37] Speaker 05: Even at this late stage in terms of the brief to this court, I don't see that you told us what difference it would make. [00:04:46] Speaker 04: No, I respectfully disagree, Your Honor. [00:04:48] Speaker 04: I think if you look at page 10 of our fly brief, we actually have a chart where we detail the four factors that I was just mentioning to Judge Newman. [00:04:57] Speaker 04: There was, in fact, information on the record. [00:04:59] Speaker 04: Three of the factors the Commission addressed in a very cursory manner. [00:05:02] Speaker 04: They simply said, it's not surprising. [00:05:04] Speaker 04: I don't think that gives your court a discernible path to understand how those three factors, net profits, gross profits, and operating profits, should have, in fact, impacted the court, excuse me, the commission's decision. [00:05:16] Speaker 04: With respect to the return on assets, Your Honor, that factor also strongly favors my client's position. [00:05:22] Speaker 04: It was nowhere addressed in the commission's decision. [00:05:24] Speaker 04: It was addressed in a footnote. [00:05:26] Speaker 04: in the Staffordshire, but there is nothing in the commission's decision itself that talks about that particular provision. [00:05:31] Speaker 05: So for the first time in the reply brief, you argue what difference it would make? [00:05:36] Speaker 04: No, Your Honor. [00:05:36] Speaker 04: I would point out that my colleague at the bar has had a separate brief in which he explained, I think in about 40 pages, Your Honor, how those same four factors strongly favored. [00:05:46] Speaker 04: We did not want to duplicate this court's time and effort. [00:05:49] Speaker 04: We strongly believe from the beginning. [00:05:51] Speaker 05: So in your opening brief, you didn't tell us what difference it made. [00:05:54] Speaker 04: We did, Your Honor. [00:05:55] Speaker 04: We said that all the factors strongly supported our position. [00:05:58] Speaker 04: We did not have exactly the detail that are laid out on the page. [00:06:01] Speaker 05: Where did you say it, in the blue room? [00:06:04] Speaker 04: I believe I have a little time for rebuttal, Your Honor. [00:06:06] Speaker 04: I'll find that precise page for you. [00:06:08] Speaker 04: But we have consistently said that four of the five factors enumerated by Congress, the new factors, strongly favored our position. [00:06:15] Speaker 04: One factor, and I do want to make sure I hit this before my time ends on direct, Your Honor, the ability to service debt. [00:06:20] Speaker 04: There is no information on the record about that whatsoever. [00:06:24] Speaker 04: To answer Your Honor's question, the Commission could have gone back and issued questionnaires, as we pointed out in our brief. [00:06:30] Speaker 04: They actually did that in this very case. [00:06:31] Speaker 04: They gave the parties five days to collect new information. [00:06:33] Speaker 04: They could have done that same thing with respect to this factor. [00:06:36] Speaker 04: They also could have, when we appealed the issue to the Court of the National Trade, Your Honors, asked for a remand. [00:06:41] Speaker 04: They could have said, aha, now that we see that when we applied the new statute, we didn't have the time and we feel like we need more time to try to figure out how to apply these factors, they could have asked for a remand and gone back and done that. [00:06:52] Speaker 04: However, the agency elected not to do that. [00:06:54] Speaker 05: So just to be clear, before the ITC, you did not argue to them what difference these factors would have made? [00:07:03] Speaker 04: No, Your Honor, we did. [00:07:04] Speaker 05: We argued that for the five factors. [00:07:06] Speaker 05: I'm sorry, where do I find that? [00:07:09] Speaker 04: That would be in our final comments, Your Honor, that were submitted, for example, on July 10 to the Court, excuse me, to the Commission. [00:07:15] Speaker 05: Where is that in the record? [00:07:17] Speaker 04: That is, I'll find the precise page for you, but that was submitted to the Commission. [00:07:21] Speaker 05: And also, my colleague at the bar, the bulk of his argument... You can't identify standing here what page that is at? [00:07:29] Speaker 02: Oh, is it in the appendix? [00:07:31] Speaker 04: Yes, Your Honor. [00:07:33] Speaker 04: Also, my colleague at the bar, his entire argument, Your Honor, [00:07:35] Speaker 04: is about the three profit factors and also about the return on assets. [00:07:39] Speaker 04: So for four of the five factors, one factor, there was no information whatsoever on the record. [00:07:44] Speaker 04: For four of the five factors, we strongly argued to the commission, and then again to the CIT, and in our brief to you, Your Honor, that those support our position. [00:07:52] Speaker 05: I thought you had said earlier that you didn't argue these factors to the commission, that you didn't address the TEPA factors. [00:08:00] Speaker 04: No, we argued four of the five. [00:08:02] Speaker 04: For one of them, Your Honor, [00:08:03] Speaker 04: Ability to service debt. [00:08:05] Speaker 04: There is no information whatsoever on the record. [00:08:07] Speaker 04: It was absolutely impossible for anybody to argue that. [00:08:10] Speaker 04: For that reason alone. [00:08:12] Speaker 05: Where did you argue the TEPA factors to the agency? [00:08:17] Speaker 05: If we're talking about exhaustion, we need to see where you've done that. [00:08:22] Speaker 04: Again, Your Honor, we did not argue to the agency that it should apply the TEPA or not. [00:08:27] Speaker 04: My colleague at the bar did. [00:08:29] Speaker 04: We did argue, though, as to those specific factual points. [00:08:33] Speaker 04: They were points that we made to the commission in our briefs in the agency blow. [00:08:38] Speaker 04: With that, I'll reserve my time. [00:08:40] Speaker 02: We'll save you double time, but this is a critical aspect, it seems to me. [00:08:45] Speaker 02: Perhaps we can pursue it with Mr. Marshak. [00:08:57] Speaker 01: I'd like to talk about the merits of the case and why we believe that the commission's decision wasn't supported by substantial evidence. [00:09:05] Speaker 01: Did you argue that new TEPA factors to the agency? [00:09:10] Speaker 01: No. [00:09:12] Speaker 01: Well, we didn't argue them as being new factors. [00:09:15] Speaker 01: What we argued to the agency was that profitability was critical to the case. [00:09:20] Speaker 01: And what the agency said was, [00:09:22] Speaker 01: The domestic, and I'll quote from what the agency said, the domestic industry and each individual domestic producer were increasingly profitable during the POI. [00:09:30] Speaker 01: This is not unexpected. [00:09:32] Speaker 01: And that's all they said about profitability. [00:09:34] Speaker 01: And a major portion of our brief addressed the fact that during the POI, this industry was making record profits objectively as an industry and also compared to other industries. [00:09:47] Speaker 01: So it's operating profits. [00:09:49] Speaker 01: It's net profits. [00:09:50] Speaker 01: It's return on assets. [00:09:52] Speaker 01: It's return on investments. [00:09:54] Speaker 01: We're all going through the roof. [00:09:56] Speaker 01: Now, we didn't put that in the context of the new law, but we said this is what the commission is required to look at. [00:10:02] Speaker 01: When you look at an industry, whether an industry is being injured, whether the harm is not inconsequential, immaterial, or unimportant, you have to look at the profitability of the industry. [00:10:16] Speaker 01: That's like a number one factor to look at, which is very, very critical. [00:10:21] Speaker 01: And we stressed that throughout our brief, and to the agency, and to this court, when we said, when the commission just said it wasn't unexpected, that alone makes a decision not supporting nine and a quarter through the law. [00:10:37] Speaker 05: But it's true that the ITC also addressed at length the profitability question, right? [00:10:43] Speaker 01: No, we don't believe it did. [00:10:45] Speaker 01: Absolutely not, Your Honor. [00:10:46] Speaker 01: We believe the agencies- Did they address profitability? [00:10:50] Speaker 01: That was the problem. [00:10:51] Speaker 01: What the agency said was, in one sentence, the domestic industry and each individual domestic producer were increasingly profitable during the PLI. [00:10:59] Speaker 01: Absolutely true. [00:11:00] Speaker 01: And then they said, this is not unexpected during a period of increasing apparent US consumption and declining more material costs for natural and synthetic rubber. [00:11:09] Speaker 01: Well, it probably isn't unexpected. [00:11:12] Speaker 01: But here, we're talking about profits that were increasing, that were higher than comparative industries, that were record [00:11:20] Speaker 01: profits, I'll just quote from Goodyear's CEO when he was talking about what was going on in the market. [00:11:28] Speaker 01: The CEO of Goodyear, this is the appendix page 2494, and he was going to say, I will tell you, in that market we have stayed true to our North American strategy or our company's strategy of staying focused on our targeted market segments where we can maximize the value of the Goodyear brand. [00:11:46] Speaker 01: Even in that tough market, we haven't changed and said, hey, [00:11:49] Speaker 01: The markets grow, and let's just sell more tires for volume, for volume's sake. [00:11:55] Speaker 01: We haven't done that, and you see that in the record fourth quarter. [00:11:58] Speaker 01: And you see that in the record full year results. [00:12:01] Speaker 01: So you are managing it very well. [00:12:04] Speaker 01: What was going on in this industry was that the industry made a conscious decision not to chase market share. [00:12:11] Speaker 01: They were not chasing revenue. [00:12:14] Speaker 01: And what the agency said was that there was injury because [00:12:20] Speaker 01: There was lower revenues than they otherwise would have had. [00:12:23] Speaker 01: So the International Trade Commission said the industry is being injured because the revenues are lower. [00:12:29] Speaker 01: But what the domestic industry was saying is we don't want to chase revenue. [00:12:35] Speaker 01: Our idea is not to chase revenue anymore. [00:12:38] Speaker 01: What we want to do is we want to increase our profitability. [00:12:41] Speaker 01: These are worldwide companies. [00:12:43] Speaker 01: They're not just making tires in the United States. [00:12:46] Speaker 01: These companies are producing tires throughout