[00:00:00] Speaker 01:
Okay.

[00:00:00] Speaker 01:
The next argued case this morning is number 22, 1199 Al-Gharer Iron and Steel LLC against the United States.

[00:00:11] Speaker 01:
Mr. Gosling.

[00:00:15] Speaker 04:
Good morning, your honor.

[00:00:16] Speaker 04:
May it please the court.

[00:00:17] Speaker 04:
My name is Rob Gosling here today on behalf of plaintiff of Plano Al-Gharer Iron and Steel Company.

[00:00:24] Speaker 04:
A-G-I-S is how I abbreviate it.

[00:00:26] Speaker 04:
In this case, Commerce acted illegally when it determined that corrosion resistant steel produced in the UAE using Chinese steel and exported to the United States was circumventing the AD and CVD orders on core from China.

[00:00:41] Speaker 04:
Our briefs raised several arguments that illustrated why Commerce's circumvention determination was contrary to law.

[00:00:48] Speaker 04:
Given the available time, I'd like to focus on just a few of those errors today, beginning with patterns of trade.

[00:00:55] Speaker 04:
In determining whether to include merchandise produced in a foreign country within an AD or CBD order on another country, the circumvention statute directs that commerce shall take into account patterns of trade, including sourcing patterns.

[00:01:11] Speaker 04:
In this case, Commerce compared two four-year periods of time preceding and following the initiation of the China core investigations and found that AGIS's exports of core to the United States produced with Chinese steel had increased.

[00:01:28] Speaker 04:
Commerce thus found that the pattern of trade during the period of inquiry supported a determination

[00:01:34] Speaker 04:
that circumvention of the China Core Orders had occurred.

[00:01:38] Speaker 04:
But citing this one fact out of context is incomplete.

[00:01:42] Speaker 04:
And in addition, AGIS identified numerous other trade patterns that established that AJS did not shift its trade in response to the China Core Orders.

[00:01:55] Speaker 04:
Commerce unfortunately ignored all of these arguments in their entirety.

[00:01:59] Speaker 04:
For example,

[00:02:00] Speaker 04:
Commerce did not address at all that AGIS's steel purchases from China decreased substantially.

[00:02:07] Speaker 04:
over the latter period of inquiry, so that by the time of the final semi-annual period that they examined, Chinese steel purchases represented only a fraction of their total purchases.

[00:02:19] Speaker 04:
Commerce also ignored entirely that during the four years following initiation of the China core investigations, virtually all of the steel inputs that AGS purchased in China were never used to produce core ship to the United States, and that only a fraction

[00:02:36] Speaker 04:
of the core ship to the United States was produced with Chinese steel.

[00:02:41] Speaker 02:
But perhaps the most important... Do you agree that you do not contest Commerce's findings on the patterns of trade factor with respect to Commerce's country-wide analysis?

[00:02:52] Speaker 02:
Do you agree with that statement?

[00:02:55] Speaker 04:
I do disagree because Commerce did not have information on its patterns of trade with respect to total exports to the United States.

[00:03:06] Speaker 04:
I apologize.

[00:03:09] Speaker 04:
They had data regarding total exports of core to the United States, but they did not know exactly how much of that core was produced with Chinese steel.

[00:03:21] Speaker 04:
With respect to my client, AGIS, there was an increase from before the initiation of the China orders to after the initiation of the China orders, but that

[00:03:34] Speaker 04:
simple fact of an increase from the before period to the after period neglects entirely that during that four-year period AGIS's shipments of core to the United States decreased substantially.

[00:03:49] Speaker 03:
Well, maybe that's explained because AGIS's purchase of

[00:03:55] Speaker 03:
heart-grown coal or steel from China in the 49 period after initiation of the corner investigation, it increased by more than 26,000%.

[00:04:05] Speaker 03:
I mean, that's a lot.

[00:04:09] Speaker 03:
That's a big increase.

[00:04:11] Speaker 03:
Your Honor, that is a huge increase.

[00:04:13] Speaker 03:
It's kind of like stocking your pantry.

[00:04:16] Speaker 03:
And then for the next four years, you don't have to go back and

[00:04:21] Speaker 03:
and reached stock.

[00:04:23] Speaker 04:
It's an enormous amount, but the fact is that almost none of that purchases of Chinese hot wheel steel went to the United States.

[00:04:32] Speaker 04:
In 2016, AJS did ship for... Did any of it go to the United States?

[00:04:37] Speaker 03:
Yes.

[00:04:38] Speaker 03:
Yes, a small amount.

[00:04:39] Speaker 03:
Here the purpose of this particular test or analysis is just to spot the trends, correct?

[00:04:47] Speaker 04:
Pre-trends.

[00:04:48] Speaker 04:
It's supposed to spot all the trends and patterns that might exist.

[00:04:52] Speaker 04:
There's no specific requirement in the law that commerce look at a particular trend or many trends, but we presented a number of trends to commerce that they ignored in their entirety.

[00:05:04] Speaker 04:
In 2016, the year of publication of the core orders, AJS did export merchandise to the United States that was produced with Chinese steel.

[00:05:13] Speaker 04:
But in the following year, those shipments containing Chinese steel represented less than 1% of all shipments to the US.

