[00:00:00] Speaker 05: Okay, the next case before the court is case number 21-1748, also an appeal from the Court of International Trade, Hyundai Steel Company versus the United States. [00:00:36] Speaker 00: I'm reserving five minutes for rebuttal. [00:00:40] Speaker 05: Thanks for taking your mask off. [00:00:47] Speaker 05: How much time did you want to save for rebuttal? [00:00:49] Speaker 05: Five minutes, please. [00:00:50] Speaker 05: OK. [00:00:56] Speaker 00: Good afternoon. [00:00:57] Speaker 00: May it please the court, my name is Elizabeth Drake from the law firm Chagrin Associates on behalf of the defendant Pellant Well-Spun Tubular LLC USA. [00:01:06] Speaker 00: See everyone in person. [00:01:07] Speaker 00: I appreciate all the protocols the court has created to keep us all safe. [00:01:12] Speaker 00: This case below, which was called Who Steal, but is now Hyundai on appeal, had two issues that we appealed. [00:01:19] Speaker 00: One is the substantial evidence issue, very similar to the one that was discussed in the prior case. [00:01:25] Speaker 00: But it also has a statutory issue. [00:01:27] Speaker 00: Because in this case, the CIT found that when commerce bases normal value on home market sales, not constructed value, [00:01:36] Speaker 00: it is legally prohibited from making any adjustment to account for a particular market situation. [00:01:42] Speaker 00: So even if substantial evidence did support the particular market situation finding, the court said the law prohibited commerce from doing anything about it because normal value was based on home market sales. [00:01:52] Speaker 05: So does that mean in this case if we were to agree that commerce did not have the authority that we wouldn't even need to get to the question of the substantial evidence on the [00:02:06] Speaker 00: That's correct. [00:02:07] Speaker 00: If this court were to affirm the legal statutory interpretation issue, it would not have to address the substantial evidence issues. [00:02:14] Speaker 00: That's not true of the prior case where normal value is based on constructed value, so the substantial evidence issues need to be resolved. [00:02:22] Speaker 00: We believe the court erred in this finding because it applied the expressio unius maxim, which is inappropriate in an administrative setting. [00:02:32] Speaker 00: Basically, what the court did is it said Congress amended the constructed value provision, but did not amend directly the home market provision. [00:02:44] Speaker 00: And therefore, the amendment in the constructed value provision cannot be relied upon or a similar process cannot be used when relying on home market sales. [00:02:54] Speaker 00: This is incorrect because under Chevron, [00:02:57] Speaker 00: Congress simply did not speak directly to the precise issue of whether or not commerce could address a PMS in the context of home market sales. [00:03:06] Speaker 00: The statute is silent. [00:03:08] Speaker 03: Can I ask a question on that? [00:03:10] Speaker 03: Before this amendment, there was no authority for commerce to do this particular market situation at all, right? [00:03:17] Speaker 00: I would not concede that, Your Honor, and that is because there are a number of cases [00:03:22] Speaker 00: including on a cut-to-length plate from Russia. [00:03:25] Speaker 03: I don't want to talk about them. [00:03:26] Speaker 03: Let's assume there was no authority, because that's not where I'm going. [00:03:31] Speaker 03: Congress had not specifically given commerce authority to do a particular market situation at all. [00:03:38] Speaker 03: They amended the statute, and they amended the statute specifically to allow them to do it in one section of constructed value. [00:03:46] Speaker 03: And it specifically, when it talks about it, references that paragraph, right? [00:03:51] Speaker 03: Correct. [00:03:52] Speaker 03: So your argument is that somehow Congress implicitly intended to give commerce authority where it never had it before because of some general statements in legislative history and the like? [00:04:05] Speaker 00: Thank you, Your Honor. [00:04:06] Speaker 00: Our position is that, first of all, [00:04:09] Speaker 00: Congress in the same act also amended the definitions section in 1677-15 to clarify that one of the situations that is outside an ordinary course of trade is a situation where a PMS is found to exist. [00:04:23] Speaker 00: And the term ordinary course of trade is used throughout the normal value provisions, not only in constructed value, but also home market prices, also the sales below cost tests, also third country