[00:00:00] Speaker 02:
Zero, Maverick Two Corporation versus United States.

[00:01:22] Speaker 04:
Morning, Your Honors.

[00:01:23] Speaker 04:
May it please the Court?

[00:01:25] Speaker 04:
I'm David Simon.

[00:01:27] Speaker 04:
I'm appearing on behalf of Chairova Borough, and I may also refer to their affiliated exporter, Ugel Borough.

[00:01:35] Speaker 04:
This is an appeal from a dumping investigation.

[00:01:40] Speaker 04:
And the key issue concerns the duty drawback adjustment to U.S.

[00:01:45] Speaker 04:
price.

[00:01:47] Speaker 04:
The question here is whether the Commerce Department can add to its historical criteria for duty drawback adjustments the requirement that a respondent prove that it imported raw material actually suitable for use in the production of the products exported to the United States.

[00:02:08] Speaker 04:
We say that Commerce cannot add that

[00:02:11] Speaker 02:
So what criteria would you have us use?

[00:02:15] Speaker 02:
I mean, if the government, the foreign government says it's equivalent, is that the test?

[00:02:22] Speaker 04:
Commerce has always had this two-part criterion.

[00:02:25] Speaker 04:
Is there a sufficient link?

[00:02:27] Speaker 04:
And that's an issue that concerns an analysis of the Turkish or foreign country law regarding duty drawback.

[00:02:36] Speaker 04:
And in the Turkish system,

[00:02:38] Speaker 04:
there is this concept of equivalent goods.

[00:02:42] Speaker 04:
So on what they call an inward processing certificate that governs these things, the UGEL has to show, for example, it will import 200,000 tons of hot rolled coil in a couple of different tariff categories according to the thicknesses of the coil.

[00:03:04] Speaker 04:
And it will export 190,000 tons of steel pipe.

[00:03:09] Speaker 04:
and all of the coil inside the import allowance is equivalent goods because it's in the same eight-digit tariff category.

[00:03:24] Speaker 02:
Okay, I appreciate that.

[00:03:25] Speaker 02:
That's helpful.

[00:03:26] Speaker 02:
My question is, is that what you want us to say, that if the country, if the foreign

[00:03:35] Speaker 02:
concludes that they're equivalent goods, then they're included in this calculation.

[00:03:42] Speaker 02:
Or can every country come up with whatever criteria they want to establish who's going to get the rebate and whether that rebate should be improved?

[00:03:53] Speaker 04:
Well, commerce analyzes the law of the foreign country and sees how it works.

[00:03:58] Speaker 02:
So conceivably under the

[00:04:01] Speaker 02:
construct of the statute you're proposing, we could have a different regime in every foreign country in the world, right?

[00:04:10] Speaker 02:
And we don't have any say as to whether or not to test the concept of equivalency or whatever other concept another country would come up with that would put them in this basket that we're willing to include, right?

[00:04:23] Speaker 04:
Well, in this case, commerce knows that the equivalency is the

[00:04:31] Speaker 04:
digit tariff classification.

[00:04:34] Speaker 04:
So UGEL, which is a steel pipe maker, couldn't import chocolate and get a drawback on that because chocolate's not an input to pipe.

[00:04:44] Speaker 04:
So Commerce checks that.

[00:04:47] Speaker 04:
They look at that.

[00:04:48] Speaker 04:
They look at the drawback certificates, and they see coil, pipe.

[00:04:55] Speaker 04:
And because they always see that as a pattern, they say the system works.

[00:05:01] Speaker 04:
The system's not giving drawback on something that's not capable of being used on the exported product.

[00:05:11] Speaker 03:
Of course, the statute doesn't say capable of being used.

[00:05:14] Speaker 04:
That's right.

[00:05:15] Speaker 04:
The statute says any import duties imposed by the country of exportation.

[00:05:23] Speaker 04:
But the case law goes, and this goes way back to the 80s,

[00:05:30] Speaker 04:
authorizes accepts commerce's ability need to analyze whether the foreign system is working in a way that the substitution materials are appropriate for for customs purposes and for dumping purposes and they have found time and again there's lots of these Turkish cases and they found

[00:05:58] Speaker 04:
in the original Taiwan cases, in the FEMCO cases, for instance, that the foreign systems did have an appropriate structure for linking imports and exports, and that the eight-digit HTS structure is an adequate structure.

