[00:00:00] Speaker 04:
The next case for argument is 24-1142 Midwest CBK versus United States.

[00:00:08] Speaker 04:
Mr. Klein, remove your room.

[00:00:13] Speaker 04:
Don't feel bad that you cleaned out the room.

[00:00:16] Speaker 04:
Attorney, Your Honor.

[00:00:16] Speaker 04:
Don't feel bad that you cleaned out the room.

[00:00:21] Speaker 01:
It may please the court.

[00:00:23] Speaker 01:
Thank you, Your Honors.

[00:00:23] Speaker 01:
It is my first appellate argument, so maybe it's better it's empty.

[00:00:27] Speaker 04:
It's all recorded for posterity.

[00:00:31] Speaker 01:
Thank you.

[00:00:32] Speaker 01:
My name is Patrick Klein.

[00:00:33] Speaker 01:
I'm an attorney at Neville Peterson, joined by my colleague, Mr. John Peterson.

[00:00:36] Speaker 01:
And we're arguing today on behalf of Appellant Midwest CBK.

[00:00:40] Speaker 01:
There are two issues before the court in this appeal.

[00:00:42] Speaker 01:
The first is whether the trade court properly held that appellant's injuries were not being liquidated by operation of law.

[00:00:49] Speaker 01:
and whether the trade court properly held that the appellant sales to customers were sales for export to the U.S.

[00:00:56] Speaker 01:
and could serve as the basis of transaction value.

[00:00:59] Speaker 01:
I would like to start with the deemed liquidation arguments and finish with the sale for export issue.

[00:01:06] Speaker 01:
The protestant entries were deemed liquidated by the operational law according to 19 U.S.C.

[00:01:10] Speaker 01:
1504.

[00:01:12] Speaker 01:
According to the statute, customs may extend liquidation of an entry if the information needed for proper appraisal is not available to the customs service.

[00:01:21] Speaker 01:
Under the language of the statute, it is clear that CBP has authority to extend liquidation when the agency does not have possession of the necessary info to appraise the entry.

[00:01:32] Speaker 01:
By June 2014, the latest, all of the information necessary for the liquidation had been given to the agency in this case.

[00:01:40] Speaker 04:
Yeah, but my instincts may be different.

[00:01:44] Speaker 04:
But our precedent says that it's not just getting information from outside parties.

[00:01:49] Speaker 04:
It's getting information from inside the agency as well.

[00:01:54] Speaker 04:
So that ship has sailed, not understanding what the language says.

[00:01:58] Speaker 01:
What we're arguing is not that there was necessary information outstanding that customs needed to appraise the entries.

[00:02:05] Speaker 01:
What customs was doing was an internal bureaucratic analysis of the information.

[00:02:09] Speaker 01:
and that that took too long to happen and that the information necessary for the appraisement was in their possession when Midwest answered all their... The analysis that they were doing, doesn't that go to the appraisement?

[00:02:23] Speaker 01:
The analysis they were doing

[00:02:25] Speaker 01:
It did deal with what was the proper appraisement, but if you look at the steps that they took, right, it was let's make sure that someone checked off on it, someone supervised it, that there was a quality assurance check and stuff like that.

[00:02:39] Speaker 02:
But there were checks happening

[00:02:42] Speaker 02:
There were a lot of checks, but they were happening on a fairly regular basis during this entire time period, weren't they?

[00:02:49] Speaker 01:
Yes.

[00:02:49] Speaker 01:
Yes, their detail was happening at a regular basis.

[00:02:52] Speaker 01:
But again, as we say, those checks are not the information that was required to appraise these entries.

[00:02:58] Speaker 01:
That information was what Midwest submitted to them.

[00:03:01] Speaker 01:
Their analysis isn't that information.

[00:03:06] Speaker 01:
During that time period, CBP conducted the painstakingly so.

[00:03:10] Speaker 01:
analysis, the draft audit report that they issued was only a page and a half long.

[00:03:15] Speaker 01:
And after they issued the draft audit report, the agency went silent again for an additional seven months until it released the final audit report in 2016.

[00:03:23] Speaker 01:
And then it began liquidating entries in April of that year.

[00:03:26] Speaker 03:
Did Midwest ever provide some type of documents or evidence that customers had not followed the customary practice in extending the liquidation of entries after that period in June 2014?

[00:03:40] Speaker 01:
I'm sorry, Your Honor.

[00:03:42] Speaker 01:
I'm not sure I understood your question.

[00:03:43] Speaker 01:
You're asking the Midwest.

