[00:00:24] Speaker 05: Okay, the next argued case is number 172577, Canadian Solar Incorporated Against the United States. [00:00:53] Speaker 05: Now, Mr. Griffin, you and Mr. Sykes, you're dividing the principal argument, or have you designated a shift? [00:01:04] Speaker 05: I see that you are taking 10 minutes. [00:01:06] Speaker 05: Mr. Sykes has 5 minutes. [00:01:08] Speaker 05: Is that for rebuttal, or is that? [00:01:11] Speaker 01: Yes, that is correct, Your Honor. [00:01:12] Speaker 01: I will take 10 minutes, and my colleague, Devin Sykes, will take 5 minutes for rebuttal. [00:01:16] Speaker 05: For rebuttal. [00:01:17] Speaker 05: Okay. [00:01:18] Speaker 01: If that's all right with the Court. [00:01:22] Speaker 05: And you're ready. [00:01:23] Speaker 01: Thank you. [00:01:24] Speaker 01: Thank you, Judge Newman. [00:01:25] Speaker 01: May it please the Court? [00:01:26] Speaker 01: My name is Spencer Griffith here today on behalf of Appellants. [00:01:31] Speaker 01: This case is about the Commerce Department's scope determination in solar panels from China called Solar 2. [00:01:39] Speaker 01: The Commerce Department here issued a scope determination that was arbitrary and not supported by substantial record evidence. [00:01:46] Speaker 01: and which failed to provide a reasoned explanation for why it treated similarly situated situations differently. [00:01:54] Speaker 04: You go back and forth between talking about whether the statute's ambiguous or talking about whether or not this is simply a question of a state farm problem because they changed their process. [00:02:09] Speaker 04: I actually read your state farm argument to say, all right, we agree the statute says that commerce [00:02:16] Speaker 04: defines what the class or kind of merchandise is, and it's just a question of whether they can define it one way and one proceeding and another way and another proceeding without a reasoned explanation. [00:02:29] Speaker 04: Is that correct? [00:02:31] Speaker 01: Bursch, Jr. [00:02:31] Speaker 01: Yes, Your Honor. [00:02:32] Speaker 01: That's essentially correct. [00:02:33] Speaker 01: As we stated in our brief, it's our position that the statutes that the Commerce Department relied on in its remand decision [00:02:43] Speaker 01: The department says that the class or kind is proceeding specific, and therefore, essentially, the department's position is it did not matter that they reversed themselves on the country of origin test in Solar II from what they used in Solar I, because they say each of those determinations is proceeding specific. [00:03:05] Speaker 04: Well, but I'm really trying to determine what legal framework we're in. [00:03:13] Speaker 04: Okay. [00:03:13] Speaker 04: My take is that this statute is not ambiguous. [00:03:17] Speaker 04: It just doesn't address proceeding specific or non-proceeding specific. [00:03:21] Speaker 04: It simply says that commerce determines and sets the class of kind of merchandise based on the, at each investigation. [00:03:32] Speaker 04: Do you agree with that? [00:03:32] Speaker 01: Yes, Your Honor, we do agree. [00:03:34] Speaker 01: As we state in our briefs, we believe the statute is silent. [00:03:37] Speaker 01: on this issue of whether or not the classifying definition is proceeding specific. [00:03:42] Speaker 01: But we then go on, Your Honor, in our brief, and it's our position, that that doesn't really matter. [00:03:48] Speaker 01: The issue is not whether the statute addresses or doesn't address that specific issue. [00:03:53] Speaker 01: The issue is that the agency has an independent obligation. [00:03:57] Speaker 01: It's a basic axiom of administrative law. [00:04:00] Speaker 01: that it has to adequately explain with a reasoned explanation why it treated similarly situated situations differently. [00:04:07] Speaker 04: So they had the right in the first case. [00:04:08] Speaker 04: You're not complaining about the first time when they defined what the classic kind of merchandise was. [00:04:14] Speaker 04: That's correct. [00:04:15] Speaker 04: You're just saying, again, under State Farm, you're saying that it was arbitrary and capricious to change that definition. [00:04:23] Speaker 01: That is correct, Your Honor. [00:04:24] Speaker 01: It's our position. [00:04:25] Speaker 01: We are not challenging in any way. [00:04:26] Speaker 03: So let me put it in my notes to make sure I'm on the same playing field as you and George O'Malley. [00:04:34] Speaker 03: If this was the first case of its kind dealing with the supply chain with multiple countries participating in the ultimate production of some merchandise that eventually gets imported into our country. [00:04:48] Speaker 03: And so this is the first case like that. [00:04:52] Speaker 03: Commerce had never employed the Substantial Transformation Test. [00:04:57] Speaker 03: And so this is the first case, and they decide that China is the country of origin here under these circumstances in Solar 2. [00:05:08] Speaker 03: It would be your point of view that there's nothing wrong with that. [00:05:12] Speaker 03: And that commerce would have a clean lane to be able to say, yes, these particular goods being assembled in China, China's the country of origin. [00:05:22] Speaker 03: Aha, I see subsidies being applied here from the government. [00:05:26] Speaker 03: I see the unfair pricing structure going on here. [00:05:29] Speaker 03: So commerce is now going to apply anti-dumping duty as well as a countervailing duty. [00:05:36] Speaker 03: you'd have no problem under those circumstances. [00:05:38] Speaker 01: Thank you for clarifying the question, Your Honor, but we would have a problem. [00:05:42] Speaker 01: Our position rests on two legs, Your Honor, and in response to Judge O'Malley's question as well. [00:05:48] Speaker 01: Number one, their reversal in this present appeal, Solar 2, from when their position was in Solar 1 is arbitrary, and they haven't explained with a reasoned explanation why they reversed themselves in Solar 2. [00:06:02] Speaker 01: That's the first leg, Your Honor. [00:06:03] Speaker 01: The second leg is that [00:06:05] Speaker 01: independent of the arbitrariness of what they did, reversing themselves, separately and independently, they didn't rest on their decision on substantial record evidence in