[00:00:03] Speaker 00:
We have four cases on the calendar this morning.

[00:00:07] Speaker 00:
Trade case from the CIT, patent case from the District Court, Veterans' Appeal, and employee case from the Court of Federal Claims.

[00:00:20] Speaker 00:
One of the usual days when we have four different types of cases and only one patent case.

[00:00:29] Speaker 00:
The first case is the trade case, and after we hear argument on the trade case, we will briefly adjourn and come back quite soon with the panel modified by one-third.

[00:00:46] Speaker 00:
And our first case is Papier-Fabrique August-Kerler, maybe, versus the United States in Aptheon, 2016-24.

[00:00:59] Speaker 00:
Mr. Wood.

[00:01:04] Speaker 05:
Thank you, Your Honor.

[00:01:05] Speaker 05:
May it please the Court.

[00:01:05] Speaker 05:
I'm John Wood on behalf of Kohler.

[00:01:09] Speaker 05:
In Administrative Review 3, a case that this Court decided in 2016, Commerce imposed total adverse facts available, a 75.36% AFA rate, and $100 million in duties on Kohler.

[00:01:24] Speaker 05:
As I'll explain, this case that's before you now is fundamentally different in at least two ways.

[00:01:29] Speaker 05:
Nonetheless, despite those significant differences, Kohler treated the two, I mean, Commerce treated the two cases the same and imposed the same AFA rate, total AFA, and another $80 million in duties on Kohler.

[00:01:43] Speaker 05:
Now, there are two fundamental critical ways in which this case differs from the AR3 case.

[00:01:49] Speaker 05:
The first way in which they differ is that in the case at hand, there were only five omitted home market sales out of a total of 1,100 in the home market database.

[00:01:57] Speaker 05:
Now, as your honors may know, in calculating margins, commerce compares individual US sales to a monthly average of home market sales.

[00:02:07] Speaker 05:
And so because the earliest such sale occurred in September 28, 2010, the first 10 months of the home market database were in no way affected by the omission of home market sales.

[00:02:18] Speaker 04:
Let me ask you one thing.

[00:02:19] Speaker 04:
If it's OK, please, if I could jump to the second issue relating to the 144

[00:02:28] Speaker 04:
a percent specific margin rate.

[00:02:31] Speaker 04:
And I gather at pages 8611 and 8623 of the joint appendix we have there, you're offering on the remand to establish that there was a calculation error with respect to that, correct?

[00:02:49] Speaker 04:
Correct.

[00:02:50] Speaker 04:
And I guess you have the figures purportedly showing this calculation error, and I think

[00:02:58] Speaker 04:
8643 and 8644.

[00:03:01] Speaker 04:
This is the, I guess what was the attachment three to your remand submission.

[00:03:08] Speaker 04:
If you could just, I apologize, I confess.

[00:03:11] Speaker 04:
How do you show, how does 8643, 44 exactly show that there was this improper duplication of the discounts?

[00:03:25] Speaker 05:
Yes.

[00:03:26] Speaker 04:
It was the 1,088.35 was supposedly computed twice, three times instead just once, right?

[00:03:35] Speaker 05:
So, Your Honor, there was a total of 3,000 that should have been spread across the three different line items.

[00:03:43] Speaker 05:
And what Kohler did is applied the entire amount to the first line item.

[00:03:49] Speaker 05:
And because of that, and this is on the US sales, because the entire discount was applied to one single roll, basically, of paper, it had a ridiculously low price and therefore a huge margin compared to all the other margins.

[00:04:06] Speaker 04:
You mean it should have been just $1,088.35 for each of three?

[00:04:11] Speaker 05:
Correct.

[00:04:11] Speaker 05:
Instead, the full $3,000 was applied to the first one.

[00:04:14] Speaker 04:
OK.

[00:04:17] Speaker 04:
But to the other two, was 1,088 also applied?

[00:04:21] Speaker 05:
I believe it was not.

[00:04:22] Speaker 05:
And so those other two ended up really having no impact at all.

[00:04:27] Speaker 04:
So what you're saying is the problem was it all just got bunched into one?

[00:04:29] Speaker 05:
I believe it all got bunched into one, which created a ridiculous margin that's grossly disproportionate from all the other margins.

[00:04:36] Speaker 01:
But that all is information that you provided later that Congress decided not to consider, correct?

[00:04:43] Speaker 05:
That's correct.

[00:04:44] Speaker 05:
And the reason is because the 144.63% transaction the first time around wasn't used in any significant way.

[00:04:51] Speaker 05:
It was only after, on remand, that it was being used for purpose of corroboration that it took on a significance.

[00:04:57] Speaker 01:
And I do want to... But it was used in the first Kohler case, correct?

