[00:00:00] Speaker 02:
All right, our next case for argument today is 25-1213, printing textiles versus the United States. Mr. Vils, please proceed.

[00:00:11] Speaker 00:
May it please the court.

[00:00:14] Speaker 00:
Kerem Bilge, or plaintiff talent, printing textiles.

[00:00:20] Speaker 00:
Your Honors, I think the core question before this court today is whether commerce's scope ruling in the underlying proceeding has unlawfully changed or expanded the original scope of the order by replacing adherence with receptivity in the second sentence of the scope of the order, and thereby changing the scope of the order.

[00:00:52] Speaker 00:
And as we know, the order says that the covered merchandise is artist canvases that are primed and coated, primed or coated.

[00:01:04] Speaker 00:
whether or not it's containing an ink-receptive top coat. And then the second sentence states that the priming and coating includes application of solutions that are designed to promote adherence of ink or paint to the underlying fabric. And this second sentence has been interpreted by Commerce in multiple instances to specify the type of quoting or priming that is required for a product to be included within the scope of the order.

[00:01:39] Speaker 00:
And our brief extensively details the history of this order in multiple scope proceedings.

[00:01:49] Speaker 03:
the commerce remember correctly the question is whether this second sentence is definitional of what the priming coding is that's versus whether it's saying hey, priming quoting includes this one type of thing, but that doesn't necessarily mean that it doesn't include other types of things. I mean, that is the key. That's the crux of the dispute, right?

[00:02:15] Speaker 00:
Your Honor, I think CIT found that the word including in the second sentence creates ambiguity as to whether the second sentence is definitional or just illustrative.

[00:02:29] Speaker 00:
Commerce did not make that finding in the underlying proceeding, and The record shows that the intent was always to use the second sentence as the definitional character of the priming and coating that is required for a product to be included within this code.

[00:02:55] Speaker 00:
There is like a 2019 scope ruling from Commerce about a different product that is also made of polyester. And in that ruling, Commerce said that the second sentence meaning the priming and coating that is that promotes receptiveness, which is, I think, the second key argument that we're making, that promotes receptiveness is a required characteristic of the product to be included within the scope.

[00:03:30] Speaker 00:
And in fact, they found that that product was not included within the scope, even though it was coated with a material that does not promote adherence or receptiveness of the fabric to ink.

[00:03:47] Speaker 00:
So I think the key question here is whether commerce's use of receptiveness instead of adherence is contrary to the plain meaning of the order and whether it unlawfully changes the meaning of the scope. As mentioned, the commerce found in the scope ruling that The CBM, our product, is included within the scope because CBM's primed and coated side is receptive to artist materials, receptive instead of adherence.

[00:04:27] Speaker 00:
And they also dismissed two expert reports that show that the coated side did not perform any better. And in fact, it performed worse in 75% of the cases.

[00:04:46] Speaker 00:
against the uncoated side, meaning that the coating used does not promote adherence of the ink to the underlying fabric. But despite this, commerce dismissed all this evidence because it reinterpreted the meaning of adherence as receptiveness.

[00:05:06] Speaker 03:
Is this getting into your argument about how commerce erred by not considering certain K2 sources?

[00:05:17] Speaker 00:
No, Your Honor.

[00:05:18] Speaker 03:
This is more on K1?

[00:05:19] Speaker 00:
Yeah, I think it's K1, and it's rather the argument is that does receptiveness mean the same thing as adherence?

[00:05:30] Speaker 03:
And the answer is no, because... But you are also arguing that there is a failure to move on and consider K2 sources, right?

[00:05:39] Speaker 00:
Yes, that's also a separate argument, and...

[00:05:43] Speaker 00:
And to be clear, I was not the record counsel when the brief was drafted or filed. And I'm briefing. But you're stuck with it. I'm kind of stuck with it. But the primary argument is legal, meaning that whether commerce's determination that receptiveness means adherence is contrary to the plain meaning of the order. And there is evidence on the record showing that adherence means the act of adhering, meaning that to hold fast or stick to a surface.

[00:06:22] Speaker 00:
And in the context of this order, it obviously means whether a fabric, a coated fabric, can actually adhere the ink that lands on the surface.

[00:06:38] Speaker 04:
You want to abandon your K2 argument now?

[00:06:41] Speaker 00:
I think the K2 argument is that, and I'm not going to talk about it in detail, but it's basically that... You want to abandon it?

[00:06:55] Speaker 00:
If you say so. No, no, no.

[00:06:57] Speaker 03:
You get to choose.

[00:06:59] Speaker 00:
I want to talk about the main argument instead of the K2 argument.