prices. [00:04:34] Speaker 05: But isn't in that definition, though, of ordinary course of trade, don't Congress identify sales below cost of production as one place where it's outside the ordinary course, and as the particular market situation as an alternative place? [00:04:51] Speaker 00: I don't think that they were necessarily exclusive. [00:04:54] Speaker 00: I think that when commerce was faced with the task of performing the sales flow cost test, the statute required it, once it disregarded the sales, to then only rely on the sales in the ordinary course of trade. [00:05:06] Speaker 00: Then it goes to the definitions section and sees that any time there is a particular market situation, those transactions are not in the ordinary course of trade. [00:05:16] Speaker 00: So it was in a bind. [00:05:17] Speaker 00: It had to figure out how to perform the sales flow cost test, [00:05:20] Speaker 00: with when a PMS exists. [00:05:23] Speaker 00: And if commerce's resolution of the statutory question of the ambiguity of the silence was eminently reasonable, [00:05:32] Speaker 00: because the contrary conclusion that they could not take into account the PMS would have absurd results. [00:05:38] Speaker 00: Basically, what it would do, it would make a PMS more difficult to address the more severe it is. [00:05:44] Speaker 00: So the more a PMS distorts costs, the lower costs are, the more sales pass the sales low cost test, and then commerce can never get to constructed value. [00:05:55] Speaker 00: And if that's the only place, excuse me, they can address [00:05:58] Speaker 00: the PMS, then they are barred from ever getting there as long as the PMS is so severe that at least some sales pass the sales below cost test. [00:06:08] Speaker 00: And that cannot be what Congress intended when it gave commerce the authority to address this particular market situation. [00:06:16] Speaker 05: Well, does the amendment say that Congress can simply ignore all of the other mechanisms in place? [00:06:23] Speaker 05: and jump to the constructed value? [00:06:26] Speaker 00: No, and that's not what commerce did. [00:06:28] Speaker 00: Commerce did not jump to constructed value. [00:06:30] Speaker 00: That would have been very strange because the statute specifically prefers that commerce rely on home market sales if there are any that are in the ordinary course of trade. [00:06:39] Speaker 00: Normally commerce can only go to constructed value when there are no sales left in the ordinary course of trade. [00:06:45] Speaker 00: So it would be very strange for Congress to [00:06:48] Speaker 00: give commerce the ability to address these distorted costs but make it more difficult to do so, the more distorted those costs are. [00:06:57] Speaker 00: And so we believe that commerce reasonably resolved this ambiguity, this silence about what to do when there is a particular market situation and they need to test home market sales to see if they're above the cost of production and therefore in the ordinary course of trade. [00:07:16] Speaker 00: And we think the CIT's contrary holding was inappropriate and inconsistent with this court's own precedent. [00:07:23] Speaker 03: I'm still a little bit confused. [00:07:25] Speaker 03: When there's home market sales that commerce thinks aren't in the ordinary course of trade because they're not representative of the costs associated with the production and sale of the goods, they don't have to rely on them just because they're made in the home market. [00:07:41] Speaker 03: There are other avenues to get at this, aren't there? [00:07:45] Speaker 00: So when they perform the sales below cost test, they can only disregard those sales that are below cost. [00:07:53] Speaker 00: If there are any sales that remain that are above cost, then they do need to rely on them. [00:07:57] Speaker 00: They can't just say, oh, we'd prefer to do constructive value today. [00:08:01] Speaker 00: We don't feel like relying on these remaining sales. [00:08:03] Speaker 00: They have to rely on them. [00:08:05] Speaker 05: Well, when you're talking about foreign country sales, it says that [00:08:10] Speaker 05: you only use these methodologies where the administrating authority does not determine that the particular market situation prevents a proper [00:08:19] Speaker 05: Why couldn't you have just jumped? [00:08:22] Speaker 00: Just used that provision. [00:08:24] Speaker 00: So I think Commerce read that provision as if the sales prices themselves were distorted by what's called a sales-side PMS. [00:08:34] Speaker 00: So for example, there's only one customer in the country, or