[00:05:02] Speaker 05:
in the first time in this, in AR2, are you referring to?

[00:05:08] Speaker 05:
It was used in AR3.

[00:05:09] Speaker 05:
But here's a very important difference.

[00:05:10] Speaker 05:
In AR3, Kohler did not submit any evidence to Commerce showing that that transaction was the result of a mathematical error.

[00:05:18] Speaker 05:
So what happened here is on remand, unlike in AR3, Commerce reopened the record.

[00:05:23] Speaker 05:
And it specifically asked the parties to submit information about the AFA rate and corroboration of that rate.

[00:05:30] Speaker 05:
In response to that request and the reopening of the record,

[00:05:33] Speaker 05:
Kohler submitted this information that we were just discussing.

[00:05:35] Speaker 05:
And so we believe that it was an abuse of commerce's discretion to refuse to consider evidence showing that it was a mathematical error.

[00:05:43] Speaker 05:
And I want to emphasize that when this was submitted, this information about the mathematical error was not being submitted in order to correct the omission of the home market sales.

[00:05:52] Speaker 05:
This had nothing to do with that omission of home market sales or the third country sales in the first place.

[00:05:56] Speaker 05:
This is simply a mathematical error.

[00:05:58] Speaker 05:
that Kohler was trying to bring to Commerce's attention when Commerce reopened the record and specifically invited comments on this topic.

[00:06:05] Speaker 04:
Stuart, I'm not sure it's in the... I'm not sure it's in... Were you finished answering?

[00:06:08] Speaker 04:
Yes, I was.

[00:06:10] Speaker 04:
I'm not sure it's in the record before us, but when was this calculation error discovered?

[00:06:18] Speaker 04:
I don't know if the record reflects that.

[00:06:19] Speaker 04:
I know you sought to bring it to Commerce's attention on the remand, but when did

[00:06:27] Speaker 04:
Kohler folks learn about it.

[00:06:29] Speaker 05:
Yeah, you're correct that it was not, that it's not in the records.

[00:06:32] Speaker 05:
So I don't know a date on which they learned about that.

[00:06:37] Speaker 01:
You keep referring to five sales, only five sales being affected, but I'm not sure there's really evidence of that in the record.

[00:06:45] Speaker 01:
I mean, there's clearly a trans-shipment scheme that Commerce was concerned about, and you say that only five sales were affected, but Commerce's position was they can't tell that.

[00:06:55] Speaker 05:
Yeah, it absolutely is on the record, and I do want to emphasize this point.

[00:06:59] Speaker 05:
Diapoli stated in their briefs that there's no evidence on the record regarding the extent of the omissions.

[00:07:03] Speaker 05:
But in fact, there are.

[00:07:05] Speaker 05:
I point you to the appendix page 8088, which shows the specific documents from the AR3 record that were placed on the record in AR2.

[00:07:15] Speaker 05:
That includes two documents that make this point.

[00:07:19] Speaker 05:
The first is Kohler's first supplemental questionnaire response from AR3, which stated on page 2, and this can be found at page 8111, that the earliest such shipment took place on September 28, 2010.

[00:07:31] Speaker 05:
The second one can be found at appendix page 8130, and that's the July 19, 2012 letter to Commerce on page 2, footnote 1, states that there were five line items omitted from the home market database.

[00:07:43] Speaker 05:
Now, importantly, Commerce and its determination on remand

[00:07:46] Speaker 05:
not only cited and relied on these two documents, but in fact relied on the very passages that I was just referring to.

[00:07:53] Speaker 05:
And the only basis that Commerce had for concluding that Kohler omitted home market sales during Period of Review 2 and all was the admission by Kohler that that occurred.

[00:08:05] Speaker 05:
And as part of that admission, Kohler stated that the first such sale was on October 28, 2010.

[00:08:13] Speaker 05:
It is, I'm sorry, September 28, 2010.

[00:08:15] Speaker 05:
And so it's that very statement, saying that the first such omitted home market sale occurred on September 28, that Commerce relies upon in concluding that there were omitted home market sales during Period Review 2.

[00:08:29] Speaker 05:
But Commerce cherry-picks that and only relies on and finds that there were omitted home market sales during Period Review 2, but ignores the fact that the first such sale was on September 28.

[00:08:40] Speaker 05:
And importantly,

[00:08:42] Speaker 05:
The allegation in AR3 by Appian was merely that there were omitted home market sales in period of review three.

[00:08:49] Speaker 05:
So the only reason that commerce knew about the fact that there were omitted home market sales in period of review two, which is the case before you, is because Kohler disclosed that as a result of its independent internal investigation, it found that five such sales occurred at the tail end of period of review two.

[00:09:06] Speaker 01:
But there's no documentary information.

