[00:00:00] Speaker 04:
Case is number 19, 2395, Dillinger-France, S.A., against the United States.

[00:00:07] Speaker 04:
Mr. Mudelbaugh.

[00:00:09] Speaker 00:
Yes, Your Honor, thank you very much.

[00:00:12] Speaker 00:
Our client, Dillinger France, is a custom producer of steel plate in France.

[00:00:19] Speaker 00:
They were involved in the anti-dumping duty investigation of cut-to-length plates from France.

[00:00:25] Speaker 00:
And we're challenging three aspects of the Department of Commerce's determination.

[00:00:31] Speaker 00:
Our first challenge is with the method that the department used to calculate the anti-dumping duty.

[00:00:37] Speaker 00:
had the department used their normal method for calculating anti-dumping duties, Dillinger would have received a rate of 0%, so no dumping.

[00:00:49] Speaker 00:
Instead, the department used an exceptional method, the average of transaction with zeroing, to calculate Dillinger's anti-dumping duty, and that resulted in a rate of 6%.

[00:01:03] Speaker 01:
This is Judge Dyke.

[00:01:07] Speaker 01:
I'm a little confused by this argument, because as I read the regulation 351.414, that where you have custom materials, the determination is based on transaction to transaction comparison.

[00:01:26] Speaker 01:
Apart from the issue of the pattern, I think you've

[00:01:37] Speaker 01:
an average to average comparison.

[00:01:41] Speaker 01:
And so I don't understand how that's consistent with the idea that these are custom products.

[00:01:50] Speaker 01:
Shouldn't you be arguing that the correct comparison is transaction to transaction?

[00:01:56] Speaker 00:
Your Honor, the transaction to transaction method is rarely used by the department and it requires a whole other application to get... I don't think you're answering my question.

[00:02:13] Speaker 01:
Under the regulation, 351.414, it seems to say that if it's a custom product to use transaction to transaction and yet you're not arguing for that.

[00:02:24] Speaker 00:
Correct, Your Honor.

[00:02:25] Speaker 00:
Although the regulation, as I understand it, the default is always the average to average, and then you have to convince the department to go to one of the other methods.

[00:02:38] Speaker 00:
And here the department is using the exceptional method of the average to transaction.

[00:02:45] Speaker 00:
Under the average to average, we don't believe there is dumping and there was indeed no dumping.

[00:02:53] Speaker 00:
And so the issue here is whether the department can default from their normal average to average and use an exceptional method with the transaction.

[00:03:05] Speaker 01:
What the regulation says is the secretary will use the transaction and transaction method only in unusual situations such as when

[00:03:15] Speaker 01:
the sales, the product is, quote, custom-made.

[00:03:23] Speaker 01:
If you're right that this is a custom-made product, why isn't the transaction transaction method correct?

[00:03:34] Speaker 01:
Which you never argued for.

[00:03:36] Speaker 00:
Right.

[00:03:38] Speaker 00:
First of all, that would have required us to argue before commerce the separate method and to show that this is exceptional and then argue about what custom is.

[00:03:49] Speaker 00:
What we mean by custom is it's made to order.

[00:03:53] Speaker 00:
Dillinger does not make

[00:03:54] Speaker 00:
a lot of plate in one grade and warehouse it for customers to purchase.

[00:03:59] Speaker 00:
Instead, they only melt the steel and roll the plate according to a specific customer order for what the customer needs on a specific project, whether they're building a bridge or building a skyscraper or building an offshore platform.

[00:04:14] Speaker 00:
So that's what we mean by customized.

[00:04:18] Speaker 00:
The other problem is in these cases, they come by surprise.

[00:04:22] Speaker 00:
Nobody knows that an anti-dumping case is going to be filed.

[00:04:26] Speaker 00:
Within a few weeks after the investigation is initiated, you've already received a questionnaire response, and the questionnaire response is already geared, or a questionnaire, and that's already geared towards presenting your data

[00:04:41] Speaker 00:
in the average-to-average basis.

[00:04:44] Speaker 00:
So it's very hard to try to jump out of that methodology on a short timeframe.