[00:06:15] Speaker 04:
And if I'm not mistaken, the United States works in the same way.

[00:06:19] Speaker 04:
It's in our agency briefing, but it hasn't been an issue here.

[00:06:27] Speaker 04:
So the Turkish system works on a certificate basis.

[00:06:32] Speaker 04:
A company like UGEL will apply to import 100,000 tons of coils, export 95,000 tons of pipes.

[00:06:41] Speaker 04:
Electronically, the Turkish customs computer system looks at these, looks at this application, and says, OK, granted.

[00:06:52] Speaker 04:
And then each time UGEL imports coils,

[00:06:57] Speaker 04:
counts them against, actually Turkish customs counts those coils against that inward processing certificate.

[00:07:05] Speaker 04:
Each time you gel exports pipes, Turkish customs counts them against that inward processing certificate.

[00:07:13] Speaker 04:
So it's always happening in a balanced way and commerce knows this perfectly well.

[00:07:18] Speaker 04:
The question is this suitability for use criterion

[00:07:26] Speaker 04:
that commerce is now talking about, it would be okay by me, by Eugel, if it incorporated the concept of equivalent goods.

[00:07:40] Speaker 04:
But it doesn't.

[00:07:41] Speaker 02:
Well, the question is, if you're willing to kind of slice and dice whatever criteria is used, we start with the statute.

[00:07:49] Speaker 02:
So you think the statute is ambiguous.

[00:07:53] Speaker 04:
I do not think the statute is ambiguous.

[00:07:55] Speaker 02:
I thought you just said, well, they could do one thing and not the other thing, that you realized there were limitations that could be imposed based on what the foreign country, how it was doing its calculations, right?

[00:08:07] Speaker 04:
Commerce has always interpreted the statute in a sort of a, they have the authority to see if there's a bona fide system, if drawback exists as a system, as a bona fide system.

[00:08:20] Speaker 04:
If you look back at the Femco case in the 80s, what Judge Restone said there was that the substitution principle in the Taiwanese system that was at issue there was a pretty broad structure, but it was not so broad as to be meaningless.

[00:08:41] Speaker 04:
And commerce certainly has the authority to determine whether there is a drawback system in existence

[00:08:48] Speaker 04:
that defines things adequately to be deemed a drawback in the first place.

[00:08:53] Speaker 04:
It's not an ambiguity in the statute.

[00:08:56] Speaker 04:
It's how commerce gets to the definition of drawback.

[00:09:01] Speaker 04:
Because they say, if the drawback system allowed you to import chocolate and get a drawback when you export steel pipe, then it's not any rebate by reason of the exportation, because it's not a bona fide system.

[00:09:18] Speaker 02:
So we're looking at the last provision of the statute, the last section, which says, has been rebated, which has not been collected, by reason of the exportation of the subject merchandise to the United States.

[00:09:30] Speaker 04:
Yes, but the beginning portion is, to me, the key.

[00:09:36] Speaker 04:
Any import duties, the amount of any import duties rebated.

[00:09:43] Speaker 04:
As long as the system is working systematically.

[00:09:47] Speaker 02:
But isn't that modified by the section I just read, by reason of the exportation?

[00:09:51] Speaker 02:
I mean, it's all one sentence.

[00:09:53] Speaker 02:
Yes.

[00:09:53] Speaker 02:
There are a bunch of commas in between.

[00:09:56] Speaker 02:
But when it says, shall be increased by the amount of any import duties imposed by the country of expiration, which have been rebated, et cetera, by reason of the exportation of the subject merchandise to the United States.

[00:10:12] Speaker 04:
But we don't really have an issue there because in UGEL's database of imports and exports under its inward processing certificates, you can see the line item of the OCTG that was exported to the United States.

[00:10:31] Speaker 04:
You can see that when that certificate was closed,

[00:10:36] Speaker 04:
All these imports were properly balanced against all these exports, and so the rebate was given by reason of the exportation inter alia of the goods to the United States.

[00:10:47] Speaker 02:
But it wasn't the exportation.

