[00:00:00] Speaker 04:
The last argument of the morning is docket number 24-1431.

[00:00:03] Speaker 04:
This is Captain Demir versus United States.

[00:00:13] Speaker 04:
Ms.

[00:00:13] Speaker 04:
Thorson, please begin whenever you're ready.

[00:00:17] Speaker 01:
Thank you, Your Honor.

[00:00:18] Speaker 01:
Good morning to the panel.

[00:00:19] Speaker 01:
This case involves the Commerce Department's application of its cross-attribution regulation with respect to subsidies granted to NUR,

[00:00:28] Speaker 01:
a shipbuilding company that provided scrap steel to CAPTAN, an affiliated rebar producer.

[00:00:34] Speaker 01:
At the time of the relevant agency determinations, the regulation required Commerce to cross-attribute subsidies where the supplier's production of the input product was primarily dedicated to production of the respondent's downstream product.

[00:00:50] Speaker 01:
Commerce first appropriately cross-attributed nurse subsidies

[00:00:54] Speaker 01:
on the basis that NERS applied CAPTAN with scrap that CAPTAN used to make rebar.

[00:00:59] Speaker 01:
Scrap was the primary, if not only, input into CAPTAN's rebar production.

[00:01:04] Speaker 01:
NERS sold its scrap only to CAPTAN.

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And while the amount of scrap that NERS sold might have been small, the amount is not relevant in the primarily dedicated analysis.

[00:01:15] Speaker 01:
The lower court remanded for further explanation in the agency reversed course.

[00:01:20] Speaker 01:
But its remand determination is inconsistent with its regulations as informed by the preamble, and at the very least is inadequately explained given the preamble's guidance.

[00:01:30] Speaker 01:
The regulations do not define the term primarily dedicated, but by means of examples, the preamble clarifies that the term reflects an input's role in the manufacturing of the downstream product, including whether the input is used more or less directly in that production,

[00:01:46] Speaker 01:
and as a result, imparts critical characteristics to the downstream product.

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Scrap neatly meets these requirements in relation to rebar.

[00:01:55] Speaker 01:
But Commerce found that NERS Scrap was not primarily dedicated to Captain's rebar production, reasoning that unprocessed steel scrap is a common input among a variety of products and industries and used in a variety of production processes.

[00:02:10] Speaker 03:
I understand your argument about

[00:02:14] Speaker 03:
You know, whether the scrap seal is primarily dedicated or not, and obviously you disagree with Commerce's analysis and its conclusion, but the standard of review is difficult for you because the question is whether Commerce had, whether substantial evidence supported the Commerce's decision.

[00:02:38] Speaker 03:
And even though you have a reasonable argument, they didn't buy it.

[00:02:45] Speaker 03:
How are we to address this?

[00:02:48] Speaker 01:
So I agree, Your Honor, that the substantial evidence standard is difficult for appellants.

[00:02:52] Speaker 01:
But I don't think we're entirely in a substantial evidence standard universe here.

[00:02:56] Speaker 01:
And that's because of the language of the regulation and the preamble.

[00:03:00] Speaker 01:
The agency, if we didn't have the regulation, if we didn't have the preamble, and the agency was being asked sort of in the first instance as a blue sky kind of question, should we attribute these subsidies or not?

[00:03:12] Speaker 01:
Well, they'll evaluate the evidence and weigh it as they see fit, and then the court will determine whether that was a reasonable weighing or not, but won't try to reweigh the evidence.

[00:03:21] Speaker 01:
However, here we have a regulation, and we have a preamble.

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And the preamble is the agency's authoritative interpretation of its regulation.

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to the extent that they have created this.

[00:03:32] Speaker 03:
But isn't the question, you know, commerce's charge is to apply that interpretation to the facts of the case?

[00:03:40] Speaker 01:
Yes.

[00:03:40] Speaker 03:
And that entails an evaluation of the evidence.

[00:03:43] Speaker 01:
It does.