[00:04:53] Speaker 00:
But be that as it may, we're arguing that they should have used the average-to-average and that the average-to-transaction exception is not applicable in this case.

[00:05:07] Speaker 00:
The department did not themselves say that the transaction to transaction should have been used.

[00:05:14] Speaker 00:
In fact, when you look at the exception with the average of transaction, the wording of that exception says they also have to show why the comparisons could not be done under the average to average or the transaction to transaction.

[00:05:31] Speaker 00:
And they said they didn't have to state that on the transaction to transaction.

[00:05:35] Speaker 00:
And that's not part of our case.

[00:05:38] Speaker 00:
We didn't appeal that part of their decision.

[00:05:40] Speaker 00:
So the issue here is, should the exception have been triggered?

[00:05:45] Speaker 00:
And in order to trigger the exception, the statute is very clear.

[00:05:50] Speaker 00:
It's known as the targeted dumping provision, and it says that you have to show that there's a pattern of export prices.

[00:05:56] Speaker 00:
for comparable merchandise that differs significantly among purchasers, regions, or periods of time.

[00:06:05] Speaker 00:
And what the department did, or what we argued below, is they're not looking for any pattern, that this provision specifically uses the word pattern of export prices that significantly differ.

[00:06:18] Speaker 00:
and they only look at significant differences.

[00:06:21] Speaker 00:
And in their determination, they basically confirmed that.

[00:06:25] Speaker 00:
In their determination in black and white, they said the pattern requirement necessitates only that there exist significant differences in prices.

[00:06:34] Speaker 00:
So here they're saying that they're basically reading the word pattern of export prices out of the statute.

[00:06:42] Speaker 00:
And that's precisely our problem.

[00:06:44] Speaker 00:
It's very precise issue of statutory construction.

[00:06:48] Speaker 00:
The department has a lot of discretion to interpret the statute, but they cannot

[00:06:53] Speaker 00:
interpret the statute in a way that renders specific words meaningless, and that each word in the statute should be given its normal, plain meaning.

[00:07:05] Speaker 00:
And the plain meaning of pattern, and this is in all the dictionary citations, both in our brief and the government's brief, they all come to the conclusion that pattern means a discernible sequence or arrangement.

[00:07:20] Speaker 00:
It's not enough to just show that there's price differences.

[00:07:23] Speaker 00:
You have to show that it falls into some sort of discernible sequence or arrangement.

[00:07:31] Speaker 00:
We have read all the jurisprudence

[00:07:35] Speaker 00:
of this court, the CIT, this issue has not been raised before and in the briefing that has not been disputed, that this specific issue of statutory construction has not been before the court before.

[00:07:49] Speaker 00:
And the government seems to say that it's a question of

[00:07:54] Speaker 00:
they don't have to show intent.

[00:07:56] Speaker 00:
And we're not saying that they have to show intent to mass dumping.

[00:08:03] Speaker 00:
They just have to show that there's a pattern from the evidence.

[00:08:07] Speaker 00:
So that's clear from the statute.

[00:08:09] Speaker 00:
And that would be our position that just on basic terms of statutory construction, the department did not properly apply the exception.

[00:08:22] Speaker 00:
The next point on this exception is the legislative history and the statement of administrative action also says,

[00:08:30] Speaker 00:
that commerce will proceed on a case by case basis looking at whether there's a pattern of significant price differences.

[00:08:37] Speaker 00:
And it specifically says because small differences may be significant for one industry or one type of product but not for another.

[00:08:46] Speaker 00:
And we argued that because each of our plates are made to order, of course there's going to be price differences between different orders, between different time periods that

[00:08:58] Speaker 00:
They have to take that type of product and that type of industry into consideration, and they didn't.

[00:09:04] Speaker 00:
They've always applied the same, it's called the differential pricing methodology, and they've always applied the same thresholds in every single case.

[00:09:13] Speaker 00:
And this methodology was first developed in a case about nails.

[00:09:18] Speaker 00:
And while the thresholds might make sense for a commodity product like nails, they don't make sense in a case for a custom-made plate that can be made for pipelines and various other things.

[00:09:30] Speaker 00:
So the department did not follow the legislative history.