[00:05:21] Speaker 04:
And in 2018, zero.

[00:05:23] Speaker 02:
I think part of what you're complaining about is really saying that they didn't look at some AGIS-specific data, is that?

[00:05:31] Speaker 02:
I just want to make sure I clarify your argument.

[00:05:33] Speaker 04:
No, exactly.

[00:05:34] Speaker 04:
Exactly.

[00:05:36] Speaker 04:
Correct.

[00:05:37] Speaker 04:
Correct.

[00:05:38] Speaker 04:
In 2018, AGS had no shipments.

[00:05:42] Speaker 04:
In 2019, zero shipments to the United States of core produced with Chinese steel.

[00:05:48] Speaker 04:
So we made these arguments to commerce.

[00:05:50] Speaker 04:
They ignored them.

[00:05:51] Speaker 04:
They didn't address them.

[00:05:52] Speaker 04:
But beyond the normal requirement that they should discuss arguments brought to their attention, why does this matter?

[00:05:59] Speaker 04:
Why is it so important?

[00:06:00] Speaker 04:
It's important because the statute also requires under 1677JB13 that commerce analyze whether or not action is appropriate and necessary to prevent circumvention of the order.

[00:06:16] Speaker 04:
And in this case,

[00:06:17] Speaker 04:
In the two years prior to the initiation of the inquiry, AJS had not even exported any of the circumventing, the allegedly circumventing material.

[00:06:27] Speaker 04:
And by the time commerce reached its final determination, they hadn't shipped any for three years.

[00:06:34] Speaker 04:
If commerce is supposed to determine whether or not action is necessary to prevent circumvention of the orders, then how is it reasonable that they made an affirmative circumvention determination when such circumvention was not even happening and the small amounts of shipments that did include Chinese steel had not been shipped for more than three years?

[00:06:55] Speaker 04:
In our opinion, it's not reasonable.

[00:06:57] Speaker 04:
But commerce never reached that.

[00:06:58] Speaker 03:
Maybe some of the data that I picked up from the record may be incorrect.

[00:07:05] Speaker 03:
But it seems to me that agencies export a core that used Chinese origin

[00:07:11] Speaker 03:
hot rolled steel and cold rolled steel increased from zero metric tons to 8,809 metric tons after the core investigation was initiated.

[00:07:24] Speaker 04:
That is correct.

[00:07:25] Speaker 04:
And during that same period that it exported that amount of core, it also exported about a quarter million tons that did not include Chinese core.

[00:07:36] Speaker 04:
In fact, at the same time that AJS was reducing and eliminating

[00:07:41] Speaker 03:
I'm sorry, repeat that again.

[00:07:42] Speaker 03:
Did you say Chinese core?

[00:07:44] Speaker 04:
I'm sorry.

[00:07:44] Speaker 04:
I meant Chinese steel from China.

[00:07:48] Speaker 04:
At the same time, the exact same time that AJS was not only reducing, but eliminating all of its shipments of core to the United States that use Chinese steel, it was increasing by 10% per year, all of its shipments of core to the United States that included non-Chinese core.

[00:08:09] Speaker 03:
Can you move over to the value added category?

[00:08:14] Speaker 04:
Sure.

[00:08:16] Speaker 04:
Our value added argument, in particular, is that commerce did not follow the specific statutory instruction that the value of the processing in the UAE was minor or insignificant with respect to the- And you claim that it was 30% value added in the UAE.

[00:08:39] Speaker 03:
correct your honor we we believe is even much higher than that because commerce did not use the appropriate profits so now we're headed to something i'm really interested in so is that you're claiming that commerce did not consider the data that you were offering that shows thirty percent and or that uh... commerce did not explain

[00:09:05] Speaker 03:
Uh, why 30% is, is insignificant.

[00:09:11] Speaker 04:
In our brief, we went to some length, uh, to argue why commerce did not explain why its determination of that percentage was significant.

[00:09:22] Speaker 04:
But to be, to be honest, commerce never should have even have gotten to that decision.

[00:09:28] Speaker 04:
We should never even to make those arguments because commerce's formula was incorrect.

[00:09:34] Speaker 04:
If commerce had based its calculation on the core ship to the United States that was produced with Chinese steel and based its profit percentage on that amount of steel instead of a company-wide steel percentage, then we wouldn't even be having that discussion about what constitutes significance.

[00:09:54] Speaker 03:
This case is not about circumvention by just one company.

[00:09:58] Speaker 03:
It's circumvention of products from an entire country.

[00:10:02] Speaker 03:
Countrywide data is fair.

[00:10:04] Speaker 04:
Fair enough.

[00:10:05] Speaker 04:
But the other respondent had zero exports to the United States that were produced with Chinese steel.

[00:10:12] Speaker 04:
And my client, the second respondent, had not had any in more than three years when Commerce made its final determination.

[00:10:20] Speaker 04:
And a combination of those factors, if Commerce had considered it, if they had analyzed it, I think they would have come to the opposite conclusion.

[00:10:28] Speaker 04:
that there was no circumvention, even based on a country-wide decision.

