[00:00:00] Speaker 02: The first case for argument this morning is 23-1570, Meyer Corporation versus United States. [00:00:08] Speaker 02: Mr. Peterson, good morning. [00:00:10] Speaker 00: Thank you, Your Honor. [00:00:11] Speaker 00: First, I'd like to thank the court for granting me an accommodation. [00:00:15] Speaker 00: I am working hard to get rid of this walking stick, but I'm apparently not there yet. [00:00:19] Speaker 00: OK, well hopefully we can hear each other. [00:00:22] Speaker 00: I've got my hearing aids in, and I'll speak loud. [00:00:25] Speaker 00: This customs valuation case returns to this court for the second time. [00:00:30] Speaker 00: In 2022, the court vacated and remanded the CIT's initial decision, which had speculated that non-market economy influences or the presence of non-market economy countries prevented the application of transaction value as a basis of appraisal. [00:00:48] Speaker 00: and prevented the application of this court's niche OEY rule of first sales in transaction value. [00:00:54] Speaker 02: OK, so we are all very familiar with the background of this. [00:00:58] Speaker 02: What do you want here today? [00:01:00] Speaker 02: What are you seeking here today, and why? [00:01:02] Speaker 00: Your Honor, I want a couple of things. [00:01:06] Speaker 00: The first thing I would like to see is a vacator in remand of the second decision. [00:01:11] Speaker 00: Because the court did not follow your remand instructions, it did not consider our first sales. [00:01:19] Speaker 00: I would like to see this case remanded with two instructions to the trial court, because the trial record relied upon two customs regulatory tests that are given to importers to allow them to prove that the relationship of a buyer and seller does not influence the price paid or payable. [00:01:39] Speaker 00: The first of those is the buy and sell, if not related, test, which is in section 152, L1, two small i's, of the customs regulations. [00:01:49] Speaker 00: Now, in the trial record, Meyer introduced the testimony of an expert witness who had performed a transfer pricing study comparing the Meyer. [00:01:59] Speaker 03: Can you go more in depth than that? [00:02:01] Speaker 03: Can you just lay forth the two things, just so I have them both? [00:02:03] Speaker 03: top of mind and then you can continue on with that. [00:02:06] Speaker 00: Well, we think if either of the two statutory tests are satisfied, we've established the acceptability of first sale. [00:02:13] Speaker 03: Okay, I meant you said there were two instructions you want to be given if there's a vacancy. [00:02:18] Speaker 03: I just want to make sure I know upfront the two instructions. [00:02:20] Speaker 03: Okay. [00:02:22] Speaker 00: We would like to see the case remanded to the court to consider the evidence that was given with respect to the buy and sell as if not related test. [00:02:33] Speaker 00: That would include the expert witness and the transfer pricing study put on the record. [00:02:38] Speaker 01: Is that the one that's sometimes called the normal pricing test? [00:02:42] Speaker 00: Yeah, the normal pricing test. [00:02:44] Speaker 00: The evidence is on the record, and the court has never addressed it. [00:02:48] Speaker 00: And the second request. [00:02:50] Speaker 00: is that we asked the court to, again, vacate and remand with directions for the court to consider the evidence that was put on the record about the all costs plus a profits test. [00:03:03] Speaker 00: Now, that comes from section 152. [00:03:05] Speaker 01: So I get that. [00:03:07] Speaker 01: I mean, the trial court judge did at least [00:03:13] Speaker 01: And I don't want to characterize what the trial court judged it. [00:03:16] Speaker 01: But there's at least some recognition in the record of that all cost plus profit test. [00:03:24] Speaker 01: And he simply said, you didn't meet your burden because you didn't provide the holding company's documents. [00:03:31] Speaker 01: So I don't believe. [00:03:33] Speaker 01: the testimony of your expert on this all cost plus profit. [00:03:36] Speaker 01: Whether that's correct or not, I think to say he didn't address it is a little bit overstating it, isn't it? [00:03:42] Speaker 01: He just rejected it. [00:03:44] Speaker 01: Now, in the normal pricing test, I get you. [00:03:46] Speaker 01: I didn't see where he addressed the normal pricing at all. [00:03:49] Speaker 00: Well, OK. [00:03:50] Speaker 00: But on the all cost plus the profits test, Your Honor, it requires a comparison to what they call, quote, the firm in the regulations. [00:03:58] Speaker 00: That term's not defined. [00:04:00] Speaker 01: You make a big deal out of this. [00:04:02] Speaker 01: I'm not sure that the air here is firm. [00:04:06] Speaker 01: I don't think he was requiring the holding company's documents to see their profits. [00:04:11] Speaker 01: I read his opinion as saying, because I didn't get the holding company's documents, I don't believe the cost you provided for the Meijer seller entities. [00:04:23] Speaker 01: That's the way I read his decision. [00:04:25] Speaker 01: And so what you're asking us to come up with some big legal conclusion on what is a firm for purposes of these tests seems not necessary. [00:04:35] Speaker 01: The firm here is the seller. [00:04:37] Speaker 00: I completely agree, Your Honor. [00:04:40] Speaker 00: The firm is to sell it. [00:04:41] Speaker 00: It can't be the holding company. [00:04:42] Speaker 01: But I think that's what he looked at, too. [00:04:44] Speaker 01: He looked at the firm, the seller's costs, and says, I don't believe that these are accurate, because you haven't given me the holding company's documents. [00:04:51] Speaker 00: Well, first of all, the holding company can't be the firm, because it doesn't