there's something that distorts the market for the good itself. [00:08:42] Speaker 00: The question is, what can you do to account for a cost-side PMS when you are relying on home market sales, when you've got a big enough market for the pipe itself in Korea? [00:08:55] Speaker 00: but you've got a very distorted market for the input for the hot roll coil in Korea. [00:08:59] Speaker 00: And if they're not allowed to address it in the sales below cost test, then they basically are never allowed to address it unless they go to constructed value, which they can't do if the PMS is severe enough and distorts costs. [00:09:13] Speaker 03: What happened before this new statute was passed to address this situation? [00:09:18] Speaker 00: I'm sorry, what did Congress do in the past, Your Honor? [00:09:21] Speaker 03: So... So where you have some that are below cost, but some above cost. [00:09:26] Speaker 00: In the past, when some sales are below cost and some sales are above cost, they rely on the sales that are above cost to... When you're saying above cost, these are whole market sales that are above the cost of production. [00:09:37] Speaker 03: Exactly. [00:09:37] Speaker 03: So they're intended to... So they're... They reflect the ordinary course of business. [00:09:43] Speaker 00: Exactly. [00:09:44] Speaker 00: They're in the ordinary course of trade. [00:09:45] Speaker 00: They're a good basis for normal value because they're normal. [00:09:48] Speaker 00: They provide basis for a fair comparison because they're above the cost of production. [00:09:53] Speaker 03: And when you say cost of reduction, what does that specifically mean? [00:09:57] Speaker 03: Because I think that's where the rub of this is, right? [00:10:00] Speaker 00: Yeah, so cost of production provisions are actually very similar to the constructed value provisions, except that they do not include profit. [00:10:07] Speaker 03: Because here's the thing, if these things are above the cost of production, why do we assume that they reflect any distortion? [00:10:18] Speaker 00: Because the cost of production under the CIT's reasoning [00:10:23] Speaker 00: The cost of production that Commerce is required to use to perform the test is the distorted cost of production. [00:10:29] Speaker 00: So it includes those depressed hot rolled coil prices. [00:10:33] Speaker 00: So it's the depressed distorted cost of production that they're using to perform this test. [00:10:39] Speaker 00: under the CIT's reasoning. [00:10:42] Speaker 03: I guess my question is, even if you're right about all of this, I mean Commerce was very aware that these distorted market situations were impacting Commerce's ability and they gave them a new authority. [00:10:57] Speaker 03: If they were aware that this also came in, not just at the constructed value stage, but at the normal value stage, because the cost of production, wouldn't we assume that we had to put in there instead of, I mean, it's a pretty roundabout way that you're getting us there to do this. [00:11:17] Speaker 00: Yes, if I had been on that committee drafting that legislation, I might have drafted it differently, but I don't think [00:11:23] Speaker 00: That was the CIT's role to say the Congress could have been clearer. [00:11:27] Speaker 03: The CIT's role was to- I get it. [00:11:30] Speaker 03: But my problem really is Congress saw that there was a hole here, and they attempted to plug the hole. [00:11:37] Speaker 03: They didn't do it, at least in your view, or maybe whoever's view. [00:11:42] Speaker 03: Maybe they didn't think it's not done completely. [00:11:45] Speaker 03: But isn't it up to Congress, if it still finds another hole, that commerce doesn't have sufficient authority, rather than trying to [00:11:53] Speaker 03: bootstrap a portion that clearly doesn't apply where they didn't intend to apply. [00:11:59] Speaker 03: I mean if the American steel industry wants to get this fixed they must have some clout and they can get it fixed politically like they did with this act. [00:12:10] Speaker 00: That would be an act of last resort, Your Honor. [00:12:13] Speaker 00: But the first party that had to decide how to resolve this ambiguity was Commerce. [00:12:19] Speaker 00: And we believe they resolved it in a reasonable way. [00:12:21] Speaker 00: And therefore, the court below should have deferred to that reasonable interpretation because it gave effect to all the parts of the statute, even though they weren't perfectly lined up with each other. [00:12:31] Speaker 00: It gave effect to congressional intent, and it avoided these absurd results. [00:12:37] Speaker 