[00:00:03] Speaker 00:
Final case for argument this morning is 24-1593, Mosaic Company versus United States.

[00:00:49] Speaker 00:
Good morning.

[00:00:50] Speaker 03:
Good morning.

[00:00:51] Speaker 03:
May it please the court?

[00:00:52] Speaker 03:
The Department of Commerce made three fundamental errors in its countervailing duty investigation of phosphate fertilizers from Russia.

[00:00:59] Speaker 03:
All three of those errors related to their evaluation of the provision of natural gas for less than adequate remuneration.

[00:01:06] Speaker 03:
The first error that we address is their specificity finding.

[00:01:11] Speaker 03:
Again, they didn't find a juror.

[00:01:12] Speaker 03:
They found specificity as a matter of fact, the fact of specificity.

[00:01:16] Speaker 03:
And they relied on one factor, the predominant use factor.

[00:01:19] Speaker 03:
And in making their finding that this provision of natural gas was de facto specific to the fertilizer industry.

[00:01:26] Speaker 00:
Can I ask you, on page 11 of your blueberry, if you say, quote, natural gas is available to all in Russia and widely used by all sectors in the Russian economy with no preferential terms to some users compared to others.

[00:01:42] Speaker 00:
How do we know that?

[00:01:43] Speaker 00:
I mean, there's some talk in the background.

[00:01:44] Speaker 00:
And I know stuff is confidential.

[00:01:46] Speaker 00:
So if I start to go into the wrong direction, please stop me.

[00:01:49] Speaker 00:
But is there not evidence in the record of subsidies?

[00:01:54] Speaker 03:
There is evidence in the record that Gazprom does sell natural gas to use in Russia at regulated tariff schedules.

[00:02:04] Speaker 03:
But those regulated tariff schedules primarily are with the consumers in the households.

[00:02:12] Speaker 03:
Residential use, I should say.

[00:02:14] Speaker 03:
But in terms of preferential treatment, what we're getting at there, Your Honor, is it wasn't giving preference to the fertilizer industry as opposed to power generation, or giving it to the fertilizer industry as opposed to other users in terms of the availability.

[00:02:31] Speaker 00:
I'm getting confused.

[00:02:32] Speaker 00:
One of the confusions in this case is we've got the question of whether we divide out the non-industrial versus the industrial.

[00:02:39] Speaker 00:
And then there's the question of between the industrial.

[00:02:41] Speaker 00:
So I don't know what preferential terms mean.

[00:02:45] Speaker 00:
I think we talk about subsidies in this universe, right?

[00:02:49] Speaker 00:
So are the so-called preferential terms or the subsidies different with respect to non-industrial versus industrial sectors?

[00:02:59] Speaker 03:
Your Honor, I'll just back up and say that it's the provision of natural gas itself.

[00:03:02] Speaker 03:
The gas problem was found to be a government authority.

[00:03:04] Speaker 03:
as was Rosneft, because of the ownership interests by the Russian government in those entities, and that their provision of natural gas was itself the subsidy, because it was all provided for less than adequate remuneration as compared to the benchmark that Congress uses.

[00:03:23] Speaker 03:
But to our point, and you hit the nail on the head, Your Honor.

[00:03:27] Speaker 04:
And is it because the Russian intervention is so ingrained within the gas market that you can't extricate it?

[00:03:34] Speaker 03:
correct that's what uh... that's what commerce uh... found as part of its determination i think uh... judge pros you hit the nail on the head when it comes to how do you look at this specificity and in order to find that the fertilizer industry which consumed four point seven percent of the natural gas was a predominant user they looked at only a subset uh... and our point was

[00:03:59] Speaker 00:
natural gas can you just be clear because I'm dividing it up in turn you they look your complaint is that they looked at only the industrial correct and not to the economy as a whole correct your honor and natural gas there is no dispute it is used by all

[00:04:16] Speaker 03:
of the Russian economy.

[00:04:17] Speaker 03:
It's not just for industrial users.

[00:04:21] Speaker 00:
But if the pricing or the subsidies or the preferential treatment or whatever you want to call it is different with respect to industrial versus non-industrial users, why isn't that sufficient basis for saying we're just going to look at the industrial users?

[00:04:35] Speaker 03:
I don't believe there was a specific finding on that, Your Honor.

[00:04:37] Speaker 03:
I don't believe that commerce went to that level.

[00:04:40] Speaker 06:
What I do believe is that... What about the report in 1977?

[00:04:43] Speaker 06:
I don't know if you're familiar with... This is the Brattle Report, Your Honor.