making their determination here in Solar II. [00:06:18] Speaker 01: So following up on your example, Your Honor, even if there was no Solar I, it's still our position that this Solar II country of origin determination is not supported by substantial record evidence and is an invalid determination. [00:06:31] Speaker 01: We think our position is only strengthened by the fact [00:06:35] Speaker 01: that we have this very unusual circumstance here, where we have the agency 100% contradicting itself on its country of origin test from Solar 1 to what it's doing in Solar 2. [00:06:47] Speaker 01: And so, Your Honor, to be clear, we're resting on those two legs. [00:06:51] Speaker 04: Right. [00:06:52] Speaker 04: But again, putting aside the change, if this was the first time, as Judge Chen said, your argument would not be that they didn't have the authority [00:07:04] Speaker 04: to do what they did in terms of setting it, but they didn't base it on sufficient record evidence. [00:07:12] Speaker 01: That is correct. [00:07:13] Speaker 01: We are not challenging that the agency has the authority under the statute to define country of origin. [00:07:18] Speaker 01: Indeed, country of origin is essential. [00:07:20] Speaker 01: The department has to do two things in a trade case. [00:07:24] Speaker 01: Number one, they have to define the product they're looking at. [00:07:26] Speaker 01: Here it's solar cells and modules, the things you see on the roofs of houses and buildings. [00:07:31] Speaker 01: Secondly, they have to define where is that product from? [00:07:34] Speaker 01: What country did it originate from? [00:07:36] Speaker 01: Many products in today's global supply chain world are produced in different elements or produced in different countries. [00:07:42] Speaker 01: So there's always an essential issue before the agency where, for our purposes, for these trade cases, where is this product from? [00:07:49] Speaker 01: And that's the country of origin test. [00:07:51] Speaker 01: So there's two legs. [00:07:53] Speaker 01: Number one is what is the product, and number two, [00:07:56] Speaker 01: What's the country of origin for the product? [00:07:57] Speaker 04: All right. [00:07:58] Speaker 04: And they have both the obligation and the authority to do both of those things as long as they base it on substantial evidence and they don't act arbitrary and propitiously in the process. [00:08:10] Speaker 01: Yes, that's our position, Your Honor. [00:08:11] Speaker 01: We're not challenging underlying authority of the agency to make a country of origin determination. [00:08:16] Speaker 01: It's the peculiar facts of this case and the reasoning they employed in this current Solar II appeal that we are currently challenging, Your Honor. [00:08:25] Speaker 04: Again, let's put aside the change, because we'll get back to that in a minute, but what was lacking in the record evidence to support the conclusion? [00:08:36] Speaker 04: So if this was the first time ever, why was the record evidence not sufficient? [00:08:42] Speaker 01: Okay, Your Honor. [00:08:43] Speaker 01: So thank you for the question. [00:08:46] Speaker 01: In the challenged appeal, solar two, let's look solely at the record of this current challenge investigation. [00:08:52] Speaker 01: The agency's determination rested on essentially two legs. [00:08:57] Speaker 01: Number one, that the petitioner here was alleging that the harm at issue was alleged Chinese subsidies to the assembly operation in China. [00:09:07] Speaker 01: And number two, that there was also a desire to effectuate petitioner's intent, that the petitioner wanted to pick up harm [00:09:21] Speaker 01: caused by subsidies to assembly in China. [00:09:24] Speaker 01: Okay. [00:09:25] Speaker 01: Putting to one side, in response to your question, the fact that they have never before used this test. [00:09:32] Speaker 01: There is a 30- to 40-year history of the Commerce Department applying this substantial transformation test to determine country of origin. [00:09:40] Speaker 01: There is not a single other case besides this challenged appeal in which they have ever not used the substantial transformation test. [00:09:50] Speaker 01: So all of a sudden, in this case, they invent a new test. [00:09:55] Speaker 03: Is it possible it's a unique fact pattern here? [00:09:58] Speaker 01: Your Honor, we certainly recognize that the agency has discretion to determine country of origin. [00:10:05] Speaker 01: And we also acknowledge in our briefs that the statute is silent on how the agency has to determine country of origin. [00:10:11] Speaker 01: That's up to the agency's discretion. [00:10:13] Speaker 01: And we recognize. [00:10:13] Speaker 03: And so the agency doesn't have to blindly and rigidly adhere to just one particular conception of how to go about [00:10:20] Speaker 01: That is correct, Your Honor. [00:10:22] Speaker 01: We acknowledge in our brief the statute. [00:10:24] Speaker 03: Different circumstances might warrant a different way of thinking about the issue. [00:10:27] Speaker 01: That is correct, Your Honor, if the evidence supports that determination. [00:10:31] Speaker 01: We are not saying the agency, as a matter of law, could not use a new test, but we are saying here that the record doesn't support it. [00:10:39] Speaker 03: I'm sorry. [00:10:40] Speaker 03: I interrupted your answer to Judge O'Malley's question. [00:10:43] Speaker 03: You can go back to that. [00:10:44] Speaker 04: Okay. [00:10:45] Speaker 04: Let's go back to that. [00:10:46] Speaker 04: What's wrong with the evidence that they were lying? [00:10:48] Speaker 01: Okay. [00:10:49] Speaker 01: The... You shifted back into the... Sure, sure. [00:10:52] Speaker 03: If you look at... You got me provoked. [00:10:56] Speaker 01: If you look at the remand determination that the agency issued, you have to focus on footnote 131 in the remand determination. [00:11:04] Speaker 01: The government, in its brief here, cites three separate times the footnote 131 [00:11:09] Speaker 01: And it is the only enunciation of alleged record evidence supporting the agency's decision. [00:11:16] Speaker 01: There's two problems with footnote 131. [00:11:18] Speaker 01: It cites only to two things, the petitioner's allegations in the petition, and secondly, the agency's own decision