[00:00:00] Speaker 05: Case is number 19, 2444, New Image Global Inc. [00:00:04] Speaker 05: versus United States. [00:00:13] Speaker 03: Mr. Pollack. [00:00:15] Speaker 03: Good morning. [00:00:16] Speaker 03: My name is Elon Pollack. [00:00:17] Speaker 03: I represent the appellate New Image Global in connection with this appeal. [00:00:22] Speaker 03: As a preliminary matter, I'd like this court to reverse and remand this case back to the CIT for a number of reasons, which were stated both in our opening brief and our reply brief. [00:00:34] Speaker 03: We think that the court committed reversible error by making findings of fact that are, A, not supported by the record, and, two, as the trial court and a motion for summary judgment, it's impermissible to make such findings of fact. [00:00:49] Speaker 03: And the reality is that there are genuine issues of material fact if the court's making those findings, and that's reversible error. [00:00:57] Speaker 03: But basically, this case really concerns the application of a regulation [00:01:01] Speaker 03: 19 CFR 158.7, which requires the government when weighing products like our client's product that they account for evaporation, which was not the case here. [00:01:14] Speaker 03: Beginning in 1989 with the adoption of the Harmonized Tariff Code, products like our... What do you mean it requires the government to account for evaporation? [00:01:24] Speaker 04: The specific regulation says... Just factually, what do you mean? [00:01:29] Speaker 03: What I mean is when our client's product is imported, it's in a sealed package. [00:01:35] Speaker 03: It suffers from dissipation and evaporation inside the package from the time it's manufactured to the time it's imported into the United States. [00:01:44] Speaker 03: When you open the package, volatile gases evaporate. [00:01:47] Speaker 03: They disappear from the package itself. [00:01:50] Speaker 03: And the specific regulation requires that when we're dealing with a natural product such as the tobacco, that the government is required to make an allowance for the weight to the extent of the reduction by the loss. [00:02:04] Speaker 05: But how does that support the idea that you should measure it 24 hours later when you have additional evaporation after the thing has been removed from the package? [00:02:16] Speaker 03: Well, let me just suggest the following. [00:02:19] Speaker 03: Number one, that was the lab's procedure. [00:02:23] Speaker 03: And I was about to say that since 1989, customers are required to assess duties based upon the weight of a product. [00:02:30] Speaker 03: And according to the Janet Ayers memo, that was their normal process. [00:02:35] Speaker 03: And she asked them to deviate from their normal process and come up with a different procedure to weigh the tobacco. [00:02:41] Speaker 03: So the idea is waiting. [00:02:44] Speaker 04: Is this a factual question or a legal question? [00:02:47] Speaker 04: What's the proper time and the proper product to weigh? [00:02:50] Speaker 03: Well, that was the second point I wanted to make, is that we're going to ask this court to either remand for a trial on merits because of some of these factual issues that came up in this case, or to make a definitive statement about the how and the when to weigh the product. [00:03:05] Speaker 03: There's no direction. [00:03:06] Speaker 03: There are no rules. [00:03:07] Speaker 03: There's nothing. [00:03:09] Speaker 00: Isn't the issue here [00:03:11] Speaker 00: When should the product be weighed? [00:03:13] Speaker 00: At what point? [00:03:14] Speaker 03: Well, not when it should be weighed, but once you determine when it should be weighed, how it should be weighed. [00:03:20] Speaker 00: Okay, put the how to the side. [00:03:22] Speaker 00: Let's get him back to the when. [00:03:24] Speaker 00: Isn't it clear that that valuation of imported goods is made at the point of importation? [00:03:32] Speaker 03: The specific [00:03:37] Speaker 03: Language that customs relied on was in the TTB ruling that said released from customs custody and Released from customs custody in my experience has two definitions One is an electronic release from the system saying you're free to pick up your goods And then the second is when you actually pick up so that's still not clear either So in terms of when that that that becomes a factual issue Well, you're saying that it all would be weighed after it's removed from the package [00:04:07] Speaker 05: I understand that argument, but I have no idea how that supports the idea that it should be measured 24 hours later. [00:04:16] Speaker 03: Well, whether it's 24 hours later or some other point in time, Dr. Spingarn did it in 16 hours and came up with the... Why isn't the right answer immediately when it's removed from the package? [00:04:28] Speaker 03: Because it's continuing to dissipate, and if you look at the government's... So what? [00:04:32] Speaker 04: Your product is a wrapper [00:04:35] Speaker 04: that includes these aerosols, and they're not just there for moisture, they're there for flavoring. [00:04:41] Speaker 04: It's part of the product, right? [00:04:42] Speaker 04: That's correct. [00:04:43] Speaker 04: Right? [00:04:43] Speaker 04: So if the point is to calculate the excise tax on the weight of the product, then why do you wait until part of the product has evaporated? [00:04:55] Speaker 03: Well, number one, the government cites to USP 1251. [00:04:59] Speaker 03: And USP 1251 specifically states that you weigh a product and you record the weight when it reaches a stable point, specifically. [00:05:10] Speaker 04: Well, let's say we disagree with that as a matter of