[00:00:03] Speaker 05:
We have four argued cases this morning.

[00:00:05] Speaker 05:
The first one is number 18-1250, Mid-Continent Steel and Wire versus United States.

[00:00:12] Speaker 05:
Mr. Gordon.

[00:00:20] Speaker 00:
Good morning, Your Honors.

[00:00:21] Speaker 00:
May it please the Court.

[00:00:22] Speaker 00:
My name is Adam Gordon from the Bristol Group, here today on behalf of Plaintiff Appellant Mid-Continent Steel and Wire, Incorporated.

[00:00:29] Speaker 00:
Our appeal arises from an anti-dumping duty investigation concerning imports of steel nails from the Sultanate of Oman.

[00:00:35] Speaker 00:
Specifically, we challenge a determination by the Department of Commerce that the respondent in the case, Oman Fasteners, is not affiliated with this U.S.

[00:00:43] Speaker 00:
customer by virtue of a close supply relationship arising under 19 U.S.C.

[00:00:48] Speaker 00:
1677-33-G.

[00:00:50] Speaker 00:
Specifically, we believe that the determination by commerce and as affirmed by the Court of International Trade is flawed both legally and factually.

[00:00:59] Speaker 00:
Legally, the Commerce Department applied a standard requiring actual control, which is contrary to the statute, the specific statements of the Statement of Administrative Action, the Commerce Department's own regulations, and the preamble accompanying Commerce's current regulations.

[00:01:15] Speaker 00:
The evidence of the

[00:01:17] Speaker 00:
improperly applied standard is apparent throughout the decision by the Commerce Department in his memoranda and also in the Court of International Trades decision below.

[00:01:27] Speaker 02:
Can I just ask you, in the contract, which I think, the supply agreement, which I think is not confidential, the pricing term says something, Section 3.1,

[00:01:44] Speaker 02:
says pricing follows market prices of steel or something to that effect.

[00:01:51] Speaker 02:
So there's no fixed price for the full term of the contract, right?

[00:02:00] Speaker 00:
That's correct, Your Honor, yes.

[00:02:03] Speaker 02:
And the contract expressly contemplates the possibility that a

[00:02:09] Speaker 02:
offered to buy from the customer could be rejected by Oman Fasteners.

[00:02:14] Speaker 00:
Well, it doesn't rule that out, for sure.

[00:02:16] Speaker 00:
But I think it's important to bear in mind that a close supplier relationship doesn't require that you have a fixed price or fixed pricing.

[00:02:23] Speaker 00:
What it requires is the potential to exercise restraint or direction over a company's decisions concerning production, cost, or pricing.

[00:02:32] Speaker 00:
And how does that exist here?

[00:02:33] Speaker 00:
Pardon me, sir?

[00:02:34] Speaker 00:
How does that exist here?

[00:02:35] Speaker 00:
The specific provisions of the supply agreement do give rise to an actual ability to control or exercise restraint or direction.

[00:02:44] Speaker 00:
Which provisions?

[00:02:45] Speaker 00:
The priority provision?

[00:02:47] Speaker 00:
Yes, your honor.

[00:02:48] Speaker 00:
But there are certain parts of that that are confidential.

[00:02:52] Speaker 00:
So there's a provision that you referred to that does give rise to that.

[00:02:56] Speaker 00:
That provision is always in effect at all times and applies to all

[00:03:00] Speaker 00:
all orders placed by the U.S.

[00:03:02] Speaker 00:
customer.

[00:03:03] Speaker 00:
So whether it's been actually invoked is not a question because it's always in play.

[00:03:09] Speaker 00:
And that's what the statute requires is that the potential to exercise control, in this case, the potential to exercise control over production exists all the time.

[00:03:17] Speaker 00:
Just because of the priority provision?

[00:03:20] Speaker 00:
I don't know that any more would be necessary for that, Your Honor.

[00:03:23] Speaker 00:
That is a legally enforceable contractual provision between the parties.

[00:03:28] Speaker 00:
Um, as a matter of law, uh, what is required here is the potential to exercise direction or restrained or restrained direction over, uh, production, which exists here, uh, cost, uh, or pricing.

[00:03:40] Speaker 02:
Okay.

[00:03:40] Speaker 02:
Can I ask you, uh, this question that's, like I said, I'm puzzled about.

[00:03:45] Speaker 02:
So we have a situation in which on the US side of this transnational process, there's a concern about.

[00:03:55] Speaker 02:
affiliation, potential control, and here it's on that the concern, the allegation is that the customer has the potential to control the supplier.

[00:04:11] Speaker 02:
If a customer has a potential to control the supplier, that would naturally lead the customer to want low prices, which would tend therefore to increase the dumping margin

[00:04:26] Speaker 02:
What is the domestic, your clients concern with an increase in the dumping margin?

[00:04:35] Speaker 00:
Well, I think the dynamic doesn't merely rely on a desire for lower prices.

[00:04:43] Speaker 00:
As you can tell from the provision that was just referred to, part of this will be knowing that you have reliable continuity of supply without any potential supply interruptions.

[00:04:54] Speaker 00:
That's extraordinarily valuable to a US customer, especially one who is importing products from overseas, where supply chain interruptions can be a nightmare.

[00:05:03] Speaker 00:
So from my client's point of view,

[00:05:05] Speaker 00:
You know, we see this relationship giving rise to the potential to facilitate increased imports at whatever price and increase volumes of those imports, which harm the market.

[00:05:16] Speaker 00:
And so that's kind of how this provision, I think, is intended to function.

[00:05:21] Speaker 00:
I mean, how the statutory provision is intended to function, because as the court's aware,

[00:05:26] Speaker 00:
when Congress amended the Tariff Act in 1995 with implementation of the Uruguay Round Agreements Act, it specifically broadened the definition of affiliation because, as it said, the traditional focus on stock ownership alone, equity relationships, fails to address adequately modern business relationships, which often find one firm operationally in a position to exercise restraint or direction over another firm, even in the absence of an equity relationship.

[00:05:54] Speaker 00:
There are many facets to the relationship.

[00:05:58] Speaker 00:
Price drives many decisions, but price is irrelevant if you don't have continuity of supply.

[00:06:06] Speaker 00:
So as a matter of law, we believe the Commerce Department applied the wrong standard.

[00:06:11] Speaker 00:
It's very clear on the face of the record below.

