[00:00:00] Speaker 04:
Our next case this morning is number 23-1550, Risen Energy Co.

[00:00:09] Speaker 04:
versus United States.

[00:00:42] Speaker 04:
Ms.

[00:00:42] Speaker 04:
Salzman.

[00:00:43] Speaker 01:
All right.

[00:00:44] Speaker 01:
Good morning, Madam Police of the Court.

[00:00:46] Speaker 01:
Alexandra Salzman on behalf of Appellant Risen Energy.

[00:00:51] Speaker 01:
This case has two issues.

[00:00:53] Speaker 01:
We submit that Congress did not rely on the best available information for the EVA and back sheet film inputs and did not rely on the best available information for the financial ratios.

[00:01:03] Speaker 01:
So looking first at these two inputs for Backsheet and EVA, they both turn on the same issue.

[00:01:09] Speaker 01:
Is this a film or is this a sheet?

[00:01:12] Speaker 01:
And we've submitted it as a film, which is also what Commerce had done in the prior reviews for these inputs and had classified it as such.

[00:01:19] Speaker 01:
RISN also put on its own specification information on these inputs where it called its back sheet a film and refers to its back, I mean its EVA as a film and refers to its back sheet as a film.

[00:01:31] Speaker 01:
Then RISN also put on information more generally, information on the internet about the solar industry at large, where they are also calling both of these inputs films instead of sheets.

[00:01:43] Speaker 01:
And so based on this information, RISN's own experience, the solar industry information, these should be regarded as films.

[00:01:49] Speaker 04:
But our past cases suggest that industry standards are highly relevant in interpreting.

[00:01:57] Speaker 01:
Yes, but there are not industry standards on this record specific to these inputs.

[00:02:02] Speaker 04:
The ASTM... Specific to these inputs?

[00:02:05] Speaker 04:
I mean, does that have to be specific to particular inputs?

[00:02:08] Speaker 04:
It's just a question of whether the industry standards distinguish between film and... Correct.

[00:02:17] Speaker 01:
We would say that these should not be considered industry standards.

[00:02:21] Speaker 01:
If you look at the details of what they both are, there's these two ASTM standards.

[00:02:25] Speaker 01:
One of them is about measuring thickness.

[00:02:27] Speaker 01:
It's not saying this is sheet or this is film.

[00:02:30] Speaker 01:
It's not defining it.

[00:02:31] Speaker 01:
It's not the purpose of that standard is to define between these things.

[00:02:35] Speaker 02:
And the second standard is about a- It does refer to film as being less than 0.25.

[00:02:39] Speaker 01:
It does say it could be an optional term that is used here, but the whole point of that standard, again, it's not about here's what sheet is, here's what film is.

[00:02:48] Speaker 01:
It's about these highly specific measuring of thickness between... This is a very factual issue.

[00:02:55] Speaker 01:
Yes, it is.

[00:02:56] Speaker 02:
It is.

[00:02:57] Speaker 02:
So your view is no reasonable fact finder could rely on that to ASTM specifications, right?

[00:03:03] Speaker 01:
That these two would not clearly define between sheet and film for the solar industry.

[00:03:09] Speaker 01:
that is not clear on this record from these standards.

[00:03:12] Speaker 01:
Because the point of these standards is not to make this distinction.

[00:03:15] Speaker 03:
That's not our standard of review.

[00:03:18] Speaker 03:
If commerce could have sided with you and your evidence, but equally could have sided with the way it did, we have to affirm, don't we?

[00:03:28] Speaker 01:
Commerce is supposed to be relying on the best available information.

[00:03:31] Speaker 01:
And part of that is also the specificity.

[00:03:34] Speaker 01:
So we'd say if this is not, if they've relied on something that is not specific.

[00:03:38] Speaker 03:
But is it unreasonable to view the ASTM standards as the best available evidence, and in particular as better than the type of evidence you relied on?

[00:03:48] Speaker 01:
Right, I'm aware.

[00:03:49] Speaker 01:
We would say that a reasonable mind cannot determine that

[00:03:53] Speaker 01:
that these standards would define that it is sheet.

[00:03:57] Speaker 01:
And we've said in the alternative that if we're really going to sit and say, this is ambiguous, we cannot determine on the record this is sheet or film, then the best available information would have been to rely on both HCS as our ultimate conclusion if we're not going to say.

[00:04:16] Speaker 02:
answer where you say you should average the court?

[00:04:20] Speaker 01:
Ultimately, if the court does not agree that a reasonable mind could not conclude that these standards define sheet and film, then that means that they're not defined on the record.

[00:04:34] Speaker 01:
They're unclear.

[00:04:36] Speaker 01:
So then the best available information is to rely on both of them.

[00:04:38] Speaker 02:
as opposed to what Commerce said, which was to rely only on sheet and exclude film.

[00:04:55] Speaker 02:
It does give a specific amount.

[00:04:58] Speaker 02:
It does tell you what the difference is between dumb and cheap, but it's not limited to solar.

[00:05:03] Speaker 02:
On the other hand, you could say, well, how the parties characterize their own goods could be better because it's solar.