have sales of goods of the same class. [00:04:59] Speaker 01: I suggest you don't waste your time arguing about what the firm is, because I don't think that's what the heir in his opinion is. [00:05:07] Speaker 01: I think what I said is that the firm is the seller, and he disbelieved the firm's reported costs because he didn't get the holding company's financials, which he thought might show that those costs attributed to the seller were somehow overstated or inaccurate. [00:05:28] Speaker 01: What's wrong with that? [00:05:30] Speaker 01: statement. [00:05:31] Speaker 00: Well, a couple of things. [00:05:32] Speaker 00: He's concerned with dumping and subsidization, and we established in the first appeal. [00:05:37] Speaker 00: The value code is not used to combat that. [00:05:40] Speaker 01: He didn't do a very good job, I don't think, of addressing the last opinion that said you can't consider anti-dumping and subsidies. [00:05:50] Speaker 01: He did strike out all the references to non-market. [00:05:53] Speaker 01: So it seems like he's saying, well, even if it's not non-market economy subsidies, [00:05:58] Speaker 01: we still need the holding company's documents to see if somehow these prices are overstated. [00:06:04] Speaker 01: Now, that in itself might be an error, but I don't think it's an error attributable to considering the fact that the inputs might be dumped goods from China. [00:06:15] Speaker 00: Well, I think part of the problem there is that even though he didn't have access to the holding company records, which our client didn't have, [00:06:24] Speaker 00: He has access to the records of the manufacturing companies' sellers and the trading company buyers. [00:06:31] Speaker 00: And those records would have shown anything flowing in from the holding company, and they do not. [00:06:36] Speaker 01: Your view is that the records induced at trial [00:06:40] Speaker 01: the first time around include the actual cost attributable to the Meijer. [00:06:46] Speaker 01: Can I call them the Meijer sellers and the Meijer buyers? [00:06:49] Speaker 01: Because there are so many different companies. [00:06:51] Speaker 01: And when I say seller, I mean the seller for what you're considering the first transaction. [00:06:57] Speaker 01: So your view, as the record shows, the Meijer sellers cost. [00:07:01] Speaker 01: And I think there was testimony that they added a 3% profit. [00:07:06] Speaker 01: And that that should have been sufficient to test the all cost plus profit test? [00:07:11] Speaker 00: Well, I think it is sufficient. [00:07:13] Speaker 02: What did the CIT judge say anything about the reason for the insufficiency of that information? [00:07:20] Speaker 00: He did not. [00:07:21] Speaker 00: He was focusing solely on the holding company. [00:07:24] Speaker 02: And what about the Pinkerton testimony? [00:07:26] Speaker 02: Didn't somebody ask for underlying data that you refused to provide with respect to Mr. Pinkerton's testimony? [00:07:32] Speaker 00: Well, that's fine. [00:07:33] Speaker 00: But the record, the testimony, the Pinkerton testimony was accepted into evidence. [00:07:38] Speaker 00: The transfer pricing report is evidence. [00:07:41] Speaker 00: The court found that Pinkerton was an expert witness under Rule 702. [00:07:45] Speaker 01: Can I ask you about that? [00:07:46] Speaker 01: Because I find the record very unclear on that point. [00:07:50] Speaker 01: The trial court does say he's rejecting the government's motion to exclude the Pinkerton testimony. [00:07:55] Speaker 01: But then later in the opinion, I think I'm talking about the first opinion, not the last one. [00:08:01] Speaker 01: But it might be duplicated. [00:08:03] Speaker 01: He adopts the government's proposed findings of fact and law, which propose excluding it. [00:08:09] Speaker 01: So how do we know whether that testimony is in or out? [00:08:13] Speaker 01: Because the opinion is contradictory on that point. [00:08:17] Speaker 00: Well, Your Honor, in the first opinion, the court accepted the government's finding of facts, but made no conclusions as well. [00:08:25] Speaker 01: So your view that Pinkerton testimony is in? [00:08:28] Speaker 01: I'll ask the government about this too. [00:08:29] Speaker 00: It's there for what weight the court wants to give it, but the court never considered it. [00:08:34] Speaker 00: Now, with regard to the all cost plus a profit test, in light of the Supreme Court's Loper-Brite decision, [00:08:40] Speaker 00: I think this court has the power to interpret that regulation and decide what the firm is. [00:08:46] Speaker 00: Now, Your Honor previously said. [00:08:47] Speaker 01: Again, don't ask for too much. [00:08:51] Speaker 01: I don't think the trial court interpreted firm to mean the holding company. [00:08:55] Speaker 01: The trial court looked at this Meyer seller. [00:08:58] Speaker 01: He's just finding that the insufficiency to provide the holding company's data rendered the data provided by the Meyer seller untrustworthy. [00:09:09] Speaker 01: That's not defining the holding company as the firm. [00:09:12] Speaker 01: And again, I think you're asking us to reach a different legal conclusion that we don't need to here. [00:09:19] Speaker 01: This is a factual case. [00:09:22] Speaker 03: Council, can you turn to Appendix Page 8? [00:09:26] Speaker 00: Oh. [00:09:27] Speaker 03: Appendix Page 8. [00:09:28] Speaker 03: Do you have the appendix with you? [00:09:29] Speaker 00: Yes, I do. [00:09:30] Speaker 03: OK. [00:09:32] Speaker 03: And then my question for you is, do you consider the discussion on Appendix Page 8 relating to use of the words presumptively to be part of the errors you're continuing in the CIT's decision? [00:09:47] Speaker 00: Well, Your Honor, again, [00:09:51] Speaker 00: The