[00:03:44] Speaker 01:
But the regulation and the preamble have already, that's commerce already saying, when we do this, these are the factors we find most important.

[00:03:52] Speaker 01:
Not that we're saying, and it's never been my client's argument that the

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regulation of the preamble absolutely forbid the agency from taking into account things like business activities.

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But the agency's already put its own thumb on the scale of what is the most relevant.

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What should we be focusing on?

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What is the lens through which we intend to look at this cross attribution question?

[00:04:15] Speaker 01:
And that question, they said, they've answered, well, let's look at the relationship between the input product and the output product.

[00:04:23] Speaker 01:
What kind of role

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does the input product play in the relevant output product here?

[00:04:29] Speaker 01:
And rebar, in relation to scrap, the scrap is basically rebar.

[00:04:34] Speaker 01:
Rebar is scrap that has just been remelted and reshaped.

[00:04:37] Speaker 01:
It's a very close and direct relationship in which the scrap provides primary characteristics to the rebar.

[00:04:43] Speaker 04:
Maybe that's true, but it's also true that this particular input of scrap metal can be used for a variety of different steel products beyond just rebar.

[00:04:53] Speaker 04:
Is that correct?

[00:04:54] Speaker 01:
a variety of different steel products.

[00:04:56] Speaker 01:
But if we look at the examples in the preamble.

[00:04:59] Speaker 04:
Well, this is steel scrap.

[00:05:00] Speaker 01:
Yes, but.

[00:05:00] Speaker 04:
It's going to be steel something.

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Directly, but.

[00:05:04] Speaker 01:
But.

[00:05:05] Speaker 01:
So it's going to be steel scrap will be steel something directly.

[00:05:09] Speaker 01:
But the example in the preamble of products where you wouldn't do attribution, it doesn't say something like that.

[00:05:16] Speaker 01:
Oh, it's appliances, plastic and automobiles, and plastic and appliances, where the input.

[00:05:22] Speaker 05:
And you are only made of scrap.

[00:05:24] Speaker 01:
Practically speaking, in modern commercial production of rebar, I cannot imagine a single person who would ever try to make first steel rebar, as Captain suggests, as possible.

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It's technically possible, but it would be baffling as a choice, given the commercial realities of rebar production and the market itself.

[00:05:46] Speaker 01:
But as I was saying, the examples in the preamble of automobiles and

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appliances, those involve products that are made of multiple materials where the plastics is far upstream of the finished product.

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Here we have rebar and scrap, where you're basically taking scrap and the next step is rebar.

[00:06:06] Speaker 01:
It is not a product where there's multiple inputs into it, multiple different production processes that result in the rebar.

[00:06:14] Speaker 01:
Scrap to rebar is a very direct, very close correlation, much like semolina and pasta and

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stumpage and timber and lumber, the other examples that the agency gives in its preamble.

[00:06:28] Speaker 01:
And to your point, Your Honor, the agency said, well, you can use scrap to make a bunch of different kinds of steel products.

[00:06:34] Speaker 01:
Other than primary steel production, they didn't identify any types of products that would be using scrap, nor did they identify a variety of production processes in which scrap could be used.

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Crap is essentially only usable commercial for remelting into primary steel products, like rebar, the product that is at issue here.

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And that's exactly why the agency's determination is out of keeping with the preamble's illustrative examples, particularly of plastics.

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Again, plastics is only one of many upstream inputs into goods like automobiles, into probably computers, into all kinds of things, as well as, and doesn't give primary essential characteristics to those

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far downstream goods.

[00:07:18] Speaker 01:
But again, rebar is essentially scrap that's been re-melted.

[00:07:22] Speaker 01:
Commerce also failed to explain why processing level for scrap was a relevant factor, given that there was no indication that CAPTAN required scrap that was processed in particular ways.

[00:07:34] Speaker 01:
And the only other case in which the agency found, based on a lack of processing, that steel scrap was not primarily dedicated to downstream steel products made with unprocessed scrap

[00:07:46] Speaker 01:
The lower court rejected that distinction as unexplained and unsupported.