[00:03:44] Speaker 03:
It sounds like you're arguing, and you can correct me if I misunderstood your argument, but it sounds like you're arguing that they failed to follow the customary practice or they took too long in terms of your conversation head back and forth with Judge Andrews.

[00:03:56] Speaker 03:
What I'm wondering is, did you provide anything

[00:03:59] Speaker 03:
to customs to say, hey, you're not doing this right.

[00:04:03] Speaker 03:
You're not following what should be customary practice or your timing or anything like that.

[00:04:08] Speaker 01:
There was nothing specific submitted that said that I think the clock is running on the liquidations.

[00:04:15] Speaker 01:
What we're not arguing is that there was a customary practice or something like that.

[00:04:18] Speaker 01:
We're just arguing based on the plain statutory tax about information being needed by the agency.

[00:04:23] Speaker 04:
Well, so you think, and the CIT judge, who did a very thorough job, says because customs had a reasonable basis for extending liquidation in order to complete the audit process, ensure its accuracy, and apply with established standards.

[00:04:37] Speaker 04:
Did you put on evidence?

[00:04:40] Speaker 04:
dislodges those conclusions in any way, shape, or form?

[00:04:44] Speaker 01:
I don't think the evidence is submitted in itself about what CVP was doing during this time.

[00:04:53] Speaker 01:
Not that they were moving quickly to liquidate the entries and to come up with their final determination.

[00:04:59] Speaker 01:
It's that they took forever.

[00:05:00] Speaker 03:
I think that this case is- Could you answer her direct question?

[00:05:03] Speaker 03:
She asked you a question that's really a yes or no question.

[00:05:06] Speaker 03:
Did you provide evidence in any shape or form with respect to that?

[00:05:09] Speaker 01:
No.

[00:05:10] Speaker 01:
No.

[00:05:11] Speaker 01:
No, Your Honors.

[00:05:12] Speaker 04:
So how do we to overturn?

[00:05:16] Speaker 04:
these findings if you're not disputing those findings, or you're recognizing that there's nothing in the record that would refute those conclusions.

[00:05:25] Speaker 04:
So are you saying as a matter of law that's not what you should look for?

[00:05:29] Speaker 01:
Yes, Your Honors.

[00:05:31] Speaker 01:
We're saying as a matter of law that when CBP gets put on the clock by the liquidation statute, that the amount of time that their bureaucratic processes take is not providing them with the necessary info to liquidate the entry.

[00:05:45] Speaker 01:
If I can draw a comparison to the Ford Motor case, in that case, the court held that despite CBP reportedly investigating the importer for fraud, the record could reasonably reflect that the agency did nothing for close to two years while extending the liquidations.

[00:06:01] Speaker 04:
Yeah, but they didn't do nothing.

[00:06:02] Speaker 04:
I mean, there's no finding here that they did nothing for two years.

[00:06:06] Speaker 04:
The finding is that they did this audit thing and all this stuff during the period in question.

[00:06:12] Speaker 01:
Yes, we're arguing that CBP's internal deliberations were not the proper steps that needed to be taken to define the necessary facts to liquidate these entries.

[00:06:23] Speaker 02:
I think that's something where we should be giving quite a bit of discretion in terms of reviewing what customers thinks is necessary to

[00:06:33] Speaker 02:
properly crazed or determine the facts relating to these entries?

[00:06:37] Speaker 01:
So I think that customs has some form of discretion to figure out what is necessary for them to do, but that when their internal processes take this long and stuff like that, that they're on the clock with the liquidation statute, and that that's the clock that marks it.

[00:06:52] Speaker 04:
I have.

[00:06:53] Speaker 04:
I mean, I'm not without sympathy that they filled in every single gap for every single day, but we don't do that here.

[00:07:01] Speaker 04:
And you can't review it.

[00:07:03] Speaker 04:
I mean, if it's a line drawing, you say they took too long.

[00:07:06] Speaker 04:
So if they should have taken 30 days as opposed to 60 days, one, I don't know how we at the appellate level could make that determination.

[00:07:16] Speaker 04:
But the burden is on you to prove that.

[00:07:19] Speaker 04:
And I just don't know how you would expect us to reach the conclusion you want to reach based on the record before us.

[00:07:28] Speaker 01:
Well, I understand, Your Honors, and we respectfully disagree on our papers.

[00:07:33] Speaker 01:
Unless you guys, Your Honors, have any other questions on this issue, I will move on to the next issue.

[00:07:40] Speaker 01:
The next issue is whether or not the appellant's entries during the time period were sales or export to the United States.

[00:07:49] Speaker 01:
The value statute's preferred method of valuation is transaction value.