the world. [00:12:49] Speaker 01: So when you look at their capacity in the United States, the agency said also they had capacity to make more tires. [00:12:56] Speaker 01: Well, they didn't have capacity to produce the tires they wanted to produce in the United States, the high-value tires. [00:13:05] Speaker 01: And you look at every single one of these domestic producers, and what they're saying is, we have good year. [00:13:14] Speaker 01: We have more demand for HV products than we can fill. [00:13:18] Speaker 01: Goodyear again, Robo's demand for HP tires demand, which in some cases exceeds our supply. [00:13:23] Speaker 01: Cooper, we're in the process of reconfiguring its manufacturing plan to increase production of these products. [00:13:29] Speaker 01: Toyo, our growth really is stunted by capacity. [00:13:33] Speaker 01: Bridgestone, expansion is intended to be growing demand in key market segments, including ultra-high performance and light truck SUV tires. [00:13:42] Speaker 01: So what the domestic industry was doing in their worldwide production, they're importing [00:13:48] Speaker 01: the lower price, the tires that compete against the Chinese from third countries. [00:13:52] Speaker 01: And you have more tires being imported by domestic producers from third countries that are being imported totally from China. [00:14:02] Speaker 01: The domestic industry has rationalized worldwide production. [00:14:06] Speaker 01: They're profitable. [00:14:08] Speaker 01: They're looking at their long-term growth. [00:14:10] Speaker 01: And to do that, they don't want to increase revenue by [00:14:14] Speaker 01: producing inexpensive tires in your domestic facility, that doesn't, that's not healthy for the industry. [00:14:21] Speaker 05: What's healthy? [00:14:22] Speaker 05: It sounds like a fine argument to make to the commission, but it's not our job to second guess what they've decided. [00:14:28] Speaker 01: I realize that every time we have a case against the commission, you know, we're always talking about reweighing the evidence. [00:14:36] Speaker 01: But I think it becomes a point, and in this case, [00:14:39] Speaker 01: We've reached that point where we're not talking about reweighing the evidence anymore. [00:14:43] Speaker 01: We're talking about looking at what the domestic industry really wanted to do. [00:14:49] Speaker 01: The domestic industry was not chasing revenue. [00:14:53] Speaker 01: And what the commission said is that because you have less revenue, you're being injured. [00:15:00] Speaker 01: And the domestic industry says, we don't want that revenue. [00:15:03] Speaker 01: We want to make these low [00:15:07] Speaker 01: price low-cost tires in third countries. [00:15:10] Speaker 01: That's not going to help our U.S. [00:15:12] Speaker 01: production. [00:15:13] Speaker 01: That's not going to make us healthy. [00:15:15] Speaker 01: What's going to make us healthy is to produce the high-value tires in the U.S. [00:15:21] Speaker 01: where we don't have the capacity. [00:15:22] Speaker 01: We're expanding the capacity. [00:15:24] Speaker 01: And what the commission did is they just ignored the statements of the CEOs. [00:15:30] Speaker 01: They just brushed off the fact that the industry was making record profits by saying this is not unexpected. [00:15:37] Speaker 01: And capacity, they just talked about, well, you had capacity, you had production, and there's excess. [00:15:45] Speaker 01: And for capacity, what the mistake they made was, they looked at capacity figures that the union submitted, and it was based on a static production, where when you look at capacity and capacity utilization, it changes. [00:15:59] Speaker 01: If you make more high-value tires, your capacity to make individual tires declines. [00:16:04] Speaker 01: And the Commission made these fundamental errors just by the way they looked at the industry and not considering what was good for the industry. [00:16:13] Speaker 01: I believe the Commission substituted its judgment for the judgment of the corporate executives who made decisions which led Goodyear to say it had a record year. [00:16:25] Speaker 02: Thank you. [00:16:25] Speaker 02: We'll save you rebuttal time. [00:16:37] Speaker 02: Ms. [00:16:38] Speaker 02: McNamara. [00:16:47] Speaker 00: Good morning. [00:16:47] Speaker 00: Courtney McNamara on behalf of the United States International Trade Commission. [00:16:50] Speaker 00: This court should reject ITU-VOMA's and CRA's arguments and challenges to the commission's determinations and it should... Is there a provision in the statute or the regulations that addresses exhaustion? [00:17:08] Speaker 00: I don't offhand know if there's a provision in the statute. [00:17:11] Speaker 00: I apologize, Your Honor. [00:17:12] Speaker 00: I'm happy to look that up. [00:17:16] Speaker 00: But I think that you're right. [00:17:17] Speaker 00: The court holds that there is requirement for exhaustion. [00:17:20] Speaker 00: And I think that you rightly have noticed that they did argue the profitability. [00:17:25] Speaker 00: They didn't argue the TPEA. [00:17:26] Speaker 00: But this argument raises a lot of questions about what they're arguing and whether this has been properly presented. [00:17:38] Speaker 00: The Court of International Trade correctly noted that they could