[00:09:36] Speaker 00:
applying this exception.

[00:09:40] Speaker 00:
The next point has to do with the cost of production that we reported for non-prime plate and non-prime plate is plate that doesn't meet the customer specifications.

[00:09:52] Speaker 00:
This case is direct or Ipsco that decided previously by the court is directly on point here.

[00:09:59] Speaker 00:
And what Ipsco said is where you have two products that are being made by the same process that have the same inputs and you don't know until the end of the production process which is going to be prime and which is going to be non-prime.

[00:10:15] Speaker 00:
the actual cost of production of both of those plates are the same, and you need to report the actual cost of production.

[00:10:25] Speaker 00:
It's also in the statute 1677 B3 specifically says that the cost of production is an amount equal to the cost of material, to fabrication, to other processing, and that's exactly what Dillinger reported for the non-prime plate.

[00:10:41] Speaker 00:
But commerce required Dillinger to, instead of reporting the cost of the plate, they required them to report the sales value of the plate as a surrogate for the cost.

[00:10:55] Speaker 00:
And that is directly against the court's decision in Ipsco.

[00:11:00] Speaker 00:
I hear from the town that I'm getting into my rebuttal time.

[00:11:05] Speaker 00:
Unless there are any questions, I'll stop here and reserve the rest of the time for rebuttal.

[00:11:09] Speaker 04:
Okay, is there any other major point you want to make in your argument in chief?

[00:11:15] Speaker 00:
The last point has to do with the level of trade.

[00:11:19] Speaker 00:
And the last point on the level of trade is that the statute says that commerce has to compare the prices in the foreign market and the home market based on the same level of trade.

[00:11:31] Speaker 00:
This court in Micron and in the department's regulation all agree that level of trade means a stage of marketing and that the stages of marketing are clear.

[00:11:41] Speaker 00:
You start with the producer, so sales directly from the producer.

[00:11:45] Speaker 00:
The next stage of marketing is distributors or resellers.

[00:11:52] Speaker 00:
Dillinger showed that they had two levels of trade.

[00:11:55] Speaker 00:
One was direct sales from their factory and the next one was sales that they made to a related service center that inventoried the plate and then cut it into smaller pieces and then sold that.

[00:12:09] Speaker 00:
And there's no

[00:12:12] Speaker 00:
no evidence how that is not a distributor or a reseller, that this separate company has their own sales force, has their own logistics, has their own production and cutting, and this is indeed meets all the marks of a separate level of trade, and the department erred in treating it as the same level of trade as direct sales from the factory.

[00:12:41] Speaker 04:
Okay, thank you.

[00:12:42] Speaker 04:
Any questions at this point for Mr. Murdovite?

[00:12:48] Speaker 04:
All right, then we'll hear from the other side.

[00:12:52] Speaker 04:
Counsel for the United States is Gracia.

[00:12:56] Speaker 02:
Thank you, Your Honor.

[00:12:58] Speaker 02:
I'll discuss first the differing price methodology.

[00:13:01] Speaker 02:
The methodology that the Department of Commerce has developed here is a reasonable exercise of the discretion that has been granted to it under the statute.

[00:13:09] Speaker 02:
This court has reviewed, as Mr. Montlebine indicated, almost every other element of the differing pricing methodology or DPM that Commerce has employed.

[00:13:19] Speaker 02:
And this is a narrow carve-out that they have identified that has not been specifically approved by this court.

[00:13:24] Speaker 01:
However, the... Wouldn't Commerce, if this were custom-made products, wouldn't Commerce apply the transaction to transaction method under the regulation that I cited earlier?

[00:13:37] Speaker 02:
pursues the regulation, that could be correct, Your Honor.

[00:13:39] Speaker 02:
And I think that that gets to one of the points we made in our brief, that these are not necessarily custom products within the scope of that regulation, but more runs of steel that are made to certain specifications.

[00:13:50] Speaker 02:
And I would actually direct the court to page 38 in the appendix, where the trial court did note specifically this issue.

[00:13:57] Speaker 02:
Dillinger actually did initially argue in its opening brief before the trial court that the commerce should have used T2T

[00:14:03] Speaker 02:
but ended up abandoning that argument.