memo. [00:11:29] Speaker 01: It cites to no other record evidence. [00:11:32] Speaker 01: Allegations in a petition are not [00:11:34] Speaker 01: record, substantial record evidence upon which an agency can base its determination. [00:11:38] Speaker 01: There are allegations which the agency determined were sufficient to justify initiation of the case, but they do not serve as record evidence. [00:11:47] Speaker 01: And secondly, an agency can't cite to its own determination to cite record evidence that's supporting its own determination. [00:11:53] Speaker 03: That's circular. [00:11:54] Speaker 03: So, Footnote 131 talking about all these statements from Chinese companies and the U.S. [00:11:59] Speaker 03: importer about [00:12:00] Speaker 03: reversing their supply chain in order to avoid having to pay duties. [00:12:06] Speaker 03: That's not substantial evidence. [00:12:08] Speaker 01: Those were allegations in the Petition. [00:12:09] Speaker 01: The agency made no, none independent factual investigation or fact-gathering or verification of any of those allegations. [00:12:19] Speaker 01: They are mere allegations in the Petition, and it's our position that mere allegations in a Petition by themselves, which is all the agency has, can constitute substantial record evidence. [00:12:29] Speaker 03: I don't believe that Judge Kelly addressed this issue. [00:12:39] Speaker 01: She said that the agency's rationale was sufficient because the agency explained why it reversed itself from the Solar One determination. [00:12:48] Speaker 01: She focused more on that aspect. [00:12:51] Speaker 01: I don't believe, Your Honor, that she independently addressed the substantial evidence issue that we've raised in our briefs. [00:12:59] Speaker 05: Let's hear from the other side, and we'll save your full time for Mr. Sykes. [00:13:03] Speaker 05: Thank you, Your Honor. [00:13:12] Speaker 00: Good morning, Your Honors. [00:13:12] Speaker 00: May it please the Court? [00:13:18] Speaker 03: Sure. [00:13:21] Speaker 00: Yes and no. [00:13:22] Speaker 00: I think substantial evidence might not be quite the right way to describe it. [00:13:29] Speaker 00: There were declarations in terms of the substantial evidence or the evidence on the record that commerce relied upon to depart from its normal practice. [00:13:38] Speaker 00: There were declarations or statements on the record from Chinese solar manufacturers saying that they had changed their supply chain. [00:13:49] Speaker 00: There were news articles. [00:13:52] Speaker 00: And importantly, the Chinese respondents here have never, ever disputed that this is exactly what they did. [00:13:59] Speaker 04: In fact, the... When you say there were statements on the record, were there statements other than in the petition, other than what you took from the petition? [00:14:07] Speaker 00: There were statements from the petition, yes. [00:14:10] Speaker 00: There were statements from individuals with knowledge that were contained in the petition. [00:14:16] Speaker 04: But you're saying we should just take those as true? [00:14:19] Speaker 00: in the absence of contrary record evidence, and with, again, the fact that the respondents here, as Judge Pogue noted on pages 25 and 26 of his opinion, they agree. [00:14:31] Speaker 00: They've never challenged the fact that the respondents did, in fact, change their supply chains in order to avoid paying the duties that were imposed as a result of Solar One. [00:14:41] Speaker 00: So that's the factual record. [00:14:44] Speaker 00: Those are the facts that are on the record that Commerce used [00:14:49] Speaker 00: In part, to justify its reason for departing from substantial transformation is the way to look at country of origin in this case. [00:14:59] Speaker 04: So in your view, the burden was on the challengers to convince you not to change your 40-year procedures? [00:15:13] Speaker 00: The burden is on the agency to, when it does depart from an established practice, to [00:15:18] Speaker 00: articulate a reasoned explanation for doing so. [00:15:21] Speaker 00: And we think commerce has done that. [00:15:26] Speaker 04: But your explanation can rely solely on allegations made by a petitioner and not on an actual examination of the underlying evidence to support those allegations? [00:15:38] Speaker 00: I think it's not quite right to say that they were relying solely on allegations. [00:15:42] Speaker 00: They were relying upon the factual declarations and news reports that were supplied with the petition. [00:15:49] Speaker 00: And there's no contrary record evidence that the respondents applied to suggest that this wasn't actually the case. [00:15:56] Speaker 00: Everybody agrees that this is actually what was happening. [00:16:00] Speaker 03: So given that, it... Are you basically arguing a forfeiture type of argument? [00:16:07] Speaker 00: I'm not arguing a forfeiture argument. [00:16:09] Speaker 03: I mean, for us to consider that as a live issue at the appellate stand. [00:16:14] Speaker 00: It's somewhat extraordinary that they're making this argument in the reply brief given that before the trial court in their briefing, they never challenged that finding. [00:16:24] Speaker 00: They conceded that this is actually what the Chinese manufacturers were doing. [00:16:29] Speaker 00: So I don't understand. [00:16:31] Speaker 03: So then why isn't it a forfeiture argument? [00:16:34] Speaker 00: So I suppose we could call it a forfeiture argument. [00:16:37] Speaker 00: I would suggest that to the extent that the court was concerned about commerce's rationale not being supported by some factual basis. [00:16:46] Speaker 00: I think that factual basis is found in the record and is not disputed by the respondents. [00:16:51] Speaker 04: So do you agree with your friend on the other side with respect to the legal framework that we're in? [00:16:57] Speaker 04: Because there was a lot of discussion about whether the statute was ambiguous or not. [00:17:02] Speaker 04: I don't see that as the actual argument they were making. [00:17:07] Speaker 00: In order to understand, I think in order to, for us to show the Court why their argument is wrong, we do need to go back to the language of the statute. [00:17:15] Speaker 00: Right. [00:17:16] Speaker 00: And the language of the statute