[00:10:32] Speaker 04:
But the fact is that that's just my speculation because commerce never addressed those patterns of trade.

[00:10:38] Speaker 04:
They never addressed my arguments regarding the appropriate level of profit percentage that they should have used in accordance with the statute.

[00:10:45] Speaker 03:
There's a value added in the UAE.

[00:10:51] Speaker 03:
Caused a change, a shift in the tariff classification from the Hartmut's 302 core.

[00:10:56] Speaker 04:
Yes, it does.

[00:10:58] Speaker 04:
It's, I believe, from 7208 to 7212 for the four-digit HCS classification.

[00:11:07] Speaker 02:
When we chance determination on the value of processing sub-factor, do you agree that commerce considered evidence other than the calculations?

[00:11:16] Speaker 02:
When reaching this determination on the value of processing sub-factor, do you agree that commerce considered evidence other than the calculations?

[00:11:30] Speaker 04:
I don't believe there's any information on the record that they consider external evidence.

[00:11:35] Speaker 04:
Commerce takes issue with not agreeing with my formula for making that profit calculation.

[00:11:42] Speaker 04:
But in fact, I use commerce's calculation.

[00:11:44] Speaker 04:
I use commerce's formula.

[00:11:46] Speaker 04:
The only difference was that I added in the profit on the sale to the United States instead of a company-wide profit that commerce assigned.

[00:11:54] Speaker 04:
In the case where core exported to the United States using Chinese steel represented less than 1% of all exports of core to the United States and less than 0.2% of worldwide sales of core, it was not reasonable for commerce to base a profit calculation on worldwide profits as opposed to the profits on just those sales to the United States that were made with Chinese steel.

[00:12:20] Speaker 01:
Let's hear from the other side, and we'll have rebuttal based on what they say.

[00:12:25] Speaker 00:
Good morning, and may it please the court?

[00:12:30] Speaker 00:
In this case, there's not really any dispute as to how commerce reached each of its decisions or what evidence it relied on.

[00:12:37] Speaker 00:
The dispute essentially comes down to commerce's chosen methodology at several points in the process.

[00:12:43] Speaker 00:
And of course, where the statute doesn't specify a methodology, commerce has very, very broad discretion to determine the most appropriate way to do so.

[00:12:51] Speaker 00:
Even more so in this case, where Congress has repeatedly expressed an intent to avoid, for instance, hard numerical tests

[00:13:00] Speaker 00:
that companies could potentially rely on those and, you know, game the system in order to find circumvention.

[00:13:08] Speaker 00:
So, for instance, in 1994 when Congress amended this statute, it specified that it was changing the value added factor in order to shift the focus of the inquiry away from a test of the difference in value toward the nature of the process performed.

[00:13:23] Speaker 00:
The goal was to have a new standard that would be less difficult to meet, to improve our country's ability to prevent circumvention, and therefore to forego any sort of rigid numerical standard.

[00:13:34] Speaker 02:
Can you just answer a question that I asked the opposing counsel so I can make sure I understand the state of play here?

[00:13:40] Speaker 02:
When reaching its determination on the value of processing set factor, do you agree that commerce can serve evidence

[00:13:46] Speaker 02:
other than the calculations?

[00:13:48] Speaker 00:
Absolutely.

[00:13:49] Speaker 00:
So the value added factor, that is basically one in five sub-factors as to whether AGIS's facilities are minor or insignificant.

[00:14:02] Speaker 00:
And Congress only directed the Department of Commerce to take each factor into account.

[00:14:06] Speaker 00:
So, commerce also found that all four other sub-factors weighed in favor of a finding of circumvention.

[00:14:12] Speaker 00:
But even with respect to that value-added analysis, commerce does this both qualitatively and quantitatively.

[00:14:19] Speaker 00:
And in the language I was just citing when Congress amended that section, it basically directed them to shift the focus more towards that qualitative holistic approach.

[00:14:29] Speaker 00:
rather than a concrete numerical approach.

[00:14:32] Speaker 00:
But Commerce did also consider a numerical calculation of the value added.

[00:14:37] Speaker 00:
In its initial determination, it did not consider profits and administrative costs at all.

[00:14:42] Speaker 00:
at AGIS's request following those preliminary determinations.

[00:14:47] Speaker 00:
It decided to include those, and as AGIS noted, it did use that broader data and not the data specific to the United States.

[00:14:56] Speaker 00:
But really, commerce was never required to consider profits at all.

[00:14:59] Speaker 00:
In fact, it's not really intuitive why they should point to

[00:15:03] Speaker 00:
the portion of the price that they added to get a profit and claim that that's somehow value added to the product itself.

[00:15:10] Speaker 00:
Remember that the increase aimed at deciding whether in the process of producing core products is the portion of that process that's performed by AGIS and other similar facilities in the UAE, is that are they adding a significant enough amount of value that they're not circumventing those duties imposed.

[00:15:30] Speaker 00:
and the idea that they would need to include the profits in that value added, it doesn't really make sense for the purposes of what they're trying to assess.

[00:15:40] Speaker 02:
So in your opinion, even if Commerce's calculations were wrong, can we still conclude that Commerce's determination on the value of processing sub-factor was supported by substantial evidence?