[00:07:54] Speaker 01:
Transaction value is the price actually paid or payable in the sale of a merchandise for export to the United States.

[00:08:00] Speaker 01:
This not only requires that there be a bona fide sale of merchandise, but that there be a sale for export to the country.

[00:08:07] Speaker 01:
A sale for exportation requires that the goods must move from one country to another as a result of a contract of sale.

[00:08:14] Speaker 03:
At the time of sale, where is the subject merchandise stored?

[00:08:18] Speaker 01:
It was stored in Canada.

[00:08:20] Speaker 01:
I think it's on the record.

[00:08:23] Speaker 01:
A sale for exportation requires that the parties to the contract for sale have a meeting of the minds regarding the sale for exportation.

[00:08:31] Speaker 01:
Not all foreign goods will enter the United States pursuant to a sale for exportation, and this is something the value code anticipates in providing for alternative methods.

[00:08:40] Speaker 01:
What the trade porting customs did in this case was to rewrite Midwest contracts inferring an international sale for export when none existed between Midwest and its customers.

[00:08:49] Speaker 04:
And why is that so?

[00:08:51] Speaker 01:
Because there's a lot of things to look at in response to that.

[00:08:55] Speaker 01:
The first thing I want to point out is the terms of the sale were FOB, Buffalo, New York,

[00:09:00] Speaker 04:
Yeah, and I didn't really, I mean, the government responds, and I don't see where they're wrong, if they raise an interesting point that if we were to agree with you that the shipping terms are relevant to our statutory analysis, couldn't an importer circumvent the statute entirely all the time by selecting a particular method of shipment?

[00:09:20] Speaker 04:
It seems pretty extreme to me.

[00:09:24] Speaker 01:
I think that the FOB term is just an indication here that it was a domestic term, that it's one of the few indications that the sale was not for export to the United States.

[00:09:34] Speaker 01:
You could have a shipping term that includes a domestic FOB then, and it's still be obvious by some of the other factors that there is a sale for export.

[00:09:43] Speaker 04:
Like in this case, the customers... Why does that dislodge a conclusion that there's a sale for export?

[00:09:48] Speaker 04:
I mean, the goods were in Canada.

[00:09:51] Speaker 04:
They can come from China.

[00:09:53] Speaker 04:
And they're purchased in Canada.

[00:09:55] Speaker 04:
And they come up with a border.

[00:09:57] Speaker 04:
And they get delivered to the customers.

[00:10:00] Speaker 02:
And they come over the border after they've already been paid for.

[00:10:03] Speaker 01:
The orders for the goods were placed in the United States.

[00:10:06] Speaker 01:
Midwest CVK was a United States company and employed a United States sales force.

[00:10:12] Speaker 01:
Employees in the US went around to different customers and they gathered the orders in the United States.

[00:10:19] Speaker 04:
It was for products that were in Canada that had been imported from China, right?

[00:10:24] Speaker 01:
Yes.

[00:10:26] Speaker 04:
Don't you think that would have an impact on how we do all of these assessments?

[00:10:32] Speaker 04:
If somebody comes from China or from Canada or from Mexico and individually makes a sale in the US, it's not an import.

[00:10:41] Speaker 01:
It could be a sale for import if the meeting of the minds was for a sale to import the merchandise into the country.

[00:10:48] Speaker 04:
Well, if you're an American consumer and you're dealing with the company and you're buying goods that are in another country that are going to be shipped for that country to you, isn't the understanding that

[00:10:59] Speaker 04:
goods are going to be imported that you're buying?

[00:11:02] Speaker 01:
If the consumer is aware that the goods are imported.

[00:11:04] Speaker 01:
In this case, as far as Midwest customers understood, is that they were just buying the goods from the Port of Buffalo under the shipping term.

[00:11:12] Speaker 04:
So that's the test.

[00:11:14] Speaker 04:
It's what the customer in the US understands.

[00:11:17] Speaker 04:
So that's the dispositive test for whether or not

[00:11:22] Speaker 01:
Yes, because for a sale for export, there needs to be a... What legal support for that being the test?

[00:11:27] Speaker 03:
What legal support do you have that that is the dispositive test?

[00:11:31] Speaker 01:
The first thing I want to point is that the text of the statute says the sale for import into the United States, and as I was mentioning previously, the sale must be

[00:11:40] Speaker 01:
a meeting of the minds between the two parties.

[00:11:43] Speaker 01:
And the second, I would point to the Oversphere case.

[00:11:46] Speaker 01:
Who are the two parties here?

[00:11:48] Speaker 01:
Right.