[00:06:14] Speaker 00:
The determination below is also flawed factually.

[00:06:20] Speaker 00:
The statute gives reference to the fact

[00:06:24] Speaker 00:
A close supplier relationship is one in which one firm is reliant upon the other.

[00:06:28] Speaker 00:
And the evidence below is abundantly clear that Oman Fasteners is reliant

[00:06:33] Speaker 00:
was reliant during the period of investigation on the US customer.

[00:06:36] Speaker 00:
This is a brand new nail producer in Oman who could not produce nails prior to its founding in 2012, who sold an extraordinary supermajority of its entire global production to one single customer in the United States.

[00:06:51] Speaker 03:
Why does a high percentage of sales to one customer necessarily implicate control rather than just a market desire to please one customer?

[00:07:02] Speaker 00:
Well, the extraordinarily high level of sales to the one customer, Your Honor, gives rise to a relationship of reliance.

[00:07:11] Speaker 00:
And after reliance, you look at the question of control.

[00:07:13] Speaker 05:
If it can't be that just relying on a customer indicates control, that wasn't the purpose of the provision here.

[00:07:22] Speaker 00:
No, but it's part of it, Your Honor, and it's part of what the Commerce Department examines.

[00:07:26] Speaker 00:
We're not challenging the regulation as it's intended to be applied.

[00:07:30] Speaker 00:
We're challenging how it was implied here.

[00:07:32] Speaker 00:
And when you look at the volume that the percentage of sales made to this single customer by a company who didn't exist before 2012, and you look at it in terms of the temporal aspect of it, subject to a long-term supply agreement, there's no way this relationship could easily be replaced.

[00:07:52] Speaker 00:
And that's what the law considers.

[00:07:53] Speaker 03:
Well, it's a holistic inquiry.

[00:07:54] Speaker 03:
And then Commerce looked at all of the facts before it and found that there was no control

[00:08:03] Speaker 03:
You're attempting to invoke some sort of a per se rule, it seems to me.

[00:08:11] Speaker 03:
And I'm not sure there's warrant.

[00:08:12] Speaker 00:
I'm not certain we're trying to invoke a per se rule, Your Honor.

[00:08:16] Speaker 00:
But what we do believe firmly is that the record here is compelling.

[00:08:21] Speaker 00:
Frankly, you look at the evidence on the record below.

[00:08:24] Speaker 00:
And if you can't find close supplier affiliation on these facts, we don't know when you can.

[00:08:29] Speaker 00:
It's a very clear cut case.

[00:08:32] Speaker 00:
not only factually, but also in terms of what the law requires.

[00:08:36] Speaker 00:
It appears to us that the Commerce Department's approach here was ends-oriented to try to avoid this finding, and that's partly why it concerned us enough to bring the appeal not only to the Court of International Trade, but before this Court.

[00:08:49] Speaker 05:
Okay.

[00:08:49] Speaker 05:
You're in your bottle, Tom.

[00:08:50] Speaker 05:
Do you want to save that?

[00:08:52] Speaker 05:
Apologies, sir.

[00:08:52] Speaker 05:
Thank you very much.

[00:08:58] Speaker 05:
Ms.

[00:08:58] Speaker 05:
Cotter.

[00:09:00] Speaker 01:
Mickey Cote for the United States.

[00:09:06] Speaker 01:
The trial court correctly sustained Commerce's determination that Oman Fasteners is not affiliated with U.S.

[00:09:14] Speaker 01:
customer.

[00:09:16] Speaker 01:
Because Commerce's determination is supported by substantial record evidence and is otherwise in accordance with the law, this court should sustain or affirm the trial court's decision and sustain Commerce's affiliation determination.

[00:09:33] Speaker 01:
Commerce's affiliation determination was, and I'll address the legal issue first and then the factual issue second, Your Honors, was made consistent with statutory requirements of 19 USC section 1677.33.

[00:09:54] Speaker 01:
It was consistent with the guidance provided by the SAA.

[00:09:59] Speaker 01:
It was consistent with its regulations at 19 CFR section 351.102b.

[00:10:11] Speaker 01:
And notwithstanding the arguments that are made by Mid-Continent,

[00:10:16] Speaker 01:
The trial court and Commerce fully reviewed the law, and Commerce responded to each and every one of the allegations that Mid-Continent made during the administrative proceedings.

[00:10:33] Speaker 01:
made a determination that was squarely within the scope of the law.

[00:10:39] Speaker 01:
It made a determination that there was no affiliation here based upon the entirety of the record.

[00:10:46] Speaker 01:
And that entire record included the submissions by Oman fasteners, as well as the supply agreement, as well as a complete and thorough verification

[00:11:01] Speaker 01:
reviewing accounts and records of Oman fasteners as well as reviewing their production.

[00:11:12] Speaker 01:
With respect to the facts, the facts as they are revealed in the record demonstrate there was substantial evidence supporting Commerce's position.

[00:11:25] Speaker 01:
That substantial evidence supported commerce's determination that there was no exclusive relationship.

[00:11:33] Speaker 01:
Oman fasteners had customers in addition to US customer.

[00:11:39] Speaker 02:
Tiny volumes, right?

[00:11:41] Speaker 01:
Pardon me?

[00:11:41] Speaker 02:
Tiny volumes.

[00:11:44] Speaker 01:
Notwithstanding the fact that they were tiny volumes, comparatively speaking with US customer, they had other customers nonetheless.

[00:11:54] Speaker 01:
The contract.

[00:11:55] Speaker 05:
And the contract here didn't prohibit them from selling to other people.

[00:11:59] Speaker 01:
That's correct, Your Honor.

[00:12:00] Speaker 01:
Not only did it not prohibit them from selling to other people, but as the court pointed out earlier, it permitted Oman Fasteners to reject an offer to buy.

[00:12:12] Speaker 01:
The contract itself demonstrated that two parties came together and agreed upon terms that were mutually agreeable to them and mutually beneficial to them both.

[00:12:24] Speaker 01:
Further, the one provision that was discussed earlier, which is the subject of BPI, and so I will not speak to the specifics of it, does not detract from the other sections of the contract, which demonstrate arm's length transactions, that the prices are not fixed in favor of U.S.

[00:12:48] Speaker 01:
customer, and in fact, further evidence demonstrated that those prices were consistent

[00:12:53] Speaker 01:
with the prices that other customers paid for the goods.

