Right. This is what it is. This is what it is. Right. This is what it is. This is what it is. Oh, there it is. Right. Thank you, Your Honor. Next case is tied plastic bags industry versus United States. All the ETH-L-L-E-R-L-Carrier Bag Committee. 2014-1237. This is Chair. Good morning, Your Honor. May I please the court? My name is Irene Chen. I'm here on behalf of talent. The Department of Justice Ty Plastic Bag Industries in Master Packaging and Interplast Group limited. As we demonstrated in our brief, Commerce's denial of TPPI's reported blue corner rebate adjustment to its general and administrative expense was not supported by substantial evidence for an accordance with law. Now this error in turn rendered Commerce's dumping margin for TPPI unsupported by the evidence and not in accordance with law
. Now, why does this all matter? Why is there denial of the flu-corner-revated just that matter in terms of the dumping margin calculation? Well, commerce stated in the final results that TPI could have claimed a duty drawback adjustment according to the statute, but it did not do so and the evidence didn't mandate such an adjustment. Well, for duty drawbacks, the way that it works in a dumping margin is when the home market price, when the foreign producer imports products that are subject to import duties, it's reasonable to assume that those duties are included in the home market price, which is in turn going to be compared to the US price. Now, for a duty drawback, in some situations, the foreign producer will be able to claim a rebate of those. I may be confused, but I don't understand this case having anything to do with duty drawbacks. Am I wrong? Isn't that sort of that errand sentence that commerce included that said, well, maybe you can get some love under the duty drawback provision, even if you can't get it here? But that's not actually what was decided by commerce and nor is it on appeal to us. Isn't that correct? Well, that's correct. I'm giving the following background on this issue. Stick to what's actually on appeal, which is, is there substantial evidence for commerce and determination that a rebate, which I don't think anybody denies, is given on the basis of exportation, is nonetheless a cost of production overall? Yes, well, to give the court some background on why duty drawback does not apply here, because it's a material issue in that commerce, as the court stated, stated that this, this is what they should have claimed for the adjustment. So with duty drawback, if the import duties are embedded in the normal value, the foreign market price, we disagree, we're not talking about duty drawback. So can you get, commerce may know decisions about duty drawback, there's nothing out of appeal to us about duty drawback. So focus on the only issue that is not appeal, which is whether or not there's substantial evidence in this record for commerce's determination about the export price rebate. Well, we would submit that there is not. The point here is that there is some imbalance by denying the adjustment the offset to GNA expense for duties that have been rebated to TPPI. TPPI paid a compensation fee to its raw material suppliers for the import duties they incurred upon importing the raw material products into Thailand. And in turn, when they exported that product to the US, they got a rebate. So in essence, their cost of production actually went down. And the appellate is talk about how there's, you know, some distinction between cost of production but one cost of production. The cost of production didn't go down for the domestically sold product, right? Well, yes
. And but there's just one way to protect it. Is the answer yes or no? It did not go for the, go down for the domestic product. Right. But the key here is that there's only one cost of production. There's one cost of production for domestically sold and exported product. So for the domestically sold product where they pay the import duties or the compensation fee, those products are priced accordingly. Those, those are, that's embedded in that. And the cost of production analysis, it's to try to figure out what the normal value is of the domestically sold product, right? The, well, if there's a cost test, in certain situations where it commerce suspects that price, that the home market product is being sold under the cost of production, they will build a cost of production. They will, they will compile the cost of production of making the home market product. So when you look at that, that includes the cost of materials and DNA expense along with some other expenses. So that home market cost of production should not include exported goods that upon which they've received a rebate. Why? Because it's inflated the home market value. Because as I was saying about duty drawbacks, the reason why the statute talks about making an upward adjustment to export price is because they want, there's a cemetery here. They have to compensate for the fact that- I guess what I'm wondering is, why isn't, why is it wrong for us to say that the rebate program doesn't touch or doesn't inflate the home market price, but it does deflate the export price. And that's what's going on. Well, because the cost of production is just one cost of production, whether it's for home market or exported goods. When commerce compares export price to home market, export price is just that. It's just what the price they're charging to export these goods to the US