have made arguments, and the judge emphasized that they declined to make these arguments, and even though they conceded that they could have and should have, they had an opportunity to comment on the TPEA. [00:17:54] Speaker 00: And even though the staff report contained the prior statute, that is not controlling. [00:18:04] Speaker 02: Would you explain to us why it is [00:18:07] Speaker 02: that when there's a clear change of law, an explicit change of law known to everybody that affects what everybody is doing, that the commission can say, never mind, we're not going to follow it. [00:18:20] Speaker 00: Oh, that's not what the commission said at all. [00:18:21] Speaker 00: Excuse me, Your Honor. [00:18:22] Speaker 00: That's not what the commission said at all. [00:18:24] Speaker 00: What the commission did is, and you can see the staff report. [00:18:26] Speaker 00: The staff report is primarily the commission staff taking all of the record evidence [00:18:35] Speaker 00: analyzing it, and distilling it into a single document. [00:18:37] Speaker 00: So that's a huge volume of record factual evidence. [00:18:41] Speaker 00: So the commission didn't say it wasn't going to apply that. [00:18:43] Speaker 00: It didn't say that at all. [00:18:44] Speaker 00: What it did was, while it's in the process of finalizing the staff report, the law changed. [00:18:49] Speaker 00: And the commission, perhaps it erred in not changing the boilerplate. [00:18:54] Speaker 00: But that's not the role of the staff report. [00:18:58] Speaker 00: The staff report isn't to advise the parties of the law. [00:19:00] Speaker 00: The parties should know the law. [00:19:02] Speaker 00: The purpose of the staff report is [00:19:04] Speaker 00: give a document that explains the staff's analysis of the record evidence. [00:19:09] Speaker 00: It's a huge factual-based document. [00:19:12] Speaker 00: So the fact that the staff report had the incorrect law doesn't mean that the commission wasn't going to apply it. [00:19:19] Speaker 00: And the commission could not. [00:19:20] Speaker 00: It could not decline to apply the law. [00:19:23] Speaker 00: It had to. [00:19:24] Speaker 00: And it did so in the most reasonable manner. [00:19:32] Speaker 00: It did so in the most reasonable manner. [00:19:34] Speaker 00: It did so given the pressing statutory deadlines. [00:19:37] Speaker 00: The TPEA was enacted into law on June 29th, and the commission had a pressing deadline. [00:19:46] Speaker 00: This is the final stage of its investigation. [00:19:49] Speaker 00: And that deadline didn't move. [00:19:51] Speaker 00: The TPEA didn't give extensions. [00:19:53] Speaker 00: That deadline didn't move. [00:19:54] Speaker 00: So the commission acted in the most reasonable manner. [00:19:57] Speaker 00: It determined that it was going to apply to TPEA. [00:20:00] Speaker 05: It didn't say much is the problem. [00:20:02] Speaker 05: about the new TPEA factors. [00:20:04] Speaker 00: Well, but it did. [00:20:05] Speaker 00: It talked about the profitability. [00:20:06] Speaker 00: Well, it mentioned them. [00:20:08] Speaker 00: It mentions them. [00:20:11] Speaker 00: But there's nothing in the TPEA that requires anything more. [00:20:14] Speaker 00: And that's if I can, before I move on to that point, I just want to briefly point out that in addition to the problems with exhaustion and the arguments, I just also want to point out that ITG VOMA is raising for the first time this idea that the commission should have [00:20:31] Speaker 00: obtained the evidence on the ability of the domestic industry to service debt that is raised for the first time in the reply brief. [00:20:38] Speaker 00: They did not raise that in their opening brief, and they did not raise that before the Court of International Trade. [00:20:43] Speaker 00: That argument should be waived. [00:20:46] Speaker 05: What about the argument that the domestic producers really weren't interested in the low-cost market, and that as a result of that, these imports from China, which were all of the low-cost variety, didn't injure [00:21:01] Speaker 00: Well, that's not what the record showed. [00:21:05] Speaker 00: The commission reasonably found that the record showed that they competed meaningfully against each other. [00:21:11] Speaker 05: In the low-cost market. [00:21:12] Speaker 00: Yes, absolutely, Your Honor. [00:21:14] Speaker 00: And although I understand counsel's characterization of them not chasing revenue, but companies are in the business to make money. [00:21:23] Speaker 00: They're even saying they're trying to maximize profitability. [00:21:26] Speaker 00: And if you look at the domestic industry here, the domestic industry did not cede the market share. [00:21:31] Speaker 00: They did not cede the lower market. [00:21:33] Speaker 00: They continued to participate in it. [00:21:35] Speaker 00: They continued to participate in the lower market by offering a wide variety of tires. [00:21:41] Speaker 00: And you can look at Appendix D1. [00:21:43] Speaker 00: It has the list of the different brands that they're offering. [00:21:47] Speaker 00: They're offering different brands at all the price points. [00:21:50] Speaker 05: But I think the argument is that the lower price tires were all manufactured broad, right? [00:21:55] Speaker 00: No, I mean, that