[00:07:50] Speaker 05:
Was NUR the exclusive supplier of scrap to Captain?

[00:07:57] Speaker 01:
NUR was not the exclusive supplier of scrap to Captain, but the scrap that NUR produced, it only sold to Captain.

[00:08:07] Speaker 01:
Beyond the processing distinction,

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The only other basis that commerce gave for finding that nurse scrap was not primarily dedicated to Captain's rebar production was that nurse main business is as a ship builder that had limited intercompany transactions with Captain.

[00:08:24] Speaker 01:
But as the preamble indicates, the focus of the primarily dedicated analysis is on the relationship between input and output, not the business activities of the supplier or the amount of input supplied.

[00:08:36] Speaker 05:
Sure, but the examples they seem to give

[00:08:39] Speaker 05:
for where it would be crossed, whatever the word, it is much more direct.

[00:08:48] Speaker 05:
If somebody produces semolina, they know it's going to be used for pasta.

[00:08:54] Speaker 05:
If somebody produces scrap metal, it can be used for a lot of things.

[00:08:58] Speaker 01:
If someone produces scrap metal, it can only be used for remelting.

[00:09:03] Speaker 05:
But it can be remelted and turned into a variety of steel products.

[00:09:07] Speaker 01:
Semolina could be used in plastic, it could be used in bread, it could be used in cake.

[00:09:11] Speaker 01:
And there's another.

[00:09:12] Speaker 01:
I'd point the court to the example of lined paper from Indonesia, which the agency discusses in its remand results that I think it's Appendix 2249.

[00:09:23] Speaker 01:
Line paper from Indonesia involved the agency finding that pulp logs are primarily dedicated to downstream lined paper products including notebooks.

[00:09:33] Speaker 01:
Now obviously a pulp log could be used to make all kinds of different paper products.

[00:09:38] Speaker 01:
Stationary.

[00:09:39] Speaker 01:
all kinds of stuff, copy paper.

[00:09:41] Speaker 04:
What about the statement in the preamble which says the main concern is the situation where subsidy is provided to an input producer whose production is dedicated almost exclusively to the production of a higher value added product?

[00:09:59] Speaker 04:
the type of input product that is nearly a link in the overall production chain.

[00:10:04] Speaker 04:
The part I'm interested in is that front part where it says, a subsidy provided to an input producer whose production is dedicated almost exclusively to production of a higher value added product.

[00:10:17] Speaker 04:
And here, the steel scrap that's coming off of

[00:10:22] Speaker 04:
shipbuilding seems to be extremely ancillary, and it's not what that company is primarily dedicated to.

[00:10:33] Speaker 04:
It's dedicated to shipbuilding.

[00:10:35] Speaker 01:
Yes, so I think that particular sentence in the preamble is where commerce is really trying to hang its hat.

[00:10:42] Speaker 01:
The problem is there's the rest of the preamble.

[00:10:44] Speaker 01:
If they had just stopped there, maybe they would have a better case.

[00:10:48] Speaker 01:
But the preamble goes on.

[00:10:51] Speaker 05:
I don't mean to interrupt what I'm going to say, but doesn't that make sense?

[00:10:56] Speaker 05:
In the examples they use, it's the same kind of thing.

[00:10:58] Speaker 05:
If somebody is getting a subsidy to produce semolina, that semolina is turned into higher value products, even the ones you mentioned, beyond pasta, like bread and cake and all that kind of stuff.

[00:11:11] Speaker 05:
The same thing with tree stumpage gets turned into lumber, which is higher value.

[00:11:16] Speaker 05:
Here, if there was a subsidy for the ship building,

[00:11:21] Speaker 05:
The scrap is incidental to that.

[00:11:23] Speaker 05:
And it's not turned into something of higher value.

[00:11:26] Speaker 05:
Why shouldn't that be irrelevant?

[00:11:28] Speaker 05:
I mean, it seems like that's what commerce was kind of considering here.

[00:11:32] Speaker 05:
And that seems to me to make sense in a certain instance.