[00:12:58] Speaker 02:
Can I ask you, I guess the question I asked Mr. Gordon, do you have a view about whether, here's one way to put it, whether the domestic industry is within the zone of interest protected by the affiliation standard when the affiliation is

[00:13:22] Speaker 02:
in the context on the domestic side, on the US side of the ocean.

[00:13:27] Speaker 02:
And it's about the customer controlling the supplier, presumptively to get better terms.

[00:13:34] Speaker 02:
And I would have thought, at least in general, lower prices, which seems an odd thing for a domestic industry to be complaining about in a proceeding in which lower prices on the constructed export side or the export side

[00:13:52] Speaker 02:
would lead only to higher dumping margins.

[00:13:56] Speaker 01:
I do not know the answer to your question, Your Honor.

[00:13:59] Speaker 01:
I wish that I did.

[00:14:00] Speaker 01:
It is not a part of the issues and decision memorandum, and I would not like to speculate as to that answer.

[00:14:08] Speaker 01:
For all of the reasons stated in our brief, as well as those that I've mentioned during this argument, we request that the court affirm the lower court's judgment and sustain commerce's determination regarding affiliation.

[00:14:24] Speaker 05:
Thank you, Your Honor.

[00:14:25] Speaker 05:
Okay.

[00:14:26] Speaker 05:
Thank you, Ms.

[00:14:27] Speaker 05:
Scott.

[00:14:27] Speaker 05:
Mr. House.

[00:14:34] Speaker 04:
May it please the court.

[00:14:35] Speaker 04:
My name is Michael House.

[00:14:37] Speaker 04:
I represent Oman Fasteners.

[00:14:39] Speaker 04:
I'm speaking now as a co-appellee in the case on the issue of affiliation.

[00:14:45] Speaker 04:
Just a couple of comments to Your Honor's question about the contract and the U.S.

[00:14:53] Speaker 04:
customers of Oman Fasteners.

[00:14:55] Speaker 04:
In our view, the appellate midcontinent is seizing on one specific clause in a very large contract that overwhelmingly

[00:15:04] Speaker 04:
is a market-oriented contract.

[00:15:06] Speaker 04:
There are many provisions in that supply agreement that focus on the market determining the prices that the two parties must come to agreement on.

[00:15:15] Speaker 04:
The record also has evidence of Oman Fasteners rejecting offers made by their US customer under this agreement.

[00:15:24] Speaker 04:
The record also has evidence of Oman Fasteners losing sales to this customer because the two parties could not come to agreement

[00:15:33] Speaker 04:
price so in our view this is a market oriented long-term supply agreement not unusual the department looked at that along with the the voluminous other record evidence of Oman fasteners commercial relationship with this customer and as well importantly the Commerce Department looked at Oman fasteners commercial relationship with all of its other admittedly smaller US customers the on-site verification as reflected in the record shows Commerce

[00:16:03] Speaker 04:
examined not only records relating to a monfascist business with this customer, but its business with its other 12 U.S.

[00:16:11] Speaker 04:
customers and how its pricing was determined across all of those customer relationships.

[00:16:19] Speaker 04:
Thank you.

[00:16:19] Speaker 04:
Is that it?

[00:16:20] Speaker 05:
Thank you.

[00:16:21] Speaker 05:
Thank all counsel.

[00:16:22] Speaker 05:
The first case is submitted.

[00:16:24] Speaker 05:
The second case this morning

[00:16:26] Speaker 05:
the cross-appeal in the same case it's number 18-1296 Mid-continent steel and wire versus United States and this time Mr. House goes first.

[00:16:37] Speaker 04:
Thank you your honor may I please the court again Michael House I represent Oman fasteners in this cross-appeal we asked court to

[00:16:49] Speaker 04:
require the Commerce Department to determine the profit of the constructed value of Oman fasteners in this case, the way that the US Congress plainly intended, which is a value based on evidence of the country under investigation, Oman, and importantly,

[00:17:08] Speaker 04:
the specific product under investigation, steel nails, the foreign like product.

[00:17:13] Speaker 04:
In this case, commerce did neither one of those things.

[00:17:16] Speaker 04:
Instead, it chose to rely on a financial statement of a producer in a third country that makes no steel nails.

[00:17:25] Speaker 02:
On that question, would your position require us to say that the statute prohibited commerce from saying

[00:17:35] Speaker 02:
when you submitted as the only real alternative a partially translated document that commerce acted contrary to law in saying, sorry, we don't do documents we can't understand.

[00:17:58] Speaker 04:
No, Your Honor, I don't think we're going that far in our position here.

[00:18:01] Speaker 04:
I think what's important here is the context of when that document, that partially translated statement, was submitted to the Commerce Department biomonfasciners in this case.

[00:18:10] Speaker 02:
But some reliance on Commerce having accepted it in the Chinese proceeding.

[00:18:14] Speaker 05:
Yes, Your Honor.

[00:18:15] Speaker 05:
Is your contention basically that Commerce was arbitrary and capricious in refusing to accept the fully translated document?

[00:18:25] Speaker 05:
once it was apparent that Congress wanted that in this proceeding?

[00:18:31] Speaker 04:
Yes, Your Honor.

[00:18:32] Speaker 04:
Particularly in this case.

[00:18:34] Speaker 05:
And there are cases that suggest that the refusal to reopen the record can be arbitrary and capricious action by an agency.

[00:18:41] Speaker 05:
The difficulty here, it seems to me, is that in the proceeding, you were not initially arguing that the LSI data

[00:18:53] Speaker 05:
should be used, you were only arguing that it corroborated your client's own data.

[00:18:59] Speaker 05:
Am I correct about that?

[00:19:01] Speaker 04:
Yes, Your Honor.

[00:19:01] Speaker 04:
In our initial submission of profit data on October 31st in this case,

[00:19:06] Speaker 04:
we included the partially translated LSI data financial statement as part of a larger record of profit determinations by the Commerce Department involving this product, Steel Nails, and it was our position.

[00:19:19] Speaker 05:
So given the limited purpose for which you were using the LSI data, maybe the refusal to reopen the record wasn't our

[00:19:28] Speaker 04:
Well, Your Honor, I would submit that these are two different questions.