[00:11:49] Speaker 01:
In this case?

[00:11:49] Speaker 01:
Yeah, customer and Midwest.

[00:11:51] Speaker 01:
Customer and Midwest, yes.

[00:11:53] Speaker 04:
And there's no dispute the purchase was of products while the products were in Canada to be imported to the customer in the US, right?

[00:12:03] Speaker 04:
Nobody's disputing.

[00:12:04] Speaker 01:
No, we're not disputing that, no.

[00:12:07] Speaker 04:
OK, so I'm not clear what meeting of the minds

[00:12:10] Speaker 04:
the absolute failure of the meeting of the minds would dislodge that conclusion.

[00:12:15] Speaker 04:
I mean, do we adjudicate these cases by going to every customer and saying,

[00:12:20] Speaker 04:
Did you know these came from China, or did you think you were buying them from Baltimore?

[00:12:24] Speaker 04:
I mean, I don't understand what your test is and how it would work.

[00:12:29] Speaker 01:
Well, I mean, the Orbiter report put forward that there's a number of factors to consider in that.

[00:12:35] Speaker 01:
And the FOB term was one of them, and that the court took into consideration a number of things that it said were domestic factors.

[00:12:42] Speaker 04:
Yeah, the problem with Alberscher is that the CIT did, I think, a good analysis talking about that being an old case that was adjudicated under a different statute, which has since been revised, the argument being made that the revisions dislodged whatever came out of that case.

[00:12:59] Speaker 01:
No?

[00:13:00] Speaker 01:
Is that wrong?

[00:13:01] Speaker 01:
Are they wrong?

[00:13:03] Speaker 01:
The Orbisphere case was decided under the current value statute, and the case decided between deductive and transaction value.

[00:13:12] Speaker 01:
The Orbisphere court took a holding from this court in the Massey case, which was decided under the previous value code.

[00:13:21] Speaker 01:
But the Orbisphere court was under the current value code, and the Massey case, even though it was decided under a previous value code,

[00:13:29] Speaker 01:
the things that the court in Orbisphere took was a very similar language to the language that is in the statute now, a sale for export to the United States from the previous statute.

[00:13:40] Speaker 02:
The Court of International Trade in this case basically explained why Orbisphere doesn't apply, but as the Court of Appeals

[00:13:52] Speaker 02:
Even if word of the sphere did apply, we wouldn't have to follow it, would we?

[00:13:57] Speaker 02:
No, you don't have to follow it.

[00:13:58] Speaker 02:
But we do.

[00:13:59] Speaker 03:
Do you have any binding case law that we would need to follow that would support the arguments you're making here?

[00:14:06] Speaker 01:
Binding case law from this court to follow.

[00:14:08] Speaker 01:
I would think that the issue of sale for export to the United States has been before this court a lot in a few other cases, but in different scenarios, mostly involving first sale.

[00:14:19] Speaker 01:
But I think, based on our research and writing these briefs, that there really hasn't been an opinion on point, I would think, about this issue.

[00:14:27] Speaker 04:
I was looking at my watch to see if I should say good afternoon or good morning, but we're right on the cusp here.

[00:14:43] Speaker 00:
I'll say good morning.

[00:14:49] Speaker 00:
May it please the court.

[00:14:50] Speaker 00:
The trial court properly determined both issues here, that there was a sale for exportation to the United States and that the merchandise did not liquidate by operation of law.

[00:14:59] Speaker 00:
I'll address.

[00:15:00] Speaker 04:
Can we ask you about the second one first?

[00:15:01] Speaker 04:
Sure.

[00:15:03] Speaker 04:
At some look at what went down, I mean, accepting Ford Motors construction of the statute, that it can be internal stuff.

[00:15:13] Speaker 04:
What was done, I think they make an argument, and I didn't have enough documents in front of me to determine the brightness.

[00:15:19] Speaker 04:
Does the government establish that the stuff that was done during this interim period, the review, the audits, et cetera, et cetera, was relevant to the ultimate conclusion?

[00:15:31] Speaker 00:
Yes, Your Honor.

[00:15:34] Speaker 00:
What happened here?

[00:15:35] Speaker 00:
Just to put this a little bit in perspective, this is the magnitude of the case.

[00:15:40] Speaker 00:
This case had 562 entries.

[00:15:43] Speaker 00:
Sometimes with a hundred or more line items which related to different classifications.

[00:15:48] Speaker 04:
So each of the 561 entries have a lot of

[00:15:51] Speaker 00:
Stuff under that.

[00:15:52] Speaker 00:
A lot of stuff.