is the argument, but that's not what the record shows. [00:21:58] Speaker 00: And you can look, in particular, one of the biggest manufacturers on Appendix D1 self-identifies the tires that they're producing in the United States. [00:22:08] Speaker 00: The overwhelming majority are the ones that are being produced, not in the tier, top tier, but in the secondary and the third tier, so those lower value tires. [00:22:19] Speaker 00: That's one of the largest producers in the domestic industry said, [00:22:24] Speaker 00: The bulk of our market is going to those tiers. [00:22:29] Speaker 00: And the commission found that they were competing against each other. [00:22:32] Speaker 00: No matter how you define brand, the commission found reasonably that the domestic industry was serving all those aspects of the market. [00:22:40] Speaker 00: And they lost market share. [00:22:42] Speaker 00: So it doesn't make sense. [00:22:44] Speaker 00: The commission noted they have to be obtaining some of the growth because all the parties agree that the growth here is in the, [00:22:54] Speaker 00: The growth here is in the area of the higher value tires. [00:22:58] Speaker 00: So if they're gaining market share, then they're necessarily participating in that growth. [00:23:05] Speaker 00: If they're confined to the lower tier of the market, how are they gaining market share? [00:23:14] Speaker 00: And even though I'll turn to ITG's arguments, the commission [00:23:24] Speaker 00: The commission's path here is even though it didn't specifically address the rate of return on assets, the commission's path is clear. [00:23:37] Speaker 00: I'd also just like to add that their argument is premised on a misreading and a conflation of the statute. [00:23:46] Speaker 00: Section B of the statute provides that the commission shall, in each case, [00:23:51] Speaker 00: consider the volume price and impact and explain its analysis with respect to those factors. [00:23:56] Speaker 00: Section B further provides that if the commission considers factors outside of that, it shall identify and explain the relevance of those factors. [00:24:05] Speaker 00: Section C provides that the commission shall evaluate certain enumerated factors. [00:24:11] Speaker 00: But nothing in Section C says anything about a level of analysis. [00:24:15] Speaker 00: And this court has said as long as the path of the agency is reasonably discernible, it's determination should be upheld. [00:24:22] Speaker 00: And here the agency's path is clear. [00:24:25] Speaker 00: The domestic industry was profitable by every measure. [00:24:28] Speaker 00: There's no debate about that. [00:24:30] Speaker 00: And although the commission didn't specifically address the rate of return on assets, it is, it explains in the stock report that that's a function of this profitable industry. [00:24:40] Speaker 00: There's no debate. [00:24:41] Speaker 00: They were a profitable industry. [00:24:43] Speaker 00: But not withstanding that profitability, [00:24:46] Speaker 00: Throughout the period of investigation, their shipments, their net values, their net sales values, net sales volumes, production, and employment all declined. [00:24:56] Speaker 00: And the domestic industry lost market share. [00:24:59] Speaker 00: So here, it's very clear. [00:25:00] Speaker 00: And as the court noticed, they haven't made any argument about how these new factors undermine the commission's analysis at all. [00:25:11] Speaker 00: They point to their reply brief, and they say that they put the factors [00:25:16] Speaker 00: and the evidence from the staff report in a chart, but they haven't made any argument other than point to those factors. [00:25:23] Speaker 00: And the commission acknowledged those factors. [00:25:26] Speaker 00: All they are doing is, I mean, they haven't made any argument. [00:25:29] Speaker 00: The commission acknowledged that the domestic industry was profitable by every measure, but that doesn't mean they're not injured. [00:25:35] Speaker 00: And the commission, excuse me, council has not articulated any way that the rate of return of assets or the profitability undermines the commission's determination. [00:25:47] Speaker 00: They were profitable. [00:25:50] Speaker 00: That's fine. [00:25:51] Speaker 00: They had a high rate of return on assets. [00:25:54] Speaker 00: OK, but that doesn't mean they didn't lose market share. [00:25:56] Speaker 00: And it doesn't mean that they didn't experience all those declines in indicators. [00:26:03] Speaker 00: IDG VOMA and CRA, they're just seeking to substitute their judgment for that of the commission. [00:26:12] Speaker 00: They want to place decisive weight on these profitability factors. [00:26:17] Speaker 00: But that's contrary to law. [00:26:20] Speaker 00: The statute provides that the presence or absence of any factor is not decisive. [00:26:27] Speaker 00: And the TPEA itself expressly precludes [00:26:30] Speaker 00: the commission from finding an industry not injured just because it's profitable. [00:26:36] Speaker 00: The court should reject these challenges. [00:26:41] Speaker 00: Oh, I just also want to briefly address ITG VOMA's argument that it didn't have a sufficient opportunity to comment on the TPEA because of commission rules. [00:26:51] Speaker 00: They are correct in now arguing