[00:00:42] Speaker 02:
The next case is tension steel industries versus the United States.

[00:00:49] Speaker 02:
Appeal number 172526.

[00:00:50] Speaker 02:
Mr. DeFranchesco, whenever you're ready.

[00:00:57] Speaker 02:
Did I say your name correctly?

[00:00:59] Speaker 00:
Yes, Your Honor.

[00:01:17] Speaker 00:
Thank you, and good morning, Your Honor.

[00:01:19] Speaker 00:
May it please the court, I'm Robert DeFrancisco on behalf of Appellate Maverick Tube Corporation.

[00:01:23] Speaker 00:
As we indicated in our briefs, we believe the lower court in this case overstepped its authority in rejecting the department's longstanding practice regarding how it evaluates a respondent's rebates.

[00:01:34] Speaker 00:
The lower court in this case simply accepted what we believe is a flawed court of international trade determination in Kohler AG regarding the department's practice and its regulations.

[00:01:44] Speaker 00:
We believe that both decisions by the court in Tension 1

[00:01:47] Speaker 00:
And the court in Kohler AG to require commerce to blindly accept all reported rebates by respondents contradicts the agency's interpretation of its regulations, its past practice, and without providing the proper amount of deference to the agency in interpreting its regulations.

[00:02:04] Speaker 00:
To reach this conclusion, both courts in those cases improperly interpreted the term net outlay in the department's regulations to mean the department must accept

[00:02:14] Speaker 00:
any and all rebates paid by a respondent, regardless of how dubious those rebates might be.

[00:02:19] Speaker 04:
In this case, the other mandatory, there's only one other mandatory respondent, Chung-Hum Steel Corp.

[00:02:26] Speaker 04:
They got a zero margin, right?

[00:02:28] Speaker 00:
That is correct, Your Honor.

[00:02:28] Speaker 04:
And they didn't have any rebates.

[00:02:29] Speaker 00:
Correct, Your Honor.

[00:02:30] Speaker 04:
So this case, the question of whether or not there's, and this is an initial investigation, not an annual review.

[00:02:39] Speaker 04:
Correct.

[00:02:40] Speaker 04:
And this is the first time that I'm aware of that the agency would be applying its interpretation to an initial investigation as opposed to an ongoing review.

[00:02:54] Speaker 00:
Correct.

[00:02:55] Speaker 00:
Both the Kohler case and the case substance that were in your review.

[00:02:58] Speaker 04:
And the problem is that in this for me, so you know where I'm coming from,

[00:03:03] Speaker 04:
There's a finding by Judge Gordon that there's no manipulation here.

[00:03:07] Speaker 04:
There's been no showing of any manipulation.

[00:03:11] Speaker 04:
And the various two at least or three of the other previous final determinations all indicate that the reason for the interpretation is to prevent manipulation.

[00:03:24] Speaker 04:
That is to say somebody who's going to, after there's an existing anti-dubbing order, give a few after-the-fact rebates.

[00:03:32] Speaker 04:
in order to drive the home price down.

[00:03:33] Speaker 04:
And so for me, in this particular case, and I understand there are very few of these cases left.

[00:03:43] Speaker 04:
So this is kind of a one-off.

[00:03:46] Speaker 04:
I'm looking at it and saying the shoe doesn't fit.

[00:03:50] Speaker 04:
The reason for the interpretation, which has now been refined in new regulations that have, I think, a little more clarity about exactly what's up

[00:04:02] Speaker 04:
that more corresponds to the two earlier cases that existed before and squared that up.

[00:04:08] Speaker 04:
So for me, the issue doesn't fit because there is a finding of no manipulation that tensions as I have these rebates in place well before anybody ever came knocking on my door.

[00:04:22] Speaker 04:
And so the policy that drives your regulation is ill-served in this case.

[00:04:29] Speaker 04:
That's where I'm coming from.

[00:04:30] Speaker 00:
Thank you, Your Honor.

[00:04:32] Speaker 00:
To get to the question of whether there's manipulation, you still have to get over the first hurdle of, does the department's regulation allow it to go behind what's going on with the rebates?

[00:04:44] Speaker 00:
And the court's decision in Tension I and Kohler in interpreting that regulation say no.

[00:04:51] Speaker 00:
If the rebates are granted, that's it.

[00:04:52] Speaker 00:
There's no more questions asked.

[00:04:54] Speaker 04:
Your view is that Kohler's going to deal with the manipulation case too.

[00:04:59] Speaker 04:
Kohler isn't going to stop the manipulation.

[00:05:03] Speaker 00:
Right.