[00:10:48] Speaker 02:
What is meant by the subject merchandise?

[00:10:50] Speaker 04:
Yeah, we have that.

[00:10:51] Speaker 04:
That's never been an issue.

[00:10:53] Speaker 04:
We exported OCTG.

[00:10:55] Speaker 04:
That's not the issue before the court.

[00:10:57] Speaker 04:
The issue here is whether

[00:10:58] Speaker 04:
We imported a raw material suitable for use in the exported merchandise.

[00:11:07] Speaker 04:
And we certainly imported a lot of hot rolled coil.

[00:11:15] Speaker 04:
The problem factually is we did not import the J55

[00:11:23] Speaker 04:
grade or standard of coil that is suitable for use in OCTG.

[00:11:31] Speaker 04:
OCTG is a very sophisticated product.

[00:11:33] Speaker 04:
It operates under a lot of pressure and so forth.

[00:11:35] Speaker 04:
So you have to have a specific kind of coil.

[00:11:39] Speaker 04:
It's in the same eight-digit tariff category as all the coils, but it happens that for these couple of hundred tons out of hundreds of thousands of tons, these couple of hundred tons that we produce that were OCTG

[00:11:53] Speaker 04:
We didn't import those coils, but they were that we could claim the OCTG as an export because of equivalent goods.

[00:12:06] Speaker 04:
All of the coils we imported are equivalent to each other and equivalent also to J55 coils.

[00:12:17] Speaker 04:
On the import side,

[00:12:19] Speaker 02:
And what commerce does is they write... What is the policy argument for equivalency?

[00:12:24] Speaker 02:
Is it because, like, everything, it's all interchangeable?

[00:12:29] Speaker 02:
It's all, yeah.

[00:12:30] Speaker 02:
So if you could, could you just as easily have used the stuff that was imported from China?

[00:12:37] Speaker 04:
Well, we didn't import from China, in fact, but we could have imported J55 coils.

[00:12:42] Speaker 04:
It just happens that in that period we didn't, but there's no reason that we couldn't have.

[00:12:48] Speaker 04:
The policy argument is that a coil weighs 20 tons, and you're exporting hundreds of thousands of tons of pipe.

[00:12:57] Speaker 04:
And you're getting some from an import, some from domestic.

[00:13:01] Speaker 04:
And there's no way that customs, because customs is administering the system, there's no way that customs can link this imported coil to this exported pipe.

[00:13:12] Speaker 04:
In fact, there's no way that a manufacturer can do that either.

[00:13:16] Speaker 04:
I mean, it has always been thus, since the 80s and when I started working on these drawback cases.

[00:13:24] Speaker 04:
You have to – you cannot run a drawback system without substitution drawback, as we call it in the United States, doctrine of equivalence, as it's called in Turkey.

[00:13:36] Speaker 02:
Okay.

[00:13:37] Speaker 02:
You're into your rebuttal.

[00:13:38] Speaker 02:
Thank you.

[00:13:49] Speaker 00:
Good morning.

[00:13:50] Speaker 00:
May it please the court?

[00:13:53] Speaker 00:
The trial court's decision here should be affirmed.

[00:13:56] Speaker 00:
This case has nothing to do with the Turkish duty drawback system.

[00:14:00] Speaker 02:
Can I just ask you as background, is this a consistent policy that the government has followed or is there going to switch around to reach the conclusion it reached here?

[00:14:10] Speaker 00:
This is a very unique situation what happened here.

[00:14:13] Speaker 00:
It's not here again.

[00:14:14] Speaker 00:
It has nothing to do with the duty drawback system that's in Turkey.

[00:14:18] Speaker 00:
This case slowly, and I can, if I may explain, you have to step back a little bit here.

[00:14:23] Speaker 00:
The whole purpose of when commerce does the dumping calculation, the whole purpose of the AD statute is to account for subject merchandise related items, so that when you're doing a proper comparison between normal value, which is in the exporting country, with the US price of the US.

[00:14:39] Speaker 00:
So I understand that.

[00:14:40] Speaker 02:
I'm just wondering, your friend proposes a substitution or equivalence kind of mantra over this.