[00:09:10] Speaker 01:
These are just self-serving statements from

[00:09:12] Speaker 01:
Council, right?

[00:09:13] Speaker 05:
No, not at all, Your Honor.

[00:09:14] Speaker 05:
These are just like any other information that Commerce relies on, just like it's any of the questionnaire responses or databases.

[00:09:21] Speaker 05:
They were submitted by Council, but they were certified by an officer of the corporation, in this case a Chief Financial Officer.

[00:09:27] Speaker 01:
But wasn't Commerce's position that in the absence of documentation, it was difficult to trust anything Kohler was submitting, given the trans-shipment scheme?

[00:09:36] Speaker 05:
Well, it wouldn't allow Kohler to submit any documentation.

[00:09:39] Speaker 05:
Yes, it did say in the absence of documentation, but it says in the absence of documentation after they refused to allow Kohler to submit any documentation to that effect.

[00:09:47] Speaker 01:
Well, the documentation that you tried to submit after the fact didn't include this documentation, did it?

[00:09:53] Speaker 05:
It did.

[00:09:55] Speaker 05:
Kohler attempted to submit information showing that there were those five sales and the exact statistics for things like price and quantity for those sales.

[00:10:05] Speaker 05:
Commerce refused to allow them to submit that.

[00:10:10] Speaker 05:
And so having refused to allow them to submit that, then they point to the fact that there's no record evidence.

[00:10:15] Speaker 05:
But in fact, the only record evidence establishing at all that there were any sales during period review two was those two statements that I pointed you to.

[00:10:23] Speaker 01:
So your position is that once Commerce determined that it really couldn't trust anything that they were being told because there was material omitted and that they were going to apply AFA, that on remand you could then choose to submit information to say they shouldn't have done that?

[00:10:41] Speaker 05:
You know, this is the problem.

[00:10:42] Speaker 01:
You didn't supply the stuff up front when Commerce said there's material omissions and we can't trust this data, right?

[00:10:52] Speaker 05:
No.

[00:10:52] Speaker 05:
There were five omitted sales from the home market database the first time around.

[00:10:57] Speaker 05:
Kohler agreed to a remand because Kohler brought to Commerce's attention the fact that there were omitted sales in period review two.

[00:11:04] Speaker 05:
Now, there was an allegation in period review three that there were omitted home market sales there, and that was because Appian brought that

[00:11:11] Speaker 05:
to Kohler's management attention.

[00:11:13] Speaker 05:
But Kohler's management had an independent investigation done and found there were five omitted home market sales from period review two.

[00:11:19] Speaker 05:
And the only basis for commerce to conclude that there were omitted home market sales from period review two on remand was that admission by Kohler that the first such sale occurred on September 28th.

[00:11:31] Speaker 05:
So what commerce did is they just cherry-picked that and instead of saying the first sale occurred on September 28th, they just say,

[00:11:38] Speaker 05:
that there were sales during period review two, but we're not going to believe anything that they say, and we're going to throw out all of their data.

[00:11:45] Speaker 05:
And that makes no sense, because they're basically saying, you know, Kohler's lying, so we can't trust anything they're saying, so we're just going to throw out everything, and we're not going to give any weight to their statement that the first sale occurred on September 28.

[00:11:56] Speaker 05:
But if you think about it, there would be no reason for

[00:12:00] Speaker 05:
Kohler, if it were going to try to lie about this and deceive commerce, there was no reason for Kohler to disclose in the first place that there were sales during period review two that were omitted because there was not even an allegation to that effect.

[00:12:12] Speaker 05:
So it makes no sense for commerce to simply cherry pick certain parts of the admission and ignore the other parts.

[00:12:17] Speaker 05:
And the fact is, there's no evidence on the record that in any way calls into question the first 10 months of the home market database, which were separately each one of those months is a separate calculation

[00:12:28] Speaker 05:
There's nothing about an omission of home market sales beginning on September 28th that in any way affects the first 10 months of the home market database.

[00:12:37] Speaker 05:
And so this is why this case is entirely different from Administrative Review 3.

[00:12:41] Speaker 01:
What legal authority do you have for the proposition that commerce must assess the materiality of the omitted data before it can apply AFA?

[00:12:50] Speaker 05:
Well, it's not really a materiality question, Your Honor.

[00:12:53] Speaker 05:
It's more a question of what data is usable

[00:12:57] Speaker 05:
The first 10 months of the home market database, which were timely submitted, and there were no errors in that, that was timely submitted, verifiable.

[00:13:07] Speaker 05:
There's no reason why Commerce can't rely on that.

[00:13:10] Speaker 05:
So there's a series of cases saying that Commerce can only use AFA to fill gaps in the record.

[00:13:15] Speaker 05:
So Shajin Dunan from this court would be an example of that.