[00:04:47] Speaker 06:
I don't know if this is the Brattle Report, but there is a...

[00:04:52] Speaker 06:
This is a report with a very lengthy chart.

[00:04:56] Speaker 06:
First, it's in Russian, and then it's translated into English.

[00:05:00] Speaker 06:
And at the end of this report, in 1977, in the second column, it says, in accordance with

[00:05:10] Speaker 06:
applicable Russian laws end consumers by gas at regulated prices, which are differentiated by consumer group, parentheses, households, versus industrial consumers, close parentheses, and price range based on the both.

[00:05:26] Speaker 02:
So I'm not seeing the citation that you said, 1977?

[00:05:33] Speaker 02:
1977.

[00:05:38] Speaker 06:
It's in the second column, first full paragraph.

[00:05:41] Speaker 03:
Ah, I see what you're saying.

[00:05:42] Speaker 03:
I apologize, your honor.

[00:05:43] Speaker 03:
I misled to the rung.

[00:05:45] Speaker 03:
Yeah, I mean, this is from Gazprom.

[00:05:48] Speaker 03:
You are correct.

[00:05:49] Speaker 03:
I mean, in terms of the pricing itself, Gazprom does indicate that there are potentially different prices.

[00:05:57] Speaker 03:
But again, we're looking at whether the provision of natural gas itself

[00:06:02] Speaker 03:
is de facto specific, where the users of natural gas, the fertilizer industry, is a predominant user of natural gas.

[00:06:10] Speaker 03:
Whether a benefit was conferred and therefore count available, you're looking at comparing the prices that were paid by my client, Eurochem, and then the other respondent to the benchmark price that commerce constructs.

[00:06:24] Speaker 03:
But in terms of de facto specificity itself, we argue, Your Honor, that looking at 4.7%

[00:06:31] Speaker 03:
is not a predominant use.

[00:06:32] Speaker 03:
And even the CIT indicated that it wasn't very significant when it comes to, I'm probably paraphrasing here.

[00:06:39] Speaker 00:
I don't feel a lot of numbers that are confident in this.

[00:06:43] Speaker 00:
Of course.

[00:06:44] Speaker 00:
But if you compare it to just the industrial users, it clearly satisfies the predominant user, based on the numbers I see in the record, which I think are confident.

[00:06:55] Speaker 03:
understood John, if you're only limiting it to the industrial users, that commerce, but of course they also eliminated what I would argue is another industry, which is power generation and electricity as well, saying that somehow that's not an industry.

[00:07:09] Speaker 03:
And so I think that they jerry-rigged

[00:07:11] Speaker 03:
the denominator, if you will, in order to find that there was a predominant use for it.

[00:07:14] Speaker 03:
And I think when you go back to the statute itself, it talks about whether looking at de facto specificity within the context of whether it's a predominant user within the jurisdiction of the authority.

[00:07:26] Speaker 03:
Well, that jurisdiction of the authority is all of Russia, because natural gas is used by all of Russia.

[00:07:31] Speaker 04:
And in fact, the state... You're not really challenging the methodology that commerce used, just the results.

[00:07:40] Speaker 04:
No, Your Honor, I think... And if it's a methodology, point exactly what the problem is with the methodology.

[00:07:50] Speaker 03:
I would say it's probably a little bit of both, Your Honor.

[00:07:55] Speaker 03:
The fact that Commerce, they rely primarily, we have the authority and discretion to determine predominant use and what to compare that to.

[00:08:04] Speaker 04:
You have to compare it to something.

[00:08:06] Speaker 04:
Under the SAA, doesn't Commerce have that authority?

[00:08:14] Speaker 04:
Isn't that the intent of the statute?

[00:08:18] Speaker 03:
Your Honor, I would argue that in the statement of authority, commerce indicated or the administration indicated their prior practice that where a subsidy is broadly used and broadly available within the economy, that's not counter-available.

[00:08:35] Speaker 03:
And that's the exact situation we're dealing with here.

[00:08:37] Speaker 03:
They've tried to manipulate the comparison to only a subset of industrial users to say, well, whatever usage by the fertilizer industry

[00:08:46] Speaker 03:
is a predominant usage when you compare it to only this.

[00:08:50] Speaker 03:
But again, you're not tangling with the statute itself, where you're looking at the jurisdiction of which the authority operates, which is all of Russia.

[00:09:01] Speaker 06:
The fact, undisputed, that- You put a finer point on it.

[00:09:06] Speaker 06:
I think you would have to agree that when it comes to making specificity determinations, commerce gets to apply a rule of reason.