ties class or kind of merchandise specifically to an investigation or an order. [00:17:24] Speaker 00: So the class or kind of merchandise, as Mr. Griffiths correctly says. [00:17:28] Speaker 04: Right. [00:17:29] Speaker 04: They concede that the statute [00:17:32] Speaker 04: gives the authority to commerce to make those determinations and that it doesn't define what it has to be or how you decide country of origin. [00:17:41] Speaker 04: So I just don't understand the whole Chevron discussion. [00:17:45] Speaker 00: Your Honor, I don't think Chevron is necessary except to the... Chevron comes in to the point where Congress has not spoken directly as to how commerce is to define class or kind of merchandise or to do a [00:18:01] Speaker 00: of origin analysis when it's appropriate. [00:18:04] Speaker 00: The respondents concede that what Congress has spoken directly to is the fact that class or kind of merchandise is tied to the investigation or the order at issue. [00:18:16] Speaker 00: It is not some sort of generic term. [00:18:19] Speaker 00: So when we're. [00:18:20] Speaker 04: But even if that's true. [00:18:22] Speaker 04: Yes. [00:18:22] Speaker 04: Isn't it true under State Farm that if you have a 40-year policy of analyzing these questions under one test, [00:18:31] Speaker 04: that to change the test for just one investigation when you haven't changed it for any other investigation is arbitrary? [00:18:42] Speaker 00: It is not arbitrary when the agency explains its reason for departing from its practice. [00:18:49] Speaker 00: And here it did so, and it did so [00:18:52] Speaker 00: also by providing the parties an opportunity to comment on the scope before it reaches those decisions. [00:18:56] Speaker 04: Well, those explanations have to be reasonable. [00:18:58] Speaker 04: It's just not enough to just provide explanations. [00:19:01] Speaker 04: They have to be reasonable explanations or reasoned explanations. [00:19:04] Speaker 00: Right. [00:19:05] Speaker 00: And we believe that the Commerce has done so. [00:19:07] Speaker 00: So if the Court looks at pages 542 and 583 of the appendix, Commerce says, we agree, we concede, substantial transformation is normally how we evaluate [00:19:17] Speaker 00: substantial transformation. [00:19:19] Speaker 00: And that's what we did in Solar 1 when we were looking at solar cells and solar cells that were assembled into panels and laminates. [00:19:26] Speaker 00: But there are new facts and unique circumstances of what happened after that that warrant a departure from that. [00:19:33] Speaker 00: And it is specifically that the unique nature of the solar products industry in terms of this very adaptable supply chain, the concern that [00:19:41] Speaker 00: In fact, petitioners had proposed a slightly different scope language in Solar 2 that would have looked at the country of origin for the ingots or the wafers that become the cells. [00:19:52] Speaker 00: In commerce, that would not be administrable because the respondents don't keep track of their supply chain in that way. [00:19:58] Speaker 00: And three, commerce needed a mechanism to address the harm alleged by the petitioner. [00:20:03] Speaker 00: And that harm was specific to the panel assembly in China. [00:20:08] Speaker 00: It was not specific to [00:20:10] Speaker 04: Well, what about the fact that there was a finding that, in fact, parties relied upon that said, we're not talking about those panels that are manufactured in China or assembled in China? [00:20:24] Speaker 04: I mean, why couldn't importers rely upon commerce's determination and specific reference to that fact in making their ultimate decisions? [00:20:35] Speaker 00: They certainly can, Your Honor. [00:20:37] Speaker 00: And I think that they would argue that that was good business sense on their part to adapt their supply chains so that they didn't have to pay the duties. [00:20:45] Speaker 00: That doesn't preclude commerce from, that doesn't constrain commerce's authority to investigate allegations of unfair trade practices. [00:20:54] Speaker 00: And as here, commerce found, and the ITC found in their respective investigations, that there was positive dumping. [00:21:04] Speaker 00: There was countervailability subsidies. [00:21:07] Speaker 00: And there was harm to the domestic industry that was specific to panels. [00:21:11] Speaker 00: And so where that's the case, commerce has the authority under the statute to impose duties to address those unfair trade practices. [00:21:23] Speaker 00: So it's not that there was anything wrong or illegal with what they did, but that doesn't constrain commerce in any way from addressing harms that are subsequently alleged in light of [00:21:36] Speaker 00: of the facts that came forward after the imposition of Solar One. [00:21:40] Speaker 04: Has Commerce ever before affirmatively said that we believe this classic kind of merchandise determination is proceeding specific and we can change longstanding policy on the basis of a proceeding other than here? [00:21:57] Speaker 00: Commerce has never said proceeding specific. [00:21:59] Speaker 00: I think that language actually comes from the Court of International Trade. [00:22:02] Speaker 00: What commerce is relied upon is the language of section 1677-25 that talks about class or kind of merchandise being tied to the scope of the investigation or the order. [00:22:17] Speaker 04: So has commerce ever, whether it be the transformation test or not, ever gone from one circumstance where you're looking at a type of merchandise and then in another proceeding [00:22:31] Speaker 04: say we're going to apply a different test. [00:22:35] Speaker 00: Has this ever happened? [00:22:37] Speaker 00: These are very unique circumstances. [00:22:38] Speaker 00: I think probably maybe the closest that has been cited is the Drams from Korea case. [00:22:44] Speaker 00: But actually, what Commerce said there was, and that had to do with semiconductors, and so we were looking at whether the wafer or the semiconductor would confer country of origin [00:22:55] Speaker 00: Commerce said, in the absence of other evidence to suggest that there's a reason to depart from our normal test, we're not going to depart from our normal test. [00:23:03] Speaker 00: Here, Commerce found that there were facts on the record, undisputed