[00:19:34] Speaker 04:
The partially translated LSI statement, in fact, was on the record in our case here.

[00:19:40] Speaker 04:
We submitted it.

[00:19:41] Speaker 04:
And our position is that once it's on the record, the Commerce has that information and should have relied upon it, given this is important to us, given

[00:19:51] Speaker 04:
its reliance on that same statement contemporaneously in another Steel Nails proceeding as the best evidence, and particularly in comparison to the high-tech statement that they rejected in those contemporaneous proceedings, but applied here, leading to the anomalous profit rate that they used.

[00:20:13] Speaker 03:
The requirement was that if you were going to rely on a document like that, you were required to submit

[00:20:20] Speaker 03:
A fully translated document, is that correct?

[00:20:24] Speaker 04:
Your Honor.

[00:20:24] Speaker 03:
Isn't that what the rules say?

[00:20:26] Speaker 04:
The Commerce Department regulation does have a requirement about submitting fully translated documents.

[00:20:34] Speaker 04:
And it is the government's defense in this case that Oman Fasteners failed to meet that requirement.

[00:20:44] Speaker 04:
Our position is that in the context of this case, we were submitting evidence that was already on the record at the Commerce Department in the concurrent

[00:20:55] Speaker 04:
China nails investigations the same product.

[00:20:58] Speaker 04:
So we were submitting evidence, actually, that the Commerce Department already had in its hands in those concurrent proceedings.

[00:21:05] Speaker 04:
We were placing it on the record in this investigation.

[00:21:08] Speaker 03:
So it goes back to the point that Judge Dyke was raising, that because you were just submitting that as sort of corroborate your other submissions, not as a separate matter of evidentiary consideration,

[00:21:24] Speaker 04:
Well, Your Honor, we think that it merits consideration as evidence.

[00:21:29] Speaker 04:
It was evidence that we submitted on the record, particularly when the Commerce Department had very imperfect options available to it in the home market and in third country markets.

[00:21:41] Speaker 03:
I hear you, but we've got a difficult standard of review to contend with.

[00:21:47] Speaker 04:
Yes, Your Honor, we understand the standard that the court must apply.

[00:21:51] Speaker 04:
In our view, the submission that our client made was consistent with what the Commerce Department was doing on this issue.

[00:22:04] Speaker 04:
That is to say, in October at the time in this case, the Commerce Department was using that statement as a propative and best evidence measure

[00:22:13] Speaker 05:
Profit and that's and that's the spirit in which we submitted it What we think we turn to the to the profit cap because the same issue it seems to me arises in connection with the profit cap Where you you did argue that they should use the LSI data as facts available Yes, your honor This is a complicated area my understanding is that the

[00:22:39] Speaker 05:
Court of International Trade and other decisions has said that the profit cap has to be computed solely on home market data and that it can't use other country data, which the LSI data is.

[00:22:53] Speaker 05:
And doesn't that sort of sink you on that point?

[00:22:57] Speaker 04:
Well, Your Honor, there's no question that the record in this case is imperfect when it comes to data with respect to profit, constructed value of profit.

[00:23:08] Speaker 04:
And so what we would submit is that the profit cap provision of the statute is intended to keep

[00:23:15] Speaker 04:
the decision on this factual question within the bounds of a non-aborational figure.

[00:23:20] Speaker 05:
Your contention is that commerce is compelled, if necessary, to look outside the home market data, right?

[00:23:27] Speaker 04:
Well, Your Honor, the profit cap section does have two aspects to it.

[00:23:32] Speaker 05:
But I'm trying to just understand your position is they should have used the LSI data in computing the profit cap, and the fact that the LSI data

[00:23:42] Speaker 05:
was from another country doesn't mean that it's irrelevant to the profit cap calculation, correct?

[00:23:48] Speaker 04:
Not only the LSI data, but yes, your honor.

[00:23:51] Speaker 04:
The LSI data plus the data should be overlooked.

[00:23:55] Speaker 04:
We submitted data of other third, admittedly third country producers of mails.

[00:23:59] Speaker 05:
So the question is, under the CIT cases, as I understand them, the other country data could not be used even under the facts available

[00:24:12] Speaker 05:
theory to calculate the profit cap.

[00:24:15] Speaker 05:
If my understanding of the other Court of International Trade cases is correct, you can only use home market data for calculating the profit cap.

[00:24:25] Speaker 05:
So under that line of cases,

[00:24:27] Speaker 05:
the LSI data would not have been relevant, right?

[00:24:31] Speaker 04:
Your Honor, I believe there are CIT cases to that effect.

[00:24:34] Speaker 04:
There are also CIT cases that considered Commerce using a broader, the Hugh Steel case in particular, the CIT looked at Commerce's use of a broader basket.

[00:24:45] Speaker 04:
of profit rates to apply a cap.

[00:24:48] Speaker 05:
A broader basket of profit rates from other countries?

[00:24:50] Speaker 04:
Correct, yes, including the home market and other countries in that case.

[00:24:54] Speaker 04:
That's what Commerce did there, and Commerce decided that's our best approach to applying a cap.

[00:25:01] Speaker 04:
That's the Hugh Steel case.

[00:25:04] Speaker 04:
But our focus, and we think the Court's focus, should be on the fact that the statute has a

[00:25:11] Speaker 04:
overriding preference for non-aborational profit rates and rates that do reflect the foreign-like products, steel nails.

[00:25:20] Speaker 04:
And what the Commerce Department did here accomplishes neither one of those things.

[00:25:24] Speaker 04:
And our overall position is that this record, with the partial LSI statement, as well as the other China profit rate calculations that this agency performed, along with the home market data that the Commerce Department also had in front of it,

[00:25:40] Speaker 04:
provide a wealth of benchmarks that this agency could have relied upon and should have relied upon to ensure that it did not impose an aberrational profit rate.

[00:25:55] Speaker 04:
And in our view, that's what the statute is all about, both the subsections of A and the three options under B for profit as well as the cap provision.

[00:26:05] Speaker 04:
We also don't want to overlook the fact that the Commerce Department refused what we consider to be the very best evidence of home market profit, which are the sales by Oman fasteners in Oman, the country under investigation, of steel nails.

[00:26:22] Speaker 05:
Well, I think you may be right that the 5% provision doesn't apply here to the extent that Commerce is using that to justify the decision.