[00:09:16] Speaker 06:
and that our precedent indicates that commerce enjoys a certain amount of latitude based on the facts and circumstances and gets to decide and define what's the right framework of thinking about specificity on a case-by-case basis.

[00:09:34] Speaker 06:
However, having said all of that, you would say, nevertheless,

[00:09:39] Speaker 06:
This was an abuse of discretion to arbitrarily redefine the relevant players to compare your client to just industry and not all end users of natural gas.

[00:09:59] Speaker 06:
Is that a fair way to characterize what's going on here?

[00:10:03] Speaker 03:
I would say, I would agree, that it would be an abuse of discretion.

[00:10:06] Speaker 03:
But I also say that prior precedents and commerce looking at this and interpreting the statute in which they are implementing under 1677 the definitions of specificity, we're not in the Chevron world anymore.

[00:10:18] Speaker 03:
And we do note this as, of course, the Supreme Court came out with a little bit right following the opening brief.

[00:10:24] Speaker 03:
An argument is that the CIT should have engaged in that statutory construction of what does it mean to be a predominant use?

[00:10:32] Speaker 03:
Is it a matter of looking at and crafting the subset so that you can find a high predominant usage?

[00:10:39] Speaker 03:
Or is it when you have a situation like this as the SAA indicated, right, that where a subsidy is broadly available and broadly used,

[00:10:50] Speaker 03:
across the economy, in that situation you're not likely, you're not going to find counter-available subsidies.

[00:10:56] Speaker 04:
That's why you look for predominant usage, right?

[00:10:59] Speaker 03:
Correct, but again, how are you comparing that predominant usage?

[00:11:02] Speaker 03:
If you look at it of

[00:11:03] Speaker 03:
the fertilizer industry compared to the fertilizer industry, yes, they're using a ton.

[00:11:07] Speaker 03:
If you're using only two industries.

[00:11:10] Speaker 03:
Again, Congress is not able to manipulate this and that's not reasonable.

[00:11:13] Speaker 03:
They haven't used any criteria in which how they determine how the subset is they're going to use, particularly when you're eliminating some industrial users like power generation and electricity.

[00:11:24] Speaker 03:
And so how do you make that determination and

[00:11:27] Speaker 00:
Our point, your honor, is... I mean, are you saying that they can eliminate these industries, the power they use just to keep the lights on?

[00:11:37] Speaker 00:
That's different than what we're talking about here in the agrochemical industry, where they're using it to produce the product.

[00:11:44] Speaker 00:
And the power... Isn't it fair to treat that a different way?

[00:11:50] Speaker 03:
Well, the fact is it's still being used, Your Honor.

[00:11:52] Speaker 03:
The power generation industry is using natural gas to generate electricity that is then used by others as well.

[00:11:57] Speaker 03:
And so it's still a usage that is broadly used within the Russian economy.

[00:12:04] Speaker 00:
So your position is they have to use

[00:12:07] Speaker 03:
Every use industrial and non non-industrial absolutely your honor because the four point seven percent usage that was in the record for the fertilizer industry was in comparison to all users of natural gas That was been provided by gas prom

[00:12:23] Speaker 03:
So your honor, that's that is our position and I think when you look at the statute as been interpreted by the statement of authority From the Uruguay rounds.

[00:12:34] Speaker 03:
I think that's all consistent with that.

[00:12:36] Speaker 03:
You know, Congress doesn't have the authority.

[00:12:37] Speaker 03:
They don't identify where in the statute they can eliminate and say manipulate the denominator in order to effectively inflate the numerator and find a predominant use and

[00:12:51] Speaker 03:
I'd like to touch, Your Honor, on sort of the other two issues.

[00:12:54] Speaker 03:
And these deal with the benefits conferred by the provision of natural gas.

[00:13:01] Speaker 03:
And the first issue, preference is tier one, right, Your Honors, where you compare the government price to market prices.

[00:13:10] Speaker 03:
Where distortion is caused by government involvement in the economy, look at tier one.

[00:13:14] Speaker 03:
You go to tier two, which is world price.

[00:13:15] Speaker 03:
Where there's no world price, you go to tier three.

[00:13:18] Speaker 03:
And that's where we ended up, Your Honor, in tier three.

[00:13:20] Speaker 03:
And as the Commerce Department notes, they normally measure the adequacy of remuneration under Tier 3 by assessing whether the government price is consistent with market principles.

[00:13:29] Speaker 03:
And they look at price setting philosophy, cost recovery, but Commerce Society ought to do that.

[00:13:34] Speaker 03:
And they argue, well, it's distorted because of the government involvement.