[00:15:52] Speaker 00:
Yes, because they looked both at that numerical value and they looked

[00:15:57] Speaker 00:
They looked more at the nature of the process performed as Congress said should be the focus.

[00:16:03] Speaker 00:
So qualitatively they found consistent with their other findings as to the minor and insignificant factor that the value of processing was relatively small in the UAE.

[00:16:18] Speaker 00:
AGIS focused a lot of its argument on the patterns of trade, but essentially what AGIS is arguing for is to read a new requirement into the statute that would say that the patterns have to be continuous through the period into which commerce makes its conclusion.

[00:16:34] Speaker 00:
First of all, that simply isn't a requirement of the statute.

[00:16:39] Speaker 00:
The statute left that within the discretion of commerce, as I've said, because commerce needs to be able to adapt to the circumstances of each case.

[00:16:47] Speaker 00:
It can't set some rigid tests that could easily be gamed by parties in order to circumvent

[00:16:51] Speaker 00:
the laws that we have to protect our domestic interest and encourage fair trade.

[00:16:58] Speaker 00:
So in this case, Commerce looked at the numbers before and after those duty decisions were passed on core products from China and it found an increase.

[00:17:07] Speaker 00:
AGIS characterized this as an increase.

[00:17:09] Speaker 00:
I would say that is a drastic understatement, which based on some of the questions you asked,

[00:17:15] Speaker 00:
I think is fully understood.

[00:17:18] Speaker 00:
On pages 11 and 12 of our brief, most of these numbers are BPI, but it's easy to see that before those countervailing and anti-dumping duty orders were issued,

[00:17:30] Speaker 00:
basically what AGIS was importing from China and exporting to the United States was negligible compared to the amount afterwards.

[00:17:39] Speaker 02:
And eventually... How much is countrywide findings sufficient on their own to conclude that commerce's patterns of trade determination was also supported by 51?

[00:17:53] Speaker 02:
I would aside the what I'm going to say the AGIS specific findings.

[00:17:57] Speaker 00:
So those countrywide patterns of trade were consistent with findings of circumvention.

[00:18:02] Speaker 00:
The reason commerce initiated this investigation in the first place was that it noticed increased countrywide imports of those steel substrate inputs from China to the UAE.

[00:18:18] Speaker 00:
Significant increases around 35% to 47%.

[00:18:21] Speaker 00:
It also found increased

[00:18:24] Speaker 00:
increased imports, of course, in the United States from the UAE and other countries.

[00:18:29] Speaker 00:
And that is another enormous number, something along the lines of 6,000%.

[00:18:35] Speaker 00:
So that's why it initiated.

[00:18:38] Speaker 00:
But to AGIS's point that commerce should consider whether there was any decrease in that trend over time.

[00:18:48] Speaker 00:
Yes, as I was saying, that would essentially require something that the statute doesn't require, which is to say that those trades have to continue upward throughout the course of the investigation.

[00:18:57] Speaker 00:
And that wouldn't be feasible.

[00:18:59] Speaker 00:
Companies could easily use that rule to evade

[00:19:03] Speaker 00:
having those duties applied to them because they could simply circumvent for a short period of time and then see circumvention or as the court suggested.

[00:19:11] Speaker 03:
The ultimate goal of the circumvention inquiry is to determine whether circumvention is occurring.

[00:19:18] Speaker 03:
There's no exports to the U.S.

[00:19:20] Speaker 03:
There's no circumvention.

[00:19:22] Speaker 03:
The likelihood of that, that data shows the likelihood of exports to the U.S.

[00:19:26] Speaker 03:
to be minimal.

[00:19:27] Speaker 00:
Sure, and I would argue that there are two ways that commerce might respond to that.

[00:19:31] Speaker 00:
They might say, if the circumvention isn't happening today, then we can't find circumvention.

[00:19:36] Speaker 00:
But as I've said, it would be easy to game that system by they could cease as soon as they think that commerce is likely to start investigating them, they could cease.

[00:19:44] Speaker 00:
Or as you suggested, they could stock the pantry with those inputs and then continue.

[00:19:48] Speaker 03:
I agree, but I'm reluctant to give commerce the wide, broad,

[00:19:56] Speaker 03:
on discretion that you apparently believe it has in relying on these data or the data that it gets.

[00:20:06] Speaker 03:
I mean, zero exports also means something.

[00:20:10] Speaker 00:
Right.

[00:20:11] Speaker 00:
What zero exports means is that all AGIS has to do is put a certificate in its shipments saying, we didn't use the inputs from China, and they don't have to pay the duties.

[00:20:20] Speaker 00:
That's the only consequence of this case.

[00:20:22] Speaker 03:
Is that your argument that they did?

[00:20:25] Speaker 03:
Are you arguing that that's what they did?

[00:20:28] Speaker 03:
They used false certificates?

[00:20:29] Speaker 00:
No, no, no.

[00:20:30] Speaker 00:
Sorry.

[00:20:30] Speaker 00:
Going forward, now that there has been this finding of circumvention, now they don't have to pay duties as long as they certify that they aren't using those products from China.