[00:15:53] Speaker 00:
And just to give you a little bit, I mean, this was actually in Midwest Brief.

[00:15:58] Speaker 00:
This covered millions of individual sales to US customers.

[00:16:01] Speaker 00:
And they said 12,000 distinct SKUs.

[00:16:05] Speaker 00:
And at every phase here, the administrative phase and even in this litigation, Midwest couldn't provide the information that would typically be used by CBP to determine a typical transaction value calculation.

[00:16:20] Speaker 00:
It was actually the reason that Midwest waived its second argument here, which is the challenge to the actual calculations.

[00:16:26] Speaker 04:
I'm sorry to interrupt, but what was the difference between you had the 2013 data and the 2013 data?

[00:16:34] Speaker 04:
And there was some question raised about a problem being because you didn't have the 2014 data.

[00:16:39] Speaker 04:
Did you ever ask them for the 2014 data?

[00:16:43] Speaker 00:
I'm not sure exactly what you're referencing in terms of the 2014 data.

[00:16:47] Speaker 00:
We did have the 2013 data at some point during the administrator process.

[00:16:54] Speaker 00:
But I think the thing that Midwest raised was that we had the 2013 data earlier on in the process than the merchandise was actually liquidated.

[00:17:04] Speaker 00:
So we had the 2013 data in 2014 at some point.

[00:17:08] Speaker 00:
But the 2013 data came into play more when

[00:17:13] Speaker 00:
we were at the second phase.

[00:17:14] Speaker 00:
So the first phase was, what method evaluation should CBP implement in valuing and coming to an appraisal for this merchandise?

[00:17:24] Speaker 00:
Then the next step was, how do we do this once we determine whether or not transaction value is the proper method of valuation?

[00:17:31] Speaker 00:
As you're likely aware, 1401A dictates that CBP use transaction value whenever it can be calculated.

[00:17:41] Speaker 00:
And it can be calculated here.

[00:17:42] Speaker 00:
So during the process, there was a quick response audit as a result of what Midwest prompted by Midwest letter to CBP saying, we're going to do things different now.

[00:17:53] Speaker 00:
We've moved our offices.

[00:17:55] Speaker 00:
We're going to use deductive value.

[00:17:57] Speaker 00:
That prompted this quick response audit.

[00:17:59] Speaker 00:
And then from that point, CBP moved expeditiously as possible to first determine the proper method evaluation and then to determine how to calculate that method evaluation.

[00:18:12] Speaker 00:
Just putting aside for a second, they did have that information in 2014, but at that point they hadn't determined what the proper method evaluation was.

[00:18:20] Speaker 00:
They couldn't use that or any method at that point to do the actual calculations, which did come a bit later.

[00:18:27] Speaker 04:
So what went into determining the proper method evaluation?

[00:18:30] Speaker 04:
How long did that take?

[00:18:31] Speaker 00:
That took from 2013 when the CDP was first alerted to this.

[00:18:38] Speaker 00:
And the declaration of James Conrad steps through this pretty thoroughly.

[00:18:44] Speaker 00:
But there were facts that had to be gathered from the importer, which happened as

[00:18:50] Speaker 00:
Midwest admits through 2014, I believe the middle of 2014 somewhere.

[00:18:55] Speaker 00:
And then there was field work that was conducted.

[00:18:58] Speaker 00:
That happened through October of 2014.

[00:19:00] Speaker 00:
That included a visit to the facility in Canada and a review of some of the information.

[00:19:06] Speaker 00:
Obtaining information, that's not something that CBP had at that point, because when they entered the merchandise, they entered it using what they identified as their deductive value calculation.

[00:19:17] Speaker 00:
So typically, you would get purchasers and invoices from the actual purchase and sale.

[00:19:23] Speaker 00:
That didn't happen here.

[00:19:24] Speaker 00:
That had to be asked for later.

[00:19:27] Speaker 00:
send some of it.

[00:19:28] Speaker 00:
So what happened during the administrative process is that CBP asked for 12 specific line items.

[00:19:32] Speaker 00:
So they could basically trace it.

[00:19:34] Speaker 03:
Did you ever answer Judge Pro's question about how long it took though?

[00:19:36] Speaker 03:
Can you just get an answer to that question?

[00:19:39] Speaker 00:
Yes.

[00:19:39] Speaker 00:
So from 2013 they had a draft audit report

[00:19:45] Speaker 00:
completed in 2015 and a final order report that was completed in 2016.

[00:19:52] Speaker 00:
And the determination there was that transaction value was the proper method of appraisal.

[00:19:57] Speaker 00:
There were a number of steps that happened as that took place.