[00:13:37] Speaker 03:
Well, of course, that's why you're in Tier 3, because government distortion prevents you from looking at

[00:13:42] Speaker 03:
the market prices.

[00:13:43] Speaker 03:
So if distortion is a reason not to do your normal analysis of looking at the government price, then when would you ever do it?

[00:13:50] Speaker 03:
So they ignored their normal practice without really any justification.

[00:13:55] Speaker 03:
In fact, they had the records to do it, and the Brattle report showed them how to do it, where they looked at the government cost setting, they looked at the cost recovery and profitability, and so the data was there.

[00:14:07] Speaker 03:
Commerce chose just not to do it, and we would argue that was their decision to do so was unsupported by the record, substantial evidence and contrary to law.

[00:14:15] Speaker 03:
My final point, your honor, is on using the IEA pricing data.

[00:14:21] Speaker 03:
Commerce essentially admitted that those prices are prices for natural gas sold in Europe, and they reflect, quote, the market dynamics in that market.

[00:14:30] Speaker 03:
Well, we're not in Europe, we are in Russia, and the statute clearly states

[00:14:35] Speaker 03:
that commerce has determined the adequacy of remuneration, quote, in relation to prevailing market conditions for the good being provided in the country which is subject to the investigation review.

[00:14:46] Speaker 03:
They did not do that.

[00:14:48] Speaker 03:
And their determination was unsupported by substantial evidence, and therefore not in accordance with law.

[00:14:54] Speaker 03:
OK.

[00:14:54] Speaker 00:
And I will refer to your rebuttal time.

[00:14:56] Speaker 00:
Thank you.

[00:14:57] Speaker 00:
Thank you, Your Honor.

[00:14:58] Speaker 00:
Let's hear from the other side.

[00:15:22] Speaker 01:
Good morning.

[00:15:23] Speaker 01:
May it please the court.

[00:15:25] Speaker 01:
To address the arguments of Palin's just raised and presented, starting with some of the questions the court raised, and I think we can provide some clarity.

[00:15:34] Speaker 01:
The argument is supposed to be that Commerce only looked at a subset, only looked at industrial use, but the record reflects that's actually not what Commerce did to determine whether or not there was specificity in this case.

[00:15:43] Speaker 01:
On Appendix 1854, Commerce's final determination

[00:15:47] Speaker 00:
Yeah, I see that.

[00:15:47] Speaker 00:
Go ahead, finish what it says.

[00:15:49] Speaker 01:
Well, of course I'm already aware of it.

[00:15:50] Speaker 01:
We'll just make sure we're on the same page.

[00:15:53] Speaker 01:
Not only did Commercy say that the agrochemical sector is the largest industrial consumer,

[00:16:00] Speaker 01:
But it's also, quote, among the top five consuming groups.

[00:16:03] Speaker 01:
So those are the groups that include household, electricity generation, and heat generation.

[00:16:08] Speaker 00:
Yeah, but you've got a CIT opinion.

[00:16:10] Speaker 00:
Does CIT reference that?

[00:16:12] Speaker 00:
I thought the CIT just relied on the distinction between industrial and non-industrial.

[00:16:18] Speaker 01:
That's correct.

[00:16:19] Speaker 01:
But the COT said that this was essentially enough.

[00:16:21] Speaker 01:
That Congress had looked at the industrial and found that this one industrial group.

[00:16:24] Speaker 00:
So you want us to decide this case based on, let's throw out the CIT opinion and look at all together, and we still win, and you think we're going to do that here?

[00:16:33] Speaker 01:
I don't think the court needs to in any way.

[00:16:35] Speaker 01:
I'm just pointing out that when the record is stated that commerce never looked at this, that's just simply not true of the record of flex.

[00:16:40] Speaker 01:
The CIT did not go further.

[00:16:43] Speaker 00:
But in order to affirm, don't you agree we have to agree with commerce and with the CIT that the division of industrial versus non-industrial was the way to go here?

[00:16:53] Speaker 01:
Well, my understanding is also talking about the matter of law and the interpretation of the statute and how to look at what the word a predominant user means and whether predominant use can be based on industrial, based on non-industrial, the court can in some ways.

[00:17:08] Speaker 01:
do a de novo review of that.

[00:17:10] Speaker 01:
But in this case, no, we think the court can simply affirm the CIT and say, CIT looked at this and determined that comparing one industrial user to all industrial users, and especially the court references the chart on Appendix 1787, which is the data from the government of Russia that shows the comparison industry by industry of how much Gazpon gas was being used by each industry.

[00:17:31] Speaker 01:
This is not a case where one industry is slightly one step ahead of all the others.