[00:26:30] Speaker 05:
I'm a little skeptical about that, but there has to be some

[00:26:34] Speaker 05:
pointed which commerce could say there's not just not enough data here for us to to calculate this reliably and that's the situation here that's what they said right well your honor I mean is your position that no matter how little data there is that that commerce has to use that we think what's important your honor

[00:26:55] Speaker 04:
is the quality of the data and that's what the statute is getting after here.

[00:27:01] Speaker 04:
That is to say if the home market data are small but represent above cost sales, represent sales that are not made to affiliates and otherwise are not deficient in quality,

[00:27:13] Speaker 04:
the quantity, the quantitative volume of those sales can be quite small.

[00:27:19] Speaker 04:
I don't know for a prepared degree if there was a single sale that could be used if it were qualitatively okay in those respects.

[00:27:29] Speaker 02:
But here we had more than... I'm not sure about what the...

[00:27:33] Speaker 02:
with the basis for the quality-quantity distinction.

[00:27:36] Speaker 02:
Isn't the idea here that if the sales are even just too few in number in Oman, that Oman fasteners could be perfectly happy living with a unduly small profit because it's going to make up for it everywhere else it does business.

[00:27:56] Speaker 02:
So isn't there just a judgment call about for commerce to make?

[00:28:02] Speaker 02:
5%, or I mean, maybe 5% is arbitrary, but that's the concern, isn't it?

[00:28:10] Speaker 04:
Your Honor, I'm not sure we agree with that characterization of the profit.

[00:28:15] Speaker 04:
section of the statute.

[00:28:17] Speaker 04:
Certainly there is a quantitative threshold in the price-to-price section of the statute.

[00:28:22] Speaker 05:
That is the threshold question about will the department, should the department... I think you're probably right about the five percent not carrying over to this section, but put that aside.

[00:28:31] Speaker 05:
I mean what Judge Toronto is asking you is isn't there some relevance to the small quantity of data that's available and isn't it within commerce's discretion to say there's just too little data here?

[00:28:43] Speaker 04:
However, Your Honor, the Commerce Department didn't do that in this case.

[00:28:47] Speaker 04:
They did not engage in any analysis of whether this number of sales were too small.

[00:28:53] Speaker 04:
They didn't engage in any analysis of the qualitative circumstances of these sales.

[00:29:00] Speaker 04:
They applied a bright line rule in their decision.

[00:29:03] Speaker 04:
Our reading of their determination is that they said, this falls under 5%.

[00:29:09] Speaker 05:
I don't see that in the decision.

[00:29:13] Speaker 05:
I don't see that they mentioned the 5% at all in the Commerce decision.

[00:29:17] Speaker 05:
They do in the brief here.

[00:29:18] Speaker 05:
They did in justifying it in the Court of International Trade, but I don't see in the Commerce decision itself that they relied on the 5% criteria.

[00:29:26] Speaker 04:
Your Honor, where we find that is the Commerce used the word viable in its underlying administrative decision.

[00:29:32] Speaker 04:
Do you think that that necessarily means 5%?

[00:29:35] Speaker 04:
Yes, your honor, because the Commerce Department as a term of art administratively uses the term viable to refer to cases where the 5% test is not met under that section of the statute.

[00:29:50] Speaker 04:
So there are countless cases under which Commerce measures the home market against the 5% threshold.

[00:29:57] Speaker 04:
If it falls below that, they use the term non-viable to refer to that failure,

[00:30:04] Speaker 04:
Calculation below five percent so in our view when they said a non-viable home market They were specifically referring to the calculation under that five percent threshold in that first part the price-to-price part of the statue Okay, unless there are other questions.

[00:30:22] Speaker 05:
I think I will give you two minutes for model Let's cut it again

[00:30:38] Speaker 05:
Could you maybe start with that last point?

[00:30:42] Speaker 05:
Do you read commerce's decision here as applying a 5% criterion?

[00:30:48] Speaker 01:
Yes.

[00:30:49] Speaker 05:
You do?

[00:30:50] Speaker 05:
Really?

[00:30:52] Speaker 01:
It's less than 5%.

[00:30:54] Speaker 02:
It was... Without further inquiry?

[00:30:59] Speaker 01:
In this situation, it was not... I can't speak to any situation other than the determination that was made here, Your Honor.

[00:31:09] Speaker 01:
In this circumstance, the amount of sales were less than 5% for purposes of calculating normal value.

[00:31:19] Speaker 01:
They were negligible for purposes of calculating constructive value.

[00:31:29] Speaker 05:
But just to be clear, are you saying, if we say that there's no 5% bright line rule that's appropriate in this area,

[00:31:38] Speaker 05:
Does that mean that we have to set aside commerce's determination because it rests on that?

[00:31:46] Speaker 01:
Commerce's determination rests upon the facts of this case, which are that the sales in Oman by Oman fasteners were negligible.

[00:32:02] Speaker 01:
They're not

[00:32:03] Speaker 02:
And by negligible, you mean not even in the neighborhood of 5%.

[00:32:07] Speaker 01:
Not even in the neighborhood of 5%.

[00:32:10] Speaker 03:
So you're saying that commerce made its determination not by applying a strict 5% threshold, but by looking at the facts and reaching a determination that there was not enough data there to make a reasonable determination.

[00:32:26] Speaker 01:
That is 100% correct.

[00:32:28] Speaker 01:
So when you're starting with the 5% for purposes of normal value,

[00:32:33] Speaker 01:
They didn't have 5% for calculating normal values.

[00:32:38] Speaker 05:
But you keep coming back to the 5%.

[00:32:39] Speaker 05:
I think what we're trying to ask you.

[00:32:40] Speaker 01:
Which takes us to an alternate means of constructing value here.

[00:32:46] Speaker 01:
And that's why I said that.

[00:32:47] Speaker 05:
Let me be candid with you.

[00:32:48] Speaker 05:
I think that applying the 5% thing here is very questionable.

[00:32:54] Speaker 05:
So what I'm trying to get at

[00:32:56] Speaker 05:
is whether Congress's decision rests on applying a 5% bright line rule or whether, as I thought you just said, it rests on a more holistic determination that the data here weren't sufficient.

[00:33:10] Speaker 01:
Within the context of the determination made here, it was made based upon a holistic review of all of the data presented in this case.

[00:33:20] Speaker 01:
I cannot speak to a bright line rule, Your Honor.