[00:14:05] Speaker 02:
So that's just simply not an issue before this court, but I do think it highlights that these are not necessarily items that are as custom, I think, as some of the briefing from Pentecostal might indicate.

[00:14:17] Speaker 02:
And, you know, the statutory language that Commerce is addressing here says that Commerce needs to determine whether there is a pattern of expert prices for comparable merchandise that differ significantly.

[00:14:30] Speaker 02:
The three-part test

[00:14:32] Speaker 02:
in and of itself, determines whether or not there is a significant amount of pattern differences or of pricing differences over the subject period of review.

[00:14:41] Speaker 02:
And the very narrow definition urged by Dillinger is essentially that there needs to be some sort of connection made by commerce.

[00:14:49] Speaker 02:
You know, it needs to be all the same geography or they only dump in November or, you know, some sort of connection needs to be made by commerce other than the fact that there just is significant differencing in pricing.

[00:14:59] Speaker 02:
And I do think it's important to take a slightly closer look at the Cohen's D analysis.

[00:15:03] Speaker 02:
The thresholds of the analysis are not something that commerce came up with arbitrarily, but rather those that were assigned by the mathematician, Dr. Cohen, who developed this methodology.

[00:15:13] Speaker 02:
And the point of the methodology is that it can detect small price changes, and those are important in the great scope of the data presented, or it can detect large changes, depending on, again, the standard deviation and the statistical analysis of all of the data.

[00:15:27] Speaker 02:
And in fact, this court actually rejected an exactly opposite argument in the mid-continent steel case just last year, where essentially a steel producer argued that because a half a penny price change per kilogram can be a significant, can be tagged as potential dumping by the co-industry analysis, the thresholds were too difficult to meet.

[00:15:49] Speaker 02:
And this court rejected that, saying that in accordance with the language in the FAA, that

[00:15:53] Speaker 02:
that those small differences might be really important in a male's case, whereas when we're talking about plate steel like here, likely a half pound or half penny change per kilogram is not going to be a significant price change.

[00:16:07] Speaker 02:
And so the practice that commerce has developed is in accordance with the significant discretion given to it under the statute.

[00:16:14] Speaker 02:
And we would also note that pattern identification could be inherently subjective, especially if we're talking about the kind of patterns

[00:16:22] Speaker 02:
Dillinger seems to be urging, you know, some sort of geographic connection, um, something along those lines, uh, by virtue of using the same analysis across the, um, across the board, there is, uh, you know, pattern identification could potentially be subjective, your honor, if it were an analysis that Dillinger seems to urge, i.e.

[00:16:47] Speaker 02:
some sort of connection between timing or

[00:16:50] Speaker 02:
you know, what if we're saying they only dump to customers in the South, well, which states are considered the South?

[00:16:55] Speaker 02:
And so by using this mathematical statistical analysis... I didn't hear them say they were dumping to anybody.

[00:17:03] Speaker 02:
I understood, Your Honor, and not to imply that they've conceded dumping, but rather the pattern requirement that they urge.

[00:17:09] Speaker 02:
While conceding that there is no requirement to find an intent, it does, you know, I think it would force commerce to thread a very difficult

[00:17:18] Speaker 02:
needle wherein how do you make the determination that there's a pattern of dumping to states in a given region or at a given time of year or to a given customer without essentially making the indication that they intended to make that move.

[00:17:34] Speaker 02:
And we would submit that that is perhaps that could be a reasonable exercise of commerce and discretion under the statute, but it does not mean that the practice that they currently have is unreasonable.

[00:17:46] Speaker 01:
Okay, could I take you to the prime non-prime issue before we run out of time here?

[00:17:52] Speaker 01:
Certainly, certainly.

[00:17:53] Speaker 01:
As I understand it, you used the Dillinger books and records to assign the cost between prime and non-prime.

[00:18:04] Speaker 01:
And you rely on the statute as authorizing that.

[00:18:07] Speaker 01:
But I think the record shows pretty clearly

[00:18:10] Speaker 01:
that the Dillinger books and records are based on price allocation rather than cost allocation.