[00:17:37] Speaker 01:
This is a case where the agrochemical sector is using a multiplied factor more of natural gas than any other.

[00:17:44] Speaker 01:
And I won't go into the actual numbers because they're confidential.

[00:17:46] Speaker 00:
Let me back up a little.

[00:17:47] Speaker 00:
Since I got you off of arguing something that was not the basis of the CIT, what is the justification for the government to have made the distinction between industrial and non-industrial?

[00:17:58] Speaker 01:
Well, again, we look to what the statute says, which is, is it the predominant user?

[00:18:04] Speaker 01:
Is the industry in question the majority user?

[00:18:09] Speaker 01:
These are not the language Congress used.

[00:18:10] Speaker 01:
Congress said a predominant user.

[00:18:13] Speaker 01:
And the SAA

[00:18:15] Speaker 00:
Confirmed that what commerce has done is the appropriate way to approach this kind of question now the appellant quoted so historically is there an approach by commerce that you Divide up industrial and non-industrial sectors commerce has done that in the past.

[00:18:30] Speaker 01:
We started into our case I know there's a Russian metallurgical case where we looked at it just industry by industry.

[00:18:35] Speaker 06:
It's in our brief I don't have the site with me right now, but there have been situations because you've done it before Maybe that alone is not good enough.

[00:18:42] Speaker 06:
What is the because for why?

[00:18:45] Speaker 06:
It is reasonable to divide up the denominator to just include industrious sectors.

[00:18:55] Speaker 06:
because because the because the SAA tells us that's exactly the purpose of the predominance and the Well, I don't know if the SAA specifically talks about dividing away all the you know consuming public and just looking at industry You won't find that in the SAA, right?

[00:19:15] Speaker 06:
So what do you mean when you say this is what the SAA exactly tells us?

[00:19:20] Speaker 01:
Because the SAA now, I point out that Appellant has quoted language in the SAA where it talks about when a subsidy is spread for an economy but doesn't quote the next sentence which states, conversely, the specificity test was not intended to function as a loophole.

[00:19:34] Speaker 01:
And the essay goes on to say, where the number of users of a subsidy is very large, the predominant use and disproportionate factors would have to be assessed.

[00:19:43] Speaker 01:
This is the question of when a subsidy like this one, and the argument is not being put forward that it's only going to industries, that it's only going to certain industries.

[00:19:51] Speaker 01:
The subsidy is on natural gas.

[00:19:53] Speaker 01:
But where that subsidy results in what is a de facto subsidy, what the statute tells Congress it must be looking for,

[00:20:02] Speaker 01:
And we find that there is a predominant user.

[00:20:05] Speaker 01:
Again, not the predominant user, not the majority user, but a predominant user of that subsidy.

[00:20:11] Speaker 01:
We have to avoid the loophole, where a broadly applied subsidy across an entire economy somehow escapes the CVD law.

[00:20:19] Speaker 01:
Because part of that subsidy is also being given out to households and to energy generation and to heating.

[00:20:26] Speaker 01:
At the end of the day, the question is not

[00:20:29] Speaker 01:
Well appellate is pointing to four points.

[00:20:31] Speaker 04:
That applies essentially to like all consumables, water, gas, oil, energy.

[00:20:40] Speaker 01:
It could potentially do so.

[00:20:41] Speaker 01:
There could be situations where a government has

[00:20:45] Speaker 01:
Water, for example, could be an industry where water is one of its major inputs, where it is creating products using a disproportionate or predominant amount of water from that country.

[00:20:56] Speaker 01:
Well, if the government is subsidising water use for all,

[00:21:01] Speaker 01:
That still is a subsidy that that one industry is getting a disproportionate, a predominant benefit from that is then resulting in unfair trade practices that require a countervailing duty in order to assess and make sure that the trade is fair within the United States.

[00:21:17] Speaker 01:
And this is again what this course looked to in the past when it comes to these sort of questions.

[00:21:21] Speaker 01:
The AK Steel case.

[00:21:24] Speaker 01:
Determinations of disproportionality and dominant use are not subject to rigid rules.

[00:21:28] Speaker 01:
must be determined on a case-by-case basis.

[00:21:31] Speaker 01:
And quoting from the proposed regulations in that same case, this court noted, the specificity test cannot be reduced to a precise mathematical formula.

[00:21:38] Speaker 01:
And it specifically went on to say that commerce does not err when it looks at relative benefit versus an absolute benefit, versus how many of the total benefit of this one industry getting.

[00:21:51] Speaker 00:
And it's called.

[00:21:52] Speaker 00:
So what does relative benefit mean in this context?