law, that you can't. [00:05:15] Speaker 04: These products contain the aerosols. [00:05:17] Speaker 04: Correct. [00:05:18] Speaker 04: And that that is something that, as a matter of law, should be included in the weight. [00:05:24] Speaker 03: No, no, no. [00:05:25] Speaker 04: I don't want to argue this. [00:05:26] Speaker 04: This is part of the hypothetical now. [00:05:28] Speaker 04: That's the legal definition we come up with, which is [00:05:33] Speaker 04: product that you're importing is a tobacco wrapper that has been treated with these aerosols to add flavor and what Customs needs to do is get the most get a suit I don't want to say the most accurate because there's no way Right that we can get some kind of most accurate here It's because the aerosols are so volatile, but the customs job is to get a suitable weight for that product upon importation by which I mean [00:06:01] Speaker 04: you pull it out of the package and weigh it right out of the package. [00:06:04] Speaker 04: Okay, that's my legal definition of when this should be weighed. [00:06:10] Speaker 04: Now then, where do we go from there with the Court of International Trade Judgment? [00:06:16] Speaker 03: I'd like to answer that. [00:06:18] Speaker 03: Specifically, you pull the product out of the package, and according to USP 1251, you put it on the receiver. [00:06:25] Speaker 03: And it's fluctuating. [00:06:27] Speaker 03: There's no stable or steady weight. [00:06:29] Speaker 03: And the customs lab person, Sheila Eng, even testified that you need to have a steady or stable weight in order to take an accurate reading. [00:06:36] Speaker 03: They waited 24 hours. [00:06:38] Speaker 04: You're not going to help yourself by trying to argue for the 24-hour testimony. [00:06:43] Speaker 04: So I want to know, given the volatility here and the differing methods proposed, which one is [00:06:54] Speaker 04: And I understand there are factual issues here, too. [00:06:57] Speaker 04: But how do we come up with if we're going to remand this to the CIT if we need to, what we tell her she has to decide as a matter of fact? [00:07:06] Speaker 03: That customs can weigh the product out of the wrapper and when it reaches a steady weight. [00:07:12] Speaker 03: That's how you determine what the weight is. [00:07:15] Speaker 04: No, but let me just emphasize. [00:07:16] Speaker 04: My hypothetical is does not allow for delay. [00:07:21] Speaker 04: You weigh the product out of the wrapper. [00:07:25] Speaker 04: And so as a matter of law, what should be taxable here is the product as it exists immediately out of the wrapper. [00:07:32] Speaker 03: The fact is, if you have evaporation, that cannot be an essential ingredient of the product. [00:07:39] Speaker 05: You're fighting the hypothetical. [00:07:41] Speaker 05: I beg your pardon? [00:07:41] Speaker 05: You're fighting the hypothetical. [00:07:43] Speaker 05: I think the question that Judge Hughes is asking you is, if in fact the legal rule requires that the weight be determined immediately after it's removed from the package without any delay, [00:07:54] Speaker 05: Without any weight for stabilization, do you lose your case? [00:08:00] Speaker 03: I don't think so. [00:08:01] Speaker 03: Because number one, you have the regulation that says that they have to allow for evaporation. [00:08:07] Speaker 04: No, no, no. [00:08:08] Speaker 04: You're still fighting the hypothetical. [00:08:10] Speaker 04: Answer the hypothetical. [00:08:12] Speaker 03: Because we don't lose the case because the weight that the government achieved doing the method that it used is greater than the factory weight. [00:08:20] Speaker 03: It's not possible. [00:08:22] Speaker 04: Okay, so I have a little bit of an issue with that. [00:08:25] Speaker 04: How do we know your factory weight is accurate? [00:08:28] Speaker 03: The government deposed the factory manager who testified specifically about the processes of how they do it. [00:08:35] Speaker 03: They weighed at least 250 wrappers every single day, and they recorded them daily. [00:08:41] Speaker 04: They were weighed in a vacuum, right? [00:08:45] Speaker 03: They used the same Ohouse scale. [00:08:47] Speaker 04: They were weighed in a vacuum on the Ohio scale, right? [00:08:51] Speaker 04: Wouldn't the vacuum immediately pull out all the aerosols? [00:08:55] Speaker 03: I'm trying to think. [00:08:59] Speaker 03: I remember seeing the scale, but I don't believe it does. [00:09:05] Speaker 03: And it would just simply weigh the net material. [00:09:08] Speaker 04: Can I just ask you to look at Appendix 366? [00:09:10] Speaker 04: Yes, Your Honor. [00:09:20] Speaker 04: And this is the 30B6 of Felix Hernandez. [00:09:24] Speaker 04: And who is that? [00:09:25] Speaker 03: He was the factory manager in Mexico. [00:09:28] Speaker 04: He's testifying about the weighing method. [00:09:32] Speaker 04: And he's talking about the Ohio scale. [00:09:34] Speaker 04: But down about line 16, he says, the scale is protected. [00:09:40] Speaker 04: It's in an acrylic box to create a vacuum and so that it can be precise as possible. [00:09:45] Speaker 04: I see that. [00:09:46] Speaker 04: Right. [00:09:47] Speaker 04: Yes. [00:09:48] Speaker 04: If it's in a vacuum, isn't the vacuum going to expedite the dissipation of the aerosols? [00:09:56] Speaker 03: I'm not a scientist. [00:09:57] Speaker 03: I really don't know the answer to that. [00:09:58] Speaker 04: I don't know the answer to it either, but you're positing this factory weight as some kind of reliable weight that should be weighed against the government's weight. [00:10:06] Speaker 04: But what if it's not reliable