[00:33:24] Speaker 01:
I can only speak within the context of the determination that was made here.

[00:33:30] Speaker 01:
And Commerce certainly did not state that it was making a bright line rule within the context of this case.

[00:33:38] Speaker 01:
So I would be uncomfortable making a hard and fast statement on behalf of the agency

[00:33:46] Speaker 01:
that the agency itself did not make in its determination here.

[00:33:50] Speaker 02:
What the agency did determine... Can I ask you a question on a different topic, which we haven't discussed this morning, but I came into the argument, I guess, having some concerns.

[00:33:58] Speaker 02:
And that's the question of commerce as having decided that it would not, in this anti-tumping proceeding, consider whether the

[00:34:10] Speaker 02:
was that high-techs profits were affected by subsidies.

[00:34:15] Speaker 02:
And as far as I can tell, neither in the Commerce decision at 4865 nor in your brief, which probably wouldn't substitute for it anyway, does Commerce actually give a reason for why that is reasonable.

[00:34:31] Speaker 02:
All it does is say, we don't do that in anti-dumping cases.

[00:34:36] Speaker 02:
And we've certainly said that the fact that

[00:34:39] Speaker 02:
an agency statement of what it normally does or has done before is not the same thing, an explanation of why it's reasonable.

[00:34:47] Speaker 02:
And I don't see an explanation of why it's reasonable.

[00:34:58] Speaker 01:
I thought we did address that in our brief, but this is a market economy case.

[00:35:03] Speaker 02:
The statute refers to... If you're trying to determine whether high-techs profits, what they are, as a tool for saying, here's what the profits of Oman should be, how do you not take into account whether high-techs country has given it wheelbarrows full of money

[00:35:28] Speaker 02:
that go into its profit making them much too high.

[00:35:37] Speaker 01:
I believe that, and I don't have the record citation available to me your honor right now, but I believe that commerce did state in the issues and decision memorandum that it took into account the subsidies that high tech received.

[00:35:56] Speaker 02:
I don't recall.

[00:35:57] Speaker 01:
I don't recall that.

[00:35:59] Speaker 02:
So this is a 4865.

[00:36:01] Speaker 02:
Your brief actually states a page that's not in the joint appendix of 3232 or something.

[00:36:06] Speaker 02:
Oh, I'm sorry.

[00:36:07] Speaker 02:
No, it's OK.

[00:36:08] Speaker 02:
But it's at 4865 of the appendix.

[00:36:10] Speaker 02:
It's really only, what, two paragraphs or something.

[00:36:13] Speaker 02:
And as far as I can tell, I guess I'd like to be shown why this is wrong, that the only thing that Commerce said is our practice is not to consider this.

[00:36:29] Speaker 01:
Within the context of a case that involves a market economy, which is the case here, the subsidies do not have the same bearing that they would have within the context of a non-market economy case.

[00:36:46] Speaker 05:
So... Well, I think you're right in the sense that the statute

[00:36:51] Speaker 05:
statutory prohibition doesn't apply in these circumstances, but I think the question is, even apart from the statutory provision, isn't it perfectly evident that subsidies should be taken into account anyway?

[00:37:16] Speaker 01:
I don't know the answer to your question, Your Honor.

[00:37:20] Speaker 01:
I believe that within the context of the statute in a market economy, subsidies do not have the same red flag effect that they do in a non-market economy situation.

[00:37:36] Speaker 01:
Anything else that I say on this matter would be speculation on my part because it is not in the issues and decision memorandum.

[00:37:44] Speaker 01:
However, I'd go further and state here that,

[00:37:48] Speaker 01:
Based upon the record that was before commerce, that was the only reasonable evidence upon which to make a determination regarding constructive value and a constructive value cap.

[00:38:01] Speaker 01:
I see that my time is up, and for all these reasons, Your Honor, and the reasons stated in our brief.

[00:38:06] Speaker 05:
Your time's up.

[00:38:19] Speaker 05:
And let's throw other questions about that.

[00:38:21] Speaker 05:
Let me ask you about the profit cap, because I'm not clear about what commerce's position is here as to whether it's appropriate under the facts available standard, which you seem to agree is appropriate, whether you can look to data outside the home market.

[00:38:41] Speaker 01:
Commerce's determination is made based upon the record that is before it.

[00:38:46] Speaker 01:
And here, the record that was before it did not provide it home market data from which it could make a determination regarding profit cap.

[00:38:54] Speaker 01:
The home market information that was provided by Oman Fasteners involved a steel and hollow company and a construction company.

[00:39:08] Speaker 05:
OK, but I'm not really asking about that.

[00:39:10] Speaker 05:
They're arguing that the LSI data, and here, unlike their arguments made in connection with the preliminary determination, they did argue directly not to use the LSI data as corroboration, but to use it directly to create a profit gap.

[00:39:26] Speaker 05:
And of course, the LSI data is from another country.

[00:39:30] Speaker 05:
And the question is, does commerce agree

[00:39:33] Speaker 05:
that it's appropriate under the facts available standard to look to data from another country and calculate the profit cap.

[00:39:40] Speaker 05:
Yes, and it did so here.

[00:39:42] Speaker 05:
You do think it's appropriate.

[00:39:43] Speaker 01:
It calculated the profit cap based upon high tax information.

[00:39:47] Speaker 01:
High tech is from another country.

[00:39:50] Speaker 05:
So these commercial trade cases that say that's not appropriate, Commerce disagrees with those.

[00:39:58] Speaker 01:
Each Commerce case stands upon its own record.

[00:40:03] Speaker 01:
I cannot speak to the Court of International Trade cases to which the Court is referring, because those cases rested upon the evidence or the administrative record put before them by the parties to those cases.

[00:40:23] Speaker 05:
With respect to... So if that's the case, then, as Judge Toronto points out, your high-tech data is questionable because of the subsidies.

[00:40:32] Speaker 05:
Why wasn't it then an abuse of discretion not to consider the LSI data, fully translated data in that connection, given the unsatisfactory nature of the other data?

[00:40:47] Speaker 01:
For all the reasons why commerce made a determination not to use the LSI data, whether it was submitted in the form of partially translated financial statements,

[00:41:00] Speaker 01:
or whether it was fully submitted translations.

[00:41:09] Speaker 01:
Oman fasteners submitted partially translated documents where substantial portions of it.