[00:21:55] Speaker 01:
Well, this is what commerce did, based on how much of the benefit that's flowing to the industry relative to other industrial users was this one industry getting.

[00:22:05] Speaker 01:
And that's the relative benefit commerce looked to here.

[00:22:09] Speaker 01:
Of all industrial users, and again, the data is on 1787, why is this one standing up?

[00:22:16] Speaker 01:
And the numbers are confidential, but the names of the industries are public.

[00:22:20] Speaker 01:
The agrochemical industry is compared to

[00:22:22] Speaker 01:
the metallurgical industry, the cement industry, the petrochemical industry, the automotive industry, the other industries, which is all other industries as a group, and comes up compared to any one single industry, not just slightly ahead of them, but a multiplied factor ahead of them.

[00:22:38] Speaker 01:
The only group that beats it is other industries as an entire group, which you can see the numbers are not significantly higher than the agricultural group.

[00:22:48] Speaker 00:
Why are you looking at the gross number?

[00:22:49] Speaker 00:
Let's say all the industries are tiny.

[00:22:52] Speaker 00:
So the number, the gross number, is obviously going to be smaller.

[00:22:55] Speaker 00:
Why don't we look at a percentage, a percentage of overall costs or overall expenditures?

[00:23:01] Speaker 00:
Because if other industries are tiny, the number is going to be small.

[00:23:06] Speaker 00:
But that doesn't mean that they're not spending 50% of their income on natural gas.

[00:23:13] Speaker 01:
Well, commerce did look to that as well, and noted the heavy use by the agrochemical sector of natural gas.

[00:23:19] Speaker 01:
It is not only used as it is in many other industries, but it's also an ingredient, a component into the fertilizer.

[00:23:25] Speaker 01:
And that's how it came up, or sorry, how Russia came up with the 4.7% number was in the exhibit, I believe it's called the Gas Exhibit, and that is on appendix

[00:23:42] Speaker 01:
the mathematical formula that creates this 4.7% number is based on how much that industry is using in order to create the product it creates.

[00:23:53] Speaker 01:
So this is where this comes from, is not just looking at numbers, but looking at this raw percentage, this mathematical data, as to how much this product, this one industry is using.

[00:24:06] Speaker 01:
That information is then taken and then we look at, well, how does that compare to other industries?

[00:24:12] Speaker 01:
And that's where we find out, oh, it's not just a little bit more.

[00:24:14] Speaker 01:
It's, again, I can't speak to the exact numbers, but a multiplied factor more than any other industry.

[00:24:20] Speaker 01:
And we come again to what this court has told us to do in, again, AK Steel, in the Royal Thai government, requiring a comparison of absolute benefits, requiring commerce to compare all users of a subsidy, and say you must get above a certain number.

[00:24:37] Speaker 01:
This court said that could produce an untenable result.

[00:24:40] Speaker 01:
And that's what Thomas relied upon in reaching this decision again here.

[00:24:44] Speaker 01:
Now, we've agreed to split our time with the intervener's counsel.

[00:24:49] Speaker 01:
I do want to, if I have your court's permission, to address briefly the other issues that appellant has raised in terms of the benefits covered.

[00:24:55] Speaker 00:
Well, you're going to be eating into your friend's time if you do that.

[00:24:58] Speaker 00:
So we have a briefing on the issues.

[00:25:00] Speaker 01:
You do indeed.

[00:25:01] Speaker 01:
I would just point out the court to pages 1864 and 1866 of the brief of the appendix very briefly just to point out that commerce specifically explains that it did attempt to create a market comparison with the Russian data on the tier 3 basis, but because Gazprom prices are distorted,

[00:25:22] Speaker 01:
They don't reflect market principles, so therefore that was impossible to do, so they had to use other data.

[00:25:29] Speaker 01:
And 1866 explains that the EU natural gas prices are reasonable as a benchmark because those prices include gas coming from Russia.

[00:25:38] Speaker 01:
The same gas that we're trying to find out what is the market rate.

[00:25:40] Speaker 01:
While we're seeing people buy that in the open market, isn't the price of Russian natural gas and the open market likely a good benchmark for what the price of Russian natural gas would be on the open market?

[00:25:51] Speaker 01:
Unless, of course, any further questions, I'll see the rest of my time to intervene on.

[00:25:57] Speaker 01:
Thank you.

[00:26:13] Speaker 05:
Morning, may it please the court.

[00:26:14] Speaker 05:
I'm David Ross with WilmerHale.

[00:26:16] Speaker 05:
I'm here representing the Mosaic Company.