[00:07:06] Speaker 00:
So the adherence, there's evidence on the record that adherence means entirely something else than receptiveness in the sense that adherence requires a coating to promote the ink to stick to the surface. And as I mentioned, there are two test reports on the record that say that this product is not coated with the material that promotes the adherence of the of the ink to the fabric, and in contrast, receptiveness essentially, commerce never defined what receptiveness means, but the plain meaning of it is obviously different than adherence, meaning that there's a dictionary definition on the record that defines receptiveness as the act of receiving, meaning and in the context of this order, whether ink can land on the surface of a fabric.

[00:08:13] Speaker 00:
But the adherence in the context of the order is a lot more limited, and for that reason, the commerce is like replacement, substitution of the of the term adherence with receptiveness is contrary to law, and I believe should be reversed by this court. And I will note that the reinterpretation of the scope essentially infected Commerce's entire factual analysis as to whether our product is within the scope of the order, because As I mentioned, there are two test reports on the record that show that the product is not coated with a material that promotes adherence of ink to the fabric.

[00:09:05] Speaker 00:
But all Commerce said was, we do not adopt the definition of adherence as the experts did.

[00:09:16] Speaker 03:
They looked at whether it improves the receptivity of the canvas.

[00:09:20] Speaker 00:
Exactly. Okay. But the argument is that receptivity is not the same thing as adherence. And one of the test reports, Lab 2010, test report actually did not adopt any official definition of adherence. but they just tested the product based on an international standard, ASTM standard, and found that the coating does not promote adherence of the material, of the ink, artistic material.

[00:09:54] Speaker 00:
And the other experts basically adopted the dictionary definition of adherence and used that as the basis to determine whether a product is in scope or not.

[00:10:10] Speaker 00:
And if this court agrees with our definition, with the plain meaning of adherence as used in the scope, then Commerce's finding would also fail the substantial evidence standard because it would mean that they essentially ignored or misinterpreted two key evidence that is on the record that significantly detract from their conclusion.

[00:10:37] Speaker 03:
We wouldn't decide that in the first instance, right? If we agree with you on the legal issue, at most you're going to get a vacate and remand, right?

[00:10:44] Speaker 00:
Exactly.

[00:10:47] Speaker 02:
Okay, do you want to save the remainder of your time for rebuttal?

[00:10:49] Speaker 00:
Yes, I will save my time for rebuttal. Thank you.

[00:10:51] Speaker 02:
Mr. Kalman?

[00:11:06] Speaker 04:
May it please the Court.

[00:11:08] Speaker 04:
The scope language at issue in this case requires that the product, one, be an artist canvas, that two, has been primed and coded. This priming and coding includes the application of a solution designed to promote the adherence of artist materials. The record evidence in this case, including appellant's own scope application, clearly establishes that Canvas Banner Matisse, or CBM, is a canvas that has been primed and coded. In fact, their own patent for CBM states that it has a, quote, ink-receptive coding, end quote, that is applied to a canvas.

[00:11:44] Speaker 03:
Can I back up for a minute? Sure. Just to ask you, are you agreeing that the scope of the word includes is not really an issue in this case?

[00:11:56] Speaker 04:
We do agree.

[00:11:57] Speaker 03:
Whether that sentence, the second sentence of the order, is exemplary or whether it's definitional.

[00:12:03] Speaker 04:
Yes. We do not think that that's something the court needs to decide, in this case to affirm, because Commerce here determined that this was adherence. It didn't rely on anything other than these.

[00:12:14] Speaker 03:
So now the question, the challenge that we have before us is whether Commerce had a too broad of an interpretation of adherence, right? Yes.

[00:12:25] Speaker 04:
I think that's fair assessment, Your Honor.

[00:12:27] Speaker 03:
And so why is the adherence meaning receptivity? Why is that correct? What sources support Commerce's determination?

[00:12:38] Speaker 04:
So Commerce did a thorough analysis here of the K-1 sources and looking back at how it has defined adherence. And it's...

[00:12:51] Speaker 04:
went through all of its prior scope rulings, but probably most importantly was the ITC final report, which said, quote, artist canvas is a surface for the graphic presentation of painted or printed images. It is made from woven fabrics that is primed or coated, gessoed to accept paints or inks. And that's Appendix 473.

[00:13:14] Speaker 04:
And commerce went on.

[00:13:15] Speaker 03:
So it's the to accept phrase that's the most, what you're focusing on?

[00:13:20] Speaker 04:
Right, to accept and then through its prior scope of rulings, commerce further refined that to mean receptivity. And commerce went through and analyzed that and showed that the receptivity is how from the ITC ruling all the way through the various scope rulings that are discussed on the record. Receptivity is what it has understood adherence to mean throughout this order.