[00:05:04] Speaker 00:
That's right, Your Honor.

[00:05:05] Speaker 04:
The court's decision.

[00:05:06] Speaker 04:
I agree with you on that.

[00:05:07] Speaker 04:
And let me tell you also where I'm coming from so you see it.

[00:05:13] Speaker 04:
I can appreciate the way in which you chose to present your case in your brief.

[00:05:18] Speaker 04:
But when I looked at this, I read Judge Stansel's opinion in Kohler.

[00:05:24] Speaker 04:
And I said, this is a statutory interpretation.

[00:05:27] Speaker 04:
He says it's a plain meaning.

[00:05:29] Speaker 04:
Where there's a plain meaning, there's no room for a contrary regulation.

[00:05:33] Speaker 04:
Radiation is inconsistent.

[00:05:35] Speaker 04:
So the question to me was, what's the ambiguity?

[00:05:39] Speaker 04:
And your brief sort of dances around, but never exactly picks one word and says, this is it.

[00:05:45] Speaker 04:
You sort of a little bit here, a little bit there, a little bit of this, a little bit of that.

[00:05:49] Speaker 04:
But the true fact is that in this, all throughout the gomish of all these cases, when commerce has stood up to fight, its only complaint has been over the word rebate.

[00:06:02] Speaker 04:
It hasn't talked about satisfactory proving and all the other stuff.

[00:06:07] Speaker 04:
It simply said there was an instance because there is no definition of an illegitimate remake.

[00:06:12] Speaker 04:
That's where they went.

[00:06:13] Speaker 04:
I went back and read all the briefing and the other cases.

[00:06:16] Speaker 04:
So I would have expected your brief to come in and say it's rebate, there it is, right up the line, but I didn't see that.

[00:06:22] Speaker 04:
So I saw you sort of waffling a little bit about where the ambiguity was.

[00:06:28] Speaker 00:
To Commerce's point, where they would view the ambiguity, at least in the regulation, is there's a portion of the regulation, actually in two places within the regulation, that says the respondent or the person coming in and claiming the adjustment has the burden of proof to demonstrate to the satisfaction of the agency that you've carried that burden, that they're satisfied.

[00:06:46] Speaker 00:
At the same time, the court's interpretation of net outlay, vis-a-vis this particular rebate, says, well, even if I find that you haven't satisfied me, Commerce,

[00:06:57] Speaker 00:
entitled to this rebate, I have no choice, but I have to accept it.

[00:07:01] Speaker 00:
Beyond that, the department's practice as it relates to rebates has always been before the regulations were written and after the regulations were written to say, if the terms of the rebate are not known at the time of the sale, I will deny the rebate.

[00:07:18] Speaker 00:
And in this situation, going to your other point vis-a-vis really the merits, and if I analyze the facts, is there

[00:07:26] Speaker 00:
room for manipulation.

[00:07:28] Speaker 00:
In this case, we have a scenario where there's no overarching document outlining a rebate program, if you will.

[00:07:37] Speaker 00:
The only documents that identify that a rebate will be granted, if any, are in the sales documents, in the contract of sale.

[00:07:45] Speaker 00:
And they don't appear in every contract of sale.

[00:07:49] Speaker 00:
They occasionally appear in a few contracts of sale.

[00:07:52] Speaker 00:
And then what we have happened later on,

[00:07:54] Speaker 00:
is the respondent in this case says, within the contract of sale, it says, if I get a price adjustment from my coil supplier, remember this is a pipe that we're welding coil, if I get a price adjustment from my coil supplier, I will pass, it doesn't say how much, if any, of that benefit onto my customer.

[00:08:16] Speaker 00:
It only says that in a few of the sales contracts, not all.

[00:08:19] Speaker 00:
However, in this case, where there were price adjustments given,

[00:08:24] Speaker 00:
some of which three years before the rebate was paid, they gathered all these different price adjustments and then allocated them across all of those sales.

[00:08:35] Speaker 00:
And in certain instances, there were price adjustments or rebates that were granted where no price adjustment on the coil was granted at all.

[00:08:44] Speaker 00:
So they didn't follow the terms of their own program that they outlaid in those sales documents.

[00:08:49] Speaker 00:
And there's no way to tie up certain of the

[00:08:53] Speaker 00:
coil adjustments with the rebates that were granted, and there's no way for the customer, a normal rebate program, Your Honor, would lay out terms that the customer's aware of and that the customer would know, I've done something to satisfy this benefit and can actually enforce it contractually.

[00:09:07] Speaker 00:
That doesn't exist here at all.