court's decision is not based on evidence. [00:09:54] Speaker 00: It's based on a presumption. [00:09:56] Speaker 00: You're saying, well, the parent company Meyer Holding presumptively had the ability to influence the price paid or payable. [00:10:03] Speaker 00: There's no fact of fact drawn from the trial record there. [00:10:07] Speaker 00: And again, we know that for purposes of the trial record, [00:10:16] Speaker 00: For purposes of record or the regulation, the holding company can't be the firm because it has no sales. [00:10:23] Speaker 00: Now, to judge user's point, if the lower court is saying, well, the absence of the holding company document from the record leads me to question the costs of the tested company, [00:10:36] Speaker 00: My answer is, number one, the financials of the tested company are on record. [00:10:44] Speaker 00: And he can see that nothing's flowing from the holding company. [00:10:47] Speaker 00: And second, what he's concerned about is the holding company providing subsidies, private subsidies instead of non-market economy subsidies. [00:10:59] Speaker 00: And again, in the first opinion, this court [00:11:01] Speaker 00: made it clear the value code's not for fighting, dumping, and countervailing duty issues. [00:11:09] Speaker 01: What if they were other funded subsidies and not anti-dumping or countervailing duty subsidies? [00:11:15] Speaker 00: I don't know. [00:11:16] Speaker 00: The private subsidies are actionable. [00:11:20] Speaker 01: And I'm going to ask the government this, too. [00:11:24] Speaker 01: If we're looking solely at, because we're looking to determine whether a specific transaction is at arm's length. [00:11:31] Speaker 01: So that means the seller has to report all the cost it incurred plus a reasonable profit. [00:11:36] Speaker 01: But if it buys goods below market value, [00:11:41] Speaker 01: That's still its cost, right? [00:11:43] Speaker 01: Even if it's below market value. [00:11:44] Speaker 00: Well, Your Honor, the cost is the cost. [00:11:47] Speaker 00: I think what the lower court is saying- That's what I'm trying to get at. [00:11:49] Speaker 01: It doesn't matter, does it, if these goods are being subsidized by somebody else to determine the arms-linked transaction between the Meijer seller and the Meijer buyer. [00:12:00] Speaker 01: If the buyer-seller's costs are less than market value, as long as they're recovering those costs plus reasonable profit, that's an arm's length transaction. [00:12:11] Speaker 00: I agree. [00:12:12] Speaker 00: And some companies, the parent companies, may be large, powerful, and well-capitalized. [00:12:17] Speaker 00: Other importers, the parent companies, less so. [00:12:20] Speaker 00: You don't make that comparison. [00:12:22] Speaker 00: You kind of look at the data and say, did this seller make back its cost plus a profit? [00:12:29] Speaker 00: That's all the regulation requires. [00:12:31] Speaker 02: Can I ask you just quickly, because you're getting into your rebuttal time, but I'll ask the government too. [00:12:36] Speaker 02: What procedure, I mean, much is made of the fact that the holding company didn't provide voluntarily its documents. [00:12:43] Speaker 02: Is there a procedure under the CIT rules for them to go and subpoena the holding company, even though they're not a party? [00:12:50] Speaker 02: Can they compel them to do this? [00:12:53] Speaker 02: What authority do they have over the holding company if you do not have control over that? [00:12:59] Speaker 00: Well, in an earlier opinion addressed to summary judgment, I believe it was Judge Musgrave who said the government didn't have to file a Rule 37 letter and a motion to compel against Meyer precisely because Meyer didn't possess the documents. [00:13:13] Speaker 00: Now I agree. [00:13:14] Speaker 02: Right, I'm talking about the holding company. [00:13:15] Speaker 00: Yeah, I mean they could have subsidized, they could have subpoenaed it. [00:13:19] Speaker 00: They could have perhaps sought it through the Hague Convention. [00:13:22] Speaker 00: The point being the government did not. [00:13:24] Speaker 00: We don't have the holding company on record. [00:13:27] Speaker 00: The court is speculating about what might be in there. [00:13:30] Speaker 00: But because they have the financials of the buyer and seller, they don't need to speculate. [00:13:34] Speaker 02: But what if we have a circumstance where the holding company is necessary, arguably, has necessary information? [00:13:42] Speaker 02: I just want to establish whether, under the CIT rules, they have the authority to go and demand the information from the holding company. [00:13:50] Speaker 02: And if they can't, what does that do to you? [00:13:53] Speaker 00: They would. [00:13:53] Speaker 00: I don't know if the British Virgin Islands is a Hague Convention country. [00:13:57] Speaker 00: But they could attempt. [00:13:58] Speaker 00: There was an August Kohler decision in the Court of International Trade about two weeks ago allowing service to be made through pencil. [00:14:05] Speaker 02: So are there circumstances in your view, perhaps not your case, where an adverse inference could be drawn if it's established that the holding company does have records that would be pertinent to in the analysis here? [00:14:19] Speaker 00: Well, in order to draw an adverse evidentiary inference, two conditions have to be met. [00:14:26] Speaker 00: First, it has to be established that the company you're seeking the documents from has them, which is not the case here. [00:14:33] Speaker 00: And second, you have to establish by evidence that there is a probability that if the documents were disclosed, they would be adverse to the disclosing party. [00:14:45] Speaker 00: Again, that finding wasn't made here. [00:14:47] Speaker 