facts on the record, to suggest that applying its substantial transformation test and using the cell as the country of origin would not be sufficient to address the harms and the injuries that were specifically alleged with respect to the panels. [00:23:23] Speaker 00: The fact remains we have three, we haven't talked about Taiwan, but there are three sets of orders. [00:23:29] Speaker 00: Each of them cover different merchandise. [00:23:32] Speaker 00: There is no overlap. [00:23:33] Speaker 00: There's no one piece of solar panel that comes to America and that is subject to more than one of these sets of orders. [00:23:40] Speaker 04: And in the Taiwan case, you reverted back to the old test. [00:23:43] Speaker 00: In Taiwan, Congress said that there was no reason not to. [00:23:47] Speaker 03: I understand Congress's theory, which is that we're talking about literally different products, different physical products in each given proceeding. [00:23:57] Speaker 03: So therefore, Solar One, although the American consumer, these products would look essentially identical, they're literally different products. [00:24:08] Speaker 03: Solar One, the solar cell is made in China and assembled somewhere else, Taiwan, I presume. [00:24:14] Speaker 03: Solar too, the solar cells are produced in Taiwan and then assembled somewhere in China. [00:24:21] Speaker 03: And so therefore, in your view, these are two different proceedings dealing with two different products sourced in different ways using the inverted supply chain. [00:24:34] Speaker 03: What if, proceeding one, the solar cells were made in Beijing [00:24:43] Speaker 03: and assembled in Taipei, and then proceeding to the solar cells were made in Shanghai and assembled in Taipei, would you say, oh, well, those are different products because the solar cells came from a different part of China. [00:25:02] Speaker 03: And so therefore, we can use a completely different [00:25:05] Speaker 03: analysis for this proceeding, proceeding two, in determining, you know, what is the country of origin. [00:25:13] Speaker 03: Would that be a logical way of thinking about why these are different products? [00:25:22] Speaker 00: Well, what Congress would need to look at is what is directed to do under the anti-dumping and countervailing duty statute, and that's tied to the exporting country. [00:25:30] Speaker 00: So, and candidly, you may have [00:25:35] Speaker 00: reach the extent of my knowledge of Chinese geography, Your Honor. [00:25:42] Speaker 00: So what commerce is looking at is the exporting country. [00:25:46] Speaker 00: And so is there unfair subsidization going on in the exporting country? [00:25:51] Speaker 00: Is the sale of the product in the exporting country [00:25:57] Speaker 00: is a sale in the United States less than that. [00:26:02] Speaker 03: I'm trying to test what your understanding is of why in your view these products are not so similarly situated. [00:26:10] Speaker 03: One rationale is, oh, these are different products. [00:26:15] Speaker 03: this is one product that's another product these are two different proceedings they look identical but they're literally different products so therefore we can do something different and so therefore they're not similarly situated I don't know if that's enough but here you might have more which is [00:26:30] Speaker 03: This particular product, the solar cells came from country one and then were assembled in country two. [00:26:38] Speaker 03: Whereas this one, although it looks the same, it's the opposite. [00:26:42] Speaker 03: The solar cell was made in country two and then assembled in country one. [00:26:46] Speaker 03: And then thirdly, I guess you could say that for this one, the subsidy, the unfair trade subsidy was occurring at the solar cell level. [00:26:58] Speaker 03: Whereas in this one over here, the unfair trade subsidy was happening at the assembly level. [00:27:04] Speaker 03: And so therefore, when you combine all three of those things, that's a sufficient enough basis to say these are not similarly situated. [00:27:12] Speaker 03: They're differently situated. [00:27:14] Speaker 03: And under the circumstances of this case, we can go ahead and consider perhaps a different way of thinking about country of origin. [00:27:21] Speaker 03: I'd like to hear your comment on this. [00:27:25] Speaker 00: Yes. [00:27:25] Speaker 00: You do start with the scope language and look at the physical description of the merchandise. [00:27:38] Speaker 00: Those physical descriptions are all different. [00:27:40] Speaker 00: Solar One talks about solar cells that may or may not be assembled into panels or modules. [00:27:47] Speaker 00: It specifically excludes assembled panels from [00:27:53] Speaker 00: that made from cells from a country other than China. [00:27:57] Speaker 00: In Solar II, we're looking at solar panels and solar modules. [00:28:01] Speaker 00: That's a different product. [00:28:03] Speaker 00: And specifically, we're looking at those panels and modules that are assembled using cells that come from a different customs territory other than China. [00:28:14] Speaker 00: So to the naked eye, the panel might look exactly the same. [00:28:21] Speaker 00: But the way that they are put together [00:28:23] Speaker 00: and the unfair trade practices that they're alleged are specific to the way it's put together. [00:28:30] Speaker 00: Is that helpful? [00:28:32] Speaker 03: Thank you. [00:28:33] Speaker 03: OK. [00:28:34] Speaker 05: So you were sharing some time with Mr. Bradley. [00:28:36] Speaker 00: Yes. [00:28:36] Speaker 05: So you want to do that? [00:28:39] Speaker 05: Thank you, Your Honor. [00:28:39] Speaker 05: Use this time, but we shall restore it. [00:28:43] Speaker 05: OK. [00:28:43] Speaker 05: You have three minutes for any new points that you want to make. [00:28:49] Speaker 06: Thank you very much, Your Honor. [00:28:49] Speaker 06: May it please the court? [00:28:51] Speaker 06: Three points. [00:28:53] Speaker 06: Appellants challenge whether there was record evidence to support a different country of origin finding. [00:28:58] Speaker 06: Here there clearly was, and I know that because we put a lot of it on the record as petitioners, but it's factual information. [00:29:04] Speaker 06: It's not allegations. [00:29:06] Speaker 