[00:20:41] Speaker 00:
No, I'm absolutely not accusing them of any sort of false certificate.

[00:20:44] Speaker 00:
I'm simply saying the consequence of this case is that if they continue to not circumvent by not using Chinese substrates and exporting those final products to the United States, they don't have to pay anything.

[00:20:55] Speaker 00:
The only thing is that slight administrative annoyance of including that certificate with their shipments.

[00:21:00] Speaker 00:
And in exchange for that annoyance, Commerce is able to identify cases of circumvention and address them, whether or not the companies do it for a short period of time and then stop, whether or not

[00:21:14] Speaker 00:
They build up those products and then stop importing further products from China.

[00:21:20] Speaker 00:
So this is just simply a case where the benefit to being able to protect fair trade in the United States and to protect our domestic industries, Commerce found it was worth doing that, even if the active circumvention isn't clearly happening today.

[00:21:34] Speaker 00:
But looking at those trade patterns from shortly after those duties were imposed on China, where those inputs from China to the UAE and those exports from the UAE to the United States just skyrocketed.

[00:21:47] Speaker 00:
And that was why they investigated this in the first place, because of those patterns that seemed to be consistent with circumvention.

[00:21:54] Speaker 03:
In the area of the value added,

[00:22:01] Speaker 03:
Did Commerce adequately explain why it rejected AGIS's calculations?

[00:22:10] Speaker 00:
It did explain why it rejected them.

[00:22:14] Speaker 03:
You do agree that Commerce has a duty to explain its actions.

[00:22:19] Speaker 00:
Yes, commerce has a duty to explain the basis for its decisions.

[00:22:23] Speaker 00:
Can you do so here?

[00:22:26] Speaker 00:
Yes.

[00:22:27] Speaker 00:
For instance, on page 496 of the appendix, it does acknowledge that AGIS suggested its own formulas, but then commerce goes on to explain why it selected a different formula.

[00:22:38] Speaker 00:
And commerce isn't required to use the preferred formula of AGIS or any other party.

[00:22:47] Speaker 00:
And yeah, in this case, it explained the basis for its formula, and as long as its formula is reasonable, that's all that commerce has to show.

[00:22:57] Speaker 00:
And yeah, as I said in this case, first of all, the value-added formula is a very small factor.

[00:23:03] Speaker 03:
I would direct the court... It also has to show the reasonableness of its rejection of the data.

[00:23:11] Speaker 03:
AGIS's data.

[00:23:14] Speaker 00:
Yes, and it did identify

[00:23:17] Speaker 00:
You know, it did acknowledge that it wasn't using AGIS's data.

[00:23:22] Speaker 00:
I don't know how, it didn't provide an intensely detailed explanation of the differences between the formulas, but that would require a lot of commerce if every time a respondent proposed a specific formula or proposed a specific methodology.

[00:23:38] Speaker 03:
If we were to find that, I mean this case has been, is this the case that's been remanded once already for commerce to explain its

[00:23:46] Speaker 03:
Okay, this is another case this week.

[00:23:49] Speaker 03:
All right.

[00:23:50] Speaker 03:
But e-commerce does have to provide some sort of explanation.

[00:23:54] Speaker 03:
We understand that.

[00:23:55] Speaker 03:
In this case, it doesn't appear that it did.

[00:23:58] Speaker 03:
If we find that that decision then, the value added determination, is not supported by substantial evidence, what does that do to the case?

[00:24:10] Speaker 03:
Should we remand at that point?

[00:24:12] Speaker 00:
No, the value-added formula is really a very small fraction of the overall analysis.

[00:24:17] Speaker 00:
So as I've said, the statute has five requirements.

[00:24:21] Speaker 00:
One of those requirements is a finding that the process... Yeah, but you're not answering my question.

[00:24:28] Speaker 03:
If commerce does not explain why it rejected AGIS's calculation and the data that it offered,

[00:24:36] Speaker 03:
and we find that that's the case, and we determine that that decision lacks substantial evidence, should we remand at that point?

[00:24:45] Speaker 00:
No, because the decision as a whole would still be based on substantial evidence.

[00:24:49] Speaker 00:
So, for example, in the case of a peer-bearing case, which AGIS has cited repeatedly, they found that a third-party manufacturing accounted for 38 percent of total manufacturing, but even then they said that if the other factors

[00:25:03] Speaker 00:
weighed in the other direction, that 38% number still wouldn't be so significant as to outweigh the other factors.

[00:25:09] Speaker 00:
And in that case, the court was considering an even lower standard than here.

[00:25:15] Speaker 00:
They were considering how much a product would have to be changed in order

[00:25:19] Speaker 00:
for it not to fall under those countervailing and anti-dumping duty rates in the first instance.

[00:25:27] Speaker 00:
So in this case, we're already accepting that they didn't originate in China, and they don't fall under that in the first instance.

[00:25:35] Speaker 00:
So presumably there was some sort of substantial change.

[00:25:38] Speaker 00:
But now we're considering whether this is a case of circumvention, and that's when this new analysis of... Let's go back to Appendix 496.

[00:25:47] Speaker 03:
Sure.

[00:25:47] Speaker 03:
That's the page you cited as providing the basis for the rejection.