[00:18:18] Speaker 01:
So how is commerce's approach consistent with the statute which says that you should use books and records that, quote, reasonably reflect the costs associated with the production and sale of the merchandise, close quote?

[00:18:33] Speaker 01:
Certainly, Your Honor.

[00:18:34] Speaker 01:
This was a price.

[00:18:37] Speaker 01:
allocation, price-based allocation rather than cost-based allocation.

[00:18:42] Speaker 01:
So, how is that proper under the statute to use the books and records under those circumstances?

[00:18:48] Speaker 02:
Certainly, Your Honor.

[00:18:49] Speaker 02:
I think in a very short answer, the lower of cost or market principle is the reason why it's reasonable.

[00:18:55] Speaker 02:
And this is a principle that is required for gap... I don't understand.

[00:18:58] Speaker 01:
I don't understand the answer.

[00:18:59] Speaker 01:
I mean, we have a specific provision here

[00:19:04] Speaker 01:
which says costs from the, I'm sorry, the books and records will be used if they reasonably reflect the cost of production.

[00:19:15] Speaker 01:
But here, the books and records do not, the allocation does not reflect the cost of production but rather price.

[00:19:25] Speaker 02:
Right, Your Honor.

[00:19:26] Speaker 02:
So, again, if I may just briefly explain the lower cost of market principle which is a GAAP required principle.

[00:19:32] Speaker 02:
It is a principle that says that if you have to track the cost of your inventory based on either the cost of actually producing it or its market value.

[00:19:40] Speaker 02:
And it's a principle to ensure that companies do not over inflate the value of their inventory or potentially under inflate it.

[00:19:47] Speaker 02:
And I would note that the full language of the statute the court was just referring to reads, reasonably reflect the cost associated with production and sale of merchandise.

[00:19:56] Speaker 02:
This does not say actual cost and actually just

[00:19:58] Speaker 02:
on the page directly before the statute under subsection E, 2, 1, it does, Congress there asked for it, quote, the actual amount incurred and realized.

[00:20:09] Speaker 02:
So if it were actual cost of production, that is something that commerce could have written into the statute.

[00:20:15] Speaker 02:
And again, I keep coming back to the lower cost of market.

[00:20:18] Speaker 01:
I'm sorry.

[00:20:19] Speaker 01:
I don't understand your answer at all.

[00:20:21] Speaker 01:
I mean, the statute, the allocation here in the Dillinger Books and Records is a price-based allocation, correct?

[00:20:30] Speaker 02:
It's an allocation based on anticipated value on the market.

[00:20:33] Speaker 01:
Right.

[00:20:34] Speaker 01:
So price-based.

[00:20:35] Speaker 01:
OK.

[00:20:36] Speaker 01:
So why doesn't the statute say that you can't use the books and records under those circumstances because they have to be cost-based?

[00:20:45] Speaker 02:
Because the allocation as Dillinger did it is in accordance with GAAP principles.

[00:20:49] Speaker 02:
And that's where I think the lower cost of market principle, again, is important because it would make this provision of the statute internally inconsistent if by virtue of following the inventory requirements of the lower cost of market principle, you no longer can rely on those books.

[00:21:05] Speaker 01:
Well, I would read the statute as imposing alternative requirements.

[00:21:10] Speaker 01:
It both has to be in accordance with GAAP and to reflect cost.

[00:21:15] Speaker 01:
So if one of those things is not true, you can't use the books and records.

[00:21:21] Speaker 02:
I would direct the court to the court's decision in Thai Pineapple from 1999.

[00:21:26] Speaker 02:
The statutory language was codified after the period of review at issue there, but the court does specifically talk about the statutory language in footnote five.

[00:21:35] Speaker 02:
And notes that statutory language tracks Commerce's prior position that had been affirmed in the NTN case by this court.

[00:21:42] Speaker 02:
And there, the court held it for a very similar reason.

[00:21:45] Speaker 02:
There, it was the pineapple producers who said that the allocation in their actual books had no relation to the market.

[00:21:53] Speaker 02:
It was just completely random with regards to canned pineapple versus juice.

[00:21:57] Speaker 02:
Commerce took a look at the records and said, well, actually, there's some pretty consistent pricing here.