[00:11:35] Speaker 01:
Yeah.

[00:11:35] Speaker 01:
So I think that one of the issues that, well, one of the things that commerce is relying on is, again, in a blue sky world, it would possibly make sense if you said, well, OK, what is the purpose of this subsidy?

[00:11:48] Speaker 01:
Well, this company makes ships.

[00:11:49] Speaker 01:
This company makes rebar.

[00:11:52] Speaker 01:
We'll say that it's not reasonable to attribute the subsidies, but we have this regulation and we have the preamble and commerce in the preamble and the regulation said, whoa, the lens through which we're going to look at this is what is the relationship between the input product and the output product.

[00:12:11] Speaker 01:
They could have easily written this regulation and the preamble to say, we're going to focus on the primary business activities.

[00:12:17] Speaker 01:
of the input supplier.

[00:12:19] Speaker 01:
I think one of the reasons they didn't do so is the purpose behind this regulation was to address situations where you might have separate incorporation of the input generating or production operations of a company and the part of the company that's making the subject merchandise.

[00:12:36] Speaker 01:
If that's true, then I don't think business activities focus should have and doesn't, according to the regulation or the preamble, much impact

[00:12:46] Speaker 01:
on the analysis at all.

[00:12:49] Speaker 01:
Just to continue on with the limited transactions.

[00:12:54] Speaker 04:
Commerce's emphasis... You're into your rebuttal.

[00:12:57] Speaker 01:
I just wanted to let you know.

[00:12:57] Speaker 01:
Apologies.

[00:12:59] Speaker 01:
Well, just to quickly say, I'll quickly say that with respect to the limited transactions between NER and CAPTAN, to the extent that they are limited, that necessarily reflects the volume of scrap traded between them.

[00:13:12] Speaker 01:
And if, as the company suggests, or as the government suggests in its response brief at 29 and 30, the two companies actually had substantial inter-company transactions relative to their scrap transactions, that fact provides no obvious support for the agency's finding against cross-attribution, but only seems to underscore the fact that their cross-owned and in the meaning of the regulation can therefore use each other's assets essentially back and forth as if they own them themselves.

[00:13:40] Speaker 01:
Thank you.

[00:13:41] Speaker 04:
Let's hear from the government.

[00:13:53] Speaker 00:
May it please the court.

[00:13:55] Speaker 00:
Commerce reasonably found, based on the enumerated factors and the record at hand, that Neuer was not a cross-owned input supplier whose production was primarily dedicated

[00:14:04] Speaker 00:
to production of the downstream product.

[00:14:06] Speaker 00:
Here, steel rebar.

[00:14:08] Speaker 00:
Trial court correctly sustained that determination, and this court should affirm.

[00:14:12] Speaker 00:
I think it's important to start by looking at the big picture, as Commerce stated in the preamble.

[00:14:16] Speaker 00:
The whole purpose of this regulation and of cross attribution is trying to capture subsidies, where the purpose of the subsidy is to benefit the production of both the input

[00:14:27] Speaker 00:
Here, steel scrap, and the downstream product.

[00:14:30] Speaker 00:
Here, rebar.

[00:14:31] Speaker 00:
Put another way, as Ms.

[00:14:32] Speaker 00:
Thornton just alluded to, commerce was trying to close a loophole where you could avoid duty exposure by basically sectioning it off your input supplier and then having the subsidies be attributed to that input supplier such that nobody was liable for this countervailing duty subsidies.

[00:14:50] Speaker 00:
And I think if you look at that backdrop, those two statements in the preamble together

[00:14:54] Speaker 00:
It was eminently reasonable for commerce to find that subsidies to Noor, a company whose main purpose is shipbuilding, would not have been meant to benefit the production of the incidental byproduct of steel scrap, and certainly a subsidy to the shipbuilder Noor would not have been meant to benefit Captain's production of its steel product.

[00:15:14] Speaker 00:
I do think it's important to note that, you know, Ms.