05: You're into your rebuttal, but before you sit down, I want to make sure I understand your Chevron argument. [00:12:41] Speaker 05: Are you saying that at Chevron step two, this is completely unambiguous, and Congress has the authority to do this? [00:12:47] Speaker 05: Or are you saying that the statute is ambiguous or has a gap that needs to be filled, and commerce had the right to do that in the first instance? [00:12:58] Speaker 00: Yes, Your Honor, that's our argument. [00:13:01] Speaker 05: Is it ambiguous, the statute? [00:13:07] Speaker 00: Taken as a whole, it may be considered ambiguous as to why there's this specific direction for constructed value and not a specific direction in the other parts. [00:13:15] Speaker 00: But then also in the definition section, it makes very clear that you need to take a PMS into account when thinking about the ordinary course of trade. [00:13:23] Speaker 00: And there's also [00:13:26] Speaker 00: to some extent, silence in the sales below cost provision because it doesn't explicitly say you can do what you can do with constructed value. [00:13:35] Speaker 00: But whether it's silent or ambiguous, [00:13:39] Speaker 00: that those are both step two under Chevron. [00:13:41] Speaker 00: And clearly, Congress did not directly speak to the precise issue. [00:13:46] Speaker 00: That was the question that Congress had to resolve. [00:13:49] Speaker 00: So it clearly is not a Chevron step one type of inquiry. [00:13:54] Speaker 00: And it's not the kind of inquiry that the court itself can resolve in the first instance using the Espresso Unius doctrine. [00:14:03] Speaker 00: That's not appropriate in an administrative setting. [00:14:06] Speaker 05: OK, we'll give you a full two minutes for rebuttal, even though we've kept going. [00:14:10] Speaker 05: But thank you, Bill. [00:14:15] Speaker 05: All right. [00:14:16] Speaker 05: The same division, Mr. Allman and Mr. Hitman? [00:14:20] Speaker 05: That's right. [00:14:21] Speaker 05: You don't have to go back over old ground to the extent there is overlap. [00:14:26] Speaker 05: But focus on the issue we primarily focused on with your opponent. [00:14:32] Speaker 04: Yes, thank you, Your Honor. [00:14:33] Speaker 05: It's your friend on the other side, as we say. [00:14:35] Speaker 04: I do want to make one quick point on the substantial evidence question kind of relative to some of the procedural differences between the two cases. [00:14:43] Speaker 04: And this goes to some of the discussion in the previous appeal related to the directed verdict. [00:14:50] Speaker 04: In this case, in the line pipe appeal, the Court of the International Tribes remand language was the standard plain criminal language. [00:14:57] Speaker 04: It went back to commerce. [00:14:59] Speaker 04: And commerce on remand basically said, in light of the court's concerns, we can't find a PMS. [00:15:05] Speaker 04: So I just wanted to highlight that. [00:15:07] Speaker 04: Was that under protest too? [00:15:09] Speaker 04: I believe so, yes. [00:15:10] Speaker 04: But they didn't appeal? [00:15:11] Speaker 04: That's right. [00:15:13] Speaker 04: It was under protest. [00:15:15] Speaker 05: You know, following sort of your... But the court didn't tell them they had to, that they weren't allowed to. [00:15:20] Speaker 04: That's right. [00:15:20] Speaker 04: The court said, you know, reconsider, consistent with this opinion, sort of standard remand language. [00:15:29] Speaker 04: To get to the statutory question, you know, we think this is a very straightforward issue. [00:15:35] Speaker 04: You know, Congress amended the statute in one place, the constructed value provision. [00:15:41] Speaker 04: The clause starts with, for purposes of this subparagraph, or for purposes of paragraph one, that's the constructed value paragraph. [00:15:50] Speaker 03: Can I just get to what your friend was saying about how that, even if that's all correct, there's still this other problem that commerce doesn't have sufficient means to resolve. [00:16:03] Speaker 03: And do you agree that they don't have sufficient means and that that's just a, if that's true? [00:16:10] Speaker 03: Congress needs to give commerce more authority. [00:16:15] Speaker 03: I mean, I think on the textual stuff, you're probably right. [00:16:18] Speaker 03: But it does seem like there's an argument to be had that maybe that there's distortive effects on this other thing that Congress, it's hard to keep this straight, did not put in. [00:16:31] Speaker 03: But if they had thought of it, they might have. [00:16:33] Speaker 03: Or is there tools within the