[00:13:54] Speaker 04:
And I think that that's particularly important here, where Commerce rejected the third-party testing that was put on the record by the appellant here.

[00:14:08] Speaker 04:
And of particular importance here, the third-party testing noted that the testing results reflect a subjective qualitative judgment that's based on whether the adherence of the ink was the worst, the same, or better. And so Commerce determined that the definition of adherence that's put forth by the appellant on the record was not a workable definition because it relied on just the subjective interpretation of these experts versus what commerce relied on, which was the idea of receptivity, and that's very clearly established in the record here.

[00:14:45] Speaker 03:
Is there anything about the language to note the adherence of that changes it, changes that analysis? You know, I mean, I think that's part of the argument that I saw in the briefing was really emphasis on promote the adherence. Somehow that made it different than just adhering or being receptive.

[00:15:09] Speaker 04:
Right. I think that's fair, Your Honor. It promotes the adherence. As here, we have a product that is clearly designed to be printed on, to receive printed images. I think that's the same thing, and Commerce determined this as well, as adherence. When we're in this world of artist canvases, and if you look at the Rest of the scope language, it gives examples of what artist canvases are, and one of them is printable canvases.

[00:15:44] Speaker 04:
And so here where we have CBM, which they're patent notes, that is a...

[00:15:54] Speaker 04:
is designed to be printed on with ink printers, and their own statements describe the use of this. The expected use is for art reproduction. This is clearly a, Converse concluded rightly that this is clearly a canvas that's designed to be printed on, which is a printable canvas.

[00:16:18] Speaker 04:
My friend on the other side noted the prior evidence of the third-party testing.

[00:16:28] Speaker 04:
And I just wanted to flag that Commerce noted beyond just the subjectiveness of it the several other problems. The individual examiner stated that, quote, no chemical analyses can characterize adherence and no standardized tests are available to measure adherence. That's at Appendix 473. And underlying sort of all of this is The appellant here is trying to draw a distinction between what it understands to be the bottom coat of priming and coating and a top coat of priming and coating.

[00:17:03] Speaker 04:
And they're arguing that the bottom coating doesn't promote the adherence of ink properly. and the top coating is receptive to ink, but that doesn't matter. And my understanding of commerce concluded there that the distinction they're trying to draw between the bottom and top coating is irrelevant. And it appears from their testing that it was analyzing only this bottom coating that they're saying. And the...

[00:17:40] Speaker 04:
two more things I wanted to emphasize here. My friend on the other side knows this was a reinterpretation of the order.

[00:17:51] Speaker 04:
And as I noted before, from the time of the ITC report, Commerce was understanding promotes the adherence to mean accepting artist materials, which it further refined to mean receptivity. The The scope orders that Commerce has found to be out of scope, in both of those determinations, the material, the product at issue, the printed side of the material was not used at all for printing or for putting artist materials on it, which is not the case here on this record.

[00:18:31] Speaker 04:
And my final note, if there's no further questions, is that my friend on the other side, There's discussion of not using the K2 sources. K2 is clear that those only need to be used if the K1 sources are not determinative, which Commerce did determine that the K1 sources were determinative here.

[00:18:51] Speaker 03:
What would we, just curious, what would we say in a review would apply as to whether Commerce's determination that it didn't have to go beyond K1, K1 resolved the issue so it didn't have to go to K2? Is that something reviewed for substantial evidence? Can you say that one more time, Your Honor? What is the standard that applies, the legal standard that applies to our review to the question of whether commerce erred and not moving on to K-2?

[00:19:20] Speaker 03:
I think it's got to be something.

[00:19:22] Speaker 04:
I think it would be reviewing it for substantial evidence. If this court concluded that commerce's K-1 determination wasn't supported by substantial evidence, then – I don't necessarily think that it would be an error to move on to K-2, but it would just be not supported by substantial evidence.

[00:19:37] Speaker 02:
Okay. Thank you, counsel.

[00:19:40] Speaker 04:
We respect requests that you affirm the court international trade.

[00:19:44] Speaker 02:
Mr. Thompson? Yes.

[00:19:53] Speaker 01:
Good morning, Your Honors. George Thompson on behalf of Defendant Appellee Eckert Textiles. I'd like to follow up on the excellent presentation by Government Counsel. There were a couple of points which the panel raised that I'd like to go into more detail upon. First, regarding K2, I would point out that the initial scope request specifically disavowed the application of K2 and said this can be a K1 determination.

[00:20:24] Speaker 01:
So any allegation that commerce somehow erred by not conducting a K2 analysis?