[00:13:18] Speaker 05:
That case also favorably cited the CIT's decision in Gerber Foods.

[00:13:23] Speaker 05:
That was a case where there was

[00:13:26] Speaker 05:
misleading, intentionally misleading false information regarding whether a certain company was an importer of record.

[00:13:33] Speaker 05:
And so there were even falsified documents submitted.

[00:13:37] Speaker 05:
And what commerce had to do there was apply AFA only to those sales that went through or allegedly went through that importer.

[00:13:45] Speaker 05:
The rest of the sales that were unaffected by the

[00:13:48] Speaker 05:
false statements still had to be relied upon by commerce.

[00:13:51] Speaker 05:
And so we're saying the same thing is true here.

[00:13:53] Speaker 00:
Mr. Woodward, you want to save some time?

[00:13:55] Speaker 05:
I would love to, Your Honor.

[00:13:56] Speaker 05:
Thank you very much.

[00:13:59] Speaker 00:
Mr. Curland for the government.

[00:14:02] Speaker 00:
And you're going to yield two minutes to Mr. Woodward.

[00:14:05] Speaker 03:
Yes.

[00:14:11] Speaker 03:
Good morning, Your Honors.

[00:14:12] Speaker 03:
May it please the Court.

[00:14:13] Speaker 03:
The issues in this case are extremely similar

[00:14:17] Speaker 03:
to the issues that this court has already ruled upon in the third review case, in particular addressing the total AFA issue, the issue that plaintiff's counsel was talking about towards the end of his argument.

[00:14:31] Speaker 03:
One thing that each of the three courts that has already reviewed these issues and ruled on them, the two trial court decisions and this court's decision in the third review case, all of them have come to the conclusion that the significance of Kohler's fraud

[00:14:46] Speaker 03:
which was an elaborate, extensive fraud that spanned two different review periods, went beyond the numerical value of the sales at Kohler Concealed.

[00:14:56] Speaker 01:
But I think the argument on the other side is that essentially, even if there was a fraud that was extensive in the third review period, that you're punishing them in AR2 for what you found in AR3.

[00:15:12] Speaker 03:
Well, that's not correct.

[00:15:15] Speaker 03:
I mean, the level, for example, of the false statements by Kohler in this review is even more extensive because, for example, Kohler falsely certified.

[00:15:26] Speaker 03:
That's important because we've talked about certification.

[00:15:29] Speaker 03:
Kohler falsely certified in this review, by my count, at least six different questionnaire responses and supplemental questionnaire responses.

[00:15:39] Speaker 03:
One that is particularly of note

[00:15:40] Speaker 03:
It is a series of documents from pages 7202 of the record to 7213 to 14 of the record.

[00:15:49] Speaker 03:
That is where in the underlying review, Appfion actually suggested that there was fraud going on where Kohler was not reporting all of its sales in Germany during this review period.

[00:16:00] Speaker 03:
And Kohler, you know, in addition to falsely, on repeated occasions, falsely certifying that it had reported all its sales, in this case said, no, there's not a fraud going on.

[00:16:10] Speaker 03:
and certified that.

[00:16:12] Speaker 03:
That's at 1713-14 of the record.

[00:16:15] Speaker 03:
So this is pretty significant.

[00:16:18] Speaker 03:
This case was already in litigation when Commerce discovered the fraud in the Third Review and had to effectively take the case back in order to cleanse the proceeding from fraud.

[00:16:29] Speaker 03:
So each of the courts, and this Court, for example, it pages 1379 to 80 of its decision in the Third Review case.

[00:16:40] Speaker 03:
determined that when you have a situation of fraud like this one, commerce may reasonably determine that it's not a matter of the numerical value of the fraud, but that a respondent's credibility may be impeached, and the fraud may be considered to pervade the responses beyond what commerce is able to specifically confirm has been falsified.

[00:17:06] Speaker 04:
And this Court... Let me ask you one thing.

[00:17:08] Speaker 04:
When he was arguing, Mr. Wood said in response to a question from me that the record does not reflect when this calculation error relating to the 144% specific transaction, specific margin was discovered.

[00:17:27] Speaker 04:
Do you agree that there's nothing in the record reflecting that when Kohler learned about that?

[00:17:32] Speaker 03:
No, I agree that Kohler

[00:17:35] Speaker 03:
has never said when it learned.

[00:17:37] Speaker 03:
And one important aspect of that is that this was long after the review closed.

[00:17:43] Speaker 03:
And to go back to another question that one of your colleagues asked, Your Honor, this 144% rate was absolutely used in the underlying proceeding.

[00:17:54] Speaker 03:
It was one of the sales that Commerce used in creating its calculations for the underlying proceeding.

