[00:00:44] Speaker 02: Next case is Bell Supply Company versus the United States and a number of other companies, US Steel, Maverick, Boomerang, 2017, 1492, 95, 1504. [00:01:00] Speaker 02: We're going to have three five-minute arguments, correct? [00:01:06] Speaker 00: That's correct, Your Honor. [00:01:08] Speaker 02: One of them will be rebuttal. [00:01:09] Speaker 00: That's correct. [00:01:12] Speaker 02: And you are Mr. Ansorge. [00:01:13] Speaker 00: That's correct, your honor. [00:01:16] Speaker 00: Please proceed. [00:01:17] Speaker 00: May it please the court. [00:01:18] Speaker 00: My name is Joseph Ansorge of Quinn Emmanuel Urquhart & Sullivan. [00:01:21] Speaker 00: We represent United States Steel Corporation. [00:01:24] Speaker 00: Today, counsel for Maverick will be discussing the substantial transformation test. [00:01:28] Speaker 00: Counsel for Boomerang will handle rebuttal. [00:01:31] Speaker 00: And I have the privilege of speaking with you about commerce's discretion. [00:01:34] Speaker 00: when it comes to the interpretation of the plain language of its scope orders. [00:01:38] Speaker 05: So I get you all want to divide arguments and you all want to represent your clients and have separate issues, but the problem with this is we want to ask certain questions about certain things. [00:01:48] Speaker 05: And what I want to know about, and I don't know if it's you or one of the others, is what's the point of 1677 if we have the substantial transformation test? [00:01:59] Speaker 00: That might be the most appropriate question. [00:02:01] Speaker 00: I'd be happy to answer that question now. [00:02:04] Speaker 05: Let's hear an answer to that. [00:02:06] Speaker 05: I don't want to take away your argument time. [00:02:10] Speaker 05: I know you're representing your client. [00:02:12] Speaker 05: But I'm not particularly interested at this minute in what you have to say. [00:02:17] Speaker 05: No offense. [00:02:17] Speaker 05: I think the important question for me is what he's going to say. [00:02:19] Speaker 05: So can we have him up? [00:02:21] Speaker 02: Yes. [00:02:22] Speaker 02: Would you prefer me to start with him? [00:02:22] Speaker 02: If you're not there to answer that, then we will hear from someone who is. [00:02:27] Speaker 00: I mean, if you want to answer it, go ahead. [00:02:29] Speaker 00: Well, if I could provide an answer, then he can provide another answer if you'd be comfortable. [00:02:32] Speaker 02: Meanwhile, the clock is ticking. [00:02:34] Speaker 05: Use your time however you see fit. [00:02:36] Speaker 05: This has been a problem for decades in these trade cases when the private parties divide up time like this. [00:02:42] Speaker 05: So here's my question. [00:02:45] Speaker 05: The substantial transformation test you think commerce appropriately used here, how does that relate to the circumvention test? [00:02:53] Speaker 05: Why would we ever need circumvention if we have a substantial transformation test? [00:02:58] Speaker 00: Well, Your Honor, we believe that the circumvention test is for the more narrow purpose of explicitly expanding the scope of an anti-dumping and countervailing duty. [00:03:06] Speaker 05: And can you give me an example of how that might happen in these kind of factual circumstances? [00:03:12] Speaker 05: So for instance, do you mind if I just? [00:03:16] Speaker 05: You all have to decide this. [00:03:18] Speaker 05: I mean, this is frustrating to me. [00:03:19] Speaker 05: One of you get up here and answer my question. [00:03:22] Speaker 03: OK. [00:03:22] Speaker 03: So Your Honor, so your first question. [00:03:26] Speaker 03: Congress, when it was enacting the URAA, the legislative history with respect to the URAA, in the statement of administrative action, expressly recognized that the two tests exist and they exist to answer different questions. [00:03:40] Speaker 03: Congress explicitly stated, outside of a situation involving circumvention of an anti-dumping order, a substantial transformation of a good in an intermediate country would render the resulting merchandise the product of the intermediate country. [00:03:52] Speaker 03: So to go to your other question as an example, so the scope of this case covers oil country tubular goods, but a certain subset of oil country tubular goods, casing and tubing, the scope expressly excludes drill pipe. [00:04:05] Speaker 03: Right. [00:04:05] Speaker 03: So hypothetically, if the unfinished OCTG that was exported from China went to Indonesia, and if it was possible to convert that unfinished OCTG into drill pipe, the circumvention analysis in this situation would be appropriate. [00:04:22] Speaker 05: So Commerce can make a finding that even though the pipe is no longer explicitly covered by the order because it's no longer finished or unfinished tubes, the order's been circumvented by converting it to drill pipe. [00:04:36] Speaker 03: Right, because the order doesn't include drill pipe. [00:04:39] Speaker 05: But we don't get here because the order explicitly includes finished and unfinished tubes. [00:04:46] Speaker 03: Correct. [00:04:47] Speaker 03: And so the question for the [00:04:49] Speaker 03: commerce, which commerce