[00:41:18] Speaker 01:
Audit reports, statements, and footnotes were missing.

[00:41:24] Speaker 01:
Translations.

[00:41:25] Speaker 05:
It is tantamount to being missing.

[00:41:27] Speaker 05:
I think Commerce's position.

[00:41:28] Speaker 05:
about not relying on the not fully translated data is perfectly reasonable.

[00:41:33] Speaker 05:
That's not my question.

[00:41:34] Speaker 05:
I know.

[00:41:34] Speaker 05:
You were offered the full translation.

[00:41:37] Speaker 05:
It had been submitted in the China Nails docket.

[00:41:41] Speaker 05:
And given the fact that on the remand from the CIT, this profit cap issue was on the table again, why shouldn't, under those circumstances, Commerce have agreed to consider the late-filed, fully translated data?

[00:41:59] Speaker 01:
It is not an abuse of discretion.

[00:42:01] Speaker 01:
And the reason why I mention, I just want to point out, the LSI transcripts in connection with constructed value is because the constructed value profit cap follows that.

[00:42:17] Speaker 01:
So all of the reasons why commerce made a determination not to use the LSI statement for constructed value are the very same reasons

[00:42:28] Speaker 01:
that it did not use the LSI statements for purposes of a profit cap.

[00:42:35] Speaker 01:
Commerce has a right, and this court should find it does, to have deadlines and require parties to abide by them.

[00:42:48] Speaker 01:
Commerce has regulations that

[00:42:53] Speaker 01:
Had they been employed here, we might not be talking about this.

[00:42:58] Speaker 01:
However, the circumstances presented here are that a party did not argue for something in a timely manner, did not address the LSI statements until

[00:43:16] Speaker 01:
after the record had closed, in fact, did not attempt to provide a full transcript, fully translated transcript that it apparently had access to because it was on the record in other proceedings until three months after the deadline here.

[00:43:39] Speaker 01:
Commerce's discretion, and to add to that, Oman Fasteners had actually asked Commerce not to allow someone else mid-continent to file something in an untimely manner.

[00:43:55] Speaker 05:
All right.

[00:43:55] Speaker 05:
I think we're about out of time.

[00:43:57] Speaker 01:
Thank you.

[00:43:57] Speaker 05:
Thank you very much.

[00:43:58] Speaker 05:
Mr. Harris?

[00:44:10] Speaker 00:
Mr.. Gordon mr.. Gordon have you backwards okay, sorry?

[00:44:15] Speaker 00:
Your honor, thank you I would just like to offer a couple of points to follow up on what miss Cote had said with respect to the

[00:44:23] Speaker 00:
LSI financial statement.

[00:44:25] Speaker 00:
It's a very straightforward matter as she just described Oman fasteners chose to employ a certain litigation strategy through the preliminary phase of the underlying investigation whereby they argued only That commerce should rely on either their home market prop profit or profit rates from other Omani producers of completely different products such as corrugated boxes pipes and tubes or a construction company they submitted a

[00:44:51] Speaker 00:
the LSI financial statement in a barely translated form, as your honors have said, expressly, and they declared this.

[00:45:00] Speaker 00:
for purposes of benchmarking or corroborating what they argued would be a reasonable profit rate.

[00:45:06] Speaker 00:
It was only when they realized that their litigation strategy had failed in the preliminary determination that they then attempted to allege a ministerial error that commerce hadn't examined the LSI statement, notwithstanding the fact that they had never argued that it should be used before the preliminary.

[00:45:24] Speaker 00:
They did argue that in connection to the profit cap, right?

[00:45:27] Speaker 00:
Only after the fact, not in the preliminary determination.

[00:45:31] Speaker 00:
Until that point, they had never argued that it should be used in any way except as a benchmark.

[00:45:36] Speaker 00:
They had access to the fully translated statement from a different proceeding.

[00:45:39] Speaker 00:
They chose not to put it on the record, but I would argue they didn't feel they needed to because they weren't putting it on the record for a substantive purpose.

[00:45:47] Speaker 00:
Every record of every proceeding stands on its own.

[00:45:51] Speaker 00:
And they chose what to put on the record here and only later tried to invent an issue to attempt to force commerce to accept the document on the record, a fully translated version, or to reopen the record.

[00:46:02] Speaker 00:
As Ms.

[00:46:03] Speaker 00:
Cote mentioned,

[00:46:05] Speaker 00:
met uh... a lot of passengers uh... strenuously argued against our ability to similarly submit a financial state trip full translation of a financial statement for a company called sumiko uh... after the deadline passed and they want commerce rejected our request as well commerce rejected both parties request to untimely present new factual information that is within commerce is purview as a matter of responsibly managing a stock you have a

[00:46:31] Speaker 00:
It was a hotly contested active investigation and litigation.

[00:46:35] Speaker 00:
Commerce needs to draw lines about what to take and what not to.

[00:46:37] Speaker 00:
In the case of a company who puts information on the record for a totally unrelated purpose and only after it realizes its litigation error, its failure in tactics, that it tries to get the Commerce Department to accept it for a different purpose, I think there's a sound basis for Commerce to exercise its discretion to reject this information.

[00:46:56] Speaker 02:
Do you have anything to add on the subsidy question?

[00:47:01] Speaker 00:
Yes, Your Honor.

[00:47:03] Speaker 00:
Commerce has a very reasonable practice of not looking beyond the financials, beyond the numbers of a financial statement.

[00:47:10] Speaker 00:
The department doesn't want to put itself in the position of having to deconstruct financial statements and look behind or try to look behind the numbers.

[00:47:18] Speaker 00:
The statutory prohibition on avoiding subsidized financial statements from subsidized companies is specific to non-market economy cases.

[00:47:28] Speaker 00:
In a market economy case,

[00:47:30] Speaker 00:
especially on a record like the one below where e-commerce is faced with a set of imperfect choices, it was reasonable to accept the financial statement as presented.

[00:47:41] Speaker 05:
So you seem to be saying they have a policy of refusing to consider subsidies in market economy cases.

[00:47:49] Speaker 00:
That is their practice.

[00:47:51] Speaker 00:
But what I was actually saying is they have a practice also of not trying to deconstruct financial statements and fix problems or adjust the financial statement numbers.