[00:18:00] Speaker 04:
Let me ask you, if I could, one other question.

[00:18:04] Speaker 04:
This 144% rate issue comes up in connection with the question of corroboration.

[00:18:11] Speaker 04:
That's correct.

[00:18:12] Speaker 04:
75.36 petition rate that was applied as the total AFA rate, correct?

[00:18:18] Speaker 03:
Right, which as this court noted in the third review case is quite a bit lower than it's about half the 144% rate that was used for corroboration and much closer to the other high margin transactions.

[00:18:30] Speaker 04:
Now, are we in a little bit, since we're talking about corroboration under that section of the statute that I can't recite, but you know what I'm thinking of, is this a little bit of a different situation here in that, all right, Kohler had acted improperly, hadn't disclosed these transactions, yet we're now sort of in a different arena.

[00:18:50] Speaker 04:
They should have the chance at least to address the corroboration.

[00:18:55] Speaker 04:
And that's why they came forward with this

[00:18:58] Speaker 04:
purported evidence of a miscalculation.

[00:19:01] Speaker 03:
I think I can address that question, Your Honor.

[00:19:03] Speaker 03:
First of all, something that this Court ruled in the third review case, as well as its previous decision in Nanyang, was that commerce is not required to corroborate corroborating data.

[00:19:14] Speaker 03:
So that's one issue.

[00:19:17] Speaker 03:
But secondly, commerce here did give Kohler an opportunity to submit information

[00:19:22] Speaker 03:
relevant to the AFA and cooperation rate.

[00:19:25] Speaker 03:
This is at page 8062 of the record, where Commer said, look, if you want to submit information, which Kohler did, it submitted information, well, our rates and other reviews were not this high.

[00:19:36] Speaker 03:
It could have submitted even more, you know, extensive information about who at Kohler had done this, you know, more information trying to show its cooperation, and it did submit a certain amount of that information.

[00:19:47] Speaker 03:
all of which Commerce considered, and we have a disagreement over whether that restored their confidence in COLA.

[00:19:54] Speaker 03:
But what Commerce said specifically at 8062, and this goes back to some of this Court's kind of fundamental jurisprudence on these type of fraud issues, cases like Home Products, Essar Steel, and Abisma.

[00:20:04] Speaker 03:
Commerce said, look, we are in a closed administrative review that we only have to reopen because there's committed fraud, and we have to cleanse the fraud from the proceeding.

[00:20:14] Speaker 03:
We are not going to let you go back and try to revise your sales data for the review.

[00:20:19] Speaker 03:
It said specifically, we'll accept information on AFA and corroboration, but we will not accept information that's new sales data.

[00:20:29] Speaker 04:
Let me jump in.

[00:20:30] Speaker 04:
I apologize.

[00:20:31] Speaker 04:
You were in the middle of a thought there, but time is fleeting in oral argument.

[00:20:34] Speaker 03:
I understand, Your Honor.

[00:20:35] Speaker 04:
Let me just ask you one additional question.

[00:20:38] Speaker 04:
And it relates to the 144%.

[00:20:39] Speaker 04:
The Court of International Trade threw that out, said, I'm not going to consider that, but then came and said, there's enough here.

[00:20:50] Speaker 04:
What is your view with respect to the backup position of the Court of International Trade that ended up affirming Commerce's remand determination?

[00:21:00] Speaker 04:
Is that enough?

[00:21:01] Speaker 04:
What exactly did the Court rely on?

[00:21:03] Speaker 03:
Yes, it is enough.

[00:21:05] Speaker 03:
I should point out that the Court of International Trade, at the time it made that decision, it threw out the 144% as aberrational on its face.

[00:21:11] Speaker 03:
It did not have the benefit of this court's decision saying that's not a valid basis to throw it out.

[00:21:16] Speaker 01:
It did.

[00:21:17] Speaker 01:
And it did have other data that our court in the AR3 did not have, because in AR3 the court was so caught that it didn't fight that particular point.

[00:21:31] Speaker 03:
This is the same exact data that the court looked at in AR3.

[00:21:37] Speaker 03:
So the other high margin transactions on the record that the trial court in this case relied on are the same other high margin transactions that this court remarked on in AR3.

[00:21:46] Speaker 01:
Are you saying that AR3 binds us and that we can't agree with the Court of International Trade, that it's an aberrational point for purposes of AR2?

[00:21:56] Speaker 03:
Well, it's the same data.

[00:21:58] Speaker 03:
So to the extent that this court in AR3 said this is non-aborate, you can't rule it's aberration on its face just because it's higher than other sales, it's factually identical.

[00:22:07] Speaker 03:
It's not a collateral estoppel issue because you're dealing with two different administrative reviews, but it's the exact same data.