normal value thing to address this situation? [00:16:38] Speaker 04: Thank you, Your Honor. [00:16:38] Speaker 04: That's one of the main points I wanted to hit here. [00:16:41] Speaker 04: And taking a step back, on the respondent side here, number one, just think that commerce has plenty of tools as a general matter. [00:16:51] Speaker 03: Specifically on this question, so what would happen specifically if sales of hot roll [00:16:59] Speaker 03: coil are made above cost in the home market. [00:17:04] Speaker 03: But the inputs into that specific good are just concededly distorted by the particular market situation. [00:17:13] Speaker 03: How would commerce address that? [00:17:15] Speaker 04: In my view, the way commerce would need to address that is to find that the home market sales, the home market sales of, in this case, Linepipe, are affected by a particular market situation. [00:17:26] Speaker 04: That's in the statute. [00:17:30] Speaker 04: It's within the price section. [00:17:33] Speaker 04: I've got it all spelled out. [00:17:36] Speaker 04: It's 1677B, A1, B, two little i, three Roman numeral i. This is why this stuff is the best. [00:17:44] Speaker 03: If you have to get to that many letters of numbers. [00:17:50] Speaker 03: So what's the consequence of that? [00:17:52] Speaker 03: If they determine that, make that determination, does that mean they can then go on to constructed value and they don't have to use those sales and normal [00:18:00] Speaker 03: And the normal value? [00:18:02] Speaker 03: Yes. [00:18:02] Speaker 03: Okay. [00:18:03] Speaker 04: They, through that provision, they can disregard sales. [00:18:06] Speaker 04: And that's the, that, that provision. [00:18:08] Speaker 03: Even if they're above the cost? [00:18:10] Speaker 04: Even if they're above the cost. [00:18:11] Speaker 04: And that's the provision that's been on the books for years. [00:18:15] Speaker 04: And commerce has addressed those cases. [00:18:17] Speaker 04: You know, you'll see a case where a company has a single sale in a market. [00:18:21] Speaker 04: I think some of the other cases are, [00:18:24] Speaker 04: flowers in particular where I believe Congress found a particular market situation because the price in the United States was driven by holidays, Valentine's Day, etc. [00:18:34] Speaker 04: where you ended up with such differences in the market that there was a particular market situation that prevented that price to price comparison. [00:18:43] Speaker 04: So [00:18:45] Speaker 04: In the world view where commerce is left without a tool to address some input cost distortion, we disagree. [00:18:51] Speaker 04: We think commerce would need to find that the sale of the finished good is affected by a particular market situation as a result of the particular market situation with respect to the input. [00:19:07] Speaker 04: So we think that's the tool that Congress has. [00:19:10] Speaker 03: So they can't do the adjustments in the normal course thing and still use the normal course. [00:19:14] Speaker 03: They have to make this determination that takes them out of the normal value down to constructive value. [00:19:20] Speaker 04: That's right. [00:19:20] Speaker 04: That's how I would read it. [00:19:22] Speaker 04: And that's the normal structure for Congress to address, quote unquote, distortions that might affect [00:19:30] Speaker 04: the sales price of the good at issue. [00:19:34] Speaker 05: One other point within the- Well, couldn't commerce just do that here? [00:19:37] Speaker 05: I mean, if they really think that those inputs or those factors threw off the input costs, then couldn't they just say that it's not within the normal course of trade? [00:19:52] Speaker 04: If they did that, we certainly would be appealing it on the substantial evidence of whether that was. [00:19:58] Speaker 01: But not as a matter of statutory construction. [00:20:00] Speaker 04: That's right. [00:20:01] Speaker 04: Given what you've just said. [00:20:02] Speaker 04: That's right. [00:20:02] Speaker 04: If they said a particular market situation exists, we wouldn't say, no, no, no, you're not allowed to reach that finding because the statute clearly allows for it. [00:20:10] Speaker 04: The domestic industry didn't allege that here. [00:20:12] Speaker 04: Commerce didn't reach that finding because nobody raised it. [00:20:15] Speaker 04: They instead used the phrase through these provisions. [00:20:19] Speaker 04: If you read Commerce's initial write-up, it's we adjusted the cost of production through these provisions, under one section through the provisions of another