06: It includes import data showing the surge of imports from China of Chinese modules containing non-Chinese cells. [00:29:14] Speaker 06: It's also factual statements of five companies, including the CEO of Canadian Solar, who said that in an [00:29:23] Speaker 06: a Reuters article from July 2012, while the first case was still going on, all US-bound solar modules would be made with slightly more expensive Taiwanese cells to avoid the tariff. [00:29:34] Speaker 06: To avoid the tariff. [00:29:36] Speaker 06: That's Appendix page 42. [00:29:38] Speaker 06: So our petition provided sufficient factual evidence that there was a shift in trading patterns that occurred as a result of Solar One that necessitated the second case to cover Chinese modules. [00:29:50] Speaker 06: That is factual evidence. [00:29:52] Speaker 06: And it is sufficient even though it was in the petition on a legal and policy grounds. [00:29:58] Speaker 06: So why was it okay to use country of module assembly as country of origin? [00:30:04] Speaker 06: Well, that's where the dumping was coming from. [00:30:06] Speaker 06: That's where the subsidies were benefiting production. [00:30:09] Speaker 06: And that's where the injury was coming from as well. [00:30:12] Speaker 06: Second point, I would say there are important legal and policy reasons why commerce's substantial transformation practice [00:30:19] Speaker 06: should not be required to govern all cases for covering country of origin. [00:30:24] Speaker 06: As Judge Chen pointed out, there was a unique fact pattern here. [00:30:28] Speaker 06: That's what Commerce said, and that's what the Court of International Trade underneath said as well. [00:30:33] Speaker 06: There was a unique fact pattern, a wholesale switch in supply that justified using a different country of origin test in this case. [00:30:42] Speaker 06: And the Court found that the differing rules of origin are tailored to cover the particular solar products [00:30:49] Speaker 06: and reflect the particularly injurious activity discovered by each investigation. [00:30:55] Speaker 06: The third point, the appellants don't challenge the lawfulness of what Commerce did, only the explanation. [00:31:02] Speaker 06: And there was clearly enough explanation here. [00:31:04] Speaker 06: You can see that on page 23 of our brief. [00:31:07] Speaker 06: Commerce more than adequately explained the disparate treatment of similar situations here. [00:31:14] Speaker 06: The products are differently situated that answer your most recent question. [00:31:19] Speaker 06: different products being dumped. [00:31:21] Speaker 06: A Chinese module made with Taiwanese cells is different in terms of dumping effect. [00:31:26] Speaker 06: It's different in terms of subsidies being provided to China as opposed to some other country and different in terms of the injury that it caused to our U.S. [00:31:33] Speaker 06: industry. [00:31:34] Speaker 06: So and the court upheld that analysis as reasonable and said that commerce adequately explained its deviation from prior practices. [00:31:43] Speaker 03: Thank you very much. [00:31:44] Speaker 03: What do you think is the definition that commerce used here, defining the country of origin? [00:31:51] Speaker 03: Substantial transformation is easy to wrap your mind around. [00:31:55] Speaker 03: It's basically where the supply chain is, I guess, the biggest value being injected. [00:32:03] Speaker 03: And then if it's the solar cells, then that's the country where [00:32:09] Speaker 03: you define as the country of origin and anything after that, the mere assembly is not a substantial transformation. [00:32:16] Speaker 03: Here, it seems like, without knowing more, wherever there is some kind of unfair trade practice being injected into the supply chain, that will be the country of origin. [00:32:29] Speaker 03: Is that the right way to understand how commerce is behaving there? [00:32:36] Speaker 06: Well, I think, first of all, Your Honor, I think commerce did acknowledge that module manufacturing is an important step in the process as well. [00:32:43] Speaker 06: As you will recall from... No, but in actuality, probably a majority of the manufacturing occurred in China because the wafer that made the cell was made in China. [00:32:56] Speaker 03: And then you had the module that the cells were made out of also made in China. [00:33:05] Speaker 06: No, they don't. [00:33:06] Speaker 06: But I think they did acknowledge the importance. [00:33:08] Speaker 03: So that can't be part of what they relied on to decide why China, in this instance, is the country of origin. [00:33:13] Speaker 06: Well, I think they relied on, first of all, that module manufacturing was important. [00:33:18] Speaker 06: But then I think they really went to the fundamental purpose of the trade laws and how it would be frustrated by an approach that locked commerce into substantial transformation. [00:33:27] Speaker 06: You have to be able to move away from that if the injury is being caused [00:33:32] Speaker 06: in those other steps, even if there is not what Commerce or our customers would deem a substantial transformation. [00:33:37] Speaker 06: So I think that's what Commerce was attempting to do, was justify. [00:33:44] Speaker 06: We filed a petition. [00:33:45] Speaker 06: The petition alleged injury. [00:33:47] Speaker 06: It alleged dumping and subsidies not tied to cells, but to the product as a whole. [00:33:54] Speaker 06: And therefore, it's allowed to address that behavior. [00:33:56] Speaker 04: But don't importers have some right to rely on the tests that Commerce has employed for years and years and years? [00:34:03] Speaker 06: All parties acknowledge that it's a practice, but they can deviate from it with a reasoned explanation. [00:34:09] Speaker 06: So you're only allowed to rely to that extent. [00:34:13] Speaker 06: We had to go to the extent of filing a second trade petition to address this additional harm. [00:34:19] Speaker 06: All the parties were clearly on notice that we were trying to address [00:34:24] Speaker 06: the unfair trade, no matter what form it occurred in. [00:34:26] Speaker 03: I guess the question here is whether we have a new circumstance that requires a new way of thinking. [00:34:35] Speaker 03: If there were 400 other examples of