correctly identified in its original determination was, what is the country of origin? [00:04:55] Speaker 06: Before we get into all that, just to understand the interplay between 1677 and the Substantial Transformation Test, you've identified an example where 1677 can capture something that the Substantial Transformation Test cannot. [00:05:11] Speaker 06: Is it fair to say, though, that everything that the Substantial Transformation Test can sweep in [00:05:18] Speaker 06: is fully encompassed by 1677? [00:05:20] Speaker 03: Not necessarily, Your Honor. [00:05:24] Speaker 03: In peer bearing, for example, in a different case where the court looked at whether merchandise that left a subject country that was assembled in another country that was completed, the court looked at the substantial transformation test there, found that it wasn't satisfied, and then said it could then look at a circumvention analysis. [00:05:44] Speaker 03: It recognized the very situation we have here. [00:05:47] Speaker 03: But if you reach the conclusion or the determination that it's not been substantially transformed, you don't get to the circumvention test because it's never left the order. [00:05:58] Speaker 03: The circumvention analysis, as the court in purveying noted, it's an additional test to determine whether I need to expand the order to bring that product in. [00:06:06] Speaker 06: I guess what I'm wondering is, is it redundant to have the substantial transformation test anymore? [00:06:13] Speaker 06: Because whatever that could be captured using that practice [00:06:17] Speaker 06: would inevitably be captured in 1677? [00:06:20] Speaker 03: No, Your Honor, I don't think so. [00:06:22] Speaker 03: And Congress didn't indicate that it thought it was redundant either, again, in the legislative history. [00:06:26] Speaker 06: Can you think of an example, kind of like the example you gave to Judge Hughes about how 1677 was broader than substantial transformation? [00:06:34] Speaker 03: So I think in a different example, if you had a product that was subject merchandise that left the subject country, went to another country, and was assembled into [00:06:47] Speaker 03: something else that's not part of the class or kind is a possibility. [00:06:51] Speaker 03: Even in this situation, if commerce looked at the unfinished tube and it went someplace else, it may be substantially transformed, but it's also possible it could be included in circumvention. [00:07:03] Speaker 03: I'm not aware of an example that may exist, but clearly Congress thought that there wasn't a conflict and that there are two separate tests to answer two different questions. [00:07:15] Speaker 03: One is to expand, and the other one is to determine what's of the country. [00:07:20] Speaker 05: I'm a little confused. [00:07:22] Speaker 05: And part of this is because Commerce came up with multiple reasons for why these tubes were included in its orders, I think partly in response to try to satisfy the trade court. [00:07:33] Speaker 05: But it seems like its first scope ruling said, these are finished tubes entering the United States, which is indisputably correct, right? [00:07:42] Speaker 05: They're finished tubes. [00:07:43] Speaker 05: They're not unfinished tubes. [00:07:45] Speaker 03: The tubes coming from Indonesia were finished. [00:07:47] Speaker 05: The finished tubes that we're looking at. [00:07:49] Speaker 05: The things coming into the United States that are subject to the orders are finished tubes. [00:07:53] Speaker 05: Correct. [00:07:54] Speaker 05: And the order covers finished and unfinished tubes from China. [00:08:00] Speaker 05: And so what we have to figure out is, are these tubes from China? [00:08:04] Speaker 05: Isn't that correct? [00:08:05] Speaker 03: Correct. [00:08:05] Speaker 03: And that was what Commerce was seeking to do when it applied the Substantial Transformation Test is, were those tubes still Chinese? [00:08:14] Speaker 05: Right. [00:08:15] Speaker 05: It just confused me a little bit because in commerce pivoted, because they said this is finished tubes. [00:08:20] Speaker 05: I think that's what they said in their first scope ruling. [00:08:23] Speaker 05: These are finished tubes. [00:08:26] Speaker 05: And the order expressly covers finished tubes from China. [00:08:31] Speaker 05: And these are from China because of the substantial transformation test. [00:08:35] Speaker 05: But then they went back and said, well, these are also unfinished tubes from China. [00:08:40] Speaker 05: And so they're covered. [00:08:40] Speaker 03: And does it matter which rationale we rely on? [00:08:44] Speaker 03: Actually, just to clarify, Your Honor, so in the original determination at page 9, and I can give you the JAA site, but I have the original determination in front of me, Commerce says, as courts have recognized, the physical merchandise and the country of origin are two separate parameters for defining subjects to an order. [00:09:07] Speaker 03: Furthermore, the scope language is not ambiguous. [00:09:09] Speaker 03: It clearly covers finished OCTG and unfinished OCTG. [00:09:13] Speaker 03: green tubes from the PRC. [00:09:15] Speaker 03: This is why we are