[00:20:02] Speaker 04:
What is the government's view about how we are supposed to review a case such as this?

[00:20:08] Speaker 04:
Do we set up a calendar and look at, get the gaps, months, what was done, and then have

[00:20:15] Speaker 04:
think about, well, was that a reasonable period to perform these tasks within that period?

[00:20:20] Speaker 04:
How are we supposed to review this?

[00:20:22] Speaker 00:
This is an abusive discretion standard.

[00:20:24] Speaker 00:
And the limitation on CBP's discretion is a narrow one.

[00:20:28] Speaker 00:
And that's all set forth in St.

[00:20:31] Speaker 00:
Paul Fire and Marine.

[00:20:32] Speaker 00:
And I believe that it's also touched upon in the Ford Motor Company case.

[00:20:36] Speaker 00:
But an abusive discretion may only arise when the extension is granted following the elimination of all possible grounds for an extension.

[00:20:44] Speaker 00:
Essentially, CFP would have had actual knowledge that there was no reason to extend the liquidation, and yet they extended it anyway.

[00:20:50] Speaker 00:
It's been described by this court in prior case law as a very narrow limitation.

[00:20:56] Speaker 00:
This is an area where CBP has significant discretion in fixing the final appraisal of merchandise as well as in extending liquidation, which is part of that.

[00:21:08] Speaker 00:
And that's in 19 USC 1500A.

[00:21:13] Speaker 00:
It says, CBP is responsible for fixing the final appraisal of merchandise by ascertaining or estimating the value thereof by all reasonable means in its power.

[00:21:22] Speaker 00:
Their purpose and what they are required to do is,

[00:21:27] Speaker 00:
fix the final appraisal by utilizing all the tools that they have.

[00:21:31] Speaker 04:
And in this case, Congress was smart enough to have, there's an ultimate time limit, right?

[00:21:36] Speaker 00:
There is an ultimate.

[00:21:37] Speaker 04:
Four years too late to that.

[00:21:39] Speaker 00:
There is an ultimate limitation.

[00:21:40] Speaker 00:
They can't extend liquidation forever.

[00:21:42] Speaker 00:
The general rule is that you have a year or two liquidate an entry or it liquidates by operation of law.

[00:21:48] Speaker 00:
But the statute also permits three one-year extensions

[00:21:54] Speaker 00:
if the information that's reasonably necessary to liquidate the merchandise, or properly appraise the merchandise, isn't available.

[00:22:01] Speaker 00:
And as Your Honor's pointed out, that doesn't just include information from the importer.

[00:22:06] Speaker 00:
That also includes information from other areas of CBP.

[00:22:11] Speaker 00:
Although, yes, there was a lot of I's, dot, and T's crossed in making sure that the proper method of appraisement was identified, these are people that have expertise in this area and had to determine whether everything that was done by CVP was in compliance with generally accepted auditing standards.

[00:22:30] Speaker 04:
You mentioned that there's the one year, and then after that, it's every year you extend it year to year?

[00:22:37] Speaker 00:
There is three.

[00:22:38] Speaker 00:
You can get additional one year extension.

[00:22:41] Speaker 04:
Do they have to notify the parties who do anything official if they reach the one year, the two year point, saying we're extending it for another year?

[00:22:50] Speaker 00:
I do believe they are required by the statute to notify the parties of an extension of liquidation.

[00:22:55] Speaker 00:
I don't think there was any question in this case as to whether or not the importer was notified of the liquidation extension.

[00:23:02] Speaker 04:
But the statute doesn't require that they explain the reasons and bases for the extension in those notices?

[00:23:08] Speaker 00:
I don't believe there's any need to explain in any level of detail the reason for the extension, just that there is no indication.

[00:23:17] Speaker 04:
Maybe you don't know, but is this pretty routine to extend it a year or two?

[00:23:22] Speaker 04:
Because I don't think I've seen a case involving this, but I don't think that means that you always get it done in one year.

[00:23:30] Speaker 00:
I would say that it's fairly typical, for my knowledge,

[00:23:37] Speaker 00:
there might be extensions of the liquidation period.

[00:23:41] Speaker 00:
I will say in value cases, that might happen more so than other cases when it comes to

[00:23:47] Speaker 00:
Getting regulatory audit involved, which does get involved in cases like this where value is an issue and there are other accounting principles that have to be explored, they do, I would say, tend to take a little bit longer to make sure other parts of CBP get involved, not just the people at the port who typically just deal with some valuation issues.

[00:24:09] Speaker 00:
This type of case, I would say, would typically take a little bit longer.