[00:14:48] Speaker 02:
implemented consistent procedure all along in terms of how it's interpreted and applied this to similar circumstances?

[00:14:57] Speaker 00:
The duty drawback statutory provision here does not speak to the particular issue before the court here, which is whether the subject merchandise must be used.

[00:15:07] Speaker 00:
But in order to understand the provision and what it's meant to do here,

[00:15:11] Speaker 00:
the duty drawback provision is meant to account for and how this court actually held.

[00:15:18] Speaker 05:
I think this is an important question.

[00:15:20] Speaker 05:
The question is, has customs changed or commerce changed the way it's been implementing this statute?

[00:15:28] Speaker 05:
And that previously drawbacks between goods that are simply related on the schedule, those were allowed, these substitutions or doctrine of equivalent substitutions, as your adversary is referring to,

[00:15:41] Speaker 05:
Were they previously allowed, and now they're not?

[00:15:44] Speaker 00:
No.

[00:15:44] Speaker 00:
Commerce did not change that practice.

[00:15:46] Speaker 00:
Commerce actually did not reach that question here.

[00:15:49] Speaker 00:
They didn't reach the, basically, commerce does a two-pronged test when it evaluates the duty drawback provision.

[00:15:55] Speaker 00:
It never reached that because it found that as a threshold matter, the provision just doesn't apply in this situation, in the facts before it, in this case, because UCHEL did not, could not use that input, that the hot roll coils that it says,

[00:16:11] Speaker 00:
it couldn't use that import for the subject merchandise.

[00:16:14] Speaker 00:
And to use the analogy that counsel gave here, counsel said just like chocolate could not be used as an input to make the subject merchandise, same as those coils that it imported could not be used to make subject merchandise.

[00:16:27] Speaker 02:
And is that been, just to go back again, is that been the position that Commerce has consistently taken?

[00:16:34] Speaker 00:
It never came up before.

[00:16:35] Speaker 00:
This is the first case that such a factual situation came up.

[00:16:38] Speaker 00:
So it was very unique to this particular company.

[00:16:41] Speaker 00:
It never came up in a prior... You mean no one has requested it.

[00:16:44] Speaker 02:
This provision has never been applied to goods that were not subject, however we say it, to the import, an original import.

[00:16:54] Speaker 00:
Correct.

[00:16:54] Speaker 00:
As a factual matter, this issue has not come up where the respondent, the exporting company that's asking for this adjustment, factually did not use that import in the subject merchandise.

[00:17:05] Speaker 03:
That situation has never come up.

[00:17:07] Speaker 03:
This is essentially a chocolate case.

[00:17:09] Speaker 00:
Yes, it is.

[00:17:10] Speaker 00:
It's a chocolate case.

[00:17:11] Speaker 03:
Even though he shows something as far away from pipe and steel as conceivable, you're saying it's the same thing.

[00:17:19] Speaker 00:
It's the same thing.

[00:17:20] Speaker 00:
If it can't be used, it can't be used.

[00:17:23] Speaker 00:
And there's no reason.

[00:17:24] Speaker 00:
The reason under the provision that you make the adjustment... Can't be used or wasn't used?

[00:17:29] Speaker 00:
Could not be used.

[00:17:30] Speaker 02:
Could not be used.

[00:17:31] Speaker 00:
Could not be used.

[00:17:31] Speaker 02:
So you think... Can we look at the statute?

[00:17:33] Speaker 02:
Is it your position that that's mandated by the statute or that the statute is ambiguous and you get deference on your interpretation?

[00:17:41] Speaker 00:
The actual statutory provision for duty drawback doesn't speak one way or the other, but when you look at the intent of the statutory scheme.

[00:17:50] Speaker 02:
Well, why do you say it doesn't speak to it?

[00:17:51] Speaker 02:
You're looking at this.

[00:17:52] Speaker 00:
Because it doesn't use a term used.

[00:17:55] Speaker 00:
I think it's inherent and it's a given that it doesn't make sense to give.

[00:17:59] Speaker 03:
Yes, but it talks about which have been have been past tense, rebated, or which have not been past tense, collected by reason of its causation.

[00:18:11] Speaker 03:
So you seem to be walking away from the statute.