[00:09:09] Speaker 00:
This is simply a means of the respondent being allowed to adjust its margin by providing rebates as it sees fit.

[00:09:19] Speaker 02:
You agree ultimately though that there was a rebate provided, right?

[00:09:23] Speaker 00:
There was an amount of money given to the customer.

[00:09:28] Speaker 00:
There's any number of reasons why you might provide certain benefits to the customer.

[00:09:32] Speaker 00:
I might give the customer Stanley Cup tickets.

[00:09:35] Speaker 00:
It doesn't mean that that relates to the particular sale.

[00:09:38] Speaker 00:
I've given him something of value.

[00:09:40] Speaker 04:
The dollars and cents all add up.

[00:09:41] Speaker 04:
I mean, the money was paid.

[00:09:43] Speaker 04:
So that's a question.

[00:09:44] Speaker 04:
Your point is that if this was a rebate system, it was pretty sloppy, and one can't quite figure out exactly why it was happening.

[00:09:51] Speaker 00:
Correct.

[00:09:52] Speaker 00:
And in previous cases, the Pineapples case being one of them, the department has looked into, again, the program itself and said, in that case, I'm going to look at the terms.

[00:10:02] Speaker 00:
Did you follow the terms?

[00:10:03] Speaker 00:
Was the customer aware of the terms?

[00:10:05] Speaker 04:
What they're looking for is manipulated behavior.

[00:10:07] Speaker 00:
Correct.

[00:10:08] Speaker 00:
And we believe that does exist here, if you get to our report.

[00:10:11] Speaker 04:
Well, here, I mean, there's a Gordon said, no showing of amputation.

[00:10:16] Speaker 04:
I saw that over the weekend and snapped my head back because I'd missed it the first time through.

[00:10:20] Speaker 00:
We are, so we have our, the first part of our brief is about the regulation itself and whether COLA should be applied.

[00:10:30] Speaker 00:
And the second part of our brief is a substantial evidence standard that goes to that issue.

[00:10:36] Speaker 04:
And you have an interesting twist on that one in the light of how Tension has chosen to respond to the substantial evidence thing, which is... Correct, Your Honor.

[00:10:44] Speaker 04:
I mean, I just don't understand the way you're litigating it both ways.

[00:10:48] Speaker 00:
But like I said, the Department of Commerce's practice as to how they look at these rebate programs has existed over a very long period of time and hasn't changed.

[00:10:58] Speaker 02:
And in the preamble... They've chosen to not be here today, and they've chosen to modify the regulation, right?

[00:11:04] Speaker 00:
Correct, Your Honor.

[00:11:06] Speaker 00:
Correct.

[00:11:06] Speaker 00:
But throughout both in the original determination in this case, and even in the regulation when they modified it, they said explicitly they didn't agree with the court's determination.

[00:11:16] Speaker 04:
They did it without prejudice when they were modifying it, and they didn't think it should be taken as a... Well, I know where they are, but it is interesting that they chose from the very get-go not to stand and fight.

[00:11:28] Speaker 04:
And the reason why is because they got a very strange language.

[00:11:32] Speaker 04:
I mean, when you talk about the

[00:11:35] Speaker 04:
Adjustments, the adjustments are all post-sale.

[00:11:40] Speaker 04:
So I mean, you're dealing with a situation where adjustments can be made after the sale.

[00:11:44] Speaker 04:
So you're taking this initial sale in the home market, right?

[00:11:47] Speaker 04:
It's very, very important for the whole scheme.

[00:11:51] Speaker 04:
And the law allows that to be tampered with after the fact.

[00:11:54] Speaker 04:
So, oh my God, what's going to happen?

[00:11:57] Speaker 04:
Correct.

[00:11:58] Speaker 04:
Until they got the regulation a little clearer.

[00:12:01] Speaker 04:
It was clear that commerce correctly never was going to say, oh, we're going to throw anything out that happened post-sale because statute wouldn't want to do that.

[00:12:11] Speaker 00:
Correct.

[00:12:12] Speaker 00:
Correct.

[00:12:13] Speaker 00:
And that's the reason you highlighted about the extra scrutiny for these sorts of post-sale adjustments.

[00:12:20] Speaker 00:
And it applies not only to rebates.

[00:12:23] Speaker 00:
The regulation also talks about discounts.

[00:12:25] Speaker 00:
It talks about other sorts of post-sale adjustments.

[00:12:30] Speaker 04:
That's what you're going to have a number of things that will affect this base home price that are going to happen after that sale was made.

[00:12:40] Speaker 04:
And so there is obviously great possibility for manipulation.