[00:24:19] Speaker 00:
One thing I want to point out, based on something that was said in Midwest brief, the value recommended by the auditors, the transaction value, was the method of appraisal that was utilized by CBP in fixing the final appraisal of the merchandise.

[00:24:39] Speaker 00:
Like I said, it wasn't done in the typical fashion where you have a purchase order and an invoice.

[00:24:45] Speaker 00:
It would have been impossible for CBP to do that.

[00:24:50] Speaker 00:
In a normal circumstance, if transaction value is used, it would be the importer that provided entry papers identifying how to value the merchandise.

[00:24:58] Speaker 00:
And CBP would look at them and review them, not that they would be doing the calculation themselves.

[00:25:03] Speaker 00:
And in this case, looking at

[00:25:05] Speaker 00:
you know, more than a million different transactions.

[00:25:09] Speaker 00:
It wasn't even possible for Midwest to provide that during this litigation.

[00:25:13] Speaker 02:
The figure of a million transactions, is that in the CIT's opinion or some other place in the record?

[00:25:22] Speaker 00:
So that is in, I believe that's in plaintiff's brief.

[00:25:24] Speaker 00:
I want to say it's on page 13 of plaintiff's brief where they identified how

[00:25:31] Speaker 00:
large this is.

[00:25:34] Speaker 00:
I would have to.

[00:25:40] Speaker 02:
I can find it, Your Honor.

[00:25:41] Speaker 02:
I see the sentence, there were millions of FOB, Buffalo, New York, et cetera, over 12,000 distinct products, hundreds of different tariff classifications.

[00:25:55] Speaker 02:
They don't actually cite anything there, but I guess you're not contesting it.

[00:26:00] Speaker 00:
I'm not contesting it.

[00:26:01] Speaker 00:
And it does make sense.

[00:26:04] Speaker 00:
I mean, this is not in the record.

[00:26:06] Speaker 00:
But just looking at the entry papers, which I have looked at, when you have 100 line items, and the line items represent a classification.

[00:26:19] Speaker 00:
So if you say just one entry has 100 line items, that means this entry covers 100 different classifications.

[00:26:26] Speaker 00:
No, I mean, that is part of it.

[00:26:28] Speaker 00:
The number is, I don't contest, to answer your direct question.

[00:26:32] Speaker 00:
I do not contest that this is extremely voluminous.

[00:26:35] Speaker 00:
And it was one of the reasons that, you know.

[00:26:37] Speaker 02:
I think this is good for you.

[00:26:41] Speaker 02:
That's true.

[00:26:41] Speaker 02:
And I asked the question, though, because I wasn't sure where it was coming from.

[00:26:44] Speaker 02:
But now I know.

[00:26:46] Speaker 00:
Thank you.

[00:26:46] Speaker 00:
OK.

[00:26:46] Speaker 00:
So yes, one thing I wanted to point out is transaction value was used.

[00:26:51] Speaker 00:
Again, it wasn't used in a typical way.

[00:26:53] Speaker 00:
Just to go back to your honor's question,

[00:26:55] Speaker 00:
They did ultimately use the 2013 financial statements in order to identify transaction value.

[00:27:02] Speaker 00:
They used the information to identify the price paid or payable by Midwest to its US customers.

[00:27:07] Speaker 00:
And that's how it was calculated.

[00:27:11] Speaker 00:
Unless your honors have any more questions on this issue, I'm going to move on to sale for export.

[00:27:19] Speaker 00:
The trial court properly determined that the sales at issue were for exportation to the United States.

[00:27:25] Speaker 00:
This issue was addressed by the Federal Circuit, most prominently in EC McAfee and ECUA, which do discuss sale for exportation to the United States.

[00:27:35] Speaker 00:
And the standard that is applied

[00:27:38] Speaker 00:
is whether, at the time of the transaction in question, the merchandise is clearly destined for exportation to the United States.

[00:27:46] Speaker 00:
And EC McAfee provides further guidance on that.

[00:27:49] Speaker 04:
Each of those cases is a little different, right?

[00:27:51] Speaker 04:
Because they all were looking at the

[00:27:55] Speaker 04:
sale of the merchandise from the former manufacturer to the middleman.

[00:27:59] Speaker 04:
So we're not looking at the point we're looking at.

[00:28:01] Speaker 04:
Not that it makes any difference necessarily.

[00:28:03] Speaker 00:
So that's a fair point, Your Honor.

[00:28:06] Speaker 00:
I mean, those are all three tier transactions, I would say.

[00:28:10] Speaker 00:
But the determination of a sale for export has to be made individually based on each sale.