. So there's no mechanism under duty drawback as stated. So there needs to be a secondary adjustment. What is that secondary adjustment? Otherwise, you have a home market cost of production that's artificially high. You have these duties in there that have been rebated to the Thai producer that have not been pulled out. But I think the problem, though, is the standard of review. You make a very logical case, but we have to say is there's substantial evidence for commerce's determination here. And why isn't it enough that they say these rebates may well have implicated something of value to the company, but they're nonetheless not related to production costs. And production costs are all well out of the consider. These rebates are related solely to a different act, which is exportation. And exportation related expenses are not part of production costs. Well, respectfully, we would disagree that it's not related to production costs. And in fact, in a prior case, commerce stated that there is only one cost of production, whether it's domestically sold goods or exported goods. When they buy the resins from these raw material suppliers, they're just buying a whole lot of them. This is, so it's summer going to go into domestically produced, summer cost of production, shipping to the US, for example. Suppose that you produce all the goods, here are your goods, boo. Now you're going to pay a freight of 10 cents on the goods, in order to get it shipped on a giant ship that's going to sail it to the US. Is that shipping cost you're going to pay fairly characterized as cost of production? Is a cost incurred only in the exportation? Is that part of cost of production? The statute does account for differences in freight, shipping, taxation to essentially create a symmetry between the export price and the home market price. And so in a situation where you have an importer who's also an exporter, duty drawback takes care of that
. But in this case, TVBI is not the importer of the goods upon which it received the export rebate. So that's the question. Then you have to go to the next level. There's still needs to be an adjustment. I guess the problem is you have identified in the duty drawback setting, something that works to the disadvantage of your client, because he's not both importer and export. But you're asking us to more come versus what seems like a reasonable determination on these facts, namely the expense incurred or the benefit gained by virtue of exportation is simply not a part of the cost of production. It may be resultant unfairness to your client, in this case, because this other provisions I could let them garner some benefit. But I'm a little nervous about messing around with what would otherwise reasonably be encapsulated in the notion of production costs. Like you admit, freight costs to export, not a part of production costs, in fact, are separately called out. Well, the export tax, or in this case, export rebate, feels a lot more like something related to freight and shipping related to purely export. Here's the main, with duty drawback, it's a dollar to dollar adjustment. So it's a very direct and material adjustment. In this case, it's not so much that it's export. It's almost like other income. As the cases we cited with grant income, commissions, dividends, it's sort of this part of other income that needs to reduce the cost of production. And we cite in the case of the cost of shipping. Why doesn't it simply reduce the cost of shipping? You've got to pay freight to get it over there. How come the rebate isn't just offsetting debt costs? Why is it suddenly a part of that? Because that matters because we're comparing a home market price to an export price
. So the statute takes that very seriously. They want it. It's a magical price to price comparison that's apples to apples as much as possible. Now with cost of production, in light wall rectangular pipe and two for Turkey, I mean, the commerce says that the part of uniformly calculates a single cost of production, which incorporates the cost of producing both exported and domestically sold finished product. Now, I understand your honor's nervousness with stating that, okay, well, this is relating to export, but think of it more as other income. It's an offset to gene access, which is not. It's more to be nervous. It's not. I'm sure you wanted to save time. You can finish your thought. Sure, I would finish my thought. It's not a dollar to dollar adjustment. We're talking about an offset to overhead of the company as a whole. Thank you. There's a rest of your time. And the Kelly argument is split between this to Majorist for the government. Yes, Your Honor. You're going to take 11 minutes
. Yes, Your Honor. And you're going to watch the clock for the benefit of your colleague, Mr. Schneider. I will, Your Honor. Right. May I please the court? As the appellate noted, the appellate raises one issue in this appeal. Was the trial correct in sustaining commerce's decision to exclude blue corner rebate revenue from the appellance cost of production, or more specifically, was commerce reasonable in deciding that the appellance calculation of GNA expenses should not be offset by blue corner rebate revenue? Now, the overall framework of this case is calculation of normal value. And as your honors are aware, under the below cost test, commerce has the ability to disregard sales if they're below cost of production. That's what led to this case, because the appellance's file or commerce request of the Section D questionnaire and the appellant responded. And that's where we get the underlying facts that are critical to this case. So what happens is, as the appellant noted, is the appellant purchases risk from one of its suppliers. The domestic suppliers incur an import duty. They in turn charge a compensation fee to the appellant for those import duties. And then the critical point, which your honors emphasized in the appellance presentation, is that upon export, the appellants can use tax certificates that they receive from paying those compensation fees. They can provide these tax certificates to the Thai government upon export. They only get the blue corner rebate, spawn export. And that's critical because this court noted, there is only one cost of production here, and it applies in both markets, because we're talking about two markets here, the home market. And the rebate equal to the amount of the compensation fee? Yes, your honor