examining whether the substantial transformation has occurred in a third country. [00:09:19] Speaker 03: As described more fully below, we continue to find that the products in question were not substantially transformed. [00:09:24] Speaker 03: What it's saying there is the scope expressly covers the unfinished tube when it left China, and therefore I have to determine whether it's been substantially transformed. [00:09:35] Speaker 03: In the second or in the first remand that you're referring [00:09:39] Speaker 05: I'm not referring to the remand. [00:09:40] Speaker 05: I'm talking about the final scope rolling. [00:09:42] Speaker 03: Right. [00:09:43] Speaker 03: And that was what I was referring to here. [00:09:44] Speaker 03: And then you would ask the question about, in its second re-determination, it revised its analysis pursuant to the court's decision, where it then said the subject merchandise, when it left, it was unfinished. [00:09:57] Speaker 05: Right. [00:09:57] Speaker 05: I get that. [00:09:58] Speaker 05: But the first scope rolling relies on the fact that there are finished tubes. [00:10:02] Speaker 05: coming into the United States. [00:10:03] Speaker 05: That's on page seven of the order, I think. [00:10:05] Speaker 03: Correct. [00:10:05] Speaker 03: It's indicating that the finished twos themselves are. [00:10:08] Speaker 05: So what I'm getting at is if I agree with this and agree with the other one, does it make any difference to which rationale we find was suitable to uphold commerce's position? [00:10:21] Speaker 05: Does it have any impact on the case? [00:10:24] Speaker 03: I would say the rationale could support including. [00:10:27] Speaker 03: Either determination would support including it. [00:10:31] Speaker 03: I would say, though, that the lower court was incorrect in taking the substantial transformation test away from the department. [00:10:37] Speaker 03: And we argued both in the alternative in our brief. [00:10:40] Speaker 03: But frankly, the more proper interpretation is that commerce's original determination with respect to the substantial transformation and applying that to determine country of origin was correct. [00:10:50] Speaker 03: And frankly, I think that should be the determination that is upheld. [00:10:53] Speaker 03: But you can uphold both, and we've argued both in our briefs. [00:10:58] Speaker 02: OK. [00:10:58] Speaker 02: Thank you, Mr. DeFrancisco. [00:11:01] Speaker 02: We'll go back to Mr. Ian Swords and give you three minutes to conclude your presentation. [00:11:09] Speaker 06: Thank you, Your Honor. [00:11:10] Speaker 06: We're going to talk about commerce discretion. [00:11:13] Speaker 06: That's right, Your Honor. [00:11:14] Speaker 06: Commerce has exercised its discretion to not be here. [00:11:18] Speaker 06: Why do you think that is? [00:11:19] Speaker 00: Frankly, I do not know, Your Honor, why commerce is not here today. [00:11:23] Speaker 00: I do know that it doesn't change the underlying record, which we believe clearly shows that commerce was denied [00:11:28] Speaker 00: the substantial deference that is due to it in interpreting. [00:11:31] Speaker 06: Are you aware of whether commerce has changed its practice or ITC or somebody to write orders such that it makes it much more crystal clear that there's some kind of substantial transformation language that's now written into these orders? [00:11:49] Speaker 00: Do you have any idea of that? [00:11:50] Speaker 00: We believe that this case has caused a possible practice change of commerce by writing orders differently. [00:11:57] Speaker 00: So we do believe that that is the case, Your Honor. [00:12:03] Speaker 02: Which commerce opinion are we reviewing? [00:12:06] Speaker 02: The ultimate one or the original one? [00:12:09] Speaker 00: We would like you to review the original one. [00:12:11] Speaker 02: That's what you'd like, but that's gone. [00:12:14] Speaker 02: And so we're, I would think, reviewing the ultimate decision. [00:12:23] Speaker 00: Well, the second decision [00:12:26] Speaker 00: If I may draw your attention to that, Your Honor. [00:12:29] Speaker 00: Commerce explicitly makes under protest. [00:12:31] Speaker 00: We believe that both its initial scope ruling as well as... But its earlier decision was under protest. [00:12:37] Speaker 02: Was that language used in the final commerce decision? [00:12:41] Speaker 00: Your Honor is correct. [00:12:41] Speaker 00: It is not used in the final commerce decision. [00:12:50] Speaker 00: Your Honor, unlike the preceding... What do you mean? [00:12:54] Speaker 05: You mean the final commerce [00:12:56] Speaker 05: decision after the multiple remands when they just give up and switch their position, they just don't include that under protest. [00:13:03] Speaker 00: That's correct. [00:13:04] Speaker 05: But that doesn't remove your right to appeal or probably commerce's right to appeal those earlier incorrect interlocutory rulings. [00:13:12] Speaker 05: Absolutely. [00:13:13] Speaker 05: If they are incorrect. [00:13:14] Speaker 00: I think they are. [00:13:15] Speaker 00: And we believe that they're incorrect. [00:13:17] Speaker 00: And we believe that unlike a lot of the