00: The CIT. [00:14:49] Speaker 00: decides strictly on presumption. [00:14:51] Speaker 00: OK. [00:14:52] Speaker 02: All right. [00:14:52] Speaker 02: Let's move on to the government. [00:14:54] Speaker 02: Thank you, Your Honor. [00:15:09] Speaker 04: Good morning, Your Honors. [00:15:10] Speaker 04: May it please the Court. [00:15:11] Speaker 04: The trial court should be affirmed because the issue of the holding company's financials, as the Court was alluding to earlier, the trial court in an earlier decision on a partial motion for summary judgment [00:15:25] Speaker 04: This is two years before trial, told Meyer, the parents' financials, the holding company parents' financials, are of interest to me. [00:15:33] Speaker 04: And what the court told Meyer was that to understand whether or not this had been an arm's length transaction, and that it hadn't been influenced by relationship. [00:15:45] Speaker 01: And the relationship, we are- Is it all this stuff that occurred way before trial, infected by the air that we found the last time around, which was, [00:15:52] Speaker 01: He was digging into anti-dumping and countervailing duties, which we told him is not relevant to this test. [00:16:00] Speaker 04: No, Your Honor, I don't believe that that's the case, because the trial court. [00:16:05] Speaker 01: You understand that was the main focus of his opinion last time around. [00:16:08] Speaker 04: Understood. [00:16:08] Speaker 04: Understood that that was. [00:16:10] Speaker 04: Although, alternatively, in his opinion, he mentions the failure to provide the holding company's financial documents. [00:16:18] Speaker 04: And so why was that important? [00:16:20] Speaker 04: Well, two years earlier, prior to trial, there was an opinion from the trial court where the court told [00:16:27] Speaker 04: with respect to the arm's length issue has nothing to do with this other issue of non-market economy. [00:16:33] Speaker 04: That's in there as well. [00:16:34] Speaker 04: But it says just vis-a-vis only the information from the parent holding company. [00:16:40] Speaker 02: It says, OK, but you went after not the holding company. [00:16:44] Speaker 02: And there was never any dispute, was there, that Myers didn't have the records in its possession? [00:16:52] Speaker 02: Somebody would have had to get the holding company to give up the records you're asking for, right? [00:16:56] Speaker 02: Yes, Your Honor. [00:16:57] Speaker 02: OK. [00:16:58] Speaker 02: Did you ever try to do that, or are you absolutely have no authority to do anything in this regard? [00:17:03] Speaker 02: Your Honor. [00:17:04] Speaker 02: If you thought those records were necessary, you knew you were asking the wrong person for the records, and he couldn't produce them. [00:17:12] Speaker 02: You didn't do anything else to get the records, did you? [00:17:18] Speaker 04: The government did not move to compel, the government didn't file a rule 37 letter, didn't set up a subpoena, and then try to figure out what type of international law we would use to obtain documents. [00:17:30] Speaker 02: So how do you establish an adverse inference when you never even ask the person for the documents? [00:17:35] Speaker 02: That seems to be the presumption. [00:17:39] Speaker 02: Presumptively, because they weren't forthcoming on their own with nobody even asking them for anything. [00:17:45] Speaker 02: They didn't come forward, end of story, case closed. [00:17:48] Speaker 04: Well, Your Honor, the government did ask for this information. [00:17:51] Speaker 04: This is information. [00:17:53] Speaker 04: The government did ask. [00:17:55] Speaker 02: Meyer, the person that didn't possess the information. [00:17:59] Speaker 02: Did they ever ask the holding company for the information that they were seeking that the holding company had control over? [00:18:05] Speaker 04: The government did not ask for that information because the government did not need it. [00:18:11] Speaker 04: plaintiff has the burden, and here is appellant Meyer. [00:18:14] Speaker 01: I think that the problem with this whole case is the parties put on evidence during the trial, and the district court refused to consider the evidence because he's on this wild goose chase for records to the holding company. [00:18:28] Speaker 01: that the Meyer company at issue here doesn't have, and that the government didn't try to get and put in the record. [00:18:35] Speaker 01: But he somehow thinks there's something nefarious going on here without any proof that there's anything nefarious. [00:18:42] Speaker 01: And you didn't try to show this. [00:18:43] Speaker 04: Your Honor, we don't have a burden with respect to providing the financial information. [00:18:48] Speaker 01: I know you don't. [00:18:49] Speaker 01: And you don't even have a burden to show that the first sale they're claiming is a legitimate arms link transaction. [00:18:55] Speaker 01: That's on them. [00:18:56] Speaker 01: But if they put forth evidence, and they put forth a lot of evidence here, [00:19:00] Speaker 01: And you can tell me how you tried to rebut that evidence. [00:19:04] Speaker 01: It's unclear to me. [00:19:06] Speaker 01: But doesn't the trial court have to grapple with evidence in the record instead of saying, well, I think that there's some influence from these Chinese companies and that I don't believe the evidence that's actually before me? [00:19:19] Speaker 01: I mean, this evidence was either documentary evidence or it was expert testimony under oath, right? [00:19:26] Speaker 01: And what he's relying on to say that that's not good enough is, [00:19:30] Speaker 01: which seems to be a completely speculative belief that the holding company documents might show something otherwise. [00:19:37] Speaker 04: Well, Your Honor, that is true that the trial