[00:48:03] Speaker 00:
And everything is, hindsight's 20-20.

[00:48:05] Speaker 00:
The record in this investigation contained a series of difficult choices and a very badly developed record from the point of view of Oman Fasteners with respect to CV profit sources.

[00:48:19] Speaker 00:
The fact that the best choice on the record was high tech is not the Commerce Department's fault.

[00:48:26] Speaker 00:
We put high tech on the record as the best source we could.

[00:48:29] Speaker 00:
Amman Fasteners failed to present information that it had access to.

[00:48:33] Speaker 00:
So that is not our basis for criticizing the Commerce Department when it manages its administrative process.

[00:48:40] Speaker 05:
The high tech profit rate is pretty high.

[00:48:43] Speaker 05:
compared to what you might expect for this kind of commodity product, right?

[00:48:50] Speaker 00:
It is higher than some of the other sources on the record.

[00:48:53] Speaker 00:
However, there have been many cases where commerce has, and the Court of International Trade has affirmed it, merely because a profit rate is high doesn't mean that it's aberrational.

[00:49:04] Speaker 00:
All right.

[00:49:06] Speaker 00:
Thank you, Mr. Gordon.

[00:49:06] Speaker 05:
Mr. Haas?

[00:49:12] Speaker 04:
Thank you, Your Honors.

[00:49:15] Speaker 04:
A couple of quick points in rebuttal.

[00:49:18] Speaker 04:
First of all, we can't find, on the question of Commerce saying that it concluded Oman Fasteners sales were negligible, we can't find that word in the record.

[00:49:28] Speaker 02:
Don't they give a number?

[00:49:29] Speaker 02:
I don't think we're allowed to say the number, but don't they actually give a number in the record?

[00:49:34] Speaker 02:
I have a very small number.

[00:49:36] Speaker 04:
Correct, Your Honor.

[00:49:37] Speaker 04:
They do refer to the actual figure.

[00:49:39] Speaker 04:
But to us, it's clear that the decision-making rested entirely on their conclusion under the previous statutory section of what we call viability, what the department calls viability, that is to say the 5% test.

[00:49:56] Speaker 04:
Because in their final decision memo, they said because Oman Fasteners did not have a viable home market, and that reference in our view is a reference to the

[00:50:07] Speaker 04:
the first statutory provision, the 5% test, because Oman Fasteners did not have a viable home market, that we consider the home market sales to be too insignificant.

[00:50:18] Speaker 04:
Those are the words they use, too insignificant to reflect a meaningful home market.

[00:50:22] Speaker 03:
It reached that conclusion after looking at the data and concluding that there just wasn't enough data.

[00:50:30] Speaker 03:
A contrary conclusion wasn't it seems to me that a fair way to read that is not to say that they Simply apply to five percent threshold, but they looked at the record holistically which they should and

[00:50:46] Speaker 04:
I agree, Your Honor.

[00:50:47] Speaker 04:
They should look at the record holistically.

[00:50:49] Speaker 04:
Our reading of this record is that on this question, they looked only at the outcome of the 5% test under the first part of the statute and decided that since Oman Fasteners fell below the 5% threshold under that portion of the statute, that meant that the sales were too insignificant, in their words, to be used in the CV profit part of the statute.

[00:51:13] Speaker 04:
And so we read that to mean a very mechanical, bright line per se application of the facts, of the numbers here in this case.

[00:51:23] Speaker 02:
Can I ask you just one more question on this subsidy point?

[00:51:27] Speaker 02:
If we were to remand and say, look, you actually haven't, you commerce, haven't given an explanation for your exercising a judgment about what's reasonable and not reasonable in declining to inquire into

[00:51:43] Speaker 02:
Whether there are subsidies that affect the profit margin in the third third party document there would that be Futile because we know what commerce will say not just what they do because they may be very consistently doing something unreasonable so that's just not enough but but don't we know that they will say something like what mr. Gordon says which is

[00:52:11] Speaker 02:
Not only do we not look behind these annual statements and audit reports and whatnot, but there's a good reason we don't, which is that if we did, we wouldn't have the same discovery tools.

[00:52:27] Speaker 02:
It would just be too difficult to make a reliable determination.

[00:52:32] Speaker 02:
In which case, what would be the point of saying, go back and say that?

[00:52:37] Speaker 04:
Your Honor, we do not think it would be futile to ask the Commerce Department to do that, particularly on the record of this case, where the high-tech financial statement, as compared to the other evidence on the record, is so aberrational.

[00:52:52] Speaker 05:
And I would dispute... Are you arguing that the high-tech data should be adjusted by Commerce to take account of the subsidies, or that it should be discarded entirely because of the subsidies?

[00:53:05] Speaker 04:
Your Honor, in this case, we would argue it should be discarded entirely because there is better evidence on the record, which Commerce indeed itself found in comparing these two statements in the China Nails case.

[00:53:18] Speaker 04:
So in this case, we would argue that it should be discarded entirely.

[00:53:21] Speaker 04:
But I also take issue with the Commerce Department's and McConaughey's characterization of the Department never going behind statements.

[00:53:29] Speaker 04:
In fact, the reason why the Commerce Department has insisted so strenuously that it needs full translations of these statements is just so.

[00:53:38] Speaker 04:
that it can examine the statements and decide whether they're probative or whether there's something about that company and its financials that prevent or distort the data that they're looking at.

[00:53:51] Speaker 04:
So that's the whole premise.

[00:53:53] Speaker 04:
The department says that it needs full translations.

[00:53:57] Speaker 04:
So looking at subsidies, it should be part of that inquiry, we believe.

[00:54:02] Speaker 04:
And we also want to to finally note that with regard to make comments point about our objection to a late submission of a full translation on their part when we asked the Commerce Department to please reopen the record.

[00:54:18] Speaker 04:
to permit the full translation of LSI to be put on the record, we specifically said we would agree and we also urged them to open the record to have any other parties have the opportunity to submit full translations of what they felt was probative.

[00:54:34] Speaker 04:
So it was our position that Congress should have taken an even-handed approach at that point in the investigation and permitted the parties to supplement the record in that fashion.

[00:54:45] Speaker 05:
Okay.

[00:54:46] Speaker 04:
Thank you very much.

[00:54:47] Speaker 05:
Thank you, Mr. House.

[00:54:47] Speaker 05:
Thank all counsel.