[00:25:51] Speaker 03:
Show me on that page where the rejection is, as you said, detailed.

[00:25:57] Speaker 00:
Yes.

[00:25:58] Speaker 00:
And I don't mean to say that this is the only place in the appendix where they describe it, but in the first full paragraph of that page, they do say that AGIS submitted a series of analyses, but that Commerce

[00:26:15] Speaker 00:
finds its formula unpersuasive.

[00:26:22] Speaker 00:
Sorry, I'm just rereading this.

[00:26:24] Speaker 00:
Yeah, it explains why it finds AGIS's formula unpersuasive, because commerce is determining what the further processing cost is as a percentage of the total U.S.

[00:26:32] Speaker 00:
sales price.

[00:26:35] Speaker 00:
I'd have to look back at the specific formula AGIS proposed, but it does give its reason for rejecting AGIS's formula.

[00:26:42] Speaker 00:
And it's one thing for commerce to...

[00:26:45] Speaker 03:
It's kind of like what you're arguing.

[00:26:47] Speaker 03:
And it's kind of commerce did it this way, and commerce has discretion to use its own calculation.

[00:26:54] Speaker 03:
It doesn't have to accept other people's or other parties' calculations.

[00:27:00] Speaker 03:
But I'm concerned by that argument.

[00:27:02] Speaker 03:
I'm concerned by your assertions and your continued defense of commerce that it does not have to explain

[00:27:12] Speaker 03:
It's actions.

[00:27:13] Speaker 03:
It does.

[00:27:14] Speaker 03:
It's an administrative agency and it must explain its actions.

[00:27:18] Speaker 00:
It does have to explain its actions, but this is an incredibly complicated case.

[00:27:22] Speaker 00:
AGIS produced a lot of evidence and made a lot of arguments, and in this case, Commerce is addressing why it rejected that argument.

[00:27:29] Speaker 00:
It's giving the basis for it, and more importantly, it's explaining why its own calculation is reasonable.

[00:27:35] Speaker 00:
It would be one thing if Commerce were identifying evidence that it were ignoring, but this is a methodology, and choosing the methodology for

[00:27:43] Speaker 00:
applying the statutory framework is squarely within commerce's discretion, and parties could come up with infinite different methodologies that they think would be better.

[00:27:51] Speaker 00:
And sure, commerce should have to respond to those as commerce did here, but to require a detailed comparison of commerce's methodology to every single methodology proposed by another party seems excessive in light of the requirement

[00:28:08] Speaker 01:
I assure you we're used to complicated cases.

[00:28:14] Speaker 01:
That is not the reason to defer to what looks very peculiar to me.

[00:28:21] Speaker 00:
Sure, and I don't mean to say that commerce should

[00:28:26] Speaker 00:
You know, that there's no room for complexity.

[00:28:28] Speaker 00:
I simply mean that parties could come up with infinite different proposed methodologies that they think would be appropriate, and commerce could spend thousands of pages in its decisional memoranda doing a detailed comparison of every theoretically possible methodology.

[00:28:43] Speaker 00:
But all commerce has to do is choose what it believes is the appropriate methodology and bolster that with substantial evidence.

[00:28:49] Speaker 03:
And in this case... No, that methodology has to be reasonable.

[00:28:53] Speaker 03:
It's gotta be supported by data.

[00:28:56] Speaker 03:
And it's got to be explained.

[00:28:58] Speaker 00:
Yes, and Commerce did explain the reasons for its methodology.

[00:29:01] Speaker 03:
But where else other than on this page is that explanation provided?

[00:29:07] Speaker 00:
I'm not sure what.

[00:29:10] Speaker 00:
I think that is the extent of the analysis on that page.

[00:29:17] Speaker 00:
They also go into value added.

[00:29:18] Speaker 03:
These two lines that you read, that's the analysis?

[00:29:23] Speaker 00:
Well, this, here one moment.

[00:29:26] Speaker 00:
They also analyze in their final decision on page 678, they turn back to this issue.

[00:29:34] Speaker 00:
But overall, their discussion of AGIS's specific methodology is not in great detail, at least not on those pages.

[00:29:44] Speaker 00:
If I'm overlooking another portion of the appendix, I apologize.

[00:29:48] Speaker 00:
But commerce, yes, it has to give a reasonable formula supported by the evidence

[00:29:55] Speaker 00:
But the court is asking whether it should go beyond that and not only provide a reasonable explanation for the methodology it chooses, but provide a detailed explanation for every methodology that it does not choose.

[00:30:08] Speaker 00:
is theoretically infinite.

[00:30:12] Speaker 00:
There's no limit to the different possible methodologies it could use to assess these factors, and it chose what was most appropriate in its view with the goal of furthering Congress's intention of protecting the United States trade and avoiding any sort of unfair trade practices.

[00:30:26] Speaker 00:
Naturally, respondents are going to propose methodologies that would favor them, and commerce has no obligation

[00:30:33] Speaker 00:
to follow those methodologies.

[00:30:35] Speaker 00:
And in this case, it was perfectly reasonable for it to stick to the methodology that it determined was appropriate.