section. [00:20:32] Speaker 04: So to answer your question, yes, if somebody, if the other side alleged that and Commerce found a particular market situation with respect to our prices, [00:20:40] Speaker 04: In my view, that's the remedy that commerce has. [00:20:43] Speaker 04: This isn't a situation where commerce is left handcuffed, faced with disordered input costs that are rendering the prices in the home market [00:20:55] Speaker 04: whatever phrase you want to use, distorted or inappropriate outside the ordinary course of trade. [00:21:01] Speaker 05: Do you agree, going back to my initial question to your friend on the other side, and that is that if we were to conclude that you're correct on this statutory analysis, that essentially moots the question of whether there's substantial evidence to support the other factors. [00:21:16] Speaker 05: Yes. [00:21:16] Speaker 05: In this case. [00:21:17] Speaker 04: Yes, in this case. [00:21:18] Speaker 01: With respect to each of the parties. [00:21:21] Speaker 04: Yes. [00:21:22] Speaker 04: And I don't think this applies in this case, but there could be a situation where, based on commerce's complicated margin program, you could have a mix of constructed value and price to price comparisons. [00:21:35] Speaker 04: That sometimes happens where there's not comparable sales for a particular transaction. [00:21:41] Speaker 04: So you can have a situation where [00:21:43] Speaker 04: you would need to address both. [00:21:45] Speaker 04: This is not one of those cases. [00:21:46] Speaker 04: So here, if Commerce can't use the statute to adjust the cost of production, can't use the PMS provision to adjust the cost of production, then you don't need to get to the substantial evidence question. [00:22:03] Speaker 04: One other point on the normal value of sales below cost analysis that Commerce performed, it's not just a simple [00:22:13] Speaker 04: what is the cost of production. [00:22:16] Speaker 04: One of the other factors that commerce has to look at is whether the prices would permit recovery of all costs within a reasonable period. [00:22:26] Speaker 04: The reason I highlight this, it shows the aim of the statute is to evaluate whether the company is acting rationally in selling at a profit. [00:22:36] Speaker 04: You know, that's really what the low cost analysis looks at. [00:22:41] Speaker 04: Is the company being rational in selling at a profit? [00:22:44] Speaker 04: Are they able to recover their costs? [00:22:48] Speaker 04: adjustment into the cost test section, you'd be left with a situation where the responding company would be expected to recover costs it never incurred. [00:23:00] Speaker 04: The statute looks, are these below the cost and could the respondent recover its costs? [00:23:06] Speaker 04: Because the statute recognizes and commerce analysis recognizes, you might have some sales that are below cost. [00:23:12] Speaker 04: Commerce's normal analysis is if 20% or more are below cost, then those are outside the ordinary course of trade. [00:23:20] Speaker 04: Commerce recognizes you might have some that are below cost, but not a lot, and only those that reach a certain threshold get disregarded. [00:23:29] Speaker 04: And this goes to the recovery of cost tests. [00:23:32] Speaker 04: Is the company able to recover its costs? [00:23:35] Speaker 04: And by increasing the costs with an external factor, [00:23:40] Speaker 04: That renders that question absurd, for lack of a better word. [00:23:45] Speaker 04: Is a company able to recover costs that it never incurred? [00:23:49] Speaker 04: We think that would be an absurd result. [00:23:51] Speaker 04: So it's a long way of saying we think that there's plenty of tools in the statute for commerce to address this situation. [00:23:58] Speaker 04: We think just simply pulling over and plugging it in yields its own unintended consequences. [00:24:06] Speaker 04: I certainly wasn't in the drafting room. [00:24:07] Speaker 04: I don't know what Congress intended when they wrote this. [00:24:11] Speaker 04: And the legislative history doesn't tell us either. [00:24:13] Speaker 04: There's these statements, yes, Congress wanted to. [00:24:16] Speaker 05: So you think the statute's unambiguous? [00:24:18] Speaker 04: I think it's unambiguous. [00:24:19] Speaker 04: There's a cost of production section that spells out how you do that analysis. [00:24:24] Speaker 04: Congress didn't amend that. [00:24:26] Speaker 04: That part is clear. [00:24:29] Speaker 04: Congress did amend the constructed value provision. [00:24:33] Speaker 04: That is a very ambiguous statute, but