preceding patent cases. [00:13:20] Speaker 05: Because you couldn't have [00:13:21] Speaker 05: in commerce couldn't have appealed those earlier interlocutory rulings until final decision. [00:13:27] Speaker 05: So you're going to argue about discretion, but how much discretion is really necessary here? [00:13:34] Speaker 05: If the order says this covers finished and unfinished tubes from China, then it seems pretty plain on its face that it covers finished and unfinished tubes from China. [00:13:47] Speaker 05: There may be a dispute about [00:13:49] Speaker 05: What is a finished tube from China? [00:13:54] Speaker 05: But do they need discretion to do that? [00:13:56] Speaker 05: Is the discretion to allow them to use the substantial transformation test? [00:14:01] Speaker 00: Yes, that is part of the discretion. [00:14:02] Speaker 00: The discretion is also looking at the unambiguous language, which you just cited, Your Honor, finding that. [00:14:09] Speaker 00: finished and unfinished tubes are both cited in the order and then concluding, we believe logically, that if a set such as unfinished OCTG from the People's Republic of China is listed in the order, then a subset, which would be unfinished OCTG that is subsequently finished in a third country, could also logically be read into that order. [00:14:30] Speaker 00: We therefore believe that commerce was reasonable in its interpretation and in its initial scope rulings because it both was specific [00:14:37] Speaker 00: It followed this court's instructions from FEDMET resources, King Supply, Deferco, and other cases by looking at the plain language of the orders. [00:14:45] Speaker 00: And in that plain language, as you pointed out, it came across unambiguously finished and unfinished OCTG. [00:14:52] Speaker 00: It then concluded that as long as OCTG was not substantially transformed in the third country, it would therefore still fall under the scope of its orders. [00:15:01] Speaker 00: Secondly, the logical step. [00:15:04] Speaker 00: of following and looking at the class of OCTG that is produced, and then concluding that from that, an OCTG that is subsequently finished elsewhere, we believe it is a sound principle and basis for interpretation. [00:15:16] Speaker 00: And finally, the other K1 factors which commerce considered, the petition, as well as the ITC's threat injury determination, all pointed towards green tubes being considered an important asset and element within the scope of it. [00:15:30] Speaker 05: What would we do if we find the language ambiguous? [00:15:34] Speaker 05: I mean, Judge Kelly did some very thorough, lengthy opinions concluding that this language was just ambiguous and decided that because it was ambiguous, it wasn't necessarily included in the scope. [00:15:48] Speaker 05: And so therefore, any inclusion would be an addition, which you can't do absent a circumvention analysis. [00:15:56] Speaker 05: Why is that wrong? [00:15:57] Speaker 00: Your Honor, we believe it's a far too stringent standard of analysis that's nowhere reflected in any statute. [00:16:03] Speaker 00: The standard is either a product is explicitly listed or it can be reasonably interpreted to be covered by the scope of the orders. [00:16:12] Speaker 05: So your view is even if the order is ambiguous, which is a problem that commerce is presumably going to address in the future in these kind of orders, it still can be reasonably read, and that commerce gets that tough, for instance, as opposed to it being read against them. [00:16:30] Speaker 00: That's correct, Your Honor. [00:16:30] Speaker 00: We believe that. [00:16:31] Speaker 05: What's your support for that? [00:16:33] Speaker 05: precedent for that? [00:16:34] Speaker 00: Well, as this court has held in King Supply, commerce is granted substantial deference when it comes to the interpretation of the scope of its own orders. [00:16:44] Speaker 00: And I quote, the meaning and scope of an anti-dumping orders are issues particularly within the expertise and special competence of commerce. [00:16:52] Speaker 00: We believe that King Supply represents a good example and precedent. [00:16:56] Speaker 02: Thank you, counsel. [00:16:57] Speaker 02: I will hear from Mr. Cameron, who will cover all bases. [00:17:05] Speaker 04: One can only hope, Your Honor. [00:17:18] Speaker 04: Thank you, Your Honor. [00:17:21] Speaker 05: Before we get sidetracked into this 1677 stuff, can you just start out with the order and the language? [00:17:27] Speaker 05: Because I'm not convinced that this order is all that ambiguous. [00:17:31] Speaker 05: It covers goods from China. [00:17:33] Speaker 05: It covers finished and unfinished goods from China. [00:17:37] Speaker 05: And so we have to determine, in the instance of these particular items that are coming across the border, if they're from China. [00:17:43] Speaker 05: And isn't the substantial transformation test the test that commerce routinely uses, not just in scope rulings, but in everything to determine country of origin? [00:17:52] Speaker 04: Well, actually, Your Honor, I think that it isn't that simple because the issue on the scope is, what is it when it comes [00:18:03] Speaker 04: to the United