[00:18:15] Speaker 00:
It's, you know, I think for us, I think the trial court actually found that this was, you know, it didn't speak to the question, but I think it can be viewed either way.

[00:18:25] Speaker 00:
It can be viewed as when you look at the statute, it simply does not, there is a requirement that it must be used in the subject merchandise.

[00:18:35] Speaker 00:
So it can, I think it can go either way.

[00:18:38] Speaker 00:
It can be, you can interpret the statute as

[00:18:42] Speaker 00:
that use is there, that use must be used in order for this adjustment to be made.

[00:18:47] Speaker 00:
And that's why, as a threshold matter in this case, Congress simply found that the statutory provision didn't apply, so it didn't actually go further.

[00:18:54] Speaker 02:
Well, you get to prevail, I guess, arguably, if the statute is ambiguous, because then you're entitled to deference.

[00:19:00] Speaker 02:
You don't need to establish that, nor did the CIT in order to reach the decisions you reached.

[00:19:05] Speaker 02:
Correct.

[00:19:05] Speaker 02:
But your friend says that the statutory provision, as I understand it, is unambiguous.

[00:19:11] Speaker 02:
because it doesn't include any of those limitations.

[00:19:14] Speaker 02:
It says it's going to be increased by the amount that's been rebated.

[00:19:18] Speaker 02:
Here, there's no dispute that there's been a rebate by the government, right, because of those original importations and by reason of the exportation of the subject merchandise to the United States.

[00:19:31] Speaker 02:
Well, that's why the government has decided to rebate the amount

[00:19:37] Speaker 02:
that came in because they were doing it.

[00:19:39] Speaker 02:
Now, the government has made a determination.

[00:19:41] Speaker 02:
We're going to give you back this rebate, whether or not the goods are identical or whether they're just a substitution or equivalence, whatever term we're using.

[00:19:49] Speaker 02:
But why isn't your friend right that that falls clearly within the statutory text?

[00:19:54] Speaker 00:
Because it would actually be to give the adjustment in this case would actually be contrary to the statutory scheme and what this provision is meant to do.

[00:20:02] Speaker 00:
That's why it would actually create an imbalance that

[00:20:05] Speaker 00:
this provision is meant to take care of.

[00:20:07] Speaker 02:
You make me a little nervous when you talk about statutory schemes and what they're meant to do, as opposed to looking at what the language says.

[00:20:17] Speaker 02:
So why don't we look at what the language says, and what does that language tell us?

[00:20:22] Speaker 00:
Of any import duties, I think you do have to read it together, by reason of the exportation of the subject merchandise.

[00:20:28] Speaker 00:
So this import duty that the respondent is getting here is not

[00:20:33] Speaker 00:
by reason of the exportation of subject merchandise because it could not be used.

[00:20:37] Speaker 02:
So there's no... Well, you say maybe under certain systems it could not be, but isn't it conceivable that a government... The government is the one that's imposing the tax on the first instance and then deciding what it's going to rebate.

[00:20:52] Speaker 02:
Well, maybe the government decides that we're going to rebate it, not just for the expiration of the goods that it was used, but for equivalent.

[00:21:02] Speaker 02:
So why wouldn't the government's decision?

[00:21:05] Speaker 02:
That's the reason.

[00:21:06] Speaker 02:
That is the reason that the government is rebating it.

[00:21:09] Speaker 02:
It's just not using the same criteria that you would be using, right?

[00:21:13] Speaker 00:
But even if that is correct and the government is doing that, that's really not a dumping issue.

[00:21:19] Speaker 00:
That doesn't mean you make the adjustment under this provision.

[00:21:21] Speaker 00:
That's really, for lack of a better way of saying it, that's really an export subsidy.

[00:21:26] Speaker 00:
The government is saying, okay, you can get a rebate.

[00:21:29] Speaker 00:
for exporting any merchandise.

[00:21:33] Speaker 00:
And that's really an export subsidy that's going on in the country of export.

[00:21:38] Speaker 00:
It has nothing to do with dumping.

[00:21:39] Speaker 03:
The language could not have been used.

[00:21:43] Speaker 03:
But I read, as I mentioned before, the statute talking about actual past tense, which have not been collected by reason of the actor.