[00:30:41] Speaker 00:
And in this case, as I've explained, they already decided to adjust their original formula in view of AGIS's suggestion that they incorporate those profits and administrative costs.

[00:30:52] Speaker 00:
And that did raise the percentage.

[00:30:55] Speaker 00:
And even that was probably more than commerce was required to do, because as I've said,

[00:31:00] Speaker 00:
suggesting that the profits are part of the value added, it's not at all clear that that is the case.

[00:31:06] Speaker 02:
Can you just also walk us through how you think page 678 helps, just like you walked us through on 496?

[00:31:15] Speaker 00:
I'm sorry.

[00:31:15] Speaker 00:
I don't have that language up in front of me.

[00:31:18] Speaker 00:
Do you have the appendix?

[00:31:19] Speaker 00:
I have the appendix virtually, and it's frozen right now.

[00:31:22] Speaker 00:
I'm sorry.

[00:31:24] Speaker 00:
Oh, thank you.

[00:31:29] Speaker 00:
So the language on page 678 says that regarding incorporating profit, financial expenses, and SG&A into the calculation of processing costs added in the UAE, even if AGIS's profit, financial expenses, and SG&A were added to the value-added percentage calculation, the percentage of value added does not materially change, and thus the cost of processing CRS and HRS would still be much greater than the cost of processing core in the UAE.

[00:32:00] Speaker 00:
So in that way, it does explain the fact that incorporating those didn't change its initial decision.

[00:32:09] Speaker 00:
But I'm not sure.

[00:32:11] Speaker 00:
As far as I'm aware, no, there's not a detailed comparison of commerce's methodology with the methodology described by plaintiffs, or described by AGIS.

[00:32:21] Speaker 00:
But I would simply reiterate that that is more than is required of commerce.

[00:32:25] Speaker 00:
Requiring commerce to do that, there might be no end to the analyses it would have to perform if it has to not only support its own decision, but support every hypothetical alternative

[00:32:35] Speaker 00:
or support, you know, do a comparison with that and every hypothetical decision is rejected.

[00:32:41] Speaker 00:
And I would say that's more than commerce is required to do.

[00:32:43] Speaker 00:
And in any case, this is just one element of one of five sub-factors for the factor in dispute.

[00:32:54] Speaker 01:
Anything else?

[00:32:55] Speaker 01:
Thank you.

[00:33:06] Speaker 05:
Thank you, Your Honor.

[00:33:06] Speaker 05:
I'd like to start by just piggybacking on what we were previously discussing.

[00:33:10] Speaker 05:
I mean, I think one important thing to keep in mind when it comes to the profit calculation and how we were discussing the two different pages in the appendix, the process was, the first page reference, 478, or 496, sorry, that was in the preliminary determination when Commerce did not include profit SG&A in their calculation, which BGIS objected to.

[00:33:34] Speaker 05:
then after this this is not the explanation i was seeking well it's i mean it should be the case that there are problems with the formulas put forth by a g i s on the on the issue that the government has said that this details the explanation they are connected and if i can explain that you're saying that this is not the detail explanation there was only in the business only used in the preliminary well this is in the place it talks about their formulas in general because

[00:34:04] Speaker 05:
There's really, there's multiple formulas we're talking about.

[00:34:06] Speaker 05:
Number one, we're talking about their alternative calculation formula from the prelim for how to devalue for the processing.

[00:34:15] Speaker 05:
One of the issues with that, their formulas is, that formula includes, you know, as does the second formula, which we're talking about profit, it talks about the cost of the Chinese substrate coming directly from the actual sales that they're doing.

[00:34:31] Speaker 01:
But the only relevance is

[00:34:33] Speaker 01:
to determine whether there is, in fact, circumvention.

[00:34:38] Speaker 01:
Is that right?

[00:34:38] Speaker 01:
If there's no circumvention, it doesn't matter.

[00:34:42] Speaker 01:
Is that correct?

[00:34:43] Speaker 05:
Well, the purpose of the statute is to define circumvention.

[00:34:47] Speaker 05:
We're trying to figure out whether the value of the processing added is minor or insignificant.

[00:34:54] Speaker 05:
In doing so, Commerce was looking at the entire process, comparing the making of the hot world steel substrate and the value added for the activities that happened in the UAE.

[00:35:05] Speaker 05:
Now, the way that they valued the substrate that came from China, they used surrogate value.

[00:35:12] Speaker 05:
Now that surrogate value was upheld as reasonable by the CIT and isn't challenged in front of this court.

[00:35:18] Speaker 05:
Now, the formula used by AGIS in the preliminary used those hot world substrate

[00:35:28] Speaker 05:
values.

[00:35:29] Speaker 05:
Therefore, I mean, if it is reasonable for commerce to use the surrogate values, then it continues that it's reasonable that they would not continue to use any other values that would be tainted by those hot rolled substrate prices.

[00:35:44] Speaker 03:
The answer appears to be that using US data alone would have been misleading.

[00:35:52] Speaker 03:
do you agree with that using the just using the u s data that a g i s have provided would have been misperceived correct that is correct it would have been misleading you don't say that i don't see that commerce says that

[00:36:08] Speaker 03:
I mean, I said it and you said it, but where does commerce actually show that it's misleading and that's the basis for the use of the other data?