manufacturers, foreign manufacturers, inverting their supply chain to avoid a duty order, and commerce did nothing about it, then maybe there'd be an expectation for these importers to [00:34:53] Speaker 03: expect the same treatment for them, but that's not the fact pattern that we have. [00:34:59] Speaker 06: Well, the fact pattern we have is that even while the first case was going on, dozens of producers were changing their supply chain to try and find a way to not have to pay the duties. [00:35:10] Speaker 06: And this is becoming, from a policy perspective, it's becoming more common that the supply chains are global. [00:35:17] Speaker 06: So I think commerce has to have some flexibility. [00:35:21] Speaker 06: It can't be tied to the same approach. [00:35:24] Speaker 06: and I think Commerce did articulate the reason why it deviated and the logical way that it found that these products are properly subject to trade remedies. [00:35:35] Speaker 04: So it's okay to have no consistent test? [00:35:38] Speaker 06: It's important to have a test that you use in most situations, which was used for Taiwan in this case, but to deviate from it with a reasoned explanation. [00:35:47] Speaker 06: And what the Court and Commerce acknowledged was a unique fact pattern. [00:35:51] Speaker 06: It was unique. [00:35:52] Speaker 06: And it undermined the relief that my clients were entitled to. [00:35:55] Speaker 06: Thank you very much. [00:36:00] Speaker 05: Thank you, Mr. Brightbill. [00:36:03] Speaker 05: Mr. Sacks, it seems to me that Mr. Brightbill has raised the issues of what this case is really all about. [00:36:12] Speaker 05: Would you comment on the issues that he's raised concerning evasion and so on? [00:36:18] Speaker 02: Oh, absolutely, Your Honor. [00:36:19] Speaker 02: And may it please the Court, good evening. [00:36:21] Speaker 02: My name is Devin Sykes, so they can come here on behalf of Appellants. [00:36:24] Speaker 02: With respect to evasion and circumvention concerns that Mr. Bright Bill has just identified, and Commerce identified this as well throughout its remand determination, you know, the petition contains allegations on shifts in trade flows, but it's just that. [00:36:38] Speaker 02: It's allegations. [00:36:39] Speaker 02: Commerce at no point independently confirmed the veracity of those allegations. [00:36:43] Speaker 02: And let's just set aside for a moment. [00:36:44] Speaker 02: Let's accept that those are true. [00:36:46] Speaker 02: Commerce never demonstrates how allegations or [00:36:48] Speaker 02: proof of shift in trade flows demonstrates that module assembly confers origin. [00:36:52] Speaker 02: Never happens in the record, ever. [00:36:55] Speaker 04: So your CEO not following the rule that says don't ever talk to the press, that wasn't meaningful? [00:37:03] Speaker 02: No, that's relevant for purposes of circumvention. [00:37:05] Speaker 02: And commerce has other tools that it can use to address circumvention with respect to products purportedly circumventing the Solar One order. [00:37:12] Speaker 02: Absolutely. [00:37:14] Speaker 02: But not for purposes of demonstrating country of origin that modular assemblies confer country of origin in this case. [00:37:22] Speaker 04: So is it your view that it's simply good business practice to get around the duty as long as you're not violating an existing order? [00:37:33] Speaker 02: That's true. [00:37:34] Speaker 02: And I also think, though, Your Honor, it's important to keep in mind that the Solar I orders can, in fact, account for these subsidies. [00:37:41] Speaker 02: As you know, Solar One concerns solar cells produced in China that are later assembled into panels and modules in China. [00:37:49] Speaker 02: So to the extent that, and as you know, Commerce conducts administrative reviews of CVD orders, and to the extent there's a Chinese manufacturer who benefits from those assembly subsidies, Commerce can go after those subsidies and determine whether that manufacturer benefited. [00:38:03] Speaker 02: Now, to be fair, that scenario would not cover a situation in which solar cells produced in a third country are imported into China [00:38:11] Speaker 02: and then assembled into modules and panels. [00:38:13] Speaker 02: But commerce itself has acknowledged, in past cases like DRAMs from Korea, pistachios from Iran, but while pipettings from India, Judge Pogue discusses these cases on pages 518 and 19 of the Joint Appendix, that because of the particular way in which a product is manufactured, some subsidies might be beyond the reach of the CBD law. [00:38:35] Speaker 02: I want to touch on some of the other issues that the judges have raised so far today. [00:38:42] Speaker 02: Again, footnote 131, that is on page 585 of the Joint Appendix. [00:38:46] Speaker 02: This is the principal discussion where commerce grapples with the record evidence on country of origin. [00:38:51] Speaker 02: I think it's beyond dispute that a decision memoranda and plural decision memoranda are not record evidence. [00:38:57] Speaker 02: For the reasons I just explained, allegations on shift in trade flows, even if accepted as true, don't demonstrate that module assembly confers origin. [00:39:04] Speaker 04: What about the fact that there was no dispute about those allegations? [00:39:08] Speaker 02: That's actually not true, Your Honor. [00:39:10] Speaker 02: If you turn to page, see this is [00:39:12] Speaker 02: JA 469, 470, and 471. [00:39:16] Speaker 02: Below on the comments in the opening brief, appellants did raise and test whether substantial evidence supported the country of origin finding. [00:39:27] Speaker 04: I'm sorry, four? [00:39:29] Speaker 02: Sure. [00:39:31] Speaker 02: Take, for example, page 470, the middle paragraph. [00:39:35] Speaker 04: One second. [00:39:36] Speaker 02: Yep. [00:39:39] Speaker ?: OK. [00:39:40] Speaker 02: Let's see, this would be the third sentence in that paragraph, beginning with all. [00:39:46] Speaker 02: All that commerce has relied upon to justify a Solar Two scope is speculation, statements by Solar World, and statements of policy. [00:39:53] Speaker 02: No part of the so-called analysis makes reference to record developed during the investigations or to any characteristics of the product which is presumably being analyzed for determination