either? [00:10:08] Speaker 04: This is not saying it doesn't need to go back. [00:10:11] Speaker 04: This sounds to me like possibly some issues that need to be resolved, although I'm not super convinced. [00:10:17] Speaker 04: yet that we've gotten there. [00:10:19] Speaker 04: But it doesn't sound like you can just point to this and say this is good enough, because this one may be extracting the aerosols too, which under my hypothetical you don't get to do. [00:10:29] Speaker 04: And it's also not weighing it at the time of importation. [00:10:32] Speaker 03: I agree. [00:10:34] Speaker 03: And even the government concedes that the tobacco would lose weight. [00:10:39] Speaker 03: from the time it was manufactured. [00:10:41] Speaker 04: So it's going to be some loss of weight. [00:10:43] Speaker 04: Yeah, but maybe the loss of weight was even greater at the factory under your weighing method. [00:10:49] Speaker 03: Well, then we would be entitled to even a more favorable decision if it's less. [00:10:54] Speaker 04: No, you wouldn't. [00:10:55] Speaker 04: If your weights aren't accurate because they've already excluded the aerosols that we think as a matter of law should be included, then your weights aren't relevant. [00:11:07] Speaker 03: it would be impossible to weigh the evaporation and the escaping gases. [00:11:13] Speaker 03: You've got a sealed package, and you're asking the government to assess the excise tax based on the complete package, including the escaped gases. [00:11:22] Speaker 03: There's no support for the statement that says that these escaping gases are essential components to the product. [00:11:30] Speaker 05: But let's assume we reject that notion. [00:11:35] Speaker 05: Our view is that as a legal matter, you weigh the product immediately after it's removed from the packet, not in a vacuum, but in ordinary circumstances. [00:11:48] Speaker 05: It seems to me that your best argument is, well, there's a fact issue here as to whether the factory weight should be relied on as opposed to the government's indirect method. [00:12:03] Speaker 05: Because the government's indirect method [00:12:05] Speaker 05: weighs the gases that would escape immediately on opening the package. [00:12:10] Speaker 05: That's your best argument. [00:12:12] Speaker 05: I'm not sure you made it in your brief, but that's your best argument. [00:12:17] Speaker 03: I'd like to reserve the balance of my time, unless the court has additional questions. [00:12:22] Speaker 04: Well, can you respond? [00:12:24] Speaker 04: Because I mean I read your briefs and it seemed to me that your briefs are all in for this post 24-hour period Let's just assume you're not getting that that you're not getting the weight that that customs did with that first test 24 hours later and so our job is to figure out What's the proper time period? [00:12:45] Speaker 04: what as a matter of law has to be weighed, and whether there's a material question of fact, not just a dispute, but a material question of fact that renders the CIT's summary judgment deficient. [00:12:59] Speaker 04: So we've already decided, again, hypothetically, but we've already decided 24 hours after opening is not correct as a matter of law. [00:13:09] Speaker 04: As a matter of law, the time period is immediately after opening. [00:13:13] Speaker 04: And then we're down to [00:13:15] Speaker 04: there's a direct method and an indirect method, and then you're saying, I guess, that neither of them are good because they're variant from the fact-free method, but that wasn't weighed at the time of opening. [00:13:26] Speaker 04: So what's the question of fact under that legal definition of when it should be weighed that we would tell Judge Rastani she needs to decide? [00:13:40] Speaker 03: Well, again, not to repeat myself, but it seems to me that when you pull the tobacco out of the package and put it on the scale to take a reading, it has to hit a stable point. [00:13:54] Speaker 03: You get on the scale in the morning, it goes up. [00:13:56] Speaker 03: I'm confused. [00:13:59] Speaker 04: So if you can't measure it, [00:14:02] Speaker 04: immediately from a removal from package directly, because it's just not stable, then why isn't customs resort to a direct, indirect method the best approximation of what we term the legal correct time for weighing it? [00:14:19] Speaker 03: Because it's to the exclusion of the regulation. [00:14:21] Speaker 03: The regulation requires that they make an adjustment for the evaporation. [00:14:25] Speaker 03: And the indirect method includes that in the gross weight that it calculates. [00:14:32] Speaker 05: All right. [00:14:33] Speaker 05: Well, we'll give you two minutes for a bottle. [00:14:35] Speaker 03: Thank you, Your Honor. [00:14:37] Speaker 03: Should I just remain here? [00:14:39] Speaker 05: We should sit down. [00:14:41] Speaker 05: We'll hear from Ms. [00:14:43] Speaker 05: Josie. [00:14:47] Speaker 02: Good morning, Your Honor. [00:14:51] Speaker 02: We are pleased to support the Exxon Statute here, the product that is taxed here, which is... Okay, but let's get to the heart of it. [00:14:59] Speaker 05: Wait, wait, wait, wait, wait, wait. [00:15:02] Speaker 05: You have to listen to the questions. [00:15:03] Speaker 05: The technology is not very conducive for you to hear what we're saying. [00:15:09] Speaker 05: So you have to try to focus on that. [00:15:12] Speaker 05: Suppose that you're right, that the product has to be measured immediately on importation and that it has to be measured immediately after being taken out of the package with the result that some of the volatile gases will escape. [00:15:30] Speaker 05: at the moment that