that the commission rules prevent a party from raising new factual arguments. [00:27:00] Speaker 00: I mean, new facts, but facts are distinct from legal arguments, and nothing in the commission rules preclude a party from arguing about the probative value and making a legal argument. [00:27:12] Speaker 05: Well, I guess that they thought there needed to be additional facts in light of the TPEA. [00:27:17] Speaker 05: They could have made a request to reopen the record. [00:27:20] Speaker 00: Absolutely, Your Honor. [00:27:20] Speaker 00: They could have made a request. [00:27:22] Speaker 00: The commission regulation 201.12 specifically provides that the parties can make a request at any particular time. [00:27:30] Speaker 00: You're absolutely right. [00:27:30] Speaker 00: They never did that. [00:27:32] Speaker 00: In fact, not even until the reply brief did this even come up. [00:27:36] Speaker 00: They've never requested that the commission seek additional data. [00:27:46] Speaker 00: So I've talked a little bit about the competition. [00:27:48] Speaker 00: The commission's findings on competition are supported by substantial evidence. [00:27:54] Speaker 00: I also want to address the capacity the commission's [00:27:57] Speaker 00: Finding that the domestic industry had additional capacity is supported by substantial evidence. [00:28:02] Speaker 00: The commission observed that notwithstanding the, excuse me, the commission observed that as the rate of subject import slowed from 2012 to 2013, excuse me, I'm sorry, let me start over. [00:28:17] Speaker 00: The commission reasonably found that the record showed that they had additional capacity. [00:28:22] Speaker 00: Subject imports surged into the market from 2012 to 2013 at the expiration of the safeguards. [00:28:29] Speaker 00: And they more than doubled their market share. [00:28:31] Speaker 00: The rate of imports slowed in 2014. [00:28:34] Speaker 00: And the commission found that the domestic industry's capacity utilization, as those surged in, the capacity utilization declined. [00:28:43] Speaker 00: And as the rate of the imports slowed in 2014, the capacity utilization increased. [00:28:51] Speaker 00: That, along with the additional questionnaires, along with the fact that in the safeguard investigation, they had achieved a substantially higher capacitization rate, all is evidence, substantial evidence, that they had additional capacity from which they could have produced more tires and obtained greater sales. [00:29:18] Speaker 00: So I see. [00:29:24] Speaker 00: And also just with respect to non-subject imports Council contends that the that they would not have that they just turn to subject imports the record the lies that table 39 shows the Shows the domestic industries imports in you as we point out in our brief when the rate of subject import slowed the volume of non-subject imports increased only incrementally while the [00:29:52] Speaker 00: production and the shipments of the domestic industry actually increased at a greater rate. [00:29:59] Speaker 00: So in conclusion, neither ITG VOMIT nor the CRA have provided any legitimate legal or factual basis for this court to disturb the lower court's judgment. [00:30:11] Speaker 00: And this court should affirm the lower court's holding and sustain the commission's determinations in every respects. [00:30:17] Speaker 02: Thank you. [00:30:19] Speaker 02: OK. [00:30:19] Speaker 02: Thank you. [00:30:20] Speaker 02: Mr. Depress, you have three minutes. [00:30:27] Speaker 03: Good morning, Your Honours. [00:30:33] Speaker 03: May it please the Court, I would just like to address a few of the questions that came up. [00:30:38] Speaker 03: First of all, about the supposed abandonment by the domestic industry of lower value tires or lower tiers in the market, arguments like that. [00:30:50] Speaker 03: I would like to point out that there is lots of evidence to the contrary and the record, for example. [00:30:55] Speaker 03: In the hearing transcript, which is this particular section that I mentioned, is found at page 2120. [00:31:04] Speaker 03: Mr. Mangola, who was a witness for the respondents, said that, no, I think that certain manufacturers, like we've mentioned, they're very interested in competing more in the value segment of the market, the third tier of the market. [00:31:17] Speaker 03: And that's the reason why you see a lot more of the Kelly brand, et cetera, et cetera. [00:31:22] Speaker 03: And then he says, Goodyear is manufacturing tires. [00:31:25] Speaker 03: Kelly tires to specifically play in their value line market. [00:31:32] Speaker 03: And then he talks about Cooper, et cetera, et cetera. [00:31:35] Speaker 03: So there is no question that the domestic producers remained, and always were, very interested in competing in the low end of the market. [00:31:45] Speaker 03: And then also in the transcript, or the hearing transcript, 1873 to 1875, [00:31:54] Speaker 03: where a union witness is describing efforts by Michelin to recapture lower value parts of the market. [00:32:03] Speaker 03: And then at 1878 and 1879, it describes the efforts of Goodyear to do the same thing. [00:32:13] Speaker 03: With regard to the same issue, I would also like to point to, there was a lot of briefing on this, [00:32:23] Speaker 03: to the response that was