[00:22:13] Speaker 03:
In fact, the data that was used in AR3 were Kohler's reported sales in AR2.

[00:22:19] Speaker 03:
So it's even more contemporaneous here.

[00:22:23] Speaker 03:
To your honor's point,

[00:22:25] Speaker 03:
It's not just the 144%.

[00:22:27] Speaker 03:
Commerce was very explicit.

[00:22:29] Speaker 03:
And this is, for example, at page 89.68 of the record, also at 89.

[00:22:33] Speaker 03:
I'm sorry, 89.65 of the record, also at 89.38 of the record, where Commerce said, we looked at the range of Kohler's high margin transactions in the review.

[00:22:44] Speaker 03:
So Commerce looked at that range.

[00:22:46] Speaker 01:
There were other high margin.

[00:22:47] Speaker 01:
I was having a hard time following that math in the back.

[00:22:49] Speaker 01:
What's that?

[00:22:50] Speaker 01:
The math in the backup theory.

[00:22:52] Speaker 01:
So if 144 is out,

[00:22:54] Speaker 01:
How does the fact that sometimes they go up to 45 get you to 70-something?

[00:22:59] Speaker 03:
Well, 50 is surely much closer to 70.

[00:23:03] Speaker 03:
The 75% rate, which Commerce didn't choose 100, 44% rate.

[00:23:07] Speaker 03:
It shows the 75% rate.

[00:23:08] Speaker 03:
It's a heck of a lot closer to 50.

[00:23:11] Speaker 03:
Something that Commerce noted, and this is at page, well, it's at page 89, 67, and 66 to 67 of the record.

[00:23:18] Speaker 03:
They made several findings that are relevant here.

[00:23:20] Speaker 03:
As Commerce noted, and the trial court, I'm sorry,

[00:23:24] Speaker 03:
This Court noted in the third review case, you know, not only were there other high-margin transactions, one at 50 percent, one at 30 percent, 18 others between 20 and 30 percent, but this was in a world where Kohler had concealed a portion of its sales.

[00:23:42] Speaker 03:
Commerce made specific findings that we don't ultimately know the scope of how many sales that Kohler concealed.

[00:23:49] Speaker 03:
Commerce made specific findings that

[00:23:50] Speaker 03:
Because of the fraud, there may be further misrepresentations that we are not aware of.

[00:23:55] Speaker 01:
But in a world where color- But a 25% swing, actually it was more than 25%, but that gets to the point of becoming really punitive, as opposed to just allowing for a little bit of a deterrence margin.

[00:24:11] Speaker 01:
You take their somewhat, also somewhat aberrational high point, and then you add another 25% on top of that.

[00:24:20] Speaker 01:
That doesn't seem to be what the point of AMA is all about.

[00:24:23] Speaker 03:
Well, again, here, Commerce recognized, and that's something that this Court has recognized as well, there was a limited amount of data because the only respondent in the proceeding had committed fraud.

[00:24:35] Speaker 03:
There are several related points here.

[00:24:37] Speaker 03:
First, Commerce understood that the sales that would have created the highest margin transactions were the ones that

[00:24:44] Speaker 03:
Culler concealed by definition of the fraud scheme.

[00:24:47] Speaker 03:
Second, it did include a built-in increase for deterrence, and Commerce said, and even Culler kind of admitted that an AFA rate is supposed to include a built-in increase for deterrence.

[00:25:01] Speaker 03:
In addition, you have a situation where Commerce has said, and this Court has recognized,

[00:25:09] Speaker 03:
that it's specifically authorized by statute to use a petition rate.

[00:25:12] Speaker 03:
I mean, it literally used the rate that the statute says Congress is allowed to use, and that was its practice.

[00:25:20] Speaker 03:
This Court has recognized that practice in the third review case and said that is an okay practice in a situation like this one where the rate has to be corroborated to the extent practicable.

[00:25:32] Speaker 03:
Last point on this issue.

[00:25:35] Speaker 03:
What Commerce did is very much consistent with both the statute and the statement of administrative action, because the statute itself says to the extent it has to corroborate to the extent practicable, and the SAA in turn says if corroboration is not practicable, Commerce is still appropriate for Commerce to apply AFA.

[00:25:53] Speaker 03:
The only sales data that anyone put on the record of this proceeding is Kohler's second-review sales data from this proceeding.

[00:26:01] Speaker 03:
Commerce used its statutorily authorized normal AFA practice and said, look, given the data on the record.

[00:26:09] Speaker 01:
So do you agree with the CIT that there's a tension between the two obligations, or the one which is the right of Commerce to use AFA and the other is Commerce's obligation to corroborate?

[00:26:21] Speaker 01:
And do you agree that there's a tension and AFA can override the corroboration obligation?