it's removed from the package, but you don't have to wait for stabilization or 24 hours to do the measurement. [00:15:37] Speaker 05: The measurement should be done immediately after it's removed from the package and available for use by the consumer. [00:15:44] Speaker 05: Let's assume that. [00:15:46] Speaker 05: If that's correct, isn't there a fact dispute here as to whether the indirect method weighs too much because it includes the gases that escape immediately on package opening? [00:16:00] Speaker 05: And that there's an argument that a fact issue as to whether the factory weights, which are taken after the product was immediately removed from the package, are a more reliable method, even though they're taken in the vacuum. [00:16:17] Speaker 05: So my question is, isn't there a fact issue here as to which measurement is correct, the government's indirect method or the factory weight method? [00:16:31] Speaker 02: There is not a fact question with respect to that because, and I'm going to quote page 36 of our response brief, the factory weight that New Image does is done by directly weighing the wrap upon removal from the package, so it's not a stable weight. [00:16:52] Speaker 02: What New Image does at the factory is take the wrap out, put it immediately on the balance scale, so it's fluctuating. [00:16:59] Speaker 02: not in accordance with any of my methodology, which is different from how customers did with the indirect method. [00:17:04] Speaker 05: Wait, wait, wait. [00:17:06] Speaker 05: You have to pay attention. [00:17:09] Speaker 05: You're fighting the hypothetical also. [00:17:11] Speaker 05: You're saying that the weight immediately upon removal by the package is not the right weight. [00:17:16] Speaker 05: I'm asking you to assume that is the right way to do it. [00:17:21] Speaker 05: Isn't there a fact issue as to what the weight is upon immediate removal from the package? [00:17:29] Speaker 02: I'm not sure I understand the question then. [00:17:32] Speaker 02: You can please repeat. [00:17:35] Speaker 05: I'm asking you to assume that the correct way to measure this is what's the weight when it's immediately removed from the package, okay? [00:17:44] Speaker 05: And what I'm asking you is on that assumption, isn't there a fact issue as to whether the government's indirect method or the factory method more accurately arrives at that weight? [00:18:00] Speaker 02: I don't, that's not a fact question, because it's a question of reliable methodology that's being used, which is, which is not, which is, is it a reliable methodology? [00:18:13] Speaker 02: That's what the question would be then. [00:18:15] Speaker 02: Is customs methodology using the indirect method, is that reliable? [00:18:20] Speaker 02: And in a court is, and based on a scientific methodology, versus is newer images factory weight and how it's conducted, is that, [00:18:29] Speaker 02: based on a scientific methodology, and new images factory weight is not, because it's not a stable weight. [00:18:35] Speaker 02: It's not in accordance with any scientific methodology. [00:18:38] Speaker 05: And I point to the... What do you mean stable weight? [00:18:44] Speaker 05: I mean, that sounds as though you're saying, we have to wait till the weight stabilizes 24 hours later. [00:18:51] Speaker 05: It sounds as though when you say that, you're agreeing with them that you have to measure a stable weight [00:18:57] Speaker 05: rather than the weight immediately on package opening. [00:19:03] Speaker 02: What I mean by stable weight is what the USP-1251 for weighing products, what that procedure requires is in order to get an accurate weight, it has to be a steady or stable weight. [00:19:17] Speaker 02: And when you immediately open the wrap from the packaging and you put it on the scale, it fluctuates because of the dissipating [00:19:26] Speaker 02: Ingredients it fluctuates so new images factory weight is not a stable weight that it captures because it's fluctuating and That's sorry. [00:19:37] Speaker 04: Can you just can you just can you just stop? [00:19:39] Speaker 04: I know there's lag in the microphone. [00:19:41] Speaker 04: That's the reason Customs doesn't use a direct method either right? [00:19:47] Speaker 04: That's correct because if that direct method was was scientifically sound [00:19:54] Speaker 04: for the factory, it would also be scientifically sound in customs lab. [00:19:59] Speaker 04: And that would be a more legally correct moment in time because it would be moving it in the package, from the package after importation. [00:20:09] Speaker 04: But your view is that weight can't be measured in the direct method at all. [00:20:17] Speaker 04: It's just not possible. [00:20:18] Speaker 04: So my question is, what happens [00:20:21] Speaker 04: when we're in a situation where it sounds like there's no scientific way to get an actual reliable method of the weight of this product as soon as it's removed from the package. [00:20:37] Speaker 04: Where do we go from there? [00:20:41] Speaker 02: Customs indirect method we submit is a reliable and scientifically valid [00:20:47] Speaker 02: way to weigh this wrap because it's done by subtraction. [00:20:50] Speaker 05: How can that be when there are gases in the package that aren't part of the product that are released when the thing is opened and your indirect method is weighing those gases that escape upon opening? [00:21:05] Speaker 02: The gases, again, there's nothing, the indirect method, what it's doing is taking the stable weight of the packaging [00:21:15] Speaker 05: No, the indirect method is weighing the gases that immediately escape on opening the