[00:12:45] Speaker 04:
Correct.

[00:12:45] Speaker 04:
And so that's the laser eye of the commerce when they're going in to look is looking for potential manipulate behavior.

[00:12:52] Speaker 00:
Correct.

[00:12:53] Speaker 00:
And that frankly, your honor, it's that reason for that additional language within the regulation in 401B and 401G, where twice it talks about it's the person requesting the adjustment has the burden of establishing for commerce to satisfaction that you've established the nature of the adjustment.

[00:13:11] Speaker 00:
So that language is there to allow them to have that additional scrutiny, which they applied, we believe, properly in the original investigation.

[00:13:18] Speaker 00:
in this instance when they looked and said we'll grant some but not all because those terms were not outlined in all of these contracts of sale.

[00:13:29] Speaker 00:
I'm going to reserve the balance of my time for Ronald.

[00:13:32] Speaker 03:
Thank you.

[00:13:53] Speaker 01:
Good morning and may it please the court.

[00:13:55] Speaker 01:
My name is Kelly Slater and I'm here today on behalf of Tension Steel Industries Company, a Taiwanese exporter of oil country tubular goods or oil pipeline products.

[00:14:06] Speaker 01:
I'd like to talk about the substantial evidence standard first, as opposed to legal standard.

[00:14:10] Speaker 01:
I'm going to go backwards.

[00:14:13] Speaker 01:
Now, the standard of review here is de novo.

[00:14:17] Speaker 01:
It's a de novo review of the Commerce Department's decision.

[00:14:22] Speaker 01:
Substantial evidence showed on the record that Tension Steel did satisfy its evidentiary burden with respect to its claim rebates and that information was verified successfully by Commerce.

[00:14:34] Speaker 01:
Tension Steel's claim rebates were bona fide price adjustments consistent with their typical practice being as a pass through of rebates received from an upstream supplier that they would subsequently pass along a portion of to their customer like Robert explained.

[00:14:50] Speaker 01:
And the record also demonstrated that there was no evidence of price manipulation as Judge Gordon noted in his decision in the lower court.

[00:15:00] Speaker 04:
Well, this is the first instance, is it not, in your experience, where commerce sought to apply its interpretation to an initial investigation as opposed to an ongoing review?

[00:15:17] Speaker 04:
I'm not sure I understand.

[00:15:20] Speaker 04:
This is not an annual review of an exit.

[00:15:22] Speaker 04:
Your client did not have an anti-dumping order hanging around his neck.

[00:15:26] Speaker 04:
Correct.

[00:15:26] Speaker 04:
When they began an annual review.

[00:15:28] Speaker 04:
That is correct.

[00:15:29] Speaker 04:
Your client, wherever he was, was sitting in his office and all of a sudden Commerce showed up and said, we're instigating an anti-dumping investigation.

[00:15:36] Speaker 04:
Correct.

[00:15:37] Speaker 04:
Correct.

[00:15:37] Speaker 04:
And so my... There was no notice.

[00:15:41] Speaker 04:
Yeah.

[00:15:42] Speaker 04:
This is the first one that Commerce is saying, well, we don't have an outstanding order that somebody is trying to manipulate.

[00:15:49] Speaker 04:
But we're nonetheless going to apply our anti-manipulation regulation that exists for ongoing investigations to this case.

[00:15:57] Speaker 04:
Correct.

[00:15:58] Speaker 04:
Correct.

[00:15:59] Speaker 04:
That's our position.

[00:16:01] Speaker 04:
Now, prosperity, that's your case.

[00:16:04] Speaker 04:
What's the status of prosperity at the moment?

[00:16:06] Speaker 01:
Prosperity is on remand.

[00:16:08] Speaker 01:
The remand results have been filed with the court and then now are going to be commented upon.

[00:16:17] Speaker 01:
uh, follow the court's orders under respectful protest to make a similar situation.

[00:16:22] Speaker 04:
This, but it went back now for another file up here once the final comes up.

[00:16:28] Speaker 01:
Right, right.

[00:16:29] Speaker 01:
I represent a coplaniff in that litigation.

[00:16:35] Speaker 04:
Okay.

[00:16:36] Speaker 04:
So why isn't the statute ambiguous, the statute and the regulations when it comes to the term rebate?

[00:16:45] Speaker 04:
I don't think it was ambiguous.

[00:16:46] Speaker 04:
The government's position from the beginning, from Kohler's straightforward, including the supplemental briefing in Kohler, the government said, well, we think there's some ambiguity in here in what constitutes a legitimate rebate.