States. [00:18:05] Speaker 04: This pipe and tube, this OCTG, it came from Indonesia. [00:18:09] Speaker 04: So there's no question about that. [00:18:11] Speaker 04: So the question that arises is, OK, this OCTG came from Indonesia. [00:18:19] Speaker 04: Is it still covered by the orders from the covers finished and unfinished from China? [00:18:27] Speaker 04: And the answer was, well, [00:18:29] Speaker 04: Yes, it does cover unfinished that comes from China. [00:18:33] Speaker 05: You're saying it physically came from Indonesia, but the order covers finished tubing from China. [00:18:38] Speaker 04: Right, but this wasn't finished in China. [00:18:42] Speaker 05: But it could still be considered finished tubing from China if the country of origin for this product is China. [00:18:51] Speaker 04: This is where your question about 1677JV comes in, because that is exactly what the Congress is supposed. [00:19:03] Speaker 04: The Congress went and designed a statute to cover this specific thing to determine if it's not from China, if this isn't [00:19:13] Speaker 04: from China, directly from China. [00:19:15] Speaker 06: What about the legislative history that the other side pointed to? [00:19:18] Speaker 04: Well, that is not what the legislative history says. [00:19:20] Speaker 04: And actually, if your honor would read Peer Bearing, which is 986 Fed Sub 2nd, 1389, which goes extensively through the legislative history, what he's talking about is section 1677-12. [00:19:35] Speaker 04: And he's suggesting that 1677-12 somehow has a separate country of origin. [00:19:43] Speaker 04: plan in it. [00:19:46] Speaker 04: But the problem is that when they cited 1677-12, they didn't give you the full site of it, and actually it only refers to the countervailing duties. [00:19:55] Speaker 04: It doesn't refer to scope. [00:19:56] Speaker 04: It doesn't refer to anti-dumping. [00:19:59] Speaker 04: This is basically a leftover from the original countervailing duty, section 1303. [00:20:06] Speaker 04: It doesn't go to country of origin. [00:20:08] Speaker 06: Moreover, is there anything in the legislative history that suggests that 1677J is designed to displace the pre-existing information? [00:20:20] Speaker 04: There is no reference to substantial training. [00:20:24] Speaker 02: Oh, I apologize, Your Honor. [00:20:27] Speaker 02: Yes, Your Honor, I apologize. [00:20:31] Speaker 02: Proceed. [00:20:32] Speaker 06: Yeah, so I guess the question was, [00:20:34] Speaker 06: Is there anything in the legislative history that indicates that 1677J was designed, at least in part, to displace the practice of construing orders using the substantial transformation test? [00:20:49] Speaker 04: Well, it's very interesting. [00:20:51] Speaker 04: What 1677J, the legislative history, demonstrates is, first of all, that they had a problem. [00:20:59] Speaker 04: The problem was what happens when a product is [00:21:04] Speaker 04: assembled in another country. [00:21:06] Speaker 04: How do we determine that? [00:21:08] Speaker 04: And they had a statute in 1988, and they found that they had some difficulties in administering it, because it didn't really fully take care of everything. [00:21:24] Speaker 04: So in 1994, as partly as a result of the WTO, they made some amendments to it. [00:21:30] Speaker 04: And these amendments, again, are to deal with this. [00:21:33] Speaker 04: Substantial transformation is nowhere referred to in the legislative history. [00:21:38] Speaker 04: Substantial transformation is nowhere referred to in section 351, 225, which is the entire examination of what are the scope procedures? [00:21:51] Speaker 04: What are anti-circumvention procedures? [00:21:53] Speaker 04: How do we proceed? [00:21:54] Speaker 04: There's no mention of substantial transformation in there. [00:21:59] Speaker 04: If substantial transformation is the great solution to how we determine the country of origin, why is it that in a uniform regulation that covers all manner of scope, country, circumvention, everything, why isn't it mentioned? [00:22:17] Speaker 04: It's not mentioned because this is something that the Commerce Department is doing instead of what Congress passed, which is 1677J. [00:22:28] Speaker 05: And that, if you look at the terms of that provision... How long was Commerce using the Substantial Transformation Test before this legislation was passed? [00:22:39] Speaker 04: Well, I don't know the answer to that, Your Honor. [00:22:41] Speaker 04: This legislation was originally passed in 1988, and we don't have any... We have not seen any citations to any cases upholding this. [00:22:51] Speaker 04: We do have peer bearings that said that the... [00:22:56] Speaker 05: It seems to me that your argument cuts both ways. [00:22:58] Speaker 05: I mean, if the test was out there and known and Commerce had been using it, if Congress wanted to displace it, they would have mentioned it, particularly given, I mean, Commerce's broad discretion in these areas. [00:23:10] Speaker 04: Well, that's one way to look at it. [00:23:12] Speaker 04: I think that the way that we look at it is, number one, if it was out there, then Commerce would have referred to it, the Congress would