package, right? [00:21:25] Speaker 02: It's not weighing that. [00:21:27] Speaker 02: It's taking the wrapper's weight. [00:21:29] Speaker 02: There's nothing immediately. [00:21:31] Speaker 02: Whatever's in the wrapper, what's on the wrapper, what the trial court defined as additives, that's what the product is. [00:21:40] Speaker 02: It's suitable for that. [00:21:42] Speaker 02: It's including [00:21:43] Speaker 02: all of those ingredients for a reason, because that is what the product is intended to be for. [00:21:47] Speaker 05: You're not answering my question. [00:21:50] Speaker 05: When you do the indirect method, you are measuring the gases in the envelope that are not part of the product and that escape from the envelope when it is open. [00:22:03] Speaker 02: Right? [00:22:04] Speaker 02: There's no factual support that there's any moisture or anything that's [00:22:12] Speaker 02: in the product, the wrapper itself, that immediately escapes. [00:22:16] Speaker 02: There's no support. [00:22:17] Speaker 02: New Image has not pointed to any factual evidence to that point. [00:22:23] Speaker 02: There's nothing that's in the moisture. [00:22:25] Speaker 02: It's unsupported that there's droplets in the packaging or anything like that that shouldn't be part of this wrapper. [00:22:32] Speaker 02: There's no support for that. [00:22:34] Speaker 04: Can I stop you there? [00:22:36] Speaker 04: Even if there's droplets actually in the package, that would be subtracted out when you weigh the package. [00:22:42] Speaker 04: There seems to be, we're talking about some hypothetical notion that we're not sure exists, but it seems logical to us that some of the aerosols may have aerosolized into a gas. [00:22:55] Speaker 04: And when you weigh the whole package before opening, that's still part of the weight. [00:23:00] Speaker 04: And so, yes, the droplets that have evaporated off the remain in the package get subtracted out from the weight. [00:23:08] Speaker 04: But if there's anything, any measurable weight to [00:23:12] Speaker 04: already aerosolized gas in the package, that can't be included in your method, right? [00:23:21] Speaker 04: You're just saying you don't think there's any proof that that exists. [00:23:24] Speaker 04: But if it did exist, hypothetically, your method wouldn't be capturing that. [00:23:33] Speaker 02: Let me make it as clear as possible. [00:23:39] Speaker 04: When you weigh the whole package, let's say what's in the package is, or the whole thing is the package and the straw, the wrapper, and then there is some kind of gaseous form in there and that that's included in the weight. [00:23:56] Speaker 04: The indirect method [00:23:57] Speaker 04: accounts for the packaging the straw any droplets that remain in the package because that gets weighed with the package and also the you know and by deduction the weight of tobacco but those aerosolized gases if you open it and something comes out that's not getting captured by the indirect method if that existed right probably I mean I'm not sure that's on the record to say that you know I'm not I'm not [00:24:25] Speaker 02: a lab technician that would know that offhand here. [00:24:27] Speaker 02: But again, this is something that was never raised below or even on appeal. [00:24:34] Speaker 02: New Image has not supported any of this with any kind of factual assertion. [00:24:38] Speaker 02: Their whole argument has been a moving target since the inception of this case. [00:24:43] Speaker 02: Well, I understand that. [00:24:44] Speaker 04: Let me just make it clear. [00:24:50] Speaker 04: What I'm concerned here [00:24:51] Speaker 04: is that this was made as a summary judgment decision as a matter of law, and not that there's a bunch of methods out here. [00:25:00] Speaker 04: And as a matter of fact, there's just the best method that's most scientifically accurate, and the closest is your method. [00:25:12] Speaker 04: I don't think that the court made that decision as a matter of fact, and it seems like that's a factual question. [00:25:20] Speaker 02: I would submit that the court did make that decision. [00:25:23] Speaker 04: I mean, there was no other... No, no, but... You're not arguing that she made that as a matter of fact, because she did this on summary judgment. [00:25:32] Speaker 04: If she had actually said, as a matter of fact, I find all of what I just said, we'd be on an entirely different posture here. [00:25:39] Speaker 04: We'd be reviewing her for clear error. [00:25:42] Speaker 04: The question is, did their expert and the other evidence kick up enough dust to show that maybe yours is not the best? [00:25:52] Speaker 04: That there is a genuine issue of material fact as to whether the factory weight versus [00:25:59] Speaker 04: the indirect method is the best. [00:26:02] Speaker 04: I understand this wasn't well briefed because your opponent is not really arguing for the factory weight. [00:26:09] Speaker 04: They're arguing for the post 24 hours weight, which seems to me legally wrong as a matter. [00:26:15] Speaker 04: So the briefing that concentrates on that is not very helpful, but it still doesn't seem like [00:26:23] Speaker 04: as a matter of law, you win because it seems like that there's still some dispute as a matter of fact on that. [00:26:31] Speaker 04: It may come out the same way. [00:26:32] Speaker 04: Judge Rossani may say, well, this is closer because of X reasons than the factory weight because that's unreliable. [00:26:43] Speaker 04: But she didn't get to that point and make those factual findings. [00:26:46] Speaker 04: And I get also why she was there because they weren't arguing that. [00:26:50] Speaker 04: They