[00:15:18] Speaker 00:
Thornton said that she's not sure we're entirely in the realm of substantial evidence, but I don't know how that wouldn't be the case.

[00:15:25] Speaker 00:
Our attack has very specifically stated that it's not... Let me ask you this.

[00:15:29] Speaker 05:
Sure.

[00:15:30] Speaker 05:
Why does it matter that the subsidy

[00:15:36] Speaker 05:
or the part that's going to the downstream producer is just, let's just call it a by-product.

[00:15:42] Speaker 05:
If it's still subsidized, if the subsidy going to the producer benefits them in a way that allows this scrap still to be cheaper than it would have been otherwise, then isn't that subsidy still attributable to the downstream producer?

[00:16:00] Speaker 00:
I mean, I think that under that scenario, then I think we'd have a problem where something like steel scrap would always have to be primarily dedicated or plastics would always have to be primarily dedicated, no matter how wide their end use is.

[00:16:14] Speaker 00:
I think that's when you go back to looking at the whole purpose of

[00:16:19] Speaker 00:
finding this cross-attribution subsidy so that a company wouldn't sort of siphon off a part of its business in order to avoid subsidies.

[00:16:26] Speaker 00:
That wouldn't have been what happened here.

[00:16:28] Speaker 00:
I don't think the Captain group, whoever owns the group, would have siphoned off or sectioned off Newar as a shipbuilding company simply to avoid countervailing subsidies on a steel byproduct.

[00:16:39] Speaker 00:
And I think that's why

[00:16:40] Speaker 00:
byproduct being incidental to Neuers main production matters.

[00:16:43] Speaker 00:
And just to be clear, we're not suggesting that the byproduct nature prevents it from being a cross-attributed subsidy.

[00:16:51] Speaker 00:
I don't think that's the case at all.

[00:16:53] Speaker 00:
Commerce has conceded in the past that that still counts as production of an input product and supply of an input product.

[00:16:59] Speaker 00:
But it certainly goes into whether

[00:17:02] Speaker 00:
you know, the purpose of the subsidy to the shipbuilder is to benefit the production of the shipbuilding, or whether the purpose of the subsidy is to benefit Capdan as a steel rebar producer.

[00:17:14] Speaker 04:
Are there two separate bases for the finding of no cross-attribution here?

[00:17:21] Speaker 04:
One being the conclusion that the steel scrap is not primarily dedicated for making rebar.

[00:17:31] Speaker 04:
And then two, the nature of Norr's business activities are just too far flung from what the downstream producer is getting.

[00:17:41] Speaker 00:
Yes, I think that accurately captures it.

[00:17:43] Speaker 00:
Our tax seems to be challenging.

[00:17:45] Speaker 00:
commerce is determination that unprocessed steel scrap is a common input used in a variety of industries such that it wouldn't be inherently primarily dedicated.

[00:17:54] Speaker 04:
There's nothing in the text of the relevant regulation that goes straight to this inquiry of looking at the nature of the business activities of the

[00:18:05] Speaker 04:
of the input supplier, is that right?

[00:18:07] Speaker 00:
I think it's accurate to say that the regulation does not explicitly use the term business activities or something along those lines.

[00:18:13] Speaker 04:
The nature of the regulation seems to really just be focused on looking at the input itself, the input product itself, and whether that particular product is primarily dedicated to a downstream product.

[00:18:28] Speaker 00:
Well, first I'd like to take a step back and just note that ARTAC and its reply brief has made very clear that it's not

[00:18:34] Speaker 00:
saying that commerce isn't allowed to consider.

[00:18:37] Speaker 04:
I'm only talking right now about me trying to figure out the meaning of this regulation.

[00:18:44] Speaker 00:
I think that you pointed to a part of the preamble earlier with Ms.

[00:18:49] Speaker 00:
Thornton that I think talks about why

[00:18:52] Speaker 00:
a business activity, the primary business activity or the primary purpose of this input supplier does matter.

[00:18:58] Speaker 04:
And my own observation is that discussion from the preamble, I don't really see it getting translated into the text of this regulation.