court is focused on the holding company documents. [00:19:43] Speaker 04: There are two. [00:19:43] Speaker 04: There was an avenue for Meyer to get those. [00:19:46] Speaker 04: Number one, the holding company parent, because Meyer is a consolidated financial with the holding company, [00:19:54] Speaker 04: would have naturally provided. [00:19:56] Speaker 01: Can you tell me what you think is going to be in those holding company documents that's going to undercut the evidence that they put on the record? [00:20:04] Speaker 04: Well, yes, Your Honor. [00:20:06] Speaker 04: In fact, and as we note in our brief, there's a lot of evidence that's not on the record. [00:20:10] Speaker 04: There aren't purchase orders and proofs of payment. [00:20:16] Speaker 04: So that is a problem. [00:20:17] Speaker 04: You have a structure that's vertically integrated. [00:20:20] Speaker 04: Everyone is. [00:20:22] Speaker 01: Can you explain to me much more clearly what difference any of that makes? [00:20:26] Speaker 01: Yes, Your Honor. [00:20:27] Speaker 01: Because if we're talking about the cost incurred by the Meyer seller, do you know what I'm talking about? [00:20:34] Speaker 01: Because there's so many different names. [00:20:37] Speaker 01: And this, we're just talking about the first sale transaction. [00:20:40] Speaker 04: In my brain, I think of it this way. [00:20:42] Speaker 04: You're saying seller, and there are two sellers. [00:20:44] Speaker 04: So I call it manufacturer. [00:20:46] Speaker 04: Because they are the proxy for seller on the first sale. [00:20:50] Speaker 04: Then I call middleman, and then I call the minor US. [00:20:52] Speaker 01: Whatever it is. [00:20:53] Speaker 04: But I understand, Your Honor. [00:20:56] Speaker 01: They have costs, the manufacturer, and they've reported them. [00:21:00] Speaker 01: Right? [00:21:02] Speaker 01: Maybe not sufficiently for you, but there's evidence in the record of what their costs were. [00:21:06] Speaker 04: Well, there's information in the record from the expert who didn't provide us with underlying documents that were reviewed as part of the expert. [00:21:14] Speaker 01: But did you ask for those documents? [00:21:15] Speaker 01: Yes. [00:21:16] Speaker 01: Did you file a motion to compel? [00:21:17] Speaker 04: We did not file a motion to compel. [00:21:19] Speaker 04: I mean, isn't that your fault? [00:21:21] Speaker 04: Not, Your Honor, it's not the government's fault. [00:21:24] Speaker 01: He testified at trial, right? [00:21:26] Speaker 04: Yes. [00:21:26] Speaker 01: It's sworn testimony under oath. [00:21:28] Speaker 04: Yes. [00:21:29] Speaker 04: And he acknowledged that information was missing. [00:21:31] Speaker 04: He acknowledged that his transfer report had an error in it. [00:21:35] Speaker 04: I mean, the court adopted our findings a fact. [00:21:38] Speaker 04: And if we go back to the earlier. [00:21:39] Speaker 01: So again, explain to me, what would the holding company show that would make his reported costs inaccurate? [00:21:46] Speaker 04: From the government's perspective, one of the issues that we had was we are receiving information essentially from a black box. [00:21:57] Speaker 04: With a consolidated financial, this holding company, there are silos of people doing the exact same thing Meyer US is doing. [00:22:08] Speaker 04: And so if you're selling first sale, because the United States is the only country with first sale, so if your price is artificially low when it comes to the distribution chain that goes into the United States, [00:22:21] Speaker 04: But it's not sufficiently low when it's going to Italy, UK, Canada, Japan, because they don't have first sale. [00:22:30] Speaker 04: We were expecting we would find that information. [00:22:33] Speaker 04: Now, that's not what the court notes. [00:22:35] Speaker 04: The court says that it cares about the holding company. [00:22:40] Speaker 01: I'm a little confused as to why that matters. [00:22:42] Speaker 04: Because if we're talking about [00:22:46] Speaker 04: Cost plus profit. [00:22:48] Speaker 04: The costs, it's the same manufacturer. [00:22:51] Speaker 04: So it should be the same cost. [00:22:52] Speaker 04: Why? [00:22:54] Speaker 01: Because. [00:22:54] Speaker 01: We're talking about an arms transaction between what you're calling the manufacturer and the middleman. [00:23:02] Speaker 01: Why does it matter if the manufacturer got cut a break on the materials it purchased from somebody else, as long as it recovers what it paid for them? [00:23:12] Speaker 01: So hypothetically, let's say the manufacturer buys the good whatever. [00:23:17] Speaker 01: We're talking about pots, I think. [00:23:19] Speaker 01: It buys the pot for $50, which is below market value. [00:23:24] Speaker 01: This company in China. [00:23:26] Speaker 01: It will sell the pot to the Canadian company for $75, but for the manufacturer that's ultimately going to ship it to the United States for $50. [00:23:37] Speaker 01: What difference does that make as long as the manufacturer recovers the $50 it paid plus a reasonable profit to the middleman? [00:23:47] Speaker 04: Well, because in the first sale context, it matters. [00:23:50] Speaker 04: Because if we have a different set of books, say you're receiving your raws as the manufacturer, so the first step in the first sale, that manufacturer is receiving raws, there's a set price for that. [00:24:05] Speaker 04: They're running, they're manufacturing, and they're sending out to different distributors in the Meyer family. [00:24:11] Speaker 04: But they could sell them for different prices. [00:24:13] Speaker 01: I guess what you're saying is you think that what this would show is that even though the Meyer manufacturer reported it paid $50 for it, on the holding company's books, it