were arguing for the [00:26:51] Speaker 04: 24-hour period but isn't that a problem with this case? [00:26:57] Speaker 02: You know, I would say that they haven't argued that and it is waived at this point. [00:27:01] Speaker 02: That would be our submission that they waive those arguments and you know, the court does not even need to go there. [00:27:06] Speaker 02: That aside, the factory waive, it's undisputed that it's not based on any scientific methodology. [00:27:13] Speaker 02: So remand is not, I submit, would not do anything there because it's not based, you know, the methodology that is used [00:27:22] Speaker 02: or the protocol that's used to weigh these wrappers would be analyzed under Daubert and whether it's a reliable scientific methodology. [00:27:30] Speaker 02: Here, the indirect method was the factory weight is not. [00:27:34] Speaker 05: So this means no factual... Who has the burden of proof here? [00:27:40] Speaker 02: Or which method should be used? [00:27:43] Speaker 05: No, as to what the weight is. [00:27:46] Speaker 05: Who has the burden of proof to establish the correct weight? [00:27:50] Speaker 02: Well, New Image has the burden to establish the weight. [00:27:54] Speaker 02: It has the burden to declare the proper weight here by law, which it didn't do to begin with. [00:28:00] Speaker 02: It declared it 0.75 weight. [00:28:03] Speaker 02: So it didn't even do that to begin with. [00:28:05] Speaker 02: New Image has the burden as the importer to declare the proper weight. [00:28:10] Speaker 02: And they did not. [00:28:10] Speaker 05: They had the burden approved in a trade court proceeding to establish the weight. [00:28:15] Speaker 05: They claim x weight when they're importing. [00:28:19] Speaker 05: Do they have the burden to establish that weight is correct, or do you have the burden to show it's wrong? [00:28:25] Speaker 02: They have the burden to show that's the rate of their product that they're importing. [00:28:30] Speaker 02: And again, what they declared was 0.75. [00:28:33] Speaker 02: That's not even one they ultimately ended up wanting relief on. [00:28:38] Speaker 04: Yes, but when Customs rejects their declared weight and comes up with their own weight, [00:28:44] Speaker 04: Isn't it your burden, and I understand there's some kind of presumption of correctness there, but isn't there, it's your burden to prove that your alternative weight is the correct one, right? [00:28:57] Speaker 02: Yes, it's a burden to prove that it's, and the court to have looked at, which it did, whether that's a scientifically based weight and whether it's in accordance with law. [00:29:06] Speaker 02: It's in accordance with law because it meets the statutory definition of rolling over tobacco. [00:29:11] Speaker 02: And it's based on a scientific methodology [00:29:14] Speaker 02: in accordance with US 1251. [00:29:16] Speaker 04: Right, but she didn't find that as a matter of fact. [00:29:20] Speaker 04: I get all your arguments, and also there doesn't seem to be any genuine issue that the other methods aren't based upon sound scientific methodology either, but she didn't specifically find that the method you used was scientifically sound. [00:29:38] Speaker 04: Doesn't she have to do that as a matter of fact? [00:29:40] Speaker 04: If they dispute, if they say there's a genuine issue, a material fact about whether this is a scientifically sound method, and she says there is no genuine issue. [00:29:53] Speaker 04: If we find there's a genuine issue, then I know it may seem pointless to send it back to her since she's the same person that's going to make the call, but she has to make it as a matter of fact, not as a matter of law, doesn't she? [00:30:06] Speaker 02: No, I think it has to be analyzed legally, whether it's [00:30:10] Speaker 02: under Daubert whether it's sound and scientifically valid, which she did. [00:30:17] Speaker 02: She looked at the factors. [00:30:19] Speaker 05: She looked at... No, that's not true. [00:30:20] Speaker 05: The Daubert ruling is not binding on the merits. [00:30:23] Speaker 05: All of Daubert ruling is that the evidence can come in. [00:30:27] Speaker 05: It doesn't mean that it has to be believed. [00:30:30] Speaker 05: And the fact that you got past Daubert with your methodology doesn't mean that that's correct as a matter of law, or that it has to be as [00:30:39] Speaker 05: taken that way. [00:30:41] Speaker 05: They're entitled to argue at the trial, if there is a trial, that your methodology is wrong. [00:30:47] Speaker 05: It produces a wrong result. [00:30:51] Speaker 02: I would submit, even this court's precedent under Libas, the trial court has broad discretion in looking at whether the technique or the protocol that's used is reliable. [00:31:08] Speaker 02: that's what this court held in LaBosse. [00:31:10] Speaker 04: Sure, but that's all a factual matter. [00:31:14] Speaker 04: Look, I mean, I think she's going to come up with the exact same thing, but that's all should have been found as a matter of fact, not as a matter of summary judgment. [00:31:22] Speaker 04: And again, this argument that [00:31:28] Speaker 04: at least we're presenting to you, doesn't seem like it was crystallized and made clear by your opponent. [00:31:34] Speaker 04: And I'm not even sure if this is an argument they are willing to pursue because it sounds like they just want the 24-hour period, which I think she was correct to reject as a matter of law. [00:31:47] Speaker 04: But to the extent we find that the appropriate time is right after it's removed from the packaging, [00:31:56] Speaker 04: it is unclear to me that there's not a genuine issue about whether