. Because the purpose is to promote exportation. And so it covers those. So would you say that this is a very, very close cousin or maybe even almost identical to a duty drawback adjustment? It's a similar situation. Now I would notice, the court noted that the appellants don't note in their brief and don't argue that they sought a duty drawback under the statute that they sought a rebate. What would have happened if they had? So they would have needed to submit paperwork essentially tracing together these various steps that I talked about. They would have to show the link between the compensation fee and the import duties. It would largely be an issue of providing receipts. But in commerce's view, just the fact that there's this intervening player, the supplier, that's actually importing the resin into Thailand. That doesn't somehow break the chain and then deny Thai plastic bags the opportunity for a duty drawback adjustment. Is that correct? Yes, your honor, in the sense that there's only one situation where commerce has created a carve out and that's under the duty drawback statute. There's nothing in that statute that prohibits the appellant in this case from having sought a duty drawback. Now as your honor noted, that what I want to understand is what is commerce's position. Not the fact that someone could request it. Of course they can request it. But what would commerce do in response to that request? Is commerce's understanding interpretation position of the statute on this score amenable to actually granting that adjustment? Or does commerce have some other view where it rules that, no, forget it. You weren't the actual direct and porter of the resin so you can't have the adjustment. Now obviously those are different facts and what's before us. But there's nothing in the statute that precludes in these circumstances the appellant seeking a duty drawback
. But that wasn't an issue. Okay, then you've went back to you, understand. Do I need to ask my question again? Make sure that I get an answer on it. I mean, if you want to say commerce today has no position that we reserve the right to completely deny someone in typistic bag's position, duty drawback adjustment by virtue of the fact that there happened to be some intervening supplier that was actually importing the resin. Then go ahead and tell me that. But don't tell me again that, okay, of course anybody can request it and we'll accept the request. I apologize, you're on the right. Commerce doesn't have a, I think what you're on is asking is there a absolute position in commerce's view that in these circumstances with an importer in between that they could not seek a duty drawback and that is not commerce's position. This would be a very different case had the appellant sought a duty drawback and provided paperwork showing the link between the compensation fees and the import duties. And that is something that was recognized in the prior review in this case. So this exact issue came up in the prior administrative review. Commerce noted that the appropriate adjustment in this circumstance, if one were to be made, would be to increase the appellant's US price under the statute. Now to answer your honors point, commerce specifically said, we only make such adjustments under the duty drawback statute where there is a sufficient link between the import duty or taxes and the rebate and whether there are sufficient imports of the imported material to account for the duty drawback received. So the point being that appellant didn't make any effort to do this, so we don't have those facts before. They didn't seek a dues drawback. But commerce doesn't have a view that it's prohibited that they could seek one, and the statute doesn't prohibit them from seeking one. But it was never an issue in the case, because they never sought one period. What they're trying to do is shoehorn this situation into the duty drawback statute
. And as your honor pointed out, it's a different circumstance. The duty drawback statute deals with an adjustment to export price. Here what they're trying to do is say, well, our cost of production should be offset. Our DNA expenses should be offset. And there's no statute that allows them to do that. And moreover, I think it's critical to note that the appellants never even argue that the blue corner rebates an issue, our DNA, that their general and administrative expenses, they never argue that in their brief. That's what we're talking about here. They're arguing, they never say it's part of DNA, but they argue it should be offset from it. And considering the standard of review applicable here, whether commerce made a reasonable determination, it strains reasons to say that they didn't, when there's no statute saying they have to do something like this. There's no statute that speaks to what the appellant is asking them to do. Does that answer your honor's question? I did. So that's the bottom line issue. And I would also stress that there is one cost of production applicable in this case. So in the circumstance where goods are sold domestically, that is going to lead to an increase in home market price and normal value because they have to recruit that cost. That the cost has to be recouped because there's no rebate. This, the principal at play here, these blue corner rebates only apply upon exportation. And so the appropriate adjustment of one to where to be made would be to US price, not to reduce and cost of production. Just to touch on a couple more issues, appellant, the cases that are relied upon by the appellant in their briefs just deal with different circumstances