[00:17:01] Speaker 01:
Well, but then I think the Kohler's court's response to that is it's not really a legitimate response.

[00:17:06] Speaker 04:
I don't know what the Kohler's, what's your response?

[00:17:09] Speaker 04:
My response to the legitimacy.

[00:17:10] Speaker 04:
Why isn't the term rebate ambiguous?

[00:17:18] Speaker 01:
Why is it not ambiguous?

[00:17:23] Speaker 04:
How do you know?

[00:17:24] Speaker 04:
I think there's a kind of common... Would you agree with me that an illegitimate rebate should not be taken into account in adjusting the price?

[00:17:36] Speaker 01:
Well, then that would depend on how you define illegitimate.

[00:17:38] Speaker 01:
It was never paid.

[00:17:40] Speaker 04:
Well, then... Somebody said, you know, this is my rebate.

[00:17:46] Speaker 04:
I give the money back to the original purchaser, but they didn't do it.

[00:17:50] Speaker 04:
They had a deal where we just papered over it.

[00:17:52] Speaker 04:
It was a lie.

[00:17:53] Speaker 04:
It was illegitimate.

[00:17:55] Speaker 01:
Okay.

[00:17:56] Speaker 01:
That's manipulation.

[00:17:57] Speaker 01:
And I think by definition, you can't have a rebate unless it is paid.

[00:18:00] Speaker 01:
That's a crucial element of the nature of a rebate.

[00:18:03] Speaker 01:
It's a payment that is made.

[00:18:06] Speaker 04:
Well, let's say they paid and then they got it back.

[00:18:07] Speaker 01:
They paid and then they got it back.

[00:18:10] Speaker 04:
Well, then that wouldn't constitute a rebate either.

[00:18:14] Speaker 04:
Rebates aren't paid back.

[00:18:16] Speaker 04:
Your honor.

[00:18:17] Speaker 04:
So there's a possibility for some slippage in what constitutes a legitimate rebate, maybe?

[00:18:27] Speaker 04:
Because if there is, then there's room for an interpretation.

[00:18:31] Speaker 01:
Okay, but I think this is part of the reason why when the regulations were written, they weren't taking to account the subjective evaluation of whether a rebate is legitimate or not.

[00:18:40] Speaker 01:
Is it paid or is it not?

[00:18:42] Speaker 01:
If it isn't paid, then no credit is going to be given for it.

[00:18:48] Speaker 01:
And the company has the burden of demonstrating in its books and records what that amount was, how much was paid to the customer, and how its bank account statement is reflective of paying to that customer.

[00:19:01] Speaker 01:
And I would also like to say, on a related point, that my colleague here was incorrect in stating that commerce was unable to tie

[00:19:12] Speaker 01:
rebates provided to US customers to particular sales transactions.

[00:19:17] Speaker 01:
Commerce was able to verify that information.

[00:19:20] Speaker 01:
It wasn't something where they took a big pot of rebate money in the financial accounts and then distributed it somehow randomly among the different sales contracts.

[00:19:30] Speaker 04:
Your adversary on the facts, which you're not doing, your adversary is challenging the factual assessment by Commerce that there was a sufficient connection.

[00:19:40] Speaker 04:
Right.

[00:19:40] Speaker 04:
That's his substantial evidence channel.

[00:19:42] Speaker 04:
Right, right.

[00:19:43] Speaker 02:
They did make those connections, yes.

[00:19:47] Speaker 02:
Do you have a record site for that?

[00:19:52] Speaker 01:
Let me see.

[00:19:54] Speaker 01:
Well, you can look at the sales verification report at pages three to six.

[00:20:02] Speaker 01:
Gosh, I don't know if I know the appendix number of that.

[00:20:06] Speaker 01:
I could provide that.

[00:20:07] Speaker 01:
It's the sales verification report, Commerce

[00:20:11] Speaker 02:
I just thought you might have a site.

[00:20:14] Speaker 01:
It is a sales verification for pages 3 through 6.

[00:20:16] Speaker 02:
356?

[00:20:17] Speaker 01:
3 through 6, there's a discussion of their findings.

[00:20:21] Speaker 01:
It's an April 2014 document, commerce memo.

[00:20:25] Speaker 02:
Okay, thank you.

[00:20:30] Speaker 04:
Okay.

[00:20:30] Speaker 04:
So the way in which your adversary is presenting the cases, he asks us to say that

[00:20:36] Speaker 04:
And Judge Stancell was wrong in Kohler.

[00:20:40] Speaker 04:
He made a mistake.