[00:19:07] Speaker 00:
I think that the, I agree that the text of the regulation doesn't mention overall production, but I think that the preamble is certainly a view into how commerce has intended the interpretation to be

[00:19:22] Speaker 00:
interpreted, and I think the preamble makes very clear that's something like the entire production process of the input supplier.

[00:19:31] Speaker 04:
If theoretically the text of the regulation was unambiguous and not really showing any interest or concern in the business activities of the input supplier, then would the preamble's statements to the contrary be irrelevant?

[00:19:51] Speaker 00:
Well, I have a few answers to that.

[00:19:53] Speaker 00:
To answer your question most directly, I think if it were completely unambiguous, then that would be a different story.

[00:20:00] Speaker 00:
But I think that looking at the text of the preamble is one of the tools that you use in construing whether the language of the regulation is ambiguous or not.

[00:20:10] Speaker 00:
And so I don't think you can completely ignore the preamble, regardless of what the regulation says.

[00:20:15] Speaker 00:
But I also note that, again, ARTAC isn't lodging

[00:20:19] Speaker 00:
a facial challenge to commerce's enumeration of those five factors.

[00:20:23] Speaker 00:
So ARTAC has not said that commerce is prohibited from considering business activities.

[00:20:27] Speaker 00:
Rather, the argument, at least as made in its reply brief, goes to the weight that commerce afforded that factor.

[00:20:35] Speaker 04:
They seem, in their own way, to be embracing the preamble in the sense that they want to look at those analogies of stumpage to lumber and how what we have here

[00:20:48] Speaker 04:
is closer to that than plastic to automobiles?

[00:20:53] Speaker 00:
I mean, I do agree that our attack maybe focuses to its detriment on just the examples rather than looking at the overarching purpose of the subsidies.

[00:21:01] Speaker 00:
But I think even if you look at the examples, as Judge Hughes noted during Ms.

[00:21:06] Speaker 00:
Gorton's presentation, something like semolina or something like stumpage, those I think

[00:21:13] Speaker 00:
Just in a broad, non-lawyer sense, when you think of semolina, you think of pasta.

[00:21:17] Speaker 00:
When you think of sumbitch, you think of lumber.

[00:21:19] Speaker 00:
When you think of steel scrap, you don't think only of rebar.

[00:21:22] Speaker 00:
You think of a multitude of steel products that could be used.

[00:21:25] Speaker 00:
And I think the trial court got it right when it said that it's improper to use the entire universe of steel products as the denominator.

[00:21:33] Speaker 05:
I'm a little confused why.

[00:21:34] Speaker 05:
Because I assume the whole point of this is to make sure that there's not some kind of subsidy by the government that is benefiting the secondary producer, or whatever we're calling them.

[00:21:47] Speaker 05:
Why are we not talking about what the actual

[00:21:53] Speaker 05:
Wouldn't that give us some insight onto whether that subsidy was intended to benefit both of them?

[00:22:00] Speaker 05:
I mean, what was the subsidy here?

[00:22:01] Speaker 00:
The subsidy in question here was the provision of land to Noor for less than adequate remuneration.

[00:22:08] Speaker 00:
And so I do think if you look at the subsidy itself, then that would lend itself to, I think, most reasonably, a finding that the subsidy was not to meant

[00:22:16] Speaker 00:
to benefit the incidental production of steel scrap, which was then sold to Captain.

[00:22:20] Speaker 05:
The way it was given to do what?

[00:22:21] Speaker 05:
Build?

[00:22:22] Speaker 00:
I assumed to build its offices and its ships.

[00:22:25] Speaker 00:
Create lots of steel scrap?

[00:22:28] Speaker 05:
I mean, it's hard because we also get countervailing duties in tax subsidy cases, right?

[00:22:33] Speaker 05:
I mean, if you give a company favorable tax treatment for production of its goods, why wouldn't you then attribute that favorable tax treatment

[00:22:48] Speaker 05:
of the steel.