[00:26:19] Speaker 05:
I'm sure you'd like to address quickly some of the questions that you raised to the government and specifically why the Commerce Department limited its analysis in the way that it did.

[00:26:30] Speaker 05:
The reason it did is because the statute, the statutory language on de facto specificity says,

[00:26:36] Speaker 05:
that a subsidy is de facto specific if, first, the actual recipients, whether considered on an enterprise or industry basis, are limited in number.

[00:26:44] Speaker 05:
An enterprise or industry is a predominant user.

[00:26:47] Speaker 05:
An enterprise or industry receives a disproportionately large amount of the subsidy.

[00:26:51] Speaker 05:
or the manner in which the authority provides the subsidy is exercise discretion in its decision to grant it in a way that indicates that an enterprise or industry is favored over others.

[00:27:01] Speaker 05:
So in other words, the statute is focused on what are enterprises or industries receiving relative to other enterprises or industries.

[00:27:09] Speaker 05:
And that's a particularly appropriate approach in this case, because to your point, your question early in the argument, yes, there are different prices.

[00:27:18] Speaker 05:
So as Judge Chen noted, there is a price for industrial users, and there's a price for consumers.

[00:27:24] Speaker 05:
And here, when commerce asked the Russian government to provide the regulated prices for natural gas in Russia on a monthly basis during the POI,

[00:27:33] Speaker 05:
the Russian government provided regulated wholesale prices for natural gas to industrial consumers.

[00:27:38] Speaker 05:
And that's at appendix 1966 to 1975.

[00:27:40] Speaker 05:
So it didn't even provide data for other users, industrial users.

[00:27:46] Speaker 00:
So how do we know they're different?

[00:27:48] Speaker 05:
Well, we don't know if they're different, Your Honor.

[00:27:49] Speaker 05:
I don't think that's on the record.

[00:27:51] Speaker 05:
But we do know that the Russian government itself differentiates between industrial consumers and other consumers in setting regulated prices for natural gas.

[00:28:00] Speaker 05:
Then to your point,

[00:28:01] Speaker 05:
uh... it was reasonable and within the agency's discretion to look at the the usage in this way consumption by natural gas users because what does it matter uh... whether consumers are using natural gas to heat their apartment or to cook what's relevant on the subject of the countervailing duty law is are industries getting an advantage from a subsidy uh... that that uh... that is specific it's particularly appropriate in this case as Judge Ten said it's it's uh...

[00:28:29] Speaker 05:
There's discretion depending on the case by case, because in this case, the agrochemical industry uses natural gas not just for power, but they also use it as a raw material input into the production of the subject merchandise.

[00:28:42] Speaker 05:
So it's used to produce ammonia, and it's used to produce fertilizer, and that's something that the CIT found.

[00:28:46] Speaker 00:
Is that true of any other industrial users?

[00:28:49] Speaker 05:
There's nothing in the record on that.

[00:28:51] Speaker 00:
How come they didn't divide it up that way?

[00:28:54] Speaker 00:
I mean, I take your point that maybe it's a significant feature of the agrochemical industry.

[00:29:01] Speaker 00:
Nobody divided it up and say, well, they're on their own because they're using it in a different way than other people are using it.

[00:29:08] Speaker 00:
And we don't even have to do all this analysis.

[00:29:11] Speaker 05:
The Russian government.

[00:29:13] Speaker 05:
That's your question.

[00:29:14] Speaker 05:
Yeah, because they're pervasively subsidizing, but in different ways through different programs and for different purposes.

[00:29:21] Speaker 05:
And with respect to natural gas for industrial use, which is the data that they provided, Commerce looked at the information and they found that the agrochemical industry was far and away the largest user compared to other industries in Russia.

[00:29:36] Speaker 05:
And I should add, by the way, that even under this approach, which

[00:29:39] Speaker 05:
which the appellants don't support, there are going to be industries in Russia where their subsidized natural gas isn't going to become available, even though they're getting a subsidy, because their usage isn't, relative, say, to the agrochemical industry, significantly substantial.

[00:29:57] Speaker 05:
But for this particular industry, in this particular case, they're clearly the biggest consumer.

[00:30:04] Speaker 05:
I think I have about one minute to go.

[00:30:05] Speaker 05:
So the other research I wanted to very quickly touch on is the wafer point.

[00:30:10] Speaker 05:
So as we stated in our brief, on the defacto...

[00:30:19] Speaker 05:
Honor the last argument yes OECD market prices for natural gas and why that's correct and why Sure, yeah Absolutely downward to take into account no no for sure so so on that issue we have to step back and see the overall point of the benefit assessment and it is to determine whether the financial contribution is providing a benefit in the way that you discern determine if it's providing a benefit and

[00:30:46] Speaker 05:
is you look for some market benchmark you can compare it to to determine whether it's on market terms.