[00:22:01] Speaker 02:
You generally associate 9% to 18% of the cost with the juice, and you give the rest to the pineapple.

[00:22:06] Speaker 02:
So rather than adapting the weight-based system that the respondent there was urging, Commerce determined that, no, you have assigned value to the juice in the book, but we can rely on these books.

[00:22:17] Speaker 02:
And this court found that that was a reasonable interpretation of, again, at that time, it was Commerce's practice that was then subsequently codified by statute in 1996.

[00:22:27] Speaker 02:
So not applicable to the Thai pineapple decision, but already at issue there, if that makes sense, Your Honor.

[00:22:37] Speaker 02:
And just to quickly distinguish the Ipsco case that plaintiff relied on, obviously that case from 1992 does predate the statutory language here in F1.

[00:22:47] Speaker 02:
And case 1061 of that, the court specifically quoted language from commerce noting that notwithstanding the fact that we're talking about prime and non-prime pipe here, there the non-prime pipe could largely be used for almost all of the same activities and production purposes as the prime pipe.

[00:23:06] Speaker 02:
which is simply not the case here, as we made clear on the record.

[00:23:10] Speaker 02:
The non-price really sold without warranty.

[00:23:13] Speaker 02:
It seems to have almost no marketable use other than, I think, kind of weighing down or covering up manholes in construction processes.

[00:23:20] Speaker 02:
So they're completely different products, and it is much more akin to the Thai pineapple case from this court in 1999.

[00:23:28] Speaker 02:
And just to briefly touch on the level of trade argument, Mr. Mosley being the

[00:23:33] Speaker 02:
said that there is no evidence on the record that this was not a separate distributor.

[00:23:38] Speaker 02:
That completely shifts the burden here.

[00:23:41] Speaker 02:
Importers are not entitled to a level of trade distinction.

[00:23:44] Speaker 02:
Rather, it is something that they can place information on the record, establishing why they are entitled to that level of trade distinction.

[00:23:53] Speaker 02:
And I would refer the court specifically to some of the arguments that were presented by

[00:23:59] Speaker 02:
essentially circular.

[00:24:00] Speaker 02:
They are essentially saying, because it's a distribution center, therefore it's a distribution center in another level of trade.

[00:24:06] Speaker 02:
Compare that to the facts of the case in Paso Zara, this trial court decision upon which they placed a lot of emphasis, and if the court actually reads the facts that were being argued there as far as the distinction between levels of trade,

[00:24:18] Speaker 02:
There the manufacturer was saying, you know, we have two different sales operations.

[00:24:22] Speaker 02:
One deals with large manufacturers, many of whom have their own factories, their own trucks, their own distribution model.

[00:24:29] Speaker 02:
The other person deals with local mom and pop shops and restaurants that are within a close radius of our factory here in Italy.

[00:24:35] Speaker 02:
Because we deal with these smaller customers, we have to have the capacity to accept payment in cash.

[00:24:40] Speaker 02:
and to deal with bounce checks if they occur from these small producers.

[00:24:44] Speaker 02:
All of this detail given as to why these are actually significantly different levels of trade.

[00:24:51] Speaker 02:
And as we noted in our brief, in Passes R01, the trial court did remand for further consideration of those factors.

[00:24:58] Speaker 02:
However, upon remand, I hear my time is up.

[00:25:02] Speaker 02:
I'll just quickly finish my point, if I may.

[00:25:03] Speaker 02:
After the remand, the trial court sustained the determination that there was only one level of trade.

[00:25:10] Speaker 02:
Okay, thank you.

[00:25:12] Speaker 02:
Thank you, Your Honor.

[00:25:13] Speaker 02:
If there's no further questions, we respectfully ask that the court confirm the decision of the trial court.

[00:25:18] Speaker 04:
Okay, any questions from Krisniak?

[00:25:21] Speaker 04:
All right, and Ms.

[00:25:22] Speaker 03:
Galvez, you have three minutes.

[00:25:25] Speaker 03:
Thank you, Your Honor.

[00:25:25] Speaker 03:
May it please the court, Cynthia Galvez, for defending Napoleon New Corp.