[00:22:50] Speaker 00:
Because again, the purpose of this particular provision is not to capture all sort of incidental benefits that could occur.

[00:22:59] Speaker 00:
The purpose, as commercially clearly stated, is to close a loophole where companies could deliberately evade countervailing duties by structuring its corporate groupings in a certain way.

[00:23:11] Speaker 00:
And here, I think that that lends itself very clearly to a finding.

[00:23:14] Speaker 05:
But isn't that example precisely what they could do?

[00:23:17] Speaker 05:
If Newark gets favorable tax treatment and is allowed to sell its scrap metal to this other company at less than market value because of that favorable tax treatment, isn't that secondary producer getting the benefit of that favorable tax treatment without any showing that the government gave it independent favorable tax treatment?

[00:23:44] Speaker 05:
Are there other tools to go after that kind of subsidy?

[00:23:48] Speaker 00:
I do believe there's something called an upstream subsidy provision that's mentioned in the preamble.

[00:23:54] Speaker 00:
It talks about in the context of plastics to automobiles, they say that those subsidies, they would rely on the upstream subsidy provision to capture any plastics benefits which are sort of otherwise

[00:24:06] Speaker 00:
passed to the downstream producer.

[00:24:08] Speaker 00:
And so I think that could be applied here if that was necessarily the case.

[00:24:12] Speaker 00:
I can't speak to the specifics of the upstream subsidy provision, but Commerce did take that into account.

[00:24:17] Speaker 00:
The purpose of this particular provision, I think, is not to find every input supplier primarily dedicated.

[00:24:24] Speaker 00:
And I think the problem with your honor's hypothetical would be that every input supplier would be found to be primarily dedicated as long as there was some sort of incidental benefit to the respondent.

[00:24:33] Speaker 00:
And I don't think that's

[00:24:34] Speaker 00:
And I think it's very clear that that's not what commerce was going for in this particular regulation.

[00:24:39] Speaker 00:
I'm happy to answer any other questions the court may have.

[00:24:42] Speaker 00:
Otherwise, I see my time is up.

[00:24:44] Speaker 00:
So we respectfully ask that the court affirm.

[00:24:47] Speaker 04:
Good.

[00:24:47] Speaker 04:
Thank you.

[00:24:55] Speaker 02:
Good morning.

[00:24:56] Speaker 02:
May it please the court?

[00:24:58] Speaker 02:
A couple of points to raise quickly.

[00:25:01] Speaker 02:
The first is, I just want to highlight how reasonable and beneficial, both not in this case, but in a multitude of cases, Commerce's new test is to identify whether input producer has a primarily dedicated

[00:25:19] Speaker 02:
product.

[00:25:21] Speaker 02:
Effectively, prior to this case, there was a split, almost what you would call a split in the circuit at Commerce on how it was to assess whether something was primarily dedicated or not.

[00:25:31] Speaker 02:
Different cases used a multitude of different ways.

[00:25:34] Speaker 02:
Sometimes they looked at the nature of the product, sometimes they didn't, sometimes they just looked at whether the product was sold to the subject merchandise producer and it was used in subject merchandise.

[00:25:44] Speaker 02:
Now, Commerce has developed this test that identifies a number of different factors that fall in line with the variety of criteria in the preamble, including whether it's a product of merely a link or whether the production is exclusively dedicated to the downstream product.

[00:26:05] Speaker 02:
And I just want to point out that Commerce, in December of 2024, implemented a new regulation where it codified these factors that it looks at here, including the business activities of the producer.

[00:26:24] Speaker 04:
Does Commerce ever look at the nature of the subsidy?

[00:26:28] Speaker 02:
Commerce does not look at the nature of the subsidy in determining whether input producer is primarily dedicated.

[00:26:34] Speaker 02:
The primarily dedicated step is prior to looking at any subsidies.

[00:26:40] Speaker 02:
What commerce is trying to look at with this analysis is whether

[00:26:43] Speaker 02:
that the producer and the input supplier should basically be considered as a single entity.