[00:05:09] Speaker 02:
But then again, it's not as good because it's self-serving.

[00:05:15] Speaker 02:
It's not a generic reference separate and apart from the parties and the litigation.

[00:05:21] Speaker 02:
So how do I know what the criteria is for best available

[00:05:25] Speaker 02:
And so it makes it really hard to say the determination here is unreasonable.

[00:05:32] Speaker 01:
We understand it is a difficult standard because the court is not allowed to reweigh the evidence, but instead needs to decide.

[00:05:42] Speaker 01:
Is this a reasonable interpretation to decide this?

[00:05:46] Speaker 01:
And we've submitted that it's not because, again, these standards

[00:05:50] Speaker 01:
The point of these standards is not to define between film and sheet.

[00:05:53] Speaker 01:
That's not what they're doing.

[00:05:54] Speaker 04:
Ultimately, what we're relying on is an HTS in Malaysia, that Malaysian producers importing these... They are designed to distinguish between film and sheet, but they're just not designed in the solar context.

[00:06:08] Speaker 01:
No, we say they're not designed to define between film and sheet at all.

[00:06:13] Speaker 04:
Well, they do define what film is.

[00:06:17] Speaker 01:
One of these standards says it's about how to determine thickness of film specimens.

[00:06:22] Speaker 01:
If you look through it, and it's not going, this is sheet, this is film.

[00:06:26] Speaker 01:
There's one line that says an optional term could be film.

[00:06:28] Speaker 01:
The rest of it is not about that at all.

[00:06:30] Speaker 01:
It's about how do you measure it, because it's about these technical specifications.

[00:06:34] Speaker 01:
It's not about this issue.

[00:06:36] Speaker 01:
And we would just submit that ultimately the HCS being relied on are Malaysian companies importing these materials.

[00:06:44] Speaker 01:
And they're saying is this a sheet or a film when they're importing it.

[00:06:48] Speaker 01:
And we would submit that it then makes sense to look at what are people in the industry doing, which we put on not only ours but other companies in the solar industry.

[00:06:56] Speaker 01:
They think it's film.

[00:06:57] Speaker 01:
When they're importing it, they're putting it as film.

[00:07:00] Speaker 01:
That would be determinative.

[00:07:01] Speaker 01:
That's what a reasonable mind should be considering when looking at these two different options here, or ultimately, if it is truly ambiguous.

[00:07:11] Speaker 03:
Can I take you to your second issue?

[00:07:13] Speaker 03:
Yes, that's what I'm about to do.

[00:07:14] Speaker 03:
Because I found it very complicated.

[00:07:16] Speaker 03:
Is there just like a 30 second high level?

[00:07:20] Speaker 03:
Summary common sense that I might be able to hold on to as to what it is you say is the error commerce made on that second on the financial ratios exactly yes, so high level would be

[00:07:32] Speaker 01:
that commerce relied on this note, note 17, which it is not on inventories, which is not something commerce usually relies on in making these financial calculations.

[00:07:42] Speaker 01:
And it relied on that note.

[00:07:43] Speaker 04:
What page of the appendix is note 17 on?

[00:07:54] Speaker 01:
It is 6688.

[00:08:00] Speaker 01:
So high level commerce took this note to be able to basically bifurcate material costs, labor costs, energy costs from overhead costs.

[00:08:11] Speaker 01:
That's what it's trying to do in the financial ratio calculation because it took the cost of goods sold, it subtracts costs from it, and then there's a remaining cost of goods sold.

[00:08:20] Speaker 01:
And it's trying to get that remaining cost of goods sold

[00:08:23] Speaker 01:
to be one thing.

[00:08:24] Speaker 01:
Is it overhead or is it material labor and energy?

[00:08:27] Speaker 01:
And we've said it's material labor and energy.

[00:08:29] Speaker 01:
Commerce has said it's overhead.

[00:08:30] Speaker 04:
They're saying it's work in progress and they're saying it's overhead.

[00:08:36] Speaker 04:
Is that fair?

[00:08:38] Speaker 01:
Not precisely.

[00:08:39] Speaker 01:
And I would also point that I think the more important note for you to look at in the financial statement is not note 17, but note 2.12, which is on 6666.

[00:08:49] Speaker 03:
And before you explain why that's an important one, I just want to not lose track of the dispute.

[00:08:53] Speaker 03:
It's whether that remainder goes to overhead, which is what Commerce said, or to MLE, which is where you would put it.

[00:09:01] Speaker 01:
We are saying that you should not really use this note at all in our financial ratio.

[00:09:05] Speaker 03:
But where should the remainder go?

[00:09:07] Speaker 01:
The remainder should go to MLE.

[00:09:08] Speaker 01:
OK.

[00:09:08] Speaker 01:
And that you should not use this note at all.

[00:09:09] Speaker 03:
So is it fair for me to say the dispute is whether the remainder goes to overhead or to MLE?

[00:09:13] Speaker 01:
Over to MLE, correct.

[00:09:14] Speaker 04:
OK.

[00:09:14] Speaker 04:
And so why, in your view, should it go to MLE instead of overhead?

[00:09:20] Speaker 01:
So it's a missed.