of its country of origin. [00:40:03] Speaker 02: If you flip over to page 170, the last sentence of the first full paragraph there, [00:40:08] Speaker 02: Other than referring to the petitions, Commerce cites to no fact-finding that would explain the relevance of this broad statement to the country of origin determination. [00:40:15] Speaker 02: We made that argument below. [00:40:17] Speaker 04: So were there actual declarations in support of the petition? [00:40:21] Speaker 02: In support of the petition, absolutely. [00:40:22] Speaker 02: And that evidence is relevant for purposes of initiating an investigation, which Commerce did. [00:40:27] Speaker 04: But you're saying that it's not relevant for purposes of defining the scope of the investigation? [00:40:32] Speaker 02: For the purpose of the country of origin, whether module assembly itself confers origin. [00:40:36] Speaker 04: So what more would they have had to do is to put those same declarations back into the record? [00:40:43] Speaker 02: No, Congress would have to then take the additional step of confirming whether other evidence submitted during the record confirms, in fact, that module assembly confers origin. [00:40:50] Speaker 02: But again, I think just taking a step back, shifts and trade flows, which is what those declarations state, it's not relevant to whether a product originates from country A or country B. Because? [00:41:04] Speaker 02: Because it's irrelevant. [00:41:06] Speaker 02: The shifts in trade flow don't show that module assembly involves so much, you know, that I want to use words from a substantial transformation test because as we've explained, commerce is free to devise a test because it's not compelled by statute to use a particular test, but it's not relevant because it doesn't definitively show that module assembly confers origin. [00:41:28] Speaker 03: I'm trying to understand this whole country origin inquiry. [00:41:31] Speaker 03: It feels like there's an [00:41:35] Speaker 03: You seem to be arguing it as an end, whereas I think the other side is thinking about it more of a means. [00:41:43] Speaker 03: And I'm trying to understand why, I mean, maybe country of origin is more of a tool to try to understand whether or not there's an unfair trade practice. [00:41:54] Speaker 03: Sure. [00:41:54] Speaker 03: Relating to the subject of merchandise that actually comes onto the US shores. [00:41:59] Speaker 02: Sure. [00:42:00] Speaker 02: So just taking a step back, the starting point for all of this is the fact that commerce [00:42:04] Speaker 02: since 3.5 inch micro disks in 1985 has said that the scope involves two parts, class or kind of merchandise and country of origin. [00:42:12] Speaker 02: So this is a requisite component of commerce's analysis. [00:42:16] Speaker 02: So here, we're presuming that commerce is going to follow what it's done before and identify where the particular product comes from. [00:42:23] Speaker 02: And in other cases like Belgian steel plate, commerce has recognized that it can only investigate products that come from the subject country, the subject country being the one named in the petition here, China. [00:42:35] Speaker 03: But I thought in the opening argument, we had already all agreed that if this was the very first case with a supply chain going across multiple countries, that if commerce had done what it did here in Solar II, that would have been fine and acceptable under the law. [00:42:53] Speaker 02: Yeah, I think actually my colleague Spencer said that we would still debate that finding, because it was still... The finding itself, but... In terms of the authority. [00:43:02] Speaker 03: ...understanding how to understand which [00:43:05] Speaker 03: should we regard as the country of origin? [00:43:07] Speaker 02: For what test to use? [00:43:09] Speaker 02: That's absolutely correct. [00:43:10] Speaker 02: Congress has the authority to use either the substantial transformation test or a different test, as long as it explains its reasons for using a new test. [00:43:17] Speaker 02: And, of course, to do that, as you know, it has to base that new test on policy and adequate explanation, which involves some factual support for that new policy. [00:43:27] Speaker 04: So is it your position that the test was not properly defined, or that there was no evidence to support what they defined to be the test? [00:43:35] Speaker 02: We argue both. [00:43:36] Speaker 02: In our opening brief, we talk about how commerce had conducted some sort of additional analysis, but it never lays out what that additional analysis was. [00:43:42] Speaker 02: And we also argue that substantial evidence doesn't support the ultimate country of origin finding that commerce made here. [00:43:47] Speaker 02: That is, that the modules originate from China. [00:43:52] Speaker 03: Your grade brief brings up the idea that, oh, there's not enough record evidence to support the finding of what's going on with all these reverse trade flows or supply chain flows. [00:44:07] Speaker 03: But I didn't see that in the clue brief. [00:44:08] Speaker 03: Where was that in the clue brief? [00:44:10] Speaker 02: We did address the substantial evidence arguments. [00:44:14] Speaker 02: If you're asking whether the shifts in trade flows in particular, whether that was supported by substantial evidence. [00:44:19] Speaker 02: Yeah, yeah. [00:44:21] Speaker 02: I have to be honest with you. [00:44:22] Speaker 02: I don't know if we made that specific argument in our opening brief. [00:44:25] Speaker 02: I think we're responding to the arguments that the government and solo world made in its response brief. [00:44:30] Speaker 02: So that's why we probably included them in more detail in our reply. [00:44:36] Speaker 02: OK, thanks. [00:44:37] Speaker 02: Are there any further questions? [00:44:40] Speaker 05: No more questions. [00:44:40] Speaker 05: No more questions? [00:44:41] Speaker 02: OK. [00:44:41] Speaker 05: Thank you, Your Honor. [00:44:42] Speaker 05: Thank you all. [00:44:43] Speaker 05: The case has taken any submission. [00:44:46] Speaker 05: And that concludes this Court's report on the cases for this morning. [00:44:50] Speaker 01: All rise. [00:44:52] Speaker 01: The honorable court is adjourned until tomorrow morning. [00:44:55] Speaker 01: It's an o'clock a.m.