would show that they charged them $75. [00:24:31] Speaker 01: And so they're under-reporting the costs. [00:24:33] Speaker 04: Right. [00:24:33] Speaker 04: Right, Your Honor. [00:24:34] Speaker 04: And it's important to under-report the costs in first sale. [00:24:38] Speaker 04: The trial court didn't say any of that. [00:24:39] Speaker 01: There's no evidence on the record. [00:24:43] Speaker 01: It's all speculation. [00:24:44] Speaker 01: Well, what it is, Your Honor, is less- You're asking them to disprove something that they don't think is true. [00:24:50] Speaker 04: It's less than speculation, though. [00:24:52] Speaker 04: It is actually the trial court told. [00:24:54] Speaker 01: Did you put anything on the record to suggest that the cost that the Meyer manufacturer reported for the all-cust-plus profit tests were incorrect? [00:25:04] Speaker 04: Your Honor, what we did is we noted that there were not purchase orders. [00:25:08] Speaker 04: In the record, there should have been purchase orders between the manufacturer, first seller, and the middleman. [00:25:14] Speaker 04: There weren't. [00:25:14] Speaker 04: And there should have been proofs of purchase. [00:25:17] Speaker 04: If this is a paper deal, we won't know. [00:25:21] Speaker 03: So you essentially relied on an absence of evidence. [00:25:24] Speaker 03: Is that the way to put it, as opposed to putting forth evidence, as Judge Hughes asked? [00:25:28] Speaker 04: Yes, Your Honor, because an absence of evidence is also evidence. [00:25:32] Speaker 04: When people don't provide information, that in and of itself is evidence. [00:25:36] Speaker 02: Can we just step back a minute? [00:25:37] Speaker 02: You mentioned a few minutes ago, he's got the burden. [00:25:40] Speaker 02: And there's no doubt about that. [00:25:42] Speaker 02: But I guess where this case kind of seems to maybe go off the rails, arguably go off the rails, is I don't see the CIT judge as having looked at their evidence and describing and discussing why it's inadequate to prove the point. [00:25:56] Speaker 02: I don't see any of that. [00:25:57] Speaker 02: In fact, you said he adopted your findings. [00:26:00] Speaker 02: That's true. [00:26:01] Speaker 02: But he also said, but the petitioner's findings are not inaccurate. [00:26:07] Speaker 02: So I don't know what that means or where that gets us. [00:26:09] Speaker 02: But he did something different here. [00:26:12] Speaker 02: As I read his opinion, he didn't say, this information is [00:26:16] Speaker 02: not adequate for the following reasons. [00:26:19] Speaker 02: I don't believe him. [00:26:20] Speaker 02: I don't believe him. [00:26:21] Speaker 02: What he said is, because I'm not getting this holding company information, I'm drawing an adverse inference that that information would hurt them. [00:26:31] Speaker 02: And he factored that. [00:26:34] Speaker 02: maybe not solely, but predominantly, is the basis for his ruling. [00:26:38] Speaker 02: Do you see the point that there's a difference between applying the standard burden of proof and the regular rules and analyzing the information the way the CIT judge did? [00:26:50] Speaker 04: Yes, Your Honor, I do. [00:26:51] Speaker 04: But I don't know that the CIT judge went that far. [00:26:54] Speaker 04: I think that the CIT judge said, [00:26:57] Speaker 04: The court advised, the government asked for these documents. [00:27:01] Speaker 04: You should have been able to get them from your parent, because apparently you can get them from everybody else in the distribution strain. [00:27:06] Speaker 04: Everybody else in the Meyer family, you can get documents from except your parent. [00:27:09] Speaker 04: So that's kind of strange. [00:27:11] Speaker 04: But more significantly, can people get documents from people overseas? [00:27:14] Speaker 04: The way the government could is a Rule 45 subpoena. [00:27:17] Speaker 04: The way Meyer could against his own holding company parent was a Rule 45 subpoena. [00:27:21] Speaker 04: The court was clear it wanted the information. [00:27:24] Speaker 04: Meyer chose not to provide it. [00:27:25] Speaker 02: Well, we don't have to go through this again, but Maya didn't have the information. [00:27:30] Speaker 02: So it's the holding company. [00:27:31] Speaker 02: What the CIT judge did, spent virtually all of its analysis of the record on creating an adverse inference because it thought the holding company should come forward with this information happy and willingly. [00:27:44] Speaker 02: And because they didn't, he drew an adverse inference from all the information that wasn't there. [00:27:51] Speaker 02: Am I right? [00:27:53] Speaker 04: No, Your Honor. [00:27:53] Speaker 04: I don't believe that the court did draw an adverse inference, formally. [00:27:58] Speaker 01: I think what the court formally did hear was- When he starts throwing around words like presumption and all that kind of stuff, it's pretty close. [00:28:07] Speaker 01: He didn't go through the evidence that they actually provided and the expert testimony and explain why, even though he heard the expert and heard the expert, had the expert report, had the documents they provided, which in your view is insufficient, but there was stuff there. [00:28:23] Speaker 01: He didn't explain why the expert wasn't credible, for instance, which he could have done. [00:28:28] Speaker 01: He didn't explain why these documents that showed some cost were insufficient. [00:28:36] Speaker 01: He said, presumptively, there's something in the holding companies that could be there. [00:28:41] Speaker 01: How is that good enough when you didn't ask for the documents of motion to compel, you didn't ask for an adverse inference, and this is all coming from the district court, whose job is to look at the evidence put