[00:28:15] Speaker 00:
What Nisha Iwad tells you, and what it's most often cited for, is if you have two that satisfy the statutory requirements of sale for export, you use the first.

[00:28:23] Speaker 00:
That's why that's the first sale rule.

[00:28:25] Speaker 00:
So here there actually is a three-tier transaction.

[00:28:27] Speaker 00:
You have the sale from China to Midwest, but it goes to Canada.

[00:28:33] Speaker 02:
It's irrelevant to this analysis.

[00:28:39] Speaker 00:
Well, I bring it up only to say this has a three-tier transaction, but they're not arguing first sale because they can't.

[00:28:45] Speaker 00:
That was a sale for export to Canada.

[00:28:46] Speaker 00:
It was intended to go to Canada.

[00:28:48] Speaker 00:
There is only one sale that we're looking at here.

[00:28:50] Speaker 00:
So while there is a distinction a little bit in that in those cases they were arguing for the first sale, here they're not because they can't.

[00:28:57] Speaker 00:
But in those cases also, you look at the other sale, you have to see if they both satisfy.

[00:29:03] Speaker 00:
And if they both satisfy, you use the first sale.

[00:29:06] Speaker 00:
And that's what Nishio Iwata tells you.

[00:29:07] Speaker 00:
But it also is giving you the standard that has to be applied any time you're looking at a sale and saying,

[00:29:13] Speaker 00:
is the sale for exportation to the United States.

[00:29:15] Speaker 00:
And they're looking at, at the time of the transaction in question, was the merchandise clearly destined for exportation to the United States?

[00:29:24] Speaker 00:
And here it clearly was, as the trial court probably held.

[00:29:28] Speaker 00:
And EC McCaffey, which was decided earlier in time, but does provide additional guidance, it's telling you this is a fact-specific inquiry.

[00:29:36] Speaker 00:
You look at it on a case-by-case basis.

[00:29:38] Speaker 00:
And we're looking at the reality of what happened, which goes to a plaintiff is talking about a meeting of the minds.

[00:29:43] Speaker 00:
That's not necessary here.

[00:29:45] Speaker 00:
That's not part of any statute.

[00:29:46] Speaker 00:
That's not part of the case law.

[00:29:48] Speaker 00:
What the case law tells you, what EC McAfee tells you, is you look at the reality of the situation here.

[00:29:53] Speaker 00:
And what happened here was the merchandise was coming from Canada based on a sale.

[00:29:58] Speaker 00:
And it came into the United States based on that sale.

[00:30:01] Speaker 00:
And transaction value is the proper method of appraisal here.

[00:30:07] Speaker 00:
Any other criteria that Midwest identifies is not relevant here.

[00:30:14] Speaker 00:
Whether there's an international sale is not relevant.

[00:30:16] Speaker 04:
We're beyond our time.

[00:30:18] Speaker 00:
Thank you, Your Honor.

[00:30:32] Speaker 01:
Thank you, Your Honor.

[00:30:33] Speaker 01:
I'd like to make two quick points on a rebuttal to the government.

[00:30:37] Speaker 01:
The first was that the government said that the actual liquidations that occurred in this case were under transaction value.

[00:30:45] Speaker 01:
And then they were talking about how the uplift calculation accomplished that.

[00:30:50] Speaker 01:
We don't believe that represents transaction value at all.

[00:30:53] Speaker 01:
We think that that was an arbitrary uplift.

[00:30:56] Speaker 01:
And I'd also like to point out that the

[00:30:58] Speaker 01:
That uplift was calculated using the 2013 financials, and then that was also applied to later entries, the 2014 time period, and that there couldn't have been any sort of uplift relevant to those entries to be garnered from 2013.

[00:31:15] Speaker 01:
financial statements.

[00:31:17] Speaker 01:
And then I'd like to finish up by pointing out that we think the government was talking about that this was clearly a sale for export to the US.

[00:31:29] Speaker 01:
And the trade court's opinion, we think, is returning to a holding in the Brosterhouse case from the trade court that was overturned by this court, Inisha Liwa, to look at the sale that most directly caused export to the United States.

[00:31:42] Speaker 01:
and applying that test to the sale for exportation question under the statute.

[00:31:47] Speaker 01:
And we submit that that standard's already been overturned and is improper to apply.

[00:31:51] Speaker 01:
Thank you, Your Honors.

[00:31:53] Speaker 04:
Thank you.

[00:31:54] Speaker 04:
We thank both sides.

[00:31:54] Speaker 04:
The case is submitted.

[00:31:55] Speaker 04:
That concludes our proceeding for this morning.