[00:20:42] Speaker 04:
And consequently, both of the tension decisions are mistaken because they depend on Kohler.

[00:20:47] Speaker 04:
And his argument is that the regulations that were promulgated back in 94, I think it was, that deal with making these adjustments and talk about rebates leave open the possibility of illegitimate rebates, rebates that are used

[00:21:04] Speaker 04:
to manipulate an existing margin to the benefit of the party that was subject to the margin.

[00:21:11] Speaker 04:
And so in order to deal with that problem, the agency has set forth a consistent interpretive tool that allows them to decide which rebates are illegitimate and which ones aren't.

[00:21:27] Speaker 04:
And your adversary is saying, what's wrong with that system?

[00:21:35] Speaker 04:
Judge Stansel have the authority to say that that system couldn't exist.

[00:21:41] Speaker 01:
Judge Stansel have the authority to take a look at the plain language of the regulation, the price adjustment regulations, and decide whether a reasonable interpretation of that language could include a requirement that the customer and the parties to the transaction have knowledge of the rebates, terms and conditions at the time of sale.

[00:22:02] Speaker 01:
The regulation

[00:22:03] Speaker 01:
simply did not support such a requirement in Judge Stanzo's interpretation of them.

[00:22:09] Speaker 04:
The regulations as interpreted by Judge Stanzo would permit manipulation, correct?

[00:22:16] Speaker 04:
Not necessarily.

[00:22:17] Speaker 04:
Well, don't say necessarily.

[00:22:18] Speaker 04:
Say I just would.

[00:22:21] Speaker 04:
Say, for example, that your client was subject to an ongoing anti-dumping order, had a dumping margin of 10%, right?

[00:22:33] Speaker 04:
and comes along the first annual review.

[00:22:37] Speaker 04:
And under Judge Stanshouse ruling, your client says, hmm, we're getting smart here.

[00:22:41] Speaker 04:
What we're going to do is we're going to go with our abacus or our adding machine or our computer.

[00:22:47] Speaker 04:
We're going to figure out exactly how far we need to drive that home price down so as to have a zero dumping margin.

[00:22:54] Speaker 04:
Because we know exactly what we sold the stuff for in the United States.

[00:22:58] Speaker 04:
And so they know exactly how much they've got to give back.

[00:23:01] Speaker 04:
And so they go around.

[00:23:02] Speaker 04:
pick the number of people that they dealt with in the home market, and they say, you get $10, you get 20, you get 60, you get 90, you get 100, and they just stick it in there.

[00:23:14] Speaker 04:
And guess what?

[00:23:15] Speaker 04:
Comes up to be a zero-dubbing margin.

[00:23:19] Speaker 04:
And that stands out, it authorizes that, correct?

[00:23:23] Speaker 01:
I don't think Judge Stansow's decision permits

[00:23:26] Speaker 01:
manipulation, because commerce... How so not?

[00:23:30] Speaker 04:
How so not?

[00:23:31] Speaker 04:
Let's assume, for example, you're representing the hypothetical I just made.

[00:23:37] Speaker 04:
Well, commerce... And you've got your folks in the home market with rebates after the fact, years after the fact, to go adjust all the prices to come up with a zero margin.

[00:23:48] Speaker 01:
I don't read Judge Stanislaw's decision as rigidly as requiring in all cases that as long as you can demonstrate

[00:23:55] Speaker 01:
rebate was actually paid.

[00:23:57] Speaker 01:
The nature of the thing was a rebate because commerce, remember, has the inherent authority to maintain the integrity of its proceedings.

[00:24:05] Speaker 01:
And if commerce determines that there is evidence of manipulation after the fact going on, commerce has the discretion to say, no, we're not satisfied that you've demonstrated that these are rebates that were not intended to manipulate the margin.

[00:24:25] Speaker 01:
as opposed to finding that the rebates were part of what the company did in the normal course of business.

[00:24:31] Speaker 01:
If that information, you know, so if there becomes suspicion of manipulation of the margin, Commerce definitely has the discretion to probe that, to develop the record around it, to decide how far to probe it, whether or not to try to attempt to verify it.

[00:24:48] Speaker 01:
But certainly at all times, if Commerce senses that there's elements of behavior

[00:24:53] Speaker 01:
intended to damage the integrity of the proceeding.

[00:24:57] Speaker 01:
Commerce certainly has the discretion to address that.

[00:25:08] Speaker 01:
As a follow-up point on the Kohler decision, I disagree that it requires the Commerce Department to blindly accept rebate information.

[00:25:19] Speaker 01:
I don't think that's what that case said.