[00:26:27] Speaker 03:
Well, we don't completely agree with the CIT's analysis relying on fraud.

[00:26:31] Speaker 03:
This Court itself, for example, in the third review case, has recognized a balancing between the two subsections, the deterrence requirement and the corroboration requirement.

[00:26:43] Speaker 03:
To the extent those are in tension, Congress itself has indicated, by using the to the extent practicable language and also by indicating in the SAA to the extent that corroboration is not practicable, that will not prevent Congress from applying AFA.

[00:27:00] Speaker 03:
Commerce itself has tipped the balance in favor of AFA.

[00:27:03] Speaker 03:
But what the CIT did in this case, very much consistent with what this Court said in the third review case about the same other high-margin transactions, was that that was sufficient, even if one were to throw out.

[00:27:16] Speaker 01:
But what we said in prior cases, that AFA can't be the end of the inquiry, that there still is a corroboration obligation?

[00:27:22] Speaker 03:
Right.

[00:27:23] Speaker 03:
And here, look, Commerce did compare it to the other it said.

[00:27:26] Speaker 03:
Look, we looked at the range of their transactions.

[00:27:28] Speaker 03:
This was good enough.

[00:27:29] Speaker 01:
But that's assuming we accept the 144.

[00:27:31] Speaker 03:
Well, even without the 144, there are still other transactions with a built-in increase for deterrence.

[00:27:39] Speaker 03:
The one thing I'll add on that, this is important.

[00:27:42] Speaker 03:
Commerce made general findings several places, but the most particular are pages 89, 51 to 52 of the record, as well as 89, 56 of the record, that not only had Kohler's fraud undermined the credibility of its submissions

[00:27:57] Speaker 03:
prior to, during the actual review, because this review was closed, but it also undermined the credibility of Kohler's post remand submissions, these self-serving submissions.

[00:28:09] Speaker 03:
And that finding certainly extends not just to their claims about the allegedly limited number of sales involved, but also their claims about this 144% margin.

[00:28:18] Speaker 00:
Thank you, Mr. Krillin.

[00:28:19] Speaker 00:
As you can see, your light is on.

[00:28:22] Speaker 00:
We'll hear from Mr. Schneiderman for two minutes.

[00:28:24] Speaker 03:
Thank you, Your Honor.

[00:28:28] Speaker 02:
Thank you, Your Honor.

[00:28:31] Speaker 02:
If I could start just by dispelling this notion put forward by Cruller that the five missing sales were never in dispute and that Appian had never alleged trans shipments during the second review.

[00:28:42] Speaker 02:
In fact, we had.

[00:28:44] Speaker 02:
I would refer to the court to the record appendix document at 7205 to 7206.

[00:28:49] Speaker 02:
We actually alleged during the underlying AR2 proceeding, based on

[00:28:54] Speaker 02:
their reported sales data that this exact transshipment scheme had been occurring.

[00:28:58] Speaker 02:
And not only that it had been occurring, but that it had been occurring throughout the period of review.

[00:29:04] Speaker 02:
And in fact, as Judge Stansu pointed out in his decision at appendix page 16, we only had circumstantial evidence at the time.

[00:29:12] Speaker 02:
We couldn't prove it.

[00:29:13] Speaker 02:
They denied it.

[00:29:14] Speaker 02:
But we had alleged that this exact same scheme, in fact, a third country transshipment scheme to the same customer that they ultimately admitted to later, was occurring throughout the second period of review.

[00:29:24] Speaker 02:
So we do.

[00:29:25] Speaker 01:
Weren't there trans shipments in the fourth period of review?

[00:29:30] Speaker 02:
Yes, there were some, but.

[00:29:31] Speaker 01:
But Congress still found a 0%.

[00:29:33] Speaker 02:
Well, Kerler, you know, by that time, and I think it extended through, unfortunately, the beginning of the fourth review, but they had never withheld that.

[00:29:39] Speaker 02:
I mean, by that time, they'd already been caught.

[00:29:41] Speaker 02:
And so in their initial response, they reported all sales.

[00:29:45] Speaker 02:
But in this case, again, this is the second review.

[00:29:47] Speaker 02:
We had alleged throughout the period they had been concealing these sales.

[00:29:50] Speaker 02:
Later on, they made the self-serving assertion

[00:29:53] Speaker 02:
that, in fact, it was only five sales towards the end.

[00:29:55] Speaker 02:
But that was, you know, it's in dispute.

[00:29:58] Speaker 02:
And we certainly don't accept their representations.

[00:30:00] Speaker 02:
That was a very self-serving representation, as Mr. Crullin just pointed out.

[00:30:05] Speaker 02:
Commerce found it not to be credible.

[00:30:07] Speaker 02:
And again, the same thing with the information that they provided with respect to the sale with the 144.