[00:21:57] Speaker 03:
So doesn't that help you more?

[00:22:02] Speaker 00:
That the duties have not been collected?

[00:22:04] Speaker 00:
That's right, have not been collected.

[00:22:06] Speaker 00:
Yeah, but I think counsel's arguing, and that's why, for our argument, yes, the duties have not been collected for the input that's going into the subject merchandise.

[00:22:18] Speaker 00:
So, correct.

[00:22:22] Speaker 00:
Therefore, we think the trial court got it right here.

[00:22:27] Speaker 00:
decision not to grant the duty drawback adjustment was in accordance with law and reasonable in this case.

[00:22:36] Speaker 02:
Can I just ask you a question?

[00:22:37] Speaker 02:
Sure.

[00:22:37] Speaker 02:
Are we agreeing that we've not decided this issue, we've not construed the statutory provision and applied it in past cases?

[00:22:44] Speaker 00:
You have, this Court has interpreted a different issue in Sahatai.

[00:22:51] Speaker 00:
this court, but that was a totally different issue.

[00:22:53] Speaker 00:
So we have language, I understand.

[00:22:56] Speaker 02:
We have language that supports your argument, but that was dicta in that case?

[00:23:02] Speaker 00:
In that case, I think the language we cited too in that case in Sahatai was when this court was describing what the duty drop by provision is meant to do and what it is.

[00:23:11] Speaker 00:
And in that description, this court said when the exporting country imposes

[00:23:19] Speaker 00:
from inputs that are used in the subject merchandise.

[00:23:21] Speaker 00:
That's how this court described it.

[00:23:23] Speaker 00:
So yes, I think it further supports Commerce's decision in this case.

[00:23:27] Speaker 05:
But it doesn't dictate the answer to the question.

[00:23:30] Speaker 00:
That's correct.

[00:23:30] Speaker 00:
The issue was not before the court in Sahatai.

[00:23:34] Speaker 00:
That's correct.

[00:23:35] Speaker 00:
We just said that it further supports our position in this case.

[00:23:38] Speaker 00:
Correct.

[00:23:40] Speaker 00:
So if there's no other questions, thank you, Your Honor.

[00:23:44] Speaker 02:
Hold on.

[00:23:45] Speaker 02:
Your colleague has reserved a few minutes.

[00:23:54] Speaker 01:
Good morning, Your Honors.

[00:23:55] Speaker 01:
Jonathan Cooper on behalf of US Steel Corporation.

[00:23:58] Speaker 01:
May it please the Court.

[00:24:00] Speaker 01:
I think it's important to step back for just one second and understand exactly what it is that UCHEL is asking for here.

[00:24:06] Speaker 01:
It's arguing that this Court should require the Department of Commerce to engage in a skewed price comparison.

[00:24:13] Speaker 01:
Because what's going on here is that in a normal anti-dumping proceeding, Commerce will evaluate whether a foreign good is being sold unfairly in the United States by looking at, on the one hand,

[00:24:24] Speaker 01:
the price in the United States, and on the other hand the price of the good in the foreign country where it's made.

[00:24:30] Speaker 01:
What Uchel is arguing for is to increase the U.S.

[00:24:33] Speaker 01:
price by the amount of the import duty of a material that is not and is not and cannot be used to make the good that's been exported to the United States.

[00:24:44] Speaker 01:
And so that price is not reflected in the price of the good in the foreign market.

[00:24:48] Speaker 01:
So you're going to have a skewed price comparison.

[00:24:51] Speaker 01:
That's essentially flipping

[00:24:52] Speaker 01:
the statutory purpose on its head, because the ordinary reason for a duty drawback is that when the good is produced in the foreign country, using a material for which... Well, why would a country here?

[00:25:03] Speaker 02:
I mean, the predicate of this is that this country provides the rebate.

[00:25:06] Speaker 02:
I mean, if it wasn't providing the rebate, we wouldn't be here.

[00:25:09] Speaker 01:
Right?

[00:25:11] Speaker 01:
Exactly.

[00:25:11] Speaker 01:
The country provides the rebate.

[00:25:13] Speaker 01:
That's right.