[00:09:21] Speaker 01:
Commerce has decided, usually Commerce.

[00:09:24] Speaker 04:
I thought it was because you said it represented work in progress.

[00:09:28] Speaker 04:
You're now saying that's not right.

[00:09:30] Speaker 01:
That's part of it.

[00:09:32] Speaker 01:
I think the main point is that this note does not allow commerce to exclude everything other than overhead.

[00:09:41] Speaker 04:
I'm not understanding it.

[00:09:43] Speaker 04:
I know.

[00:09:46] Speaker 04:
This note says that inventory includes work in progress.

[00:09:51] Speaker 04:
It does.

[00:09:51] Speaker 04:
So the extent that your theory rests on the notion that the inventory number doesn't include work in progress, this note seems to contradict that.

[00:10:00] Speaker 04:
On the other hand, the government's theory that it represents overhead also seems to be contradicted by this note because the note says that inventory includes overhead.

[00:10:11] Speaker 01:
That is precisely our point, is that this note, these inventory costs, it does include some labor and energy.

[00:10:18] Speaker 01:
It also includes overhead costs.

[00:10:20] Speaker 04:
So this note is not helpful in any way for... Yeah, but that leaves me in a situation where I don't know

[00:10:26] Speaker 04:
what the difference between inventory and cost of goods sold is, whether it represents overhead or something else.

[00:10:35] Speaker 04:
I'm just uninformed.

[00:10:38] Speaker 01:
Right.

[00:10:38] Speaker 01:
So we have defined using the IFRS definition.

[00:10:42] Speaker 04:
What do you think it is?

[00:10:43] Speaker 04:
If it's not work in progress, what is it?

[00:10:46] Speaker 01:
Well, it's a combination.

[00:10:47] Speaker 01:
It is raw material cost but not including their labor and energy.

[00:10:52] Speaker 01:
It is works in progress and finished goods that includes their overhead and energy.

[00:10:56] Speaker 04:
I don't understand how you can argue that because this note says that the inventory number already includes those things.

[00:11:03] Speaker 01:
I'm saying this is what it is.

[00:11:05] Speaker 01:
The inventory note and raw materials had purchase price.

[00:11:07] Speaker 04:
I'm asking about the difference between the cost of goods sold and the inventory number.

[00:11:12] Speaker 01:
That's what we're arguing about.

[00:11:14] Speaker 01:
The cost of goods sold would have additional overhead and additional labor and energy in it.

[00:11:19] Speaker 04:
Why?

[00:11:20] Speaker 04:
What's the basis for that?

[00:11:21] Speaker 01:
Because this wouldn't include labor and energy used in the raw material process.

[00:11:28] Speaker 01:
So those would be excluded, for example, in this.

[00:11:31] Speaker 01:
I mean, ultimately, we agree it is a confusing note.

[00:11:34] Speaker 01:
And ultimately, we're saying it shouldn't be relied on.

[00:11:37] Speaker 01:
It doesn't make sense to use it because it can't tell you what is labor and energy and what is overhead.

[00:11:43] Speaker 04:
But my problem is I don't understand how your theory is supported.

[00:11:48] Speaker 04:
that it represents something other than overhead.

[00:11:53] Speaker 04:
Because these things that you say it represents are already in inventory, according to this note.

[00:12:01] Speaker 01:
Right, so I'm saying that's what the inventory line item is, and it's not the same as COGS, because it would be the same number.

[00:12:08] Speaker 01:
I'm saying it's unclear what all is in that difference, but it can't be overhead only, because electricity and energy are not in there for raw materials, and there's already some overhead in there.

[00:12:19] Speaker 02:
So you're not relying on this?

[00:12:21] Speaker 02:
No, so our... So what are you relying on?

[00:12:23] Speaker 01:
At 6635 is our ratio calculation, and we don't use this note at all, and this is the way commerce usually does calculate it.

[00:12:29] Speaker 01:
is we exclude the clear overhead cost of depreciation, and everything else goes to MOE.

[00:12:37] Speaker 01:
And that is what we have put forward, because this note does not actually help commerce calculate the ratios.

[00:12:43] Speaker 01:
So it shouldn't be relied on.

[00:12:44] Speaker 01:
It's an improper understanding of inventory.

[00:12:47] Speaker 01:
This isn't a line item that commerce usually uses, because it's not the same as cost of goods sold.

[00:12:53] Speaker 04:
Well, there isn't any usually uses with respect to this particular financial statement.

[00:12:58] Speaker 01:
Well, I'm saying commerce calculates ratios.

[00:13:02] Speaker 01:
No, but commerce calculates ratios all the time, including the other Malaysian financial statements that we point out on this record.

[00:13:10] Speaker 01:
IFRS is the same standard they used.

[00:13:14] Speaker 01:
And the way that petitioner calculated their ratios, the way we would, also does not use an inventories note.

[00:13:19] Speaker 01:
It uses the way that we calculated them.

[00:13:21] Speaker 01:
And that is the only clear way to calculate them.

[00:13:23] Speaker 03:
I thought the Court of International Trade found the IFRS to support what Commerce did.