before him, not to be an investigator himself? [00:28:58] Speaker 04: Understood, Your Honor. [00:28:59] Speaker 04: And I think, though, that the record, even if one puts aside the Meyer Holding Company, the trial court adopted the government's findings of fact. [00:29:09] Speaker 04: And among those findings of fact were documents that are necessary for the chain of establishing a first sale [00:29:17] Speaker 01: I understand you're trying to save a trial court opinion that's not done the best way. [00:29:24] Speaker 01: But when you're trying to say, well, even if you put aside the holding company, it still should be affirmed, he didn't make any of those findings. [00:29:31] Speaker 01: Maybe he could have. [00:29:32] Speaker 01: There's a detailed record here. [00:29:33] Speaker 01: But that's what he didn't do on remand. [00:29:36] Speaker 01: He got annoyed, complained about us for two or three pages, and then crossed out the words non-market economy in the rest of his opinion and didn't grapple with the underlying records. [00:29:45] Speaker 01: Isn't that a problem? [00:29:46] Speaker 04: Well, Your Honor, I think it would be helpful to have things a little more effusive. [00:29:52] Speaker 04: But the fact that he adopted the government's findings of fact does call into question. [00:29:57] Speaker 01: Can I ask you one point in case this goes back? [00:30:02] Speaker 01: It is unclear to me whether that expert testimony was admitted or excluded. [00:30:08] Speaker 01: Do you have a position? [00:30:09] Speaker 04: Your Honor, I believe the expert, the court, there was a flood year, the court said, I will allow the expert in for what it's worth. [00:30:18] Speaker 04: And so when I read that, because that was definitely what the court said, and when I see the adoption of the government's facts, I think that the trial court found it not worth a lot. [00:30:29] Speaker 01: It wasn't excluded. [00:30:32] Speaker 04: It was not excluded. [00:30:33] Speaker 01: But this is his problem, is he didn't explain the weight he was giving. [00:30:39] Speaker 02: And he did rely. [00:30:42] Speaker 02: I mean, you can say that maybe he didn't use the words adverse inference. [00:30:46] Speaker 02: But as Judge Hughes pointed out, he said presumptively. [00:30:49] Speaker 02: Then he said their resistance and that not coming forward on their own speaks volumes. [00:30:56] Speaker 02: I don't know. [00:30:57] Speaker 02: the foregoing leads the court to doubt the accurate ascertainment of the true value. [00:31:02] Speaker 02: All this stuff is his opinion. [00:31:04] Speaker 02: That was a large portion of his opinion. [00:31:05] Speaker 02: Virtually all of it, as I understand, is the basis for his ruling the way he did was this presumption he adopted that the other side should have voluntarily come in and given the government everything they had. [00:31:17] Speaker 02: And the failure to do so leads me to conclude that everything they said was against [00:31:24] Speaker 02: what Meyer was trying to establish. [00:31:27] Speaker 02: Isn't that a fair reading of his opinion? [00:31:30] Speaker 04: I think that reading the opinion on its face without going back to the prior opinion which was adopted, which is to look at through all those facts, I would agree with Your Honor. [00:31:39] Speaker 04: But when we put these two opinions together, we have to go back and look at the facts that were actually adopted by the trial court. [00:31:45] Speaker 04: I think it's fair for the trial court [00:31:47] Speaker 04: To come to that conclusion, yes, it's focused on the holding company documents, but we don't have purchase orders. [00:31:54] Speaker 04: We don't have proofs of payment. [00:31:56] Speaker 04: How is one to verify? [00:31:58] Speaker 04: I mean, maybe the Meyer holding company gives us documents. [00:32:01] Speaker 04: We still are lacking information, and we're lacking information. [00:32:03] Speaker 01: Can you make any findings based upon anything you're saying? [00:32:06] Speaker 01: Sorry, Your Honor? [00:32:06] Speaker 01: He didn't make any of those findings explicit on the remand. [00:32:09] Speaker 04: Well, not on the remand, but by adopting his earlier decision, which adopted the government's facts. [00:32:14] Speaker 01: Can I just ask you, you're well into your time, but I want to make sure that I have the government's position on the hypothetical I asked, the other side. [00:32:23] Speaker 01: If the Meyer manufacturer purchased the pot for $50, even if market value is $100, as long as it recovers that $50 plus a reasonable profit, does that meet the all-cost plus profit test? [00:32:38] Speaker 01: Because it may be buying at a bargain, but it's recovering its bargain cost plus profit. [00:32:45] Speaker 04: Your Honor. [00:32:47] Speaker 04: I think all costs plus a profit, yes. [00:32:50] Speaker 04: But this issue does. [00:32:51] Speaker 04: As long as those costs are accurate. [00:32:53] Speaker 01: I get what you're saying is. [00:32:54] Speaker 04: The costs are accurate because then, if the costs aren't accurate, then the profit's inflated. [00:33:00] Speaker 04: And so what profit are we comparing it to? [00:33:03] Speaker 01: If they're reporting a cost of $50, but they actually only pay $25, [00:33:08] Speaker 01: then the profit is inflated. [00:33:10] Speaker 01: But if they're reporting 50, even if they bought it on the open market, it would be 100. [00:33:17] Speaker 01: If what they paid was actually 50, then it's OK. [00:33:21] Speaker 01: That's their cost. [00:33:22] Speaker 04: Right. [00:33:22] Speaker 04: If the cost is accurate, if it is truly their cost, then there needs to be a profit. [00:33:28] Speaker 04: But whose profit is it? [00:33:29] Speaker 04: The suggestion that you compare yourself to yourself doesn't make