Cubson's method is scientifically reliable. [00:32:06] Speaker 04: And if there is a genuine issue, it doesn't have to go back for a trial. [00:32:15] Speaker 02: I would submit that there isn't a general issue. [00:32:20] Speaker 02: You know, the crew trial court looked at the validity of the system. [00:32:23] Speaker 02: Again, it's something that a new image never raised [00:32:25] Speaker 02: and should be waived at this point. [00:32:27] Speaker 02: So that's another reason why this court, I submit, is not compelled to send this back to the trial court. [00:32:34] Speaker 02: I mean, women should never argue this. [00:32:36] Speaker 02: And they still have not right now. [00:32:38] Speaker 02: Yes, Your Honor. [00:32:39] Speaker 00: Yes. [00:32:40] Speaker 00: This case came to the CIT by way of a protest, correct? [00:32:46] Speaker 02: That's correct. [00:32:47] Speaker 00: So what's being challenged here [00:32:50] Speaker 00: What appellant is challenging before the CIT is custom's decision on the protest. [00:32:59] Speaker 01: That's correct. [00:33:00] Speaker 00: So at the CIT, it's up to the appellant. [00:33:03] Speaker 00: The burden is on the appellant to show that custom's protest decision was incorrect. [00:33:11] Speaker 01: That's correct. [00:33:11] Speaker 00: And it seems to me the only argument that the appellant lodged at the CIT deals with methodology. [00:33:19] Speaker 00: not accuracy of weight, but methodology, the methodology that customers use. [00:33:26] Speaker 02: That's correct. [00:33:26] Speaker 02: I mean, it's changed throughout. [00:33:28] Speaker 02: I mean, in the complaint, it was one theory. [00:33:30] Speaker 02: Again, your image moved for some reason. [00:33:33] Speaker 00: And Judge Rustani's decision was based on whether the methodology that customers employed was reasonable. [00:33:44] Speaker 00: And this is under the Adabra ruling. [00:33:49] Speaker 00: So in your view, was it ever the issue whether one weight is more scientifically precise than the other, whether that was the issue? [00:34:00] Speaker 02: No, that was definitely never the issue before the trial court. [00:34:03] Speaker 02: It hasn't been the issue on appeal here either. [00:34:06] Speaker 00: Correct. [00:34:07] Speaker 00: The appeal here before us too is whether the methodology employed by customs in the weighing process was reasonable. [00:34:17] Speaker 00: not whether it produces a scientifically precise weight, but whether the methodology itself is reasonable. [00:34:25] Speaker 01: Correct. [00:34:28] Speaker 05: I would agree with that. [00:34:29] Speaker 05: It can't be that all you have to show is that you've got a reasonable method if it produces an incorrect result, right? [00:34:40] Speaker 02: It's reliable. [00:34:41] Speaker 02: If it's reliable, it's correct. [00:34:45] Speaker 02: It's accurate. [00:34:47] Speaker 02: That's what you're looking at the reliability for. [00:34:49] Speaker 02: Is there anything that shows that this is not the proper rate or proper weight that used to be used? [00:34:55] Speaker 02: That's why you're looking at the reliability of it. [00:35:00] Speaker 02: All right. [00:35:01] Speaker 02: Of the methodology. [00:35:02] Speaker 05: I think we're out of time. [00:35:03] Speaker 02: Sure. [00:35:04] Speaker 05: Thank you. [00:35:05] Speaker 02: Thank you, Your Honors. [00:35:06] Speaker 05: Mr. Pollack, you have two minutes. [00:35:18] Speaker 03: I don't know whether I should start from the back and work forward. [00:35:20] Speaker 04: Well, I would like you to start with what we focused in on, if there is a material issue of whether this was customs indirect method as a proper methodology, and it's an issue of fact that the court needs to decide, how you would, and again, I know you're arguing other things, but just assume you've lost all those other things, what would you envision a remand to look like? [00:35:47] Speaker 04: I mean, because it sure sounds to me like maybe this indirect method isn't going to give you the most scientifically precise method or weight, but that there isn't any other one that gives you a precise scientific weight either. [00:36:07] Speaker 04: So then doesn't it resolve into the question of is custom's decision [00:36:13] Speaker 04: correct in using a methodology that is reasonable as a matter of law, and there's no dispute of fact about how it's applied. [00:36:22] Speaker 03: Well, again, as counsel points out, it's reliable, not necessarily reasonable, what's important. [00:36:29] Speaker 03: And the fact is that we submit that the customs indirect method wasn't valid because it never accounted for the evaporating materials or the other ingredients. [00:36:40] Speaker 03: Okay, I get that. [00:36:40] Speaker 04: So let's agree that that's a question of fact that needs to be resolved. [00:36:45] Speaker 04: How do you envision the remand to look like? [00:36:48] Speaker 03: that perhaps the lower court, if this court is not willing to make some determination about what would be a period of time within which to do? [00:36:58] Speaker 04: No, the period of time is immediately upon removal from the package. [00:37:03] Speaker 04: That's the period of time. [00:37:05] Speaker 04: And so then the question is, if Custom's method isn't a scientifically reasonable way of getting at it, is there any other evidence in the record [00:37:16] Speaker 04: that would be. [00:37:18] Speaker 04: I mean, it doesn't sound like it to me. [00:37:20] Speaker 03: Well, let me just say one thing. [00:37:23] Speaker 03: We're not necessarily married to the 0.71 that the government came up with in test number one. [00:37:30] Speaker 03: We're