[00:30:51] Speaker 05:
Here, commerce found that the entire Russian market was so pervasively distorted by Gazprom's pricing that there were no appropriate in-country benchmarks under either Tier 1 or Tier 3.

[00:31:04] Speaker 05:
The appellants say that under the law for Tier 3, you can't consider distortion in assessing a situation for a Tier 3 analysis.

[00:31:17] Speaker 05:
If that were true, you can't find counter availability because the whole point is, is there distortion?

[00:31:22] Speaker 05:
That's what you're trying to measure.

[00:31:23] Speaker 05:
And so if the environment is so distorted that there's no adequate benchmark inside of Russia, you can go elsewhere.

[00:31:31] Speaker 05:
And here you have the IEA data on the record.

[00:31:34] Speaker 05:
It was information that Congress had used before in other cases.

[00:31:38] Speaker 05:
It was information that the CIT has affirmed.

[00:31:41] Speaker 05:
The only other information on the record was a Brattle Report, which Congress had found was unusable for various reasons, which are in the record and which also Judge Rastani cited

[00:31:51] Speaker 05:
in her opinion, so that wasn't appropriate and so the IEA-1 was the one that they used and that was a reasonable decision.

[00:31:59] Speaker 00:
Thank you.

[00:31:59] Speaker 05:
Thank you.

[00:32:08] Speaker 03:
Excuse the court.

[00:32:11] Speaker 03:
The chart that has been referenced on 1787, it's important to do a distinction here.

[00:32:15] Speaker 03:
1786 is the chart from Gazprom, which is the government authority that provided the subsidy.

[00:32:20] Speaker 03:
And that's where the usage is, 4.7 as compared to other industries.

[00:32:24] Speaker 03:
The chart that my friend from Commerce or the Department of Justice identified on 1787

[00:32:31] Speaker 03:
this is the transmission of natural gas from all producers.

[00:32:35] Speaker 03:
So it's not just the government authority, but also like Novatec and other independent gas producers that there is no finding that they were from a government authority.

[00:32:44] Speaker 03:
And so those numbers are not really the reliable numbers.

[00:32:49] Speaker 03:
What you're looking at is the 4.7 as gas problem as the government authority in doing that comparison.

[00:32:55] Speaker 03:
I'll also note, Judge Raina, you'd asked about water energy and other types of

[00:33:01] Speaker 03:
resources, and my friend from the Department of Justice noted about disproportionate usage.

[00:33:10] Speaker 03:
Well, that's a different factor.

[00:33:11] Speaker 03:
They didn't look at that.

[00:33:11] Speaker 03:
They looked at predominant use.

[00:33:13] Speaker 03:
And our position is that whether someone is a predominant user, you need to look at all users of the subsidy.

[00:33:20] Speaker 04:
Why would you look at a household use of a subsidy if they don't export a product?

[00:33:25] Speaker 04:
They're not creating a product for export.

[00:33:29] Speaker 03:
That's fair enough, Your Honor.

[00:33:30] Speaker 03:
except that when I go back to the statement of authority from the Uruguay rounds, it talks about this exact type of situation.

[00:33:37] Speaker 03:
Well, they don't talk about that.

[00:33:38] Speaker 04:
That's why you would look for a predominant user, because if you don't do that, then you create the loophole that the SSA is talking about.

[00:33:46] Speaker 03:
I don't view this as being a loophole.

[00:33:49] Speaker 03:
Again, Your Honor, the SSA is specifically talking about those situations where a subsidy here in natural gas is, no dispute, widely available, widely used throughout Russia.

[00:33:59] Speaker 03:
And so this is the exact type of situation that's not going to be counter-available in those situations.

[00:34:05] Speaker 03:
I will also note, Your Honor, that last point about using the IEA pricing data, again, prevailing market conditions in Russia.

[00:34:15] Speaker 03:
That's what the statute says.

[00:34:16] Speaker 03:
IEA prices by European consumers that are not in Russia, that's reflected in the short market, where they are huge consumers of natural gas, whereas Russia is a huge producer of natural gas.

[00:34:27] Speaker 03:
Supply and demand dynamics are different.

[00:34:29] Speaker 03:
Commerce should have looked at that per the statute.

[00:34:33] Speaker 03:
And unless your honors have any further questions.

[00:34:37] Speaker 03:
Thank you.

[00:34:38] Speaker 00:
Thank you.

[00:34:39] Speaker 00:
Thank you.