[00:20:30] Speaker 02:
I don't think that's fair. So, for example, you all often argue that something is absolutely clear and can be decided as a matter of law, but you both think it's absolutely clear the opposite way, and that's kind of what is at issue here with them saying it can be decided under K-1 in their favor.

[00:20:49] Speaker 02:
If it can't be decided under K-1 in their favor, they absolutely think you should go to K-2, or at least I think they have made that argument, whether he's sticking to it or not.

[00:20:57] Speaker 01:
Well, then I would point out that, as government counsel noted, it's sufficient to make a determination on K-1, so there's no need to get to K-2.

[00:21:12] Speaker 01:
and I don't understand that Appellant is arguing to the contrary. Of course, they say K1 is sufficient, so that's kind of the battleground here, along with the plain terms of the anti-dumping duty order. Now, I'd like to go into more detail on the testing. We have expert reports that say the product is inferior for ink adherence.

[00:21:39] Speaker 01:
Now, that's a little bit disingenuous, I believe, because the testing was done on the product itself based on the substrate, not on the product as imported. And indeed, one of the experts, Dr. Work, acknowledged that the priming coating layer contributes, quote, slightly to absorption of ink. So even under the constrained interpretation, that is presented by appellants, that substrate does have ink adherent properties, but that's not the proper test.

[00:22:17] Speaker 01:
You don't just look at whatever the substrate was, and we have no idea what the chemical composition was.

[00:22:24] Speaker 01:
We don't even know if there was a chemical primer at all. The imported product has a top coat, and the expert report pointed out that the top coat does allow the purpose of the top coat added to the bottom coated side is to hold the pigments up on the surface, thereby optimizing print quality color and to enhance water resistance. That's adherence right there.

[00:22:55] Speaker 01:
However you define that term, it holds the ink on top of the product. So it's the testing did not address the actual imported product. And that's based on the misinterpretation of the order that somehow the lower...

[00:23:13] Speaker 01:
The primary level has to be ink adherent as well. Here it does satisfy that requirement.

[00:23:21] Speaker 02:
We're out of time, so thank you for your argument.

[00:23:24] Speaker 01:
Thank you, Your Honor.

[00:23:26] Speaker 02:
Mr. Bills, you have some rebuttal time.

[00:23:52] Speaker 00:
Your Honors, I want to start with the last point that my colleague made in connection with the testing report and how the product was tested. If you look at Appendix 153 through 162, This is the attachment A to doctor work export report that details how the test was conducted.

[00:24:25] Speaker 00:
And you will see that in column three of each page, they describe the product and they say that test with coating with top coat front and back, which means that the product was tested with the top coat on.

[00:24:45] Speaker 00:
So, the record does not conclusively show that the doctor work tested the product with only the fabric or just the bottom coat. It does show that the product also had the top coat, which means that even with the top coat, the product just failed the adhesion test.

[00:25:13] Speaker 00:
The second point about Commerce's reliance on ITC reports as the primary source for reinterpreting adherence as receptiveness is that the problem is that the ITC report does not actually use the term receptiveness or receive at all.

[00:25:32] Speaker 00:
It just says that the product, the artist canvas, is primed and coated to accept ink to the fabric.

[00:25:44] Speaker 00:
acceptance is also not defined, and there's no evidence that the ITC intended to redefine adherence in that general description of the product, but rather it was referring, in my opinion, to the product as one of the qualities of the product as to be able to accept ink. But the plain meaning of adherence is different than receptiveness and acceptance, as the record shows. And that's why I believe commerce's reliance on this specific K1 source is not sufficient to support its determination that adherence means something other than adherence.

[00:26:27] Speaker 00:
And The other source that they relied on in their scope ruling was their prior scope rulings, determining that receptiveness is the appropriate standard for this product. But the...

[00:26:45] Speaker 00:
If their erroneous determination in 2019 as to the meaning of adherence and reliance on that in this court ruling only compounds the error that they made at the time and should not be a basis for supporting their argument that the correct interpretation of the term adherence is receptiveness.

[00:27:14] Speaker 00:
And As to the K2 issue, yes, the plaintiff appellant argued in the scope ruling that the K-1 sources should be dispositive to show that the CBM is not included within the scope of the order.

[00:27:37] Speaker 00:
But as you said, Your Honor, it does not mean that they abandoned the K-2 argument. And the scope ruling request actually shows that they They provided a lot of information showing that the K2, if Commerce were to make a K2 analysis, they would have found that the CBM product is different from the products that are typically covered by the scope of the order. And that's why the claim that Berger did not argue that K2 is applicable is not accurate.

[00:28:21] Speaker 02:
Okay, well, I think we're out of time, so I thank all counsel for their argument. This case is now taken under submission.

[00:28:27] Speaker 00:
Thank you.