just simply saying that's the test that they performed, and that's the result they got. [00:37:34] Speaker 05: Do you want a chance to show that the factory weight is the right way to do it? [00:37:39] Speaker 05: I beg your pardon, sir? [00:37:39] Speaker 05: Do you want the chance on a remand to argue for the factory weight? [00:37:45] Speaker 03: as opposed to a wait after importation? [00:37:48] Speaker 05: As opposed to the government's indirect method? [00:37:51] Speaker 03: Certainly. [00:37:52] Speaker 04: Where did you ever make that argument below? [00:37:54] Speaker 03: Well, we've not argued that point about the factory wait, because the factory wait is taken outside the United States before importation. [00:38:01] Speaker 03: So it would be improper to argue the factory wait at that point. [00:38:06] Speaker 04: Also, isn't the government correct that the way you measured at the factory is also the direct method that customs was using and determining they couldn't because there was no stable weight? [00:38:17] Speaker 03: Well, it's the same methodology they used in lab test one. [00:38:20] Speaker 03: Yes, it's the same test. [00:38:22] Speaker 03: It was no different. [00:38:23] Speaker 03: It was the same scale, same vacuum. [00:38:25] Speaker 05: It is different in the sense that the government test one waited 24 hours. [00:38:31] Speaker 03: The factory test is immediately after opening. [00:38:33] Speaker 03: And when the factory did it at that time, it was .864 in 2012. [00:38:37] Speaker 03: And when the Customs did it, they came up with .71. [00:38:41] Speaker 03: So there was a representative loss of weight by the passage of time. [00:38:45] Speaker 04: No, no, no. [00:38:47] Speaker 04: Please stop talking about the .711. [00:38:49] Speaker 04: So what I was trying to ask is, you're [00:38:53] Speaker 04: You're using at your factory a direct method before importation, right? [00:38:58] Speaker 04: Yes, sir. [00:38:59] Speaker 04: Customs tried to use that direct method also and came up and determined there was no stable weight that could be measured on a direct method after removing it from a package, correct? [00:39:13] Speaker 04: Let's assume I'm correct. [00:39:15] Speaker 04: I've read the record. [00:39:16] Speaker 04: This is what I think they did, that there's tables that show indirect and direct. [00:39:22] Speaker 03: I thought this was turned off, I'm sorry. [00:39:24] Speaker 04: So if that direct method that you use in your factory pre-importation is okay, why wouldn't that direct method post-importation be okay? [00:39:34] Speaker 03: Could you repeat the question, sir? [00:39:36] Speaker 03: I apologize. [00:39:37] Speaker 04: Yours is a direct method at your factory, right? [00:39:39] Speaker 04: Yes, sir. [00:39:40] Speaker 04: And Customs did a direct test also. [00:39:42] Speaker 04: They just decided not to use it. [00:39:45] Speaker 04: Correct. [00:39:45] Speaker 04: Because they found it not reliable. [00:39:49] Speaker 03: Well, I don't know that... No, no, no, no. [00:39:52] Speaker 04: Don't argue with me. [00:39:53] Speaker 04: That's a matter of fact. [00:39:55] Speaker 04: We're going to waste too much time. [00:39:56] Speaker 04: We're already way over it. [00:39:57] Speaker 04: As a matter of fact, they did an indirect and a direct upon opening the package. [00:40:02] Speaker 04: They found the direct method unreliable. [00:40:04] Speaker 04: Wouldn't that mean that if you think the direct method of the factory is good enough, then that should evade the method customs use? [00:40:12] Speaker 04: Or, alternatively, that they're both unreliable? [00:40:16] Speaker 03: I suspect that what I would say is that the factory weight is based on multiple weighings over a period of days, if not years, and that it's recorded by the factory at the time of manufacture. [00:40:34] Speaker 03: Would I agree to the factory weight as being the correct weight for purposes of taxation? [00:40:41] Speaker 03: I think that's a question that would have to come either to this panel or back to the district court. [00:40:49] Speaker 00: So did Gisra Astani, she reviewed the Daubert standards, right, the Daubert criteria? [00:40:57] Speaker 03: Yes. [00:40:58] Speaker 00: And on the basis of that, she ruled that as a matter of law, that the methodology employed by customs in this case produced reliable results. [00:41:08] Speaker 03: based on USP 1251. [00:41:11] Speaker 03: That's correct. [00:41:12] Speaker 03: And we're not disagreeing with that. [00:41:14] Speaker 03: We're just simply saying is that USP 1251 requires that the person performing the weighing has to allow the product to become stable. [00:41:23] Speaker 03: It says it right in their instructions. [00:41:26] Speaker 03: And in the indirect method, it doesn't say that at all. [00:41:29] Speaker 03: It didn't do that. [00:41:30] Speaker 00: You don't challenge Judge Arstani's ruling? [00:41:33] Speaker 00: Her Daubert ruling? [00:41:36] Speaker 03: I think we did raise that, that it's wrong. [00:41:40] Speaker 00: That's really the appeal here. [00:41:41] Speaker 00: That's your appeal, isn't it? [00:41:43] Speaker 00: Yes, sir. [00:41:43] Speaker 00: Your appeal is that the methodology used by customs to weigh was incorrect. [00:41:51] Speaker 00: And you prefer they use your methodology. [00:41:54] Speaker 03: And for other reasons as well. [00:41:56] Speaker 03: The sample size was tiny. [00:41:58] Speaker 00: But that was a controversy before the CIT. [00:42:02] Speaker 00: Yes. [00:42:04] Speaker 05: I think we're out of time. [00:42:09] Speaker 05: Okay, thank you, Mr. Pollack. [00:42:12] Speaker 05: Thank you very much.