[00:13:29] Speaker 03:
I think because variable expenses are supposed to be

[00:13:35] Speaker 03:
included an inventory.

[00:13:39] Speaker 01:
There was some confusing aspects of this, especially because it was not in the original decision.

[00:13:44] Speaker 01:
All of the discussion of the IFRS came up at briefing and oral argument, which is one of our points.

[00:13:49] Speaker 01:
It was not in the underlying determination, which also led to a lot of this confusion and discussion because it wasn't in a clear decision that we could then brief afterwards.

[00:13:57] Speaker 01:
But our point about the IFRS is that is extremely common.

[00:14:01] Speaker 01:
All of the other Malaysian financial statements on the record are the same standard.

[00:14:05] Speaker 01:
So why is this being?

[00:14:06] Speaker 04:
You're not pointing me to any evidence that supports the notion that this is a materials cost, MLE, as opposed to overhead.

[00:14:19] Speaker 04:
What's your evidence that that's what it represents?

[00:14:21] Speaker 04:
I'm not seeing it.

[00:14:22] Speaker 01:
Well, two things.

[00:14:23] Speaker 01:
One, the definition of inventory.

[00:14:26] Speaker 01:
We put that in our brief from the IFRS and defining what it means to be an inventory.

[00:14:31] Speaker 01:
And then two.

[00:14:31] Speaker 04:
I don't understand how that helps you.

[00:14:33] Speaker 01:
Because this is a statement under IFRS.

[00:14:36] Speaker 01:
So if they're saying this is an inventory, then they need to be meeting that definition.

[00:14:39] Speaker 04:
What is the statement and how does it help you?

[00:14:41] Speaker 04:
I don't understand what you're saying.

[00:14:43] Speaker 01:
OK.

[00:14:45] Speaker 01:
I guess another thing that may help is the fact that... Well, you're not answering my question.

[00:14:50] Speaker 04:
You're sure there's nothing else.

[00:14:51] Speaker 01:
I mean, it defines it here that finished good and works in progress is cost of direct material, labor, manufacturing, overheads.

[00:14:59] Speaker 01:
We're saying that this note includes, it does include, it already includes overhead, which on its own is a problem if you're saying the rest is overhead.

[00:15:07] Speaker 04:
That is a problem for the government, but it doesn't support

[00:15:11] Speaker 04:
your notion that it represents something else either.

[00:15:15] Speaker 01:
Well, I guess another thing that would help support this is our argument about the rest of the, based on this calculation that Commerce did, it ends up that the overhead costs are significantly higher than any other statement and that depreciation is a minor part of overhead.

[00:15:31] Speaker 01:
And that is never the case in any of the other financial statements on the record.

[00:15:37] Speaker 01:
The overhead is 98% or 97% of overhead costs.

[00:15:41] Speaker 01:
And commerce, after adding this figure to it, is now a sorry, depreciation.

[00:15:47] Speaker 01:
Appreciation is usually the vast majority of overhead.

[00:15:49] Speaker 01:
And here, with this allocation, it's 30%.

[00:15:52] Speaker 01:
So it's also speaking to the fact that this leftover does not make sense that it's overhead.

[00:15:58] Speaker 02:
I think that's your best argument.

[00:16:01] Speaker 02:
I mean, is that your best evidence?

[00:16:02] Speaker 02:
It seems like that.

[00:16:03] Speaker 01:
I would say that supports our understanding and the definition.

[00:16:07] Speaker 01:
The fact that the inventory note alone already says it includes overhead costs would mean that this cannot be that this is every cost except for overhead leftover, this remaining cogs.

[00:16:20] Speaker 01:
I'll leave my 30 seconds for rebuttal.

[00:16:24] Speaker 00:
Thank you.

[00:16:25] Speaker 04:
All right.

[00:16:25] Speaker 04:
We'll give you two minutes.

[00:16:28] Speaker 04:
Ms.

[00:16:28] Speaker 04:
Akers?

[00:16:28] Speaker 00:
Good morning, Your Honors, and may it please the Court.

[00:16:30] Speaker 00:
I'll start with the first issue regarding... Do start with the second issue.

[00:16:35] Speaker 00:
Sure.

[00:16:35] Speaker 00:
I'll start with the second issue, Your Honor.

[00:16:36] Speaker 04:
And start with the fact that this note seems to contradict your theory that the difference is overhead, because it says that overhead is already included in inventory.

[00:16:48] Speaker 00:
Note 2.12 does state what Your Honor just said.

[00:16:52] Speaker 00:
And I'll explain Commerce's reasoned analysis here and why it was reasonable to include this unallocated amount to overhead.

[00:17:02] Speaker 04:
As additional overhead?

[00:17:03] Speaker 00:
As additional overhead.

[00:17:05] Speaker 00:
OK.

[00:17:06] Speaker 00:
Sure.

[00:17:07] Speaker 00:
I'm all ears.

[00:17:08] Speaker 00:
Thank you, Your Honor.

[00:17:09] Speaker 00:
And it might be helpful to refer to Appendix 7132, which is where Commerce breaks this down.

[00:17:17] Speaker 00:
There is a general cost of sales that's about 2 million.