[00:26:50] Speaker 02:
They're not looking at necessarily whether, to your point, just use about whether the scrap is cheaper or not.

[00:26:58] Speaker 02:
They're trying to determine whether or not anything that the input supplier, any subsidy that the input supplier gets, should be attributed to the producer of the subject merchandise because they should be considered a single entity.

[00:27:12] Speaker 02:
And that's why they look at this.

[00:27:15] Speaker 02:
So Commerce has said that they're looking at, they use the primarily dedicated analysis to separate those different instances.

[00:27:24] Speaker 05:
Do they look at the relationship between the two companies, too?

[00:27:27] Speaker 02:
Oh, certainly, yeah.

[00:27:28] Speaker 05:
The second company, even though it was set up independently, had been a former part of

[00:27:48] Speaker 05:
an affiliate, is that a factor to consider?

[00:27:51] Speaker 02:
So the first factor when you're looking at cross ownership is that whether there is, in fact, cross ownership in the common sense of the terms.

[00:28:00] Speaker 02:
And then you look at if there is cross ownership, then you look at whether the input supplier, if it's primarily dedicated.

[00:28:08] Speaker 02:
A couple other quick points.

[00:28:14] Speaker 02:
Your honor asked how much scrap Captain purchased from NERF.

[00:28:22] Speaker 02:
It was actually 0.003% of the scrap that Captain used in its production of subject merchandise.

[00:28:30] Speaker 02:
It was also less than 0.5% of NER's sales, roughly less than $20,000.

[00:28:38] Speaker 02:
So if you put that just in general context here, NER was the only company that received, the only company within Captain that received any above de minimis subsidies.

[00:28:49] Speaker 02:
And it was because of that sold, that transaction was less than $20,000 that the company got a 1.82% originally.

[00:28:59] Speaker 02:
I see my time's up.

[00:29:00] Speaker 02:
Thank you very much.

[00:29:00] Speaker 04:
Thank you.

[00:29:15] Speaker 01:
Thank you, Your Honors.

[00:29:16] Speaker 01:
I have just a few quick points to make first in response to my colleague about the amount of scrap that nurse sold to Captain

[00:29:23] Speaker 01:
Commerce itself stated in its final remand results that the amount of scrap supplied is irrelevant.

[00:29:29] Speaker 01:
That's at Joint Appendix 2235.

[00:29:32] Speaker 01:
So to the extent that CAPTN has continued to make arguments that it is the amount of scrap at issue that is relevant, Commerce itself has found that that is not the case under its cross-attribution analysis.

[00:29:45] Speaker 01:
There's also a larger policy problem with Commerce's finding

[00:29:51] Speaker 01:
that steel scrap is necessarily a common input used in a variety of industries on the basis that steel scrap is used to make different types of primary steel products.

[00:30:01] Speaker 01:
And that's because heavy users of the trade remedy laws are steel companies.

[00:30:08] Speaker 01:
Steel products make up a lot of our trade remedy orders.

[00:30:11] Speaker 01:
And primary steel products tend to be made almost entirely from scrap.

[00:30:15] Speaker 01:
If we were to create a rule where scrap is simply not primarily dedicated, because no one is going to have a business where they produce scrap, it is a byproduct.

[00:30:26] Speaker 01:
It is the stuff that is left over after you've made what you are trying to make.

[00:30:30] Speaker 01:
And yet it is the primary input into downstream steel products like rebar, creating a system where companies can simply avoid

[00:30:38] Speaker 01:
countervailing subsidies on scrap generating cross-owned operations would be a real problem for the administration of the trade remedy laws.

[00:30:47] Speaker 01:
And finally, I just wanted to reiterate, the regulation states that the point, the focus of the agency is supposed to be on production of the input product, which is scrap, not other production by the input supplier.

[00:31:02] Speaker 04:
Thank you, Your Honors.

[00:31:03] Speaker 04:
Okay.

[00:31:03] Speaker 04:
Thank you.

[00:31:04] Speaker 04:
The case is submitted.