given by the petitioners to Commissioner Broadbent where discussing tiers and supposed tiers in the market. [00:32:35] Speaker 03: And as you know from what the commission concluded, there was very little agreement on what exactly, which tier belonged and what tier. [00:32:44] Speaker 03: But apart from that, what the answer to Miss Broadbent makes clear is that the tiers were really there [00:32:52] Speaker 03: Every dealer stocks a large number of brands, and I think there's a quote someplace which I can find that on the average every dealer had 11 different brands in their shop. [00:33:03] Speaker 03: So the idea is that it's a good, better, best kind of marketing strategy. [00:33:08] Speaker 03: So if a customer comes in the shop and is looking for tires, [00:33:13] Speaker 03: then you can improve your profits if you can say, well, you're interested in this tire. [00:33:17] Speaker 03: Well, we have this other one, which is a bit better, lasts a bit longer once you take into this one into consideration. [00:33:24] Speaker 03: Or if the customer believes, well, that's kind of a lot of money, then you can sell them a cheaper one. [00:33:30] Speaker 03: And this is not just for tires. [00:33:32] Speaker 03: Many products have the same marketing strategies that are used. [00:33:36] Speaker 03: It doesn't mean that [00:33:38] Speaker 03: There's somehow a lower tier or a higher tier segment and a higher tier segment is insulated from competition. [00:33:44] Speaker 03: You know, that is simply not the case. [00:33:46] Speaker 03: And then, if I may, on the subject of TBEA. [00:33:54] Speaker 05: Is there an exhaustion provision in the statute or the regulation? [00:33:58] Speaker 03: I, you know, I was thinking about that and I can't think of one. [00:34:02] Speaker 03: I think it's from, but I could be wrong. [00:34:05] Speaker 03: The statute, [00:34:08] Speaker 03: on the material injury factors. [00:34:13] Speaker 03: And this is pointed out in Ms. [00:34:15] Speaker 03: McNamara's brief. [00:34:16] Speaker 03: It lists all these factors and it says, before listing it, including but not limited to. [00:34:26] Speaker 03: So the statute tells you exactly, this is not an exhaustive list. [00:34:31] Speaker 03: You can come up with lots of other things. [00:34:32] Speaker 03: And so since profit was an issue from day one in this investigation, since the industry was profit, everybody, everybody, including our client, did its utmost best to talk about profit. [00:34:46] Speaker 03: Now, of course, they had a different ax to grind on needed. [00:34:48] Speaker 03: We tried to minimize it. [00:34:50] Speaker 03: So we submitted a study in our pre-hearing brief where we talked about the industry's ability to earn back its cost of capital. [00:35:01] Speaker 03: That's not a listed factor. [00:35:03] Speaker 03: Everybody had the same opportunity. [00:35:05] Speaker 03: And to come up at the very last moment in corporeis with a fabricated deus ex machina kind of argument that somehow or another they did not have an opportunity to argue this is simply implausible. [00:35:18] Speaker 03: People did argue whatever they could about the profit issue. [00:35:22] Speaker 03: And that is the only thing that really is important. [00:35:26] Speaker 03: And the commission took these arguments into account, including our argument. [00:35:29] Speaker 03: and found as it did, placing profit in the context of the conditions of competition and in the context of the other factors that it observed. [00:35:42] Speaker 03: Thank you very much. [00:35:43] Speaker 02: Thank you. [00:35:46] Speaker 02: Mr. Stowe, you saved two minutes. [00:35:54] Speaker 04: Thank you. [00:35:56] Speaker 04: Your Honor, there's a black letter of law that when Congress amends a statute, it is presumed that Congress, quote, intends its amendment to have a real and substantial effect. [00:36:03] Speaker 05: Do you have a site for me where you raised this? [00:36:05] Speaker 04: Yes, Your Honor. [00:36:07] Speaker 04: The site, Your Honor, is US versus Quality Stores. [00:36:10] Speaker 05: In the record here, where did you raise the TEPA issue before the agency? [00:36:16] Speaker 04: Your Honor, as I said, we did not raise the TEPA. [00:36:19] Speaker 04: We did, however, address four of the factors that Congress had. [00:36:23] Speaker 04: We address the three profit factors actually in two places, Your Honor, at appendix 4088 and 4108. [00:36:30] Speaker 04: My colleague at the bar addressed the fourth factor, Your Honor, the return on assets at appendix 4118. [00:36:36] Speaker 04: As we've said, Your Honors, for the fifth factor, the ability to service debt, there was no information on the record. [00:36:42] Speaker 04: For that reason alone, Your Honor, this case should be remanded for further consideration. [00:36:47] Speaker 04: I object to my counsel's intimation that we never raised this issue. [00:36:50] Speaker 04: We ask this court and the court below [00:36:53] Speaker 04: to remand to the commission for further consideration. [00:36:55] Speaker 04: That includes making a decision of whether to open the record when there's no information on the record about a particular factor that was enumerated by the Congress. [00:37:03] Speaker 05: But you never asked to reopen the record before the agency, right? [00:37:07] Speaker 