[00:17:22] Speaker 00:
And then as you see below it, there's the inventory costs.

[00:17:26] Speaker 00:
So when commerce is looking at the financial statement and analyzing the financial statement, it has to ask what is encompassed in the inventory costs.

[00:17:37] Speaker 00:
And note 2.12 and also the IRFS both indicate

[00:17:44] Speaker 00:
that material and labor are encompassed in inventory.

[00:17:50] Speaker 00:
And so commerce determined that in inventory, in the 1.68 million, it includes material labor.

[00:18:00] Speaker 00:
So that's accounted for on the financial sheet.

[00:18:03] Speaker 00:
It also determined that that includes energy.

[00:18:07] Speaker 00:
So because, and again, consistent with note 2.12 and

[00:18:13] Speaker 00:
the IFRS.

[00:18:14] Speaker 00:
So because the word inventory necessarily encompasses ML and E, when commerce got to the end of its financial calculation, there was a very small unallocated amount left.

[00:18:28] Speaker 00:
And so the question for commerce was, well, where does this amount go?

[00:18:33] Speaker 00:
Does it go to overhead?

[00:18:34] Speaker 00:
Does it go to something else?

[00:18:36] Speaker 00:
And commerce determined that because in the financial statements, direct costs are allocated for,

[00:18:43] Speaker 00:
This is on 7132.

[00:18:44] Speaker 04:
So it's overhead.

[00:18:45] Speaker 04:
That's your problem.

[00:18:46] Speaker 04:
I mean, 2.12 says overhead's included in inventory.

[00:18:50] Speaker 04:
It says ML&E is included in inventory and overhead is included in inventory.

[00:18:55] Speaker 04:
It seems to directly contradict your theory that you can treat the additional difference between inventory and cost of goods sold as overhead.

[00:19:05] Speaker 04:
So I mean, neither side, it seems to me, has provided

[00:19:08] Speaker 04:
a coherent explanation of what the difference is between inventory and cost of goods sold, what this number could represent.

[00:19:15] Speaker 04:
I don't understand how it can represent overhead when the note says that overhead's already included in inventory.

[00:19:22] Speaker 00:
Well, I think that's the difficult position that commerce was in, Your Honor.

[00:19:26] Speaker 00:
There was an unallocated amount.

[00:19:29] Speaker 00:
There is a small pot of money that commerce has to determine where does this fit in.

[00:19:34] Speaker 00:
and it could fit in an MLE or it could fit in an overhead.

[00:19:39] Speaker 00:
That's obviously the distinction here between the parties argument.

[00:19:42] Speaker 00:
Commerce explained why it believed it was reasonable based on 2.12 and the IFRS.

[00:19:48] Speaker 04:
It would be reasonable based on 2.1 true to treat it as overhead when 2.12 says overhead is included in inventory.

[00:19:59] Speaker 03:
Do you agree with that by the way that 2.12 says overhead is included in inventory?

[00:20:12] Speaker 04:
I don't see that directly, Your Honor, but it says manufacturing overheads.

[00:20:22] Speaker 04:
It says this is the kind of inventories accounted for as follows.

[00:20:28] Speaker 04:
So it's stating that overhead as well as ML&E is included in the inventory number.

[00:20:37] Speaker 00:
Perhaps the distinction, Your Honor, is this is manufacturing overhead, so this is

[00:20:41] Speaker 00:
a subset of overheads, which commerce determined to mean.

[00:20:45] Speaker 02:
What are you talking about?

[00:20:47] Speaker 00:
The reference on Appendix 6666.

[00:20:50] Speaker 02:
You're saying the note is talking about manufacturing.

[00:20:54] Speaker 00:
Specifically, it says manufacturing overheads.

[00:20:57] Speaker 00:
And commerce determined that manufacturing overheads means energy.

[00:21:03] Speaker 00:
In its expertise, that's what it determined it meant, energy.

[00:21:07] Speaker 04:
Where does it say that?

[00:21:30] Speaker 00:
I would point Your Honors to Appendix 7131 and 7132, which is Commerce's analysis on this issue.

[00:21:40] Speaker 04:
Okay, where does it say that manufacturing overhead is limited to energy?

[00:22:17] Speaker 00:
We could go to 7165 appendix.

[00:22:20] Speaker 00:
Thank you for your patience.

[00:22:32] Speaker 00:
And on appendix 7165 under comment 3, Commerce explains that it's relying on the financial statements to calculate the financial ratios.

[00:22:47] Speaker 00:
And it is determining that labor and energy are included in the inventories.

[00:22:57] Speaker 04:
Where does it say that the reference to overhead is a reference to energy?

[00:23:00] Speaker 04:
I don't see that.

[00:23:02] Speaker 03:
Is it at the end of that paragraph?

[00:23:04] Speaker 00:
It starts to correct, Your Honor.

[00:23:06] Speaker 00:
We believed the proportion of manufacturing overheads, that's Your Honor's reference to overheads, based on normal operating capacity

[00:23:14] Speaker 00:
to be a reference largely to energy costs.

[00:23:18] Speaker 04:
What's the basis for that?