have referred to it as in the legislation somewhere, [00:23:25] Speaker 04: and it's not referred to. [00:23:27] Speaker 04: Number two, the Commerce Department would have referred to it somewhere in their regulations on, well, OK, we have these problems. [00:23:35] Speaker 04: This isn't the first time this has come up. [00:23:38] Speaker 04: So what is the procedure that we have? [00:23:41] Speaker 04: Secondly, you're suggesting that the substantial transformation test is this set fixed somewhere. [00:23:48] Speaker 04: This is a moving target. [00:23:49] Speaker 04: This changes all the time. [00:23:51] Speaker 04: We had six factors in peer bearing. [00:23:55] Speaker 04: three of which the court basically said were irrelevant, and said it was then run around the statutory provisions in 1677 JB. [00:24:05] Speaker 04: So I think we have a problem here in that what we are asked to believe is that, well, there is this separate way that we look at scope and that we define the country of origin for an order, and we only get to [00:24:25] Speaker 04: The specific provision that covers third-party assembly and processing, which is on all fours with this case, with the facts of this case, and on the facts of pure bearing, we only get to that, well, we're not sure when we get that. [00:24:42] Speaker 04: We get to that if we want to. [00:24:44] Speaker 04: And this was the problem that the courts below had. [00:24:47] Speaker 04: The courts below both said, well, wait a second. [00:24:50] Speaker 04: Based on what do you substitute? [00:24:53] Speaker 04: the discretion of the Commerce Department to ignore a specific statutory provision that governs this very thing. [00:25:01] Speaker 06: And it gets to the question of... Well, I guess that's the question. [00:25:05] Speaker 06: Does 1677-J supplement what came before, or does it completely... There's no evidence that it... Well, that's a good question. [00:25:13] Speaker 04: I think the answer is that there is absolutely no evidence that it is supplementary. [00:25:18] Speaker 04: The evidence is that it is part of the same statute [00:25:22] Speaker 04: and that this is the way that we deal with the question of third country processing. [00:25:27] Speaker 04: And it's very clear on it. [00:25:29] Speaker 04: And there's a reason for that. [00:25:31] Speaker 06: Congress has a regulation called Rule 134.1, defining country of origin. [00:25:39] Speaker 04: You mean customs? [00:25:41] Speaker 06: Or customs, yeah. [00:25:42] Speaker 06: And so I guess what I'm wondering is, to what extent does that rule inform us? [00:25:49] Speaker 04: Well, that's a good question, Your Honor, [00:25:52] Speaker 04: The custom service in 1991 had determined that the country of origin for OCTG is the place of heat treatment, which is in Indonesia. [00:26:04] Speaker 04: That's using the country of origin of CBP. [00:26:07] Speaker 04: Now, the Commerce Department says, well, we make our own decisions with respect to substantial transformation. [00:26:13] Speaker 04: So we don't care what they do. [00:26:16] Speaker 04: But that is the way that the custom service does it. [00:26:21] Speaker 04: There was a determination on the record for 20 years before this case ever came up that said, yes, country of origin is that. [00:26:29] Speaker 04: This company that we represent was established in 1987. [00:26:32] Speaker 04: They have to import the inputs in order to produce the OCTG. [00:26:39] Speaker 04: So this wasn't a new phenomenon. [00:26:41] Speaker 04: Then in 2010, there was another decision by CBP again, which reinforced that. [00:26:49] Speaker 04: And that's what provoked the petition, the scope petition, which said that they wanted Commerce to specifically reaffirm that the order covers OCTG regardless of where it was finished. [00:27:05] Speaker 04: Well, that's very interesting, because that language never appeared in the scope language itself. [00:27:10] Speaker 04: It never appeared in the petition. [00:27:12] Speaker 04: It never appeared anyway. [00:27:13] Speaker 05: Here's the problem is it seems to me that [00:27:17] Speaker 05: both sides could benefit from the additions of words to the order. [00:27:22] Speaker 05: You, in fact, I think very interestingly, a couple minutes ago, referred to whether it directly came from China, which the trade court also referred to, I think. [00:27:31] Speaker 05: But there's no directly in the order. [00:27:34] Speaker 05: On the other hand, your friends on the other side want exactly what you just described, that it covers tubes that come from China, [00:27:44] Speaker 05: if it's a country of origin, even if they are not substantially transformed in a third country. [00:27:52] Speaker 05: But the order doesn't explicitly say one way or another how those conclusions. [00:27:58] Speaker 05: So aren't we then back to deferring to commerce on its interpretation of its order? [00:28:04] Speaker 04: Well, Your Honor, I don't believe we are. [00:28:06] Speaker 04: I think what we are back to is looking at statute, because [00:28:10] Speaker 04: the commerce department does have a statutory provision that deals with third country processing. [00:28:15] Speaker 04: And what's the