. Now they rely upon cases to concern government grants. Those situations are quite different than what we have here because the cases that are cited concern what we typically think of as subsidies or government grants. Those that might be used for the benefit of the company as a whole or to free up company funds to be used elsewhere in the business, they're not tied to subsequent actions. Here, you only get the rebate if you export your goods. And so those cases from our perspective just aren't on point. I would also note that this is not being new. Commerce addressed this exact same issue in the prior review and reached these and has been consistent on this point. And not only that in other reviews as well, Commerce has consistently refused to allow adjustments to cost calculations for revenue derived from export promotion programs. Just as a couple examples, Commerce held this in the certain hot-rolled Carbons Deal flat product committee review and also from the certain frozen and canned warm water shrimp from Brazil review. What about the US Steel case? Right. So in that case, the tabla we relied upon by the appellant and we are perspective is it's distinguishable for a lot of reasons. Now we would note this is an old case. It's from 1998, so it's prior to the Urgway round. That case is dealt with situation where normal value was based on third-party sales. So sales from Argentina to China. And the issue there was not import duties like we have here at the issue there was value added taxes. So essentially what happened in that case is that Argentine VAT type taxes. Connected to exports, all right? Well, yes, but the distinction in that case from here is the fact that there was a mismatch that was corrected via statute after the case was decided. So in that case, what was going on is that third-country prices between China, Argentina and China excluded these VAT taxes for the cost of production included them. And so commerce did to correct or what Congress did to correct this imbalance happened in 19 USC section 1677B sub part B3 where they provided for reduction of cost of production for these VAT taxes. And it was to correct the imbalance. We don't have that situation here. There is no imbalance. And arguably doing what the appellants are asking would create an imbalance because as I noted before, in sales to the home market, those prices are increased because the import duties are incurred but there's no rebate. So that cost has to be recouped through the price. But by making a reduction to cost of production, that affects both markets. So you arguably created a distortion in that circumstance. In US Steel, the statute corrected an imbalance. But aside from that, the case felt a very different fact because it dealt with the VAT tax, not import duties. And also because it dealt with this third party situation. And the statute's not applicable for these circumstances. Do you think there's an imbalance on the facts here? No, because I think the big distinction is, that's why the duty drawback adjustment statute was written, right? Right. There was a perceived imbalance distortion and that's what the statute was designed to correct. Right, right. And you even fact admitted that this fact pattern is very, very similar to what's going on with duty drawback adjustments. Right, that's the statute
. So in that case, what was going on is that third-country prices between China, Argentina and China excluded these VAT taxes for the cost of production included them. And so commerce did to correct or what Congress did to correct this imbalance happened in 19 USC section 1677B sub part B3 where they provided for reduction of cost of production for these VAT taxes. And it was to correct the imbalance. We don't have that situation here. There is no imbalance. And arguably doing what the appellants are asking would create an imbalance because as I noted before, in sales to the home market, those prices are increased because the import duties are incurred but there's no rebate. So that cost has to be recouped through the price. But by making a reduction to cost of production, that affects both markets. So you arguably created a distortion in that circumstance. In US Steel, the statute corrected an imbalance. But aside from that, the case felt a very different fact because it dealt with the VAT tax, not import duties. And also because it dealt with this third party situation. And the statute's not applicable for these circumstances. Do you think there's an imbalance on the facts here? No, because I think the big distinction is, that's why the duty drawback adjustment statute was written, right? Right. There was a perceived imbalance distortion and that's what the statute was designed to correct. Right, right. And you even fact admitted that this fact pattern is very, very similar to what's going on with duty drawback adjustments. Right, that's the statute