[00:23:21] Speaker 00:
I would submit, Your Honor, that it's commerce's interpretation of the financial records and its expertise in doing so.

[00:23:30] Speaker 04:
In other words, you're not able to point to any support for that statement?

[00:23:35] Speaker 00:
I believe the support, Your Honor, is that the financial statement says proportion of manufacturing overheads based on normal operating capacity.

[00:23:44] Speaker 00:
And commerce, knowing how to interpret financial statements, knows that that means energy.

[00:23:48] Speaker 04:
But manufacturing overhead is a fairly common term.

[00:23:54] Speaker 04:
You would think that if manufacturing overhead generally was limited to energy costs, there'd be some support for that.

[00:24:01] Speaker 04:
That wouldn't be my understanding of what manufacturing overhead is, but I'm not an expert in it.

[00:24:06] Speaker 04:
But I would have thought that if commerce had some support for that, it would say so.

[00:24:10] Speaker 04:
I don't see the support for that notion.

[00:24:13] Speaker 00:
I think, Your Honor, on appendix 7165, there's two full paragraphs explaining and providing analysis and support.

[00:24:22] Speaker 00:
for why material labor and energy encompasses the inventory category and because commerce determined and again this is not only consistent with note 1.21 but it's also consistent with the international standards

[00:24:38] Speaker 00:
that the plaintiff-appellant agrees are relevant.

[00:24:40] Speaker 03:
2.12, right.

[00:24:41] Speaker 00:
Correct.

[00:24:41] Speaker 00:
I just don't want to get more confused.

[00:24:42] Speaker 00:
Thank you.

[00:24:42] Speaker 00:
Thank you, Your Honor.

[00:24:44] Speaker 04:
It's also consistent with the international standards that the plaintiff- Well, there's nothing in the international standards about manufacturing overhead being limited to energy, is there?

[00:24:53] Speaker 00:
Not limited, but that inventory encompasses material, labor, and energy.

[00:24:57] Speaker 04:
Well, of course it does encompass that, but that doesn't mean that manufacturing overhead isn't limited to that.

[00:25:03] Speaker 00:
Sure, Your Honor.

[00:25:04] Speaker 00:
And financial statements can be interpreted differently.

[00:25:08] Speaker 00:
And in fact, they're written differently.

[00:25:09] Speaker 00:
Commerce's job here is to make a reasoned determination as to where to put this unallocated amount.

[00:25:16] Speaker 00:
And the fact that it is unallocated on the financial statement means Commerce has to make a decision.

[00:25:22] Speaker 00:
It is reasonable to include it in the overhead, because overhead are indirect costs.

[00:25:27] Speaker 00:
And as Commerce explained,

[00:25:29] Speaker 00:
all the direct costs were directly accounted for in specific lines.

[00:25:34] Speaker 00:
So because they were directly accounted for in specific line items, it's reasonable that the unallocated cost would be indirect costs.

[00:25:41] Speaker 00:
It's just because the plaintiff appellant has a different interpretation and wants to put it in overhead as opposed to, excuse me, material labor.

[00:25:51] Speaker 04:
It seems to me that commerce is putting it in overhead because that increases the dumping margin rather than because there's any support for that notion in financial statements.

[00:26:01] Speaker 00:
Well, I would again just point your honor to appendix 7165 where commerce explains this.

[00:26:06] Speaker 00:
And this isn't a situation where there is a black and white answer.

[00:26:09] Speaker 00:
This is an unallocated amount of funds on a financial statement.

[00:26:13] Speaker 00:
There is no answer.

[00:26:14] Speaker 00:
Commerce has to do the best.

[00:26:16] Speaker 02:
How often does this happen?

[00:26:17] Speaker 02:
But there's an unallocated amount of funds.

[00:26:21] Speaker 00:
I believe it's common, Your Honor, during these calculations.

[00:26:24] Speaker 00:
I've seen it in my practice.

[00:26:26] Speaker 00:
And so commerce's job is to make a reasoned analysis based on the substantial evidence.

[00:26:34] Speaker 00:
And in this case, the Court of International Trade found that it was supported.

[00:26:38] Speaker 00:
And on appeal, the only argument here

[00:26:40] Speaker 00:
is that the plaintiff-appellant wishes it went to a different bucket, but cannot.

[00:26:44] Speaker 04:
No, that's not the only argument.

[00:26:46] Speaker 04:
The argument is that this note 2.12 says that manufacturing overhead is already included in inventory.

[00:26:56] Speaker 04:
And that commerce in reaching an opposite conclusion and adding additional overhead

[00:27:07] Speaker 04:
to the inventory number is not consistent with a note.

[00:27:12] Speaker 04:
That's their argument.

[00:27:14] Speaker 00:
I don't believe the plaintiff's appellant is really arguing that it's not consistent with a note.

[00:27:17] Speaker 00:
The plaintiff's appellant has argued that it's not consistent with past practice.

[00:27:21] Speaker 00:
And the rebuttal to that is that every financial statement is different.

[00:27:26] Speaker 00:
So commerce in every individual review in every case has to analyze each individual financial statement.

[00:27:33] Speaker 00:
Most the plaintiff's appellant has argued is that this is different than past practice.