[00:36:20] Speaker 05:
I think when commerce says it finds the analysis that was presented by AGIS unpersuasive, because it's determining the further processing cost as a percentage of the total US sales price, it can't do that if it's using faulty data as underpinning that comparison.

[00:36:38] Speaker 03:
Does it matter if there's a change in the tariff classification when you get hot rolled steel or cold rolled steel and produce core from it?

[00:36:47] Speaker 05:
Not within the context of circumvention.

[00:36:49] Speaker 05:
There's nothing in the statute that makes that requirement.

[00:36:53] Speaker 05:
What if I could quickly finish on my point about the profit calculation that AJS mentioned earlier.

[00:36:59] Speaker 05:
Like with the initial calculations that we're using, the hot world luxury cost, the profit calculation put forth by AGIS also has that flaw.

[00:37:09] Speaker 05:
And so it accounts for profit and over accounts for profit because it has what have been deemed to be unreliable costs within it.

[00:37:20] Speaker 05:
Commerce looked at what was available, figured out the methodology that made most sense and was reasonable and used an Aegis wide

[00:37:28] Speaker 05:
ages-wide number to do that, to really narrow down on what the value of the processing is in the UAE.

[00:37:36] Speaker 05:
I would also add, this case is a little unusual in the sense that there is one company that was an active participant as a respondent.

[00:37:46] Speaker 05:
And so therefore, we're talking about ages numbers here.

[00:37:49] Speaker 05:
But in reality, there's multiple companies that produce core in the UAE.

[00:37:54] Speaker 05:
There's a country-wide

[00:37:56] Speaker 05:
Inquiry.

[00:37:57] Speaker 05:
One of the companies that was initially contacted, because they are a producer of CORE in the UAE, actually did not respond in the initial stages of the investigation and was, in adverse facts available, was applied to them.

[00:38:09] Speaker 05:
So if we, you know, Aegis's, Aegis's profit calculation doesn't, you know, apply, may apply only to them, but like, it doesn't work, it also doesn't work for, you know, we're doing a more broad, country-wide approach.

[00:38:22] Speaker 05:
And to, and,

[00:38:24] Speaker 05:
The argument that Aegis makes in their briefs is that the language of the statute requires this level of analysis, that the only data that commerce can use is the data directly from the individual sales of core made from Chinese substrate exported to the United States at issue.

[00:38:43] Speaker 05:
And there is nothing in the statute that limits commerce to that level of data usage.

[00:38:50] Speaker 05:
it would inhibit the ability of commerce to actually carry out the circumvention statute by not permitting commerce to find out what is most reasonable for the individual industries that issue, the individual facts of the case that issue.

[00:39:09] Speaker 01:
Anything else?

[00:39:11] Speaker 01:
Anything else?

[00:39:11] Speaker 01:
Thank you.

[00:39:12] Speaker 01:
Thank you.

[00:39:16] Speaker 01:
We have a rebuttal of Mr. Grossman.

[00:39:18] Speaker 04:
Your Honor, thank you very much.

[00:39:19] Speaker 04:
I'll try to keep it short.

[00:39:21] Speaker 04:
First, Judge Cunningham, I apologize.

[00:39:23] Speaker 04:
I didn't understand the nature of your question.

[00:39:25] Speaker 04:
Of course, Congress looks at more than just that one factor.

[00:39:30] Speaker 04:
They look at level of investment, level of extent of production facilities, nature of the production process.

[00:39:36] Speaker 04:
We've included remarks and arguments in our briefs that address all of those issues.

[00:39:41] Speaker 04:
and why we believe that commerce made mistakes and errors in evaluating each and every one of them.

[00:39:45] Speaker 04:
I think we did not address research and development, but all the other factors are ones where we felt that commerce's determination that the value added was small, or the production facilities were insignificant, or that the level of investment was minor are all areas where they did not support their decisions with substantial record evidence.

[00:40:08] Speaker 04:
The particular statute that we've been talking about asks whether the value of the processing performed in the foreign country represents a small proportion of the value of the merchandise imported into the United States.

[00:40:22] Speaker 04:
When we suggested an alternate calculation, we used commerce's formula, we used commerce's data, we used our evaluation of the substrate.

[00:40:31] Speaker 04:
The only thing we changed was we used a profit figure based on the merchandise imported into the United States as opposed to a country-wide determination.

[00:40:42] Speaker 04:
And we believe that commerce did not sufficiently explain

[00:40:46] Speaker 04:
their rationale.

[00:40:47] Speaker 04:
Commerce, this court has determined that the agency is not required by law to provide an explanation of every argument that respondents make, but it is required to discuss them so that the court and other parties have a reasonable understanding and can discern commerce's path.

[00:41:08] Speaker 04:
In this case, as in many other cases related to the patterns of trade, the level of investments, Commerce did not answer or respond to or address any other arguments you made.

[00:41:18] Speaker 04:
Thank you very much.

[00:41:21] Speaker 01:
Thank you.

[00:41:22] Speaker 01:
Thanks to all counsel.

[00:41:24] Speaker 01:
The case is taken under submission.