it simply doesn't apply over here. [00:24:38] Speaker 04: And just one final point, there's a whole subsection, paragraph F in the statute, that has a series of rules that are applicable to both constructed value and cost of production. [00:24:48] Speaker 04: There's so many logical places that Congress could have amended the statute [00:24:54] Speaker 04: in such a way that would apply to both. [00:24:55] Speaker 04: They chose a path that very clearly applies to only one. [00:25:00] Speaker 04: And we think that that's unambiguous. [00:25:02] Speaker 04: And the CIT, multiple judges, multiple opinions, you know, have the same analysis. [00:25:08] Speaker 05: We're going to try to get back on track here. [00:25:10] Speaker 04: Absolutely. [00:25:11] Speaker 05: So far over the last case. [00:25:12] Speaker 04: Thank you very much, Your Honor. [00:25:14] Speaker 05: OK. [00:25:14] Speaker 05: Mr. Winton? [00:25:48] Speaker 02: Good afternoon again. [00:25:50] Speaker 02: I'm still Mr. Winton, chastened and a little terrified to be up here. [00:25:55] Speaker 02: And I think Mr. Ommen really covered the legal issues quite well. [00:26:02] Speaker 02: I was prepared to talk at length about them, but I think there's not too much more to say to help get you back on time. [00:26:10] Speaker 02: There is something that opposing counsel said that I wanted to correct because it's not right. [00:26:16] Speaker 02: The phrase ordinary course of trade does not appear in the definition of cost of production. [00:26:20] Speaker 02: It uses a different term, ordinary course of business. [00:26:23] Speaker 02: That term used to appear in the constructed value section in the same place, and they changed it in the constructed value section to ordinary course of trade. [00:26:31] Speaker 02: They didn't change it in the cost of production. [00:26:34] Speaker 02: When you talk about ordinary course trades, it's not actually in the definition of what is the cost of production for whatever that's worth. [00:26:42] Speaker 01: If I can add... Is there any indication of the legislative history at all that goes to that particular change? [00:26:50] Speaker 01: That struck me as maybe a fairly discreet change that cries out for an explanation. [00:27:01] Speaker 02: there's not much legislative history I can tell you having been a trade lawyer at the time this was going on we put this in our brief at the time that this law was enacted the big question for trade lawyers was what's going to happen to China [00:27:18] Speaker 02: Is it going to become a market economy? [00:27:20] Speaker 02: Because right now we have this non-market economy methodology which, to be a little flip and get into trouble again, allows the Commerce Department to kind of whack China with these inflated margins based on the respondents' side view. [00:27:32] Speaker 02: I know the Commerce Department would never say something like that. [00:27:36] Speaker 02: But the concern was that was going away, because China, when it acceded to the WTO, there was a provision, and people argue about what the provision was, means, but there was an idea that that was going to go away in 2017, that we're going to have to treat China as a market economy. [00:27:53] Speaker 02: In the end, China took that to the WTO, [00:27:56] Speaker 02: they withdrew the case, the understanding is that they were going to lose and that they're allowed to be, but nobody knew that in 2015. [00:28:02] Speaker 02: And so when you look at this statute and you say, what if your goal here is to continue to apply the NME methodology to China, right? [00:28:12] Speaker 02: But we can't call [00:28:15] Speaker 02: And so what we do, well, factors of production, right, that's really that we use in NME cases, really the same as constructed value, but we don't use the actual costs, we use other, you know, we use surrogate costs. [00:28:27] Speaker 02: And that's why the statute in the constructed value section says if there's a PMS such that the cost doesn't reflect the cost of production or an interest rate, then you can use any other methodology in this section, which includes the non-market economy methodology. [00:28:40] Speaker 02: and then but that doesn't get you all the way there right because okay that that's called constructive value but you have all these sales in china and and we all assume sales in china costs in china low sales in china are below cost so how do you get rid of that when you say china the market situation in china is such that you can't rely on chinese prices for normal value and so you say china sales are not our [00:29:06] Speaker 02: In a