[00:27:37] Speaker 00:
and therefore unreasonable.

[00:27:40] Speaker 00:
The argument that Your Honor has articulated based on the manufacturing overhead in the note is not the argument that's on appeal here.

[00:27:47] Speaker 04:
You made that explicit argument when they were a couple of minutes ago.

[00:27:51] Speaker 04:
You weren't listening?

[00:27:52] Speaker 00:
I'm referencing the briefing, Your Honor.

[00:27:55] Speaker 00:
Perhaps it's a new argument made on appeal, but their argument in the briefing is that

[00:28:02] Speaker 00:
that IFRS shouldn't be looked at, and that in past cases and other cases, Commerce interpreted financial statements differently.

[00:28:12] Speaker 00:
And our retort to that is every financial statement has to be interpreted based on its own.

[00:28:18] Speaker 00:
And so reference to other times where Commerce may have allocated this differently isn't supportive for why it should allocate differently in this case.

[00:28:27] Speaker 03:
They've also argued that, under Commerce's view, overhead ends up being too high and depreciation too low.

[00:28:34] Speaker 03:
What's your response to that?

[00:28:36] Speaker 00:
They argue that, Your Honor.

[00:28:37] Speaker 00:
There's no argument that Commerce's calculation was

[00:28:42] Speaker 00:
contrary to law, that there was any mistake, that there was no citation to the record.

[00:28:46] Speaker 00:
On a substantial evidence review, the plaintiff's appellant's job here is to show that it wasn't reasonable, commerce's determination, or it's not supported by substantial evidence.

[00:28:56] Speaker 00:
But the plaintiff's appellant doesn't engage with commerce's analysis of that at all.

[00:29:00] Speaker 02:
If a result is unusual or unreasonable, doesn't that provide some kind of evidence that could be relied on, either in support

[00:29:11] Speaker 02:
of the factual determination in order to track from it?

[00:29:15] Speaker 00:
Sure, Your Honor.

[00:29:15] Speaker 00:
And at the trial level, Ryzen did argue, well, there are these other financial statements and they have way different ratios than here.

[00:29:23] Speaker 00:
And Commerce responded to that and said those other financial statements didn't break out to the cost categories like they did here.

[00:29:30] Speaker 00:
And so, so long as Commerce addresses

[00:29:33] Speaker 00:
that argument, then commerce can reach a determination that's still supported by substantial evidence, even if when analyzing a different financial statement, like in those other cases, the ratios ended up different.

[00:29:48] Speaker 00:
And here, because commerce explained why it treated the unallocated amount as overhead

[00:29:55] Speaker 04:
No, it didn't really explain that at all.

[00:29:57] Speaker 04:
It didn't explain why manufacturing overhead is largely limited to energy, what the basis for that is.

[00:30:04] Speaker 04:
It didn't say, it didn't tell us why that is true.

[00:30:12] Speaker 00:
Your Honor, the most I can say is that in Appendix 7165 and 7166, there's a lengthy discussion of the surrogate financial ratio.

[00:30:23] Speaker 04:
But not of this issue.

[00:30:24] Speaker 04:
There's no statement in there.

[00:30:27] Speaker 04:
I'm happy if you can show me one.

[00:30:29] Speaker 04:
But I don't see any statement in there that supports the notion that manufacturing overhead in that note is largely limited to energy costs, or that that's the usual practice.

[00:30:42] Speaker 00:
Well, Your Honor, Commerce doesn't say it's largely limited to energy.

[00:30:47] Speaker 00:
But it does say on Appendix 7165 that inventory includes material labored

[00:30:55] Speaker 00:
And would it interprets to be energy?

[00:30:58] Speaker 00:
So it does find that inventory includes ML and E. Yes.

[00:31:05] Speaker 04:
Well, there's no question about that.

[00:31:07] Speaker 04:
But there's also no question that it seems to include overhead.

[00:31:13] Speaker 00:
Well, Your Honor's point here is that because it references manufacturing overhead, inventory encompasses overhead.

[00:31:21] Speaker 00:
But commerce interprets manufacturing overhead to be energy, not general all overhead.

[00:31:27] Speaker 04:
I understand, but I keep asking, what's the basis for that?

[00:31:32] Speaker 04:
And I don't hear any response.

[00:31:34] Speaker 04:
I don't see anything in commerce's decision explaining why that's so.

[00:31:39] Speaker 00:
The basis is the notes, Your Honor, and the IFRS, which dictates that in... But there's nothing in the...

[00:31:48] Speaker 04:
accounting standards that says manufacturing overhead is largely energy?

[00:31:53] Speaker 00:
Not largely energy under material, labor, and energy.

[00:31:57] Speaker 00:
In other words, inventory can encompass energy.

[00:32:01] Speaker 04:
There's no question about that.

[00:32:03] Speaker 04:
The question is whether it includes only that and not other overhead items.

[00:32:09] Speaker 00:
Well, even, Your Honor, even if it included other overhead items, Congress's ultimate determination is, what is this unallocated sum?

[00:32:17] Speaker 00:
Where does it go?