sense. [00:33:34] Speaker 04: Customs has always taken the position that they use the parent company. [00:33:37] Speaker 01: Why didn't the trial court look at the normal pricing test here? [00:33:41] Speaker 01: Wasn't there evidence on the record for that? [00:33:44] Speaker 04: The focus at trial really was cost plus profit. [00:33:47] Speaker 04: And I think that that's why. [00:33:48] Speaker 04: But I don't know that the normal costs actually played a role, because there's information that the expert was developing from unaudited financials. [00:33:59] Speaker 04: They had a financial database that was never provided to the government. [00:34:02] Speaker 04: This was a volume case. [00:34:05] Speaker 04: The expert never took into consideration that the manufacturers are subject to volume contracts. [00:34:10] Speaker 04: to compare them apples to apples. [00:34:12] Speaker 04: This was apples to compots. [00:34:15] Speaker 04: It doesn't matter. [00:34:16] Speaker 04: They didn't do that. [00:34:17] Speaker 04: So when I think that as to the weight of this expert, I think it was probably slim to none because this expert didn't [00:34:26] Speaker 01: How do we know that? [00:34:27] Speaker 01: He didn't say anything. [00:34:29] Speaker 04: I appreciate that, Your Honor. [00:34:30] Speaker 04: But I think that our facts support the court not finding that expert. [00:34:34] Speaker 02: And what are we supposed to do with the fact that he said Meyer's proposed findings of fact are not inaccurate? [00:34:40] Speaker 02: Those were his findings. [00:34:41] Speaker 04: The findings of fact that they provided were not inaccurate, but they were not complete. [00:34:47] Speaker 04: And that's why he went with the government's facts. [00:34:50] Speaker 04: Our facts were more complete. [00:34:52] Speaker 04: Not that Meyer was saying anything wrong. [00:34:53] Speaker 04: They were citing facts that were good for them, but not the entire story. [00:34:59] Speaker 02: OK, thank you. [00:34:59] Speaker 04: Thank you, Your Honor. [00:35:04] Speaker 02: OK, Mr. Peterson, since we went over with the government, we'll restore three minutes of rebuttal if you need it. [00:35:09] Speaker 00: Thank you, Your Honor. [00:35:10] Speaker 00: I just want to make one point following up on what Judge Hughes was saying. [00:35:14] Speaker 00: The current value system is a positive system evaluation. [00:35:18] Speaker 00: It's not a notional system like the old one from 44 years ago, which sadly I remember. [00:35:24] Speaker 00: We're just looking at a particular company's costs. [00:35:27] Speaker 00: Now, let's say Meyer has two factories making cookware, and they've got to buy steel. [00:35:32] Speaker 00: Maybe they have a competitor that's got 10 factories making cookware. [00:35:36] Speaker 00: I would expect that competitor is probably getting a better price for steel than Meyer. [00:35:41] Speaker 00: But for each of their factories, the costs are what the costs are. [00:35:46] Speaker 00: And so when we're looking at whether Meyer recovers its cost plus a profit, we're looking at Meyer's costs. [00:35:52] Speaker 01: But you do agree if Meyer [00:35:56] Speaker 01: I guess we're calling it the manufacturer now, what I was calling the seller. [00:36:00] Speaker 01: If the cost they reported, say they reported $50 as the cost, but they were actually only charged $25, and that would appear on the holding company because we don't have purchase orders and stuff like that, that would be [00:36:16] Speaker 01: not representative of all costs. [00:36:19] Speaker 00: I don't know why anyone would overreport their costs in this situation. [00:36:24] Speaker 00: Well, you've done this a long time. [00:36:26] Speaker 01: There's lots of funny business with reporting and the way you do transactions to try to lower duties. [00:36:34] Speaker 01: and get out of anti-dumping duties and all that kind of stuff. [00:36:38] Speaker 01: So who knows? [00:36:40] Speaker 01: Judge Aquilino has been at this a long time too, so I think he has his suspicions, but I didn't see anything on the record, and he didn't explain why his suspicions. [00:36:52] Speaker 01: could be relevant in certain circumstances holding companies' documents. [00:36:56] Speaker 01: They might show that the costs that the expert in your case came in and reported were not the actual cost charge. [00:37:03] Speaker 01: And if they did, they would be relevant, right? [00:37:06] Speaker 00: Yeah, but that's all speculation in the opinion, Your Honor. [00:37:09] Speaker 02: Can I just ask you a housekeeping question, which is the brief showed there were 23 pending cases on this judge's docket with you. [00:37:18] Speaker 02: Do those all rise and fall on the determination of the first sale? [00:37:24] Speaker 00: Same issue, Your Honor, covering, I guess, different periods of time. [00:37:29] Speaker 00: I forget if there were 21 or 23, but after a while, my eyes went fuzzy redone. [00:37:33] Speaker 01: OK, but those all deal with the same issue and remain on the docket. [00:37:36] Speaker 00: They are the same issue, Your Honor. [00:37:37] Speaker 01: Are they the same expert, and the same kinds of proof, or the same kinds of lack of proof? [00:37:41] Speaker 00: Well, we don't have a trial record in some of them. [00:37:44] Speaker 00: I mean, I know one of the cases was filed in 2021. [00:37:48] Speaker 00: So I suspect it's a different time period, and we'd have to develop a different factual record. [00:37:53] Speaker 00: But it would be really, really helpful if this court, in a remand, makes very specific what the trial court needs to be looking at in cases of this type. [00:38:03] Speaker 02: Thank you. [00:38:04] Speaker 02: Thank you. [00:38:04] Speaker 02: Thank both sides. [00:38:05] Speaker 02: The case is submitted.