particular market situation, we can't use them as the source for normal value. [00:29:11] Speaker 02: We go to constructive value. [00:29:13] Speaker 02: And in constructive value, we say we can't rely on their costs because it's all distorted, too. [00:29:18] Speaker 02: And we can continue to use our factors of production methodology, calling it a different name. [00:29:22] Speaker 02: So that was how we all, I understood it. [00:29:26] Speaker 02: We cited an article. [00:29:28] Speaker 02: Of course, it wasn't written that way. [00:29:30] Speaker 02: It was written more broadly. [00:29:31] Speaker 02: But if you want to say, why would Congress, why would the steel industry write this law this way? [00:29:37] Speaker 02: If your goal was, number one goal, I want to be able to continue to apply an enemy methodology to China after 2017, this is a way to do it. [00:29:48] Speaker 02: Korea's sort of collateral damage to that in these pipe cases because it's been applied to us. [00:29:54] Speaker 02: And I think it's telling when this first went to commerce, [00:29:57] Speaker 02: They said, you know, this isn't it. [00:29:59] Speaker 02: This isn't a PMS. [00:30:00] Speaker 02: That was their preliminary decision. [00:30:02] Speaker 02: It was only after political intervention from the White House, from the Trump administration, Peter Navarro, that they, oh, yes, yes, this is, right? [00:30:10] Speaker 02: But I think the understanding of everybody was this was just a way to keep the NME methodology for China. [00:30:16] Speaker 02: But we have an article by another lawyer that says that the legislative history is extremely sparse. [00:30:29] Speaker 05: All right, two minutes. [00:30:39] Speaker 00: Thank you, Your Honors. [00:30:41] Speaker 00: It's not true that these amendments were made solely with China in mind. [00:30:45] Speaker 00: Just read Senator Brown's statements in the legislative history, and they are all about Korea and distortions in Korea, specifically Korea's steel market and Korea's pipe market. [00:30:55] Speaker 00: So I do not concede or agree with the theory that this was all solely to allow an enemy-like methodology to continue for China. [00:31:05] Speaker 00: Under Mr. Allman's interpretation, [00:31:10] Speaker 00: It's important to distinguish once again the sales-based PMS and the cost-based PMS. [00:31:15] Speaker 00: Under his interpretation of the statute, [00:31:17] Speaker 00: Once commerce finds distorted costs, it then needs to also, which they say they need to quantify, though the statute doesn't require that, then it also requires commerce to take a second step and say not only are your input costs distorted, but your sales costs are distorted as a result of those distorted input costs, and thus we can go to constructed value. [00:31:35] Speaker 00: And I don't think there's any support in the statute or the legislative history for Congress wanting to make it [00:31:41] Speaker 00: so difficult for commerce to address a cost-based PMS, the distortions to cost. [00:31:47] Speaker 00: And Mr. Allman also mentioned section 1667BF, which is the special rules for calculating [00:31:53] Speaker 00: cost of production and constructed value. [00:31:55] Speaker 00: And I will just say that even before Congress amended the statute and the two Russia cases that we cited in our brief, Commerce indicated that they thought under those rules, which only say Commerce will normally rely on a respondent's cost, under those rules, Commerce had the discretion to adjust or disregard costs that were distorted and outside the ordinary course of trade. [00:32:19] Speaker 00: They did not, in fact, do it in those two Russia cases. [00:32:22] Speaker 00: But they did previously find that that provision itself already gave them the authority to disregard or adjust certain costs because they were distorted and outside the ordinary course of trade. [00:32:34] Speaker 05: Do you think there's any meaningful difference between the phrase ordinary course of business and ordinary course of trade? [00:32:40] Speaker 00: Your Honor, I do not see a significant difference between those. [00:32:44] Speaker 00: I do not know why one was amended and the other was not. [00:32:47] Speaker 00: I would say that the term ordinary course of trade, while it does not appear in the cost of production buildup section, does appear in the section on the sales below cost tests, that they have to disregard and only rely on those sales that are in the ordinary course of trade. [00:33:04] Speaker 05: Thank you. [00:33:04] Speaker 05: Thank you. [00:33:06] Speaker 05: The cases will be submitted.