[00:32:18] Speaker 00:
And it determined that to put it in an indirect cost, an overhead, that's reasonable because it wouldn't make sense for it to be energy because it's such a small amount that it could never be the energy bucket, right?

[00:32:34] Speaker 00:
And so if that were energy, like Ryzen is saying,

[00:32:38] Speaker 00:
it would be too small to be energy.

[00:32:40] Speaker 00:
So the only place commerce could reasonably discern where this could be placed, because it's unallocated, is overhead as an indirect cost.

[00:32:49] Speaker 04:
I think we're out of time.

[00:32:50] Speaker 04:
Thank you.

[00:32:51] Speaker 00:
Thank you.

[00:32:52] Speaker 04:
Ms.

[00:32:54] Speaker 04:
Salzman?

[00:32:57] Speaker 01:
Thank you, Your Honors.

[00:32:58] Speaker 01:
Just a couple quick notes.

[00:33:00] Speaker 01:
One, we absolutely did raise the fact that note seven included overhead costs.

[00:33:06] Speaker 01:
That's one of the reasons why.

[00:33:08] Speaker 01:
It cannot be overhead remaining.

[00:33:10] Speaker 01:
We raised that at page 25 of our opening brief.

[00:33:12] Speaker 01:
We also raised it in our rebuttal brief, reply brief.

[00:33:16] Speaker 01:
So that is not a new thing at oral argument that was raised before this court.

[00:33:21] Speaker 01:
I also want to note this discussion over manufacturing overhead versus energy.

[00:33:26] Speaker 01:
These are different things.

[00:33:28] Speaker 01:
That's very clear in all the financial ratio calculations where commerce is putting a column in for energy and a column in for manufacturing costs.

[00:33:36] Speaker 01:
Starting at page 7349 of the appendix, we put in several examples of other financial ratio calculations where commerce is clearly putting energy in a different category than manufacturing overhead.

[00:33:49] Speaker 01:
It also shows many examples of what is usually in manufacturing overhead.

[00:33:53] Speaker 01:
It's not electricity, it's not energy.

[00:33:56] Speaker 01:
It's depreciation.

[00:33:57] Speaker 01:
It's some rental costs.

[00:33:59] Speaker 01:
And again, all of the overhead costs we're talking about are all manufacturing costs, because non-manufacturing overhead would be not in the cost of goods sold at all.

[00:34:08] Speaker 01:
They're in one of the other notes.

[00:34:09] Speaker 01:
So we're only talking about manufacturing overhead when we talk about overhead here.

[00:34:13] Speaker 01:
And it's not energy and that's not supported on the record, that those are the same thing.

[00:34:18] Speaker 01:
And we just ultimately submit all of this confusion over what is inventory, what does this note mean, all goes to the point, our main overarching point here, that this note does not clearly bifurcate these things.

[00:34:31] Speaker 01:
We have this cost of goods sold remaining and this note doesn't help that.

[00:34:35] Speaker 01:
If you look at our financial ratio calculations, we followed what Commerce did in the prelim, they followed this, and what they did in other past cases where they didn't use this type of note at all.

[00:34:44] Speaker 03:
What's your support for the statement that non-manufacturing overhead isn't included in the cost of goods sold?

[00:34:50] Speaker 03:
Where could I see that?

[00:34:53] Speaker 01:
I mean, I guess that speaks to commerce's normal breakdown here of cost of sales.

[00:34:58] Speaker 03:
And where can I see that in the record?

[00:35:00] Speaker 01:
I'm just going to point out, I guess, any of the financial ratio examples.

[00:35:04] Speaker 01:
I happen to have 735.

[00:35:05] Speaker 01:
That's 7349.

[00:35:07] Speaker 01:
That's one example.

[00:35:08] Speaker 01:
But if you look at any of the financial ratio calculations, cost of sales is manufacturing only costs, and then admin costs and other distribution costs are separated.

[00:35:19] Speaker 01:
So we're only dealing with manufacturing under cost of goods sold.

[00:35:22] Speaker 01:
So just to conclude that all of this confusion is only supporting the fact that this note is not helpful and our financial ratio calculations following past practice doesn't rely on an inventory note.

[00:35:35] Speaker 01:
It only deducts from cost of goods sold things that are clearly otherwise categorized.

[00:35:40] Speaker 04:
What does the record show about what manufacturing overhead

[00:35:44] Speaker 04:
includes normally or here in the statement.

[00:35:48] Speaker 04:
Is there something in the record about that?

[00:35:50] Speaker 01:
I am afraid the actual straight-up definition didn't really come up in briefing, so I don't have that.

[00:35:55] Speaker 01:
But the pages I was just talking about, starting at 7350, are several examples of financial ratio calculations, where you can see what commerce has put in the overhead category in numerous other cases.

[00:36:10] Speaker 01:
So I think that since we don't have the actual definition on, that's the best I can offer on the record.

[00:36:14] Speaker 01:
of some explanations of what is put in the overhead.

[00:36:19] Speaker 04:
OK.

[00:36:19] Speaker 04:
Thank you.

[00:36:20] Speaker 04:
Thank both counsel.

[00:36:21] Speaker 04:
The case is submitted.