[00:25:29] Speaker 03:
Corporation.

[00:25:30] Speaker 03:
Your Honor, the government has thoroughly demonstrated why commerce's determination

[00:25:35] Speaker 03:
Could you address my point, please, about the prime?

[00:25:40] Speaker 01:
I just don't understand.

[00:25:41] Speaker 01:
I mean, the statute doesn't say that you can use the books and records if they're merely consistent with a gap.

[00:25:49] Speaker 01:
It says you've got to show that it's consistent with a gap and reflects the cost of production.

[00:25:57] Speaker 03:
Right.

[00:25:58] Speaker 03:
Well, Your Honor, if this is at all elucidating, I did want to point out that commerce is reliant on that lower

[00:26:04] Speaker 03:
value of non-prime products was fully consistent with the language of BS, which is the books and records, because Dillinger specifically told Commerce, and I'm looking at appendix pages 578 and 2897, which is a copy of one another, specifically told Commerce that it valued non-prime products in its cost accounting system at their estimated likely selling price, and it also said, quote, the basis for the cost

[00:26:30] Speaker 03:
of second choice plates.

[00:26:32] Speaker 03:
And so, you know, throughout the investigation, Dillinger specifically represented that these values that it was assigning to non-prime products were equivalent to cost.

[00:26:41] Speaker 03:
And so, with that in mind, you know, Dillinger provides this information itself.

[00:26:45] Speaker 03:
Commerce relied on the information and found the cost reasonable, particularly.

[00:26:49] Speaker 01:
Wait, wait, wait, wait, wait, wait.

[00:26:51] Speaker 01:
You know, they're all talking too fast.

[00:26:53] Speaker 01:
How, what, where did they concede that their books and records were equivalent to cost?

[00:27:01] Speaker 03:
Right, so that's Appendix 578, which is also the same page as 2897, so you can switch to either side.

[00:27:08] Speaker 03:
And that's in there, Section D, Supplemental Questionnaire Response.

[00:27:12] Speaker 03:
That's where they have the, that's where Dillinger reported the language, I mean, and reported that... Wait, wait, wait, wait, wait.

[00:27:19] Speaker 03:
Good.

[00:27:21] Speaker 01:
So, okay, I'm looking at 578.

[00:27:23] Speaker 01:
Where do they say it's equivalent to cost?

[00:27:28] Speaker 04:
All right, I'm trying to look as well.

[00:27:35] Speaker 03:
Under question seven, answer, this is the CO module.

[00:27:42] Speaker 03:
Dillinger-France calculates the cost of all choices.

[00:27:45] Speaker 03:
Dillinger-France values the second choice place that's non-prime based on likely selling price for inventory purposes.

[00:27:50] Speaker 03:
And this is where we go.

[00:27:51] Speaker 03:
This is also the basis for the cost of second choice place.

[00:27:56] Speaker 01:
Yeah, but that's not saying it's equivalent to the cost of production.

[00:27:59] Speaker 01:
It's saying that's the way they calculate cost based on price.

[00:28:02] Speaker 03:
Right.

[00:28:05] Speaker 03:
That's how cost is reflected in the books and records, Your Honor.

[00:28:10] Speaker 01:
Well, that's a problem because it doesn't seem to be consistent with the statute.

[00:28:15] Speaker 03:
May I ask Your Honor for clarification?

[00:28:17] Speaker 01:
The statute says that you use the books and records if they are consistent with GAP and, quote, reasonably reflect the cost associated with the production and sale of the merchandise.

[00:28:34] Speaker 04:
Right.

[00:28:34] Speaker 01:
Recognizing that there are some circumstances in which the books and records are not reflecting the actual cost and that they're done on some other basis.

[00:28:46] Speaker 01:
As in Ipsco, here that other basis is price.

[00:28:50] Speaker 01:
And I'm just not understanding how that can be consistent with the statute.

[00:28:57] Speaker 03:
Well, Your Honor, what they owe, my time is up.

[00:29:03] Speaker 03:
Please answer the question.

[00:29:05] Speaker 03:
Right.