[00:25:21] Speaker 01:
I don't think that's what the reasoning

[00:25:23] Speaker 04:
for the decision was given that this underlying discretion... Well, how are we only going to find out in a case in which there isn't... someone is trying to rely on Kohler, yet there is evidence of manipulation?

[00:25:37] Speaker 04:
I agree with you.

[00:25:38] Speaker 04:
I mean, Judge Stanzow doesn't... the word manipulation doesn't exist in that opinion.

[00:25:42] Speaker 04:
Correct.

[00:25:44] Speaker 04:
And yet he knew full well what was driving the regulation, what was driving the concern of commerce.

[00:25:51] Speaker 04:
And he was just as aware of the

[00:25:52] Speaker 04:
preceding cases as you and I are, in which the fear of manipulation is what was driving Commerce's activity and its interpretation.

[00:26:02] Speaker 04:
Right.

[00:26:03] Speaker 01:
And that is certainly what happened in the Koenig and Bauer-Albert decision in which Commerce found that the company had engaged in amending sales contract after the petition was filed.

[00:26:17] Speaker 04:
394 cases in which that's how Commerce dealt with it.

[00:26:21] Speaker 04:
And then they got themselves, with the regulation, they got themselves into this soup that resulted in Stancell's opinion.

[00:26:30] Speaker 04:
And what's your judgment about the lay of the land going forward with the new regulation?

[00:26:34] Speaker 01:
My judgment?

[00:26:36] Speaker 01:
Well, certainly if companies want to have their rebates accepted by commerce moving forward, I think they're going to have to document rebates perhaps more rigidly, more heavily.

[00:26:49] Speaker 01:
I can't speak for every industry.

[00:26:51] Speaker 02:
At the time of sale?

[00:26:52] Speaker 02:
The current regulation is saying that the rebate has to be put in place at the time of sale.

[00:26:57] Speaker 01:
They're saying that parties have to have knowledge of the rebate at the time of sale, knowledge of the terms and conditions at the rebate.

[00:27:03] Speaker 01:
Now, it's not saying in 100% of cases, but it's a factor that commerce will heavily consider when assessing rebate information that's reported by the parties.

[00:27:14] Speaker 04:
I'm basically saying any after the sale adjustment, you have to satisfy us, and that's legit.

[00:27:19] Speaker 04:
Correct, correct.

[00:27:20] Speaker 04:
That's the bottom line in what they're saying.

[00:27:22] Speaker 04:
Document, document.

[00:27:23] Speaker 04:
Has that regulation been challenged yet, as far as you know?

[00:27:25] Speaker 04:
Pardon me?

[00:27:26] Speaker 04:
Has that regulation been challenged yet, as far as you know?

[00:27:29] Speaker 01:
No, I don't think it has.

[00:27:31] Speaker 01:
We're still fighting about the old regulation at this point.

[00:27:34] Speaker 01:
I don't know the new one.

[00:27:38] Speaker 01:
I have to say in my experience representing respondents for the last 15 years, rebates are not a very common thing in general.

[00:27:46] Speaker 01:
They do happen in certain industries more than others, but it's not, I would say it's not a real common practice.

[00:27:53] Speaker 01:
It's an every once in a while sort of issue that can crop up.

[00:27:57] Speaker 01:
So I think that may be part of the reason why there isn't a whole lot of rebate related precedent.

[00:28:03] Speaker 01:
I mean, there are some.

[00:28:04] Speaker 04:
And certainly, you know, the Koenig and Bauer, Albert, and Nachi... Other than Prosperity, there don't appear to be a number of these cases in the pipeline?

[00:28:12] Speaker 04:
I think Prosperity's it.

[00:28:14] Speaker 01:
I think that was the last one.

[00:28:15] Speaker 01:
That was the last investigation they applied the old regulation to.

[00:28:21] Speaker 01:
That's the very last one.

[00:28:23] Speaker 01:
Unless you're aware of that.

[00:28:25] Speaker 04:
I know, I don't think so.

[00:28:25] Speaker 04:
Well, there will be, but the annual reviews of extant dumping orders

[00:28:32] Speaker 04:
will now be reviewed under the new regulation.

[00:28:36] Speaker 04:
That's the effective date.

[00:28:37] Speaker 04:
I'm just trying to get my mind around the size of where this case fits.

[00:28:43] Speaker 04:
And as you put it earlier on, I think the shoe doesn't fit.

[00:28:46] Speaker 01:
These strings of cases, tension, steel, and prosperity, is sort of the last gasp of the old regulations.

[00:28:55] Speaker 01:
They're not being applied anymore.