[00:30:11] Speaker 02:
They provided that to Commerce.

[00:30:12] Speaker 02:
Commerce found it not to be credible.

[00:30:14] Speaker 02:
They rejected it from the record.

[00:30:15] Speaker 02:
So again, it's not even a valid distinction between the second review.

[00:30:18] Speaker 01:
But what evidence did Commerce rely on to find it not credible, other than

[00:30:22] Speaker 01:
Well, you lied to us once, so you're probably still lying to us.

[00:30:25] Speaker 02:
Well, I think this court's decision in ad hoc shrimp and in Kerler's third review say that, look, if you lie to us with respect to one aspect of your response, it's reasonable for us to find the entire response not to be reliable or credible.

[00:30:38] Speaker 02:
And that's certainly what commerce found here.

[00:30:39] Speaker 02:
And again, as Mr. Cronin said, that extends not just to their underlying data, but to some of the representations that they made in redetermination.

[00:30:46] Speaker 02:
Now, again, they did rely on some admissions against interest that Kerler had made, but that doesn't necessarily

[00:30:51] Speaker 02:
that the self-serving statements that Kohler made necessarily had to be credited, and Commerce did not credit those.

[00:30:58] Speaker 00:
Thank you, counsel.

[00:30:59] Speaker 00:
Mr. Wood has some rebuttal time.

[00:31:05] Speaker 05:
Yes, your honor.

[00:31:07] Speaker 05:
Diopolis tried to continue to pound a square peg into a round hole by trying to fit this case into the AR3 precedent.

[00:31:15] Speaker 05:
In this case, there was evidence submitted to Commerce that the 144.63% transaction was a result of a mathematical error.

[00:31:24] Speaker 05:
We're not suggesting that the corroborating rate has to be corroborated itself.

[00:31:28] Speaker 05:
But when there's evidence that it's a mathematical error, Commerce abuses its discretion if it refuses to even consider that evidence.

[00:31:34] Speaker 01:
But the AR3 case did reach the conclusion that the 144 number was relevant and not operational, didn't it?

[00:31:44] Speaker 05:
Correct.

[00:31:45] Speaker 05:
Now that's a very different question.

[00:31:46] Speaker 01:
Why is there a collateral estoppel at least?

[00:31:48] Speaker 05:
Because it's a very different question.

[00:31:49] Speaker 05:
There's a very big difference between an allegation that a number is aberrational on its face, which we continue to believe this one was, and Judge Stansky found that it was.

[00:31:58] Speaker 05:
There's a big difference between aberrational on its face and the results of a mathematical error that can be demonstrated with evidence that we attempted to submit.

[00:32:05] Speaker 05:
So those are two very different situations.

[00:32:07] Speaker 05:
And so here, if the 144.63% transaction is taken out,

[00:32:12] Speaker 05:
We're not aware of any case in which commerce has used an AFA rate that wasn't corroborated by at least one transaction at or above that AFA rate.

[00:32:22] Speaker 05:
Now here, the highest margin ever calculated for Kohler was 6.5 percent from the original investigation.

[00:32:29] Speaker 05:
You can't possibly say that using 75.36 percent as an AFA rate

[00:32:35] Speaker 05:
is a reasonable estimate of Kohler's actual margin, albeit with some built-in increase as a measure of deterrence.

[00:32:41] Speaker 01:
So you're saying that the conclusion in AR3 that it's not aberrational on its face would bind us, but that to the extent that there was data submitted after the remand to show that that, even if not aberrational on its face, was the product of a miscalculation or a mathematical error, that that

[00:33:04] Speaker 01:
shouldn't bind us.

[00:33:05] Speaker 01:
Is that what you're saying?

[00:33:06] Speaker 05:
Well, I wouldn't necessarily agree that the aberrational on its face question would bind you, but it doesn't matter here, because here it's entirely different.

[00:33:13] Speaker 05:
Our argument here is not that it's aberrational on its face.

[00:33:15] Speaker 05:
Our argument is that it's the result of a mathematical error, and that commerce abuses discretion by refusing to consider our arguments.

[00:33:22] Speaker 01:
So we'd have to find that underlying point first, that it was an abusive discretion not to consider it.

[00:33:27] Speaker 05:
Yes, that's correct.

[00:33:28] Speaker 05:
Or you could let Judge Stancy decide that in the first instance, because he expressly left that question open.

[00:33:33] Speaker 05:
And I think he hinted at what he thought about it, but he didn't need to address it, because he thought it's aberrational on its face.

[00:33:39] Speaker 00:
Thank you, counsel.

[00:33:39] Speaker 00:
Thank you.

[00:33:40] Speaker 00:
We will take the case under advisement from the court to adjourn briefly.