difference between substantial transformation and not insignificant and not minor, which is the standard for the circumvention? [00:28:24] Speaker 05: But sure, but that statute, if the order had included tubes [00:28:30] Speaker 05: that were treated, they wouldn't have to resort to that statute. [00:28:34] Speaker 05: You're absolutely correct. [00:28:35] Speaker 05: But that's the question then, does this order include those tubes or not? [00:28:39] Speaker 04: And that's where we get to DeFerco, because in DeFerco what it says is, if the scope says that it covers further processing, and to get to your honor's earlier question about have there been any changes, the answer is yes. [00:28:57] Speaker 04: There are many cases in which they say, and if it's further processed, then this order still applies to that. [00:29:03] Speaker 04: We gave you two examples in our brief with respect to DRAMs and with respect to solar panels, where it was explicitly stated. [00:29:12] Speaker 04: And yes, you're absolutely correct. [00:29:14] Speaker 04: In those circumstances, what's the answer? [00:29:16] Speaker 04: The answer is you look to the order first. [00:29:18] Speaker 04: We don't look to anything else but the terms of the order. [00:29:22] Speaker 04: But this order didn't say that. [00:29:23] Speaker 04: And this order didn't say, regardless of where processed. [00:29:26] Speaker 05: But it also doesn't say directly from China. [00:29:28] Speaker 04: Well, because it says from China. [00:29:33] Speaker 04: And was this from China? [00:29:35] Speaker 05: Isn't there a magic? [00:29:36] Speaker 05: Well, but that's the question. [00:29:37] Speaker 04: Is it from China? [00:29:38] Speaker 04: And the answer is this is from Indonesia. [00:29:40] Speaker 05: That's not commerce's answer. [00:29:41] Speaker 05: Commerce's answer is this is from China. [00:29:47] Speaker 04: The plain meaning of from China [00:29:51] Speaker 04: with all due respect, is from China. [00:29:53] Speaker 04: And if you want to interpret it, then you have to go to either A, is there anything in the petition? [00:30:00] Speaker 05: I sure support that the plain meaning of from China means a physical type of meaning rather than a country of origin meaning. [00:30:10] Speaker 05: Well, Your Honor. [00:30:11] Speaker 05: I mean, I don't see anything plain at all about that, particularly in the context we're dealing with, where commerce routinely looks at country of origin to determine where a product [00:30:20] Speaker 05: is fraught? [00:30:21] Speaker 04: Well, Your Honor, I guess I'm puzzled because I have not seen any court decisions. [00:30:26] Speaker 04: I know what commerce does. [00:30:29] Speaker 04: But the question is, I have never seen anything that has sustained that. [00:30:35] Speaker 04: The Commerce Department has its own way of doing it. [00:30:38] Speaker 04: And the court in pure bearing and in here has basically called that into question, saying, well, that's very interesting. [00:30:45] Speaker 04: But you have a whole different set [00:30:49] Speaker 04: of variables that you are applying, not the statutory set, and why not? [00:30:55] Speaker 04: And the reason is because the statute also puts limits on what commerce can do in terms of how they interpret it. [00:31:03] Speaker 04: The factors are different. [00:31:05] Speaker 04: They have to find that it is not minor and insignificant. [00:31:09] Speaker 04: And that's important because substantial transformation doesn't. [00:31:12] Speaker 04: And that means there's going to be a difference. [00:31:14] Speaker 04: And so the question is, [00:31:16] Speaker 04: if you have this provision, can you actually do substantial transformation as a test? [00:31:22] Speaker 04: And I think that the court below and the court in pure bearing, which for some reason is cited by counsel for Maverick, I think that both of those cases stand for the proposition that no, you cannot, because there is a provision that directly applies for it. [00:31:37] Speaker 06: Sometimes people ask me, where are you from? [00:31:40] Speaker 06: And I say, oh, I'm from California. [00:31:43] Speaker 06: And then they'll say, no, where are you really from? [00:31:45] Speaker 06: Yeah. [00:31:45] Speaker 06: I say, oh, well. [00:31:48] Speaker 04: Cleveland. [00:31:48] Speaker 04: We're from China. [00:31:49] Speaker 04: Oh, OK. [00:31:51] Speaker 04: Cleveland, China, it's the same thing. [00:31:52] Speaker 04: I understand that. [00:31:54] Speaker 04: Cleveland and China are not the same. [00:31:56] Speaker 04: Well, it depends on where you go. [00:31:59] Speaker 04: I don't know where you go. [00:32:02] Speaker 04: Well, I think that's right, Your Honor. [00:32:05] Speaker 04: But that's the reason that we looked to the petition. [00:32:09] Speaker 04: What did the petition discuss in terms of unfinished? [00:32:12] Speaker 04: The petition was very specific. [00:32:14] Speaker 04: It talked about, well, the reason we're covering unfinished is that unfinished OCTG enters the United States and is finished in the United States. [00:32:23] Speaker 04: This is part of the scope. [00:32:24] Speaker 04: So that's the basis for that. [00:32:28] Speaker 04: And we believe that the statute is clear on this. [00:32:32] Speaker 04: And we believe that the court below was right. [00:32:35] Speaker 04: And we do heartily recommend peer bearing, because peer bearing also goes to this issue of the legislative history. [00:32:43] Speaker 04: and it is not what you heard from petitioners this morning. [00:32:46] Speaker 04: Thank you very much, Your Honor. [00:32:48] Speaker 04: I appreciate your time and your patience. [00:32:50] Speaker 02: Mr. Bohn will conclude. [00:33:02] Speaker 01: Yes, Your Honor. [00:33:02] Speaker 01: I'd like to attempt to clarify the legislative history somewhat. [00:33:06] Speaker 01: The 1988 [00:33:07] Speaker 01: Uh, legislative history does not discuss substantial transformation in the context of 1677 J. We believe because Congress assumed that the courts, that commerce and customs would continue to apply the substantial transformation standard, which has been the standard for the way of looking at country of origin issues for longer than anyone in this room has been alive. [00:33:28] Speaker 01: The 1994 statement of administrative action at page 844 contains language, which is quoted in Maverick's brief at 39 to 40. [00:33:37] Speaker 01: which we believe indicates that Congress envisioned the two would coexist. [00:33:42] Speaker 01: That you would first, if necessary, look at substantial transformation to determine whether a product was from a country covered by an order. [00:33:51] Speaker 01: And then you would look at 1677J, if necessary, if the physical characteristics of the imported merchandise did not fall squarely within what the court has recently called the literal scope language [00:34:05] Speaker 01: if you can go a little bit outside that in order to combat circumvention. [00:34:10] Speaker 01: I think the legislative history, both 1988 and 1994, make perfectly clear, as the title of the statute does, that 1677J is intended to prevent circumvention of an order. [00:34:22] Speaker 01: So it gives you substantial transformation plus a chance [00:34:27] Speaker 01: in limited circumstances, and I acknowledge they have to be limited because you're going a little beyond the literal scope language. [00:34:34] Speaker 01: You do run into potential WTO concerns. [00:34:37] Speaker 01: It gives you a chance to go a bit beyond the scope if necessary in a situation where it's being used to circumvent the order, which goes back, I think, to an issue that the court previously raised in one of its questions, which is what would happen if we just threw out the substantial transformation test? [00:34:54] Speaker 01: And all there were were 1677j. [00:34:57] Speaker 01: I think what would occur then is you would have manufacturers in countries subject to orders looking around the world and saying, well, what's the least we can do to get out of the order? [00:35:10] Speaker 01: We don't have to change the classic kind of merchandise. [00:35:13] Speaker 01: We don't have to go so far as to conduct a substantial transformation in a third country. [00:35:17] Speaker 01: All we have to do is go a little bit beyond [00:35:20] Speaker 01: the minor or insignificant processing that's envisioned in 1677J. [00:35:24] Speaker 01: All we have to do is add a little bit more extra value. [00:35:27] Speaker 01: So it would give them an opportunity to find new ways of avoiding anti-dumping and countervailing duty orders, and in that way, ironically, 1677J, which Congress intended to prevent circumvention, would facilitate it. [00:35:42] Speaker 01: Meanwhile, what would customs be doing? [00:35:44] Speaker 01: Customs, presumably as its regulation indicates, [00:35:46] Speaker 06: Can you repeat that? [00:35:49] Speaker 06: You seem to accept the premise that substantial transformation is fully covered by the circumvention statute. [00:36:00] Speaker 06: If that is true, then why would taking away the substantial transformation test, because now it's completely covered by the circumvention statute, create some kind of outcome where [00:36:15] Speaker 06: the domestic industry would be worse off. [00:36:18] Speaker 01: I understand your question, Your Honor. [00:36:19] Speaker 01: We do not believe that the 1677J covers the substantial transformation test. [00:36:27] Speaker 01: We believe that the test outlined in 1677J is relatively narrow compared to substantial transformation. [00:36:35] Speaker 01: So you could have a situation, for example, where an order covers pipe up to 16 inches outside diameter. [00:36:44] Speaker 01: And someone adds a coating, which takes it a little bit beyond 16 inches outside diameter. [00:36:54] Speaker 01: And that's not a substantial transformation, but it could be covered under 1677J. [00:37:01] Speaker 01: Conversely, you could have a situation where someone performs activities in a third country which do not rise to the level of substantial transformation, and yet [00:37:13] Speaker 01: are encompassed within 1677J and thus get it out of the order. [00:37:23] Speaker 02: Anything further? [00:37:25] Speaker 01: Unless the court has additional questions, I do not. [00:37:30] Speaker 02: Thank you, gentlemen. [00:37:31] Speaker 02: We'll take the case under advisement.