[00:28:57] Speaker 01:
I think part of the reason why, too, that

[00:29:01] Speaker 01:
I mean, just because commerce had a practice of requiring, a very long-standing practice, let's say, of requiring knowledge of the rebate terms and conditions at the time of sale doesn't necessarily mean that that was a consistent, or that was an interpretation of the regulations that was consistent with the regulations themselves.

[00:29:19] Speaker 01:
It just so happens that when someone finally challenged that practice in light of the language of the regulations, commerce found itself getting overturned, its requirement of the knowledge overturned, and we have two

[00:29:31] Speaker 01:
CIT judges now in agreement on that.

[00:29:37] Speaker 02:
Your time is up.

[00:29:38] Speaker 02:
Do you want to add a wrap up sentence?

[00:29:40] Speaker 02:
No, thank you very much for this opportunity.

[00:29:49] Speaker 00:
Thank you.

[00:29:49] Speaker 00:
Thank you, Rhonda.

[00:29:50] Speaker 00:
Just quickly to your question about the verification report.

[00:29:52] Speaker 00:
I would direct your attention to page six of the verification report.

[00:29:57] Speaker 00:
It's APPX

[00:29:58] Speaker 00:
001487.

[00:30:02] Speaker 00:
Some of that information is proprietary, obviously.

[00:30:05] Speaker 00:
But it does talk about what commerce looked at at verification.

[00:30:08] Speaker 00:
They did verify that rebates were paid.

[00:30:12] Speaker 00:
My assertion is that what they weren't able to verify is when there were price adjustments on the coil that it translated into particular payments out.

[00:30:23] Speaker 00:
And in fact,

[00:30:24] Speaker 04:
And the problem for you on that issue is you're claiming a substantial evidence standard of review.

[00:30:29] Speaker 04:
And the question is, well, it's basically there were some chicken scratches in the dirt.

[00:30:35] Speaker 04:
And the question is, do those chicken scratches all add up to the rebate actually got paid to this guy at this time or not?

[00:30:42] Speaker 00:
Correct, Your Honor.

[00:30:43] Speaker 00:
And to your question about manipulation, this was a situation where when these cases were filed, this was one of nine cases filed at the same time.

[00:30:53] Speaker 00:
There were allegations of critical circumstances that went along with those.

[00:30:57] Speaker 00:
And within those allegations of critical circumstances, part of that critical circumstances petition is to say there was knowledge that these cases were coming early on and that that's why we filed the critical circumstances petition itself to address those types of things.

[00:31:12] Speaker 00:
So anybody, any respondent paying attention would know they would need to adjust things to quote unquote, dump proof their sales to prevent that.

[00:31:20] Speaker 00:
And in fact, again, going back to the verification report, where it says, and this is public, we asked Tension to reconcile this fact with the claim that it had been granting rebates on sales of OCTG since 2009.

[00:31:34] Speaker 00:
Tension clarified that it had granted rebates on sales made in 2009, but that the rebates weren't paid until much, much later.

[00:31:41] Speaker 00:
So it's granting a rebate, but then holding onto that money for a long period of time, and then suddenly granting it all at once just before the case was filed.

[00:31:50] Speaker 00:
And in our mind, that is manipulation.

[00:31:52] Speaker 00:
There was substantial evidence for commerce to deny the entire program.

[00:31:56] Speaker 00:
Instead, what they did here was say, you didn't satisfy the terms.

[00:32:02] Speaker 00:
There wasn't a legitimate rebate program, at least for a portion of these sales, and denied those sales.

[00:32:08] Speaker 00:
And you're correct, Your Honor.

[00:32:09] Speaker 00:
Judge Stansu's interpretation of the regulation would be very easy to manipulate.

[00:32:16] Speaker 00:
In fact, in light of that,

[00:32:20] Speaker 00:
Commerce then changed its regulations and did it quickly.

[00:32:22] Speaker 04:
But fortunately, those times have passed.

[00:32:24] Speaker 04:
Yes.

[00:32:25] Speaker 04:
And we're now moved into a happier hunting ground.

[00:32:29] Speaker 00:
I hope so, Your Honor.

[00:32:30] Speaker 00:
If there aren't any other questions, I'll raise.

[00:32:33] Speaker 02:
Thank you.

[00:32:34] Speaker 02:
We thank counsel, and the case is submitted.

[00:32:38] Speaker 03:
All rise.

[00:32:42] Speaker 03:
The honorable court is adjourned until tomorrow morning at 7 o'clock AM.

[00:32:49] Speaker 03:
Thank you.