[00:25:14] Speaker 01:
But the reason why that matters is, and as my colleague from the Department of Justice

[00:25:19] Speaker 01:
That would effectively be an export subsidy.

[00:25:22] Speaker 01:
The reason why it comes into the anti-dumping context is that if the good is used to make the, excuse me, if the material for which there is the import duty is used to make the foreign good, then that import duty is built into the price of that good in the foreign country.

[00:25:40] Speaker 01:
But if the good is not used and indeed cannot be used to make that foreign good, then that import duty is not in the price of the foreign good.

[00:25:50] Speaker 01:
And so that's why here there would be a skewed price comparison.

[00:25:53] Speaker 01:
Whereas in the ordinary situation where duty drawback arises, that's when the ingredient is used to make the foreign good.

[00:26:01] Speaker 01:
And so the import duty is built in the price of foreign good.

[00:26:04] Speaker 01:
And then when you have the rebate and the product is exported to the United States, that import duty, because it's been rebated, has not been built in the price of the United States.

[00:26:14] Speaker 01:
So then you make the duty drawback adjustment to get a level playing field, a level comparison.

[00:26:20] Speaker 01:
But here, because these ingredients are incapable of being used to make the foreign good, that import duty that the company is paying isn't built in the price.

[00:26:31] Speaker 02:
Is that the test you would apply?

[00:26:33] Speaker 02:
We've got all kinds of tests floating around here.

[00:26:35] Speaker 02:
But if it's not capable of use, I thought your test would be if it's actually not used in the good, and that whether it's capable of being used is not a factor.

[00:26:45] Speaker 02:
But I'm not sure.

[00:26:47] Speaker 02:
What's the test here?

[00:26:48] Speaker 01:
So we have, on our appeal, supported commerce's approach here.

[00:26:52] Speaker 01:
I agree with, I think, what Judge Lloyd was suggesting earlier, which is you could go even stronger.

[00:26:57] Speaker 01:
And as I think you were just discussing now, Chief Judge Pross, you could say, yes, the ingredient has to have been used in the foreign good that's exported to the United States.

[00:27:06] Speaker 01:
But that's not what commerce did here.

[00:27:07] Speaker 01:
And that's not what we've argued on appeal.

[00:27:09] Speaker 01:
We think it's fine that the test commerce is used, which is just capable of being used.

[00:27:13] Speaker 05:
Is the commerce using that test because it's hard to implement the other one?

[00:27:18] Speaker 05:
Do you know why they're using the capable one?

[00:27:20] Speaker 01:
You'd have to ask commerce itself.

[00:27:21] Speaker 01:
But that's my impression, that essentially there's a trade-off, right?

[00:27:23] Speaker 01:
Because if you wanted to make sure that the good had been used, it would require lots of proof by everyone about which particular input was used and which particular good export United States.

[00:27:33] Speaker 01:
And that's a trade-off about getting the most accurate margins versus the amount of proof required to achieve those margins.

[00:27:39] Speaker 01:
So commerce has for now at least drawn the line as suitable for use.

[00:27:43] Speaker 01:
And we're content with that on this appeal.

[00:27:44] Speaker 02:
And is that also because goods are recognizing that goods are fungible?

[00:27:48] Speaker 02:
So if two different products, two different things are capable of using it,

[00:27:54] Speaker 02:
Is some fungibility allowed within that?

[00:27:56] Speaker 01:
So I don't think fungibility should really play a role here at all, because again, the question isn't about fungible goods, but about the prices and the comparison of price in the US and the foreign good.

[00:28:06] Speaker 01:
And if the foreign material is not being used to make the foreign good, the foreign ingredient is not being used to make the foreign good, then it's not really equivalent.

[00:28:14] Speaker 01:
It's essentially a tax loophole in the Turkish system that's being used.

[00:28:16] Speaker 02:
But you just said it doesn't have to be used.

[00:28:17] Speaker 02:
It just has to be capable of use.

[00:28:20] Speaker 01:
That's right, under this test, but under the facts of this case, we know if it's not capable of use, then of course it's not been used.

[00:28:30] Speaker 01:
So in this case, where we have not even that it wasn't used, but that it's incapable of being used, that makes it a really easy test to administer when you have that fact.