04: No, Your Honor, we did not. [00:37:08] Speaker 04: As I said, this issue, the statute was passed on June 29th. [00:37:14] Speaker 04: Final comments, as I've said, were due on July 2nd. [00:37:17] Speaker 04: I disagree with my colleague at the bar. [00:37:19] Speaker 04: I believe that you're only allowed to make comments on the factual record. [00:37:21] Speaker 04: You're not allowed to raise new legal arguments for the first time in your papers. [00:37:25] Speaker 04: However, if that is not the position of the commission, I would point out that the other side did, in fact, raise the question of whether the TPEA should be applied. [00:37:33] Speaker 04: I think in that respect, Your Honor, this falls directly within the exception to the exhaustion. [00:37:37] Speaker 04: Where did they raise that? [00:37:38] Speaker 04: They raised it in their final comments, Your Honor, in a footnote. [00:37:41] Speaker 04: There's an exception to the exhaustion doctrine. [00:37:44] Speaker 05: Where? [00:37:46] Speaker 05: What page of the record do we see that? [00:37:54] Speaker 04: I believe, Your Honor, that the Commission discussed it in its footnote 245. [00:37:58] Speaker 05: I'm not talking about the Commission addressing it. [00:38:01] Speaker 05: I'm talking about you or your co-counsel addressing the issue and asking that the Commission address the issue. [00:38:10] Speaker 04: Your Honor, we did not address the issue. [00:38:11] Speaker 04: However, my counsel at the bar [00:38:13] Speaker 04: in a footnote in its final comments, did in fact address the issue. [00:38:17] Speaker 04: And the commission admits this. [00:38:18] Speaker 04: It admits this in the one place in the record in which it acknowledges that it's going to apply the TPA, in a very cursory footnote. [00:38:24] Speaker 04: I don't believe, as I've said, Your Honor, that they address the enumerated statutes, the enumerated new factors, enumerated by Congress, not by me or by the commission, or that they gave any explanation of how they were going to apply it. [00:38:36] Speaker 04: For that reason, Your Honor, we respectfully request that the commission's decision be reversed and remanded. [00:38:41] Speaker 02: Okay. [00:38:42] Speaker 02: Thank you. [00:38:46] Speaker 02: Okay. [00:38:46] Speaker 02: Mr. Marshack, you have one minute. [00:38:48] Speaker 02: You will have to talk fast. [00:38:54] Speaker 01: I always talk too fast, Your Honor. [00:38:57] Speaker 01: I think the government council talked about what the case was about from the International Trade Commission's viewpoint. [00:39:03] Speaker 01: And what the council said, that the domestic industry had capacity to produce more tires and obtain greater sales. [00:39:10] Speaker 01: And that's the crux of the commission case. [00:39:13] Speaker 01: And the crux of our case is they did not want to do that. [00:39:18] Speaker 01: Obtaining greater sales is not what domestic industry. [00:39:23] Speaker 01: In the domestic industry, I'm talking about the companies producing tires in the United States. [00:39:28] Speaker 01: We have great respect for the unions. [00:39:31] Speaker 01: And wages or employment are critically important. [00:39:34] Speaker 01: But the companies producing tires in the United States during the POI, Bridgestone, and Michelin, and Goodyear, and Cooper, [00:39:41] Speaker 01: They did not want to chase market share. [00:39:44] Speaker 01: They were not chasing revenues. [00:39:47] Speaker 01: They had gone through difficult times. [00:39:49] Speaker 01: It was a 421 case. [00:39:50] Speaker 01: And what they did was they rationalized worldwide production. [00:39:54] Speaker 01: And to do that, the idea was to make the high-value, expensive tires in the United States and in Europe to sell to these high-cost countries. [00:40:04] Speaker 01: The more high-cost, high-value tires are sold to the United States, the more profitable they'll be. [00:40:09] Speaker 01: And what they would do is they left for their third country markets. [00:40:13] Speaker 01: Yes, there were a lot of third country tires. [00:40:15] Speaker 01: Michigan was in the third country. [00:40:17] Speaker 01: Goody was in the third country. [00:40:19] Speaker 01: They were producing, they were importing their tier three tires from their third countries. [00:40:24] Speaker 01: Third country tires, you had twice as many imports as you had Chinese imports. [00:40:29] Speaker 01: And you had more imports by domestic producers from the third countries than you had from the Chinese. [00:40:35] Speaker 01: So what the domestic industry wanted to do [00:40:38] Speaker 01: was to not chase revenue, not obtain greater sales, but obtain more profitable sales in the high-value tires. [00:40:46] Speaker 01: And they put capacity in the United States to do that. [00:40:48] Speaker 01: And because of that, they had a record year in 2014 on their profitable, long-standing growth, good growth, profitability. [00:40:59] Speaker 01: And this is where they want to be. [00:41:01] Speaker 01: And because of that, they were not injured. [00:41:04] Speaker 02: Thank you. [00:41:05] Speaker 02: OK. [00:41:05] Speaker 02: Thank you. [00:41:06] Speaker 02: Thank you all. [00:41:07] Speaker 02: The case is taken under submission. [00:41:38] Speaker ?: Okay. [00:42:15] Speaker 02: Guys...