[00:29:06] Speaker 03:
So our view is that it is entirely consistent with the statute's language.

[00:29:11] Speaker 03:
I mean, the language does mention production and sales, and these are likely, you know, estimated likely selling prices.

[00:29:19] Speaker 03:
And furthermore, it's how Dillinger considers its costs in its own record.

[00:29:28] Speaker 03:
So we see it as entirely consistent with the statute.

[00:29:34] Speaker 04:
Okay, any more questions for Ms.

[00:29:37] Speaker 04:
Galvin?

[00:29:41] Speaker 04:
Okay, then we're ready for rebuttal from the similar dial line.

[00:29:46] Speaker 00:
So one issue on the pattern issue or one point on the pattern issue, the government still has not said what pattern means or how its methodology looks at any pattern other than it just looks at significant price differences.

[00:30:04] Speaker 00:
And the statute says what it says and each word needs to have meaning.

[00:30:08] Speaker 00:
On the non-prime issue,

[00:30:12] Speaker 00:
Well, I agree with Judge Dyke's argumentation or reading of the statute.

[00:30:20] Speaker 01:
I would dispute... How would you call the argumentation?

[00:30:24] Speaker 00:
I'm sorry, Your Honor.

[00:30:25] Speaker 00:
Yes, excuse me.

[00:30:29] Speaker 00:
Your reading of the statute.

[00:30:34] Speaker 00:
And also I would dispute that that passage that council read says that that's how the costs are.

[00:30:42] Speaker 00:
I think it's a little bit misunderstanding what value and what cost means.

[00:30:47] Speaker 00:
We said that they're valued at their selling price and that's taken over as the cost.

[00:30:53] Speaker 00:
There cannot be any dispute and nobody has ever disputed that the actual cost of production for prime and non-prime plate are the same.

[00:31:01] Speaker 00:
They have the exact same materials, they have the exact same labor, they have the exact same processing.

[00:31:07] Speaker 00:
It's not until the very end of the assembly line that you can tell what's going to be prime and what's not going to be prime.

[00:31:17] Speaker 00:
are the same for the two, and Dillinger properly reported that.

[00:31:22] Speaker 00:
Also, the statute asks for the actual cost, and that's exactly what we've given.

[00:31:28] Speaker 00:
There's no place where the statute says that sales value for subject merchandise can replace the cost.

[00:31:36] Speaker 00:
The pineapple case was a totally different situation where you had co-products, one was subject and one was non-subject.

[00:31:44] Speaker 00:
You had the fruit and you had the juice, and they had a joint raw material.

[00:31:49] Speaker 00:
And the only question in that case was how do we allocate this joint raw material to these two products, one subject and one non-subject.

[00:31:58] Speaker 00:
There the statute is not clear, but for

[00:32:02] Speaker 00:
two products of different grades that are both subject merchandise and are both made in exactly the same process, the statute is clear.

[00:32:12] Speaker 00:
You need to use the actual costs.

[00:32:15] Speaker 00:
And Ipsco is directly on point.

[00:32:17] Speaker 00:
There's nothing in later amendments to the statute that change Ipsco.

[00:32:22] Speaker 00:
In fact, when this provision F1 was enacted, the provision B3 was also enacted.

[00:32:32] Speaker 00:
The provision B3 was also enacted and B3 specifically says that the cost of production shall be the sum of materials, processing, and all transformation costs.

[00:32:48] Speaker 00:
And that's exactly what we reported here.

[00:32:50] Speaker 00:
It's totally in line with the statute.

[00:32:54] Speaker 00:
So unless there are any other questions, we would ask that the court reverse the judgment of the CIT and that the case be remanded to the Department of Commerce.

[00:33:04] Speaker 04:
Are there any more questions, Mr. Mudalbine?

[00:33:08] Speaker 04:
All right.

[00:33:09] Speaker 04:
Thanks to all counsel.

[00:33:11] Speaker 04:
The case is taken under submission.

[00:33:13] Speaker 04:
And that concludes this panel's argument for this morning.

[00:33:18] Speaker 00:
Thank you very much.

[00:33:20] Speaker 02:
The honorable court is adjourned until tomorrow morning at 10 a.m.