[00:28:40] Speaker 01:
And if that's the case,

[00:28:43] Speaker 01:
then you avoid the price skewed, the skewed price comparison that you would get if you were to allow a duty drawback adjustment here.

[00:28:57] Speaker ?:
Thank you.

[00:28:58] Speaker 04:
Thank you.

[00:28:58] Speaker 04:
Your Honor, David Simon again.

[00:28:59] Speaker 04:
I want to try to clear something up.

[00:29:02] Speaker 04:
In a huge number of cases, in every drawback case, the court and the agency have both agreed

[00:29:12] Speaker 04:
that it is not necessary to link imports and exports to have the drawback adjustment.

[00:29:22] Speaker 04:
You do not have to show any actual use.

[00:29:26] Speaker 04:
This is long-standing.

[00:29:28] Speaker 04:
It goes back 40 years.

[00:29:30] Speaker 05:
The Commerce Department... Is that a resumption of use?

[00:29:32] Speaker 05:
Is that what it is?

[00:29:33] Speaker 05:
Because the customs can't implement it instead.

[00:29:36] Speaker 05:
It's this could have been used, so we're going to assume that it was used.

[00:29:39] Speaker 04:
Right, that operate entirely on the substitution drawback concept.

[00:29:45] Speaker 04:
It has always been this way.

[00:29:46] Speaker 04:
You cannot have a drawback system that doesn't work, and commerce acknowledges that.

[00:29:52] Speaker 05:
But you're not saying that this circumstance, the specific factual circumstance here is one that arises all the time.

[00:29:59] Speaker 04:
No, I'm not.

[00:30:00] Speaker 04:
That's right.

[00:30:02] Speaker 05:
OK, just to clarify, you're not saying that, you know,

[00:30:06] Speaker 05:
drawbacks have been based on something that could not be used in the ultimate product.

[00:30:12] Speaker 04:
I'm saying we don't know one way or the other.

[00:30:14] Speaker 04:
That has never been a test.

[00:30:15] Speaker 04:
The test has always been, is the foreign government substitution system okay?

[00:30:25] Speaker 04:
Or is it okay to allow substitutability on an eight-digit HTS basis?

[00:30:32] Speaker 04:
That's always been the issue.

[00:30:34] Speaker 04:
that this time and commerce doesn't say anything different in this case except they make a new test, a threshold test that they have never done before that we have to prove for each export to the United States that we imported raw material capable of being used for that product, capable of.

[00:31:00] Speaker 04:
Not necessarily that we used it.

[00:31:03] Speaker 04:
We didn't have to buy that J55 coil and put it in that pipe.

[00:31:08] Speaker 04:
We just had to buy some J55 coil and export OCTG.

[00:31:15] Speaker 04:
This is the new test that they're applying now.

[00:31:18] Speaker 04:
And it's extremely dangerous because it writes out, it completely writes out of the drawback analysis the entire concept of substitution.

[00:31:29] Speaker 04:
My next case will be, I presume,

[00:31:32] Speaker 04:
something that is, in which we had more than three lines of data in our drawback application and database before commerce, before the Turkish government.

[00:31:44] Speaker 04:
In that case, I'm going to have to show that for

[00:31:47] Speaker 04:
pipes of 18 different specifications, I had 36 different specifications of coil, each of them in enough quantity to make all of those pipes.

[00:31:59] Speaker 04:
Because once you throw out substitution drawback, you're then having to link the actual grade of the input with the actual grade of the products exported.

[00:32:14] Speaker 04:
Even if you don't have to show they were used,

[00:32:17] Speaker 04:
you would have to show that they are capable of being used.

[00:32:22] Speaker 04:
And once you go down that path, you have no more substitution drawback system.

[00:32:28] Speaker 04:
And it's just an unworkable exercise at that point.

[00:32:34] Speaker 04:
Here, this is an easy case, in a way.

[00:32:37] Speaker 04:
I understand the intuitive appeal of this case.

[00:32:40] Speaker 04:
But I urge you not to be

[00:32:43] Speaker 04:
taken in by that because the substitution drawback was real.

[00:32:48] Speaker 04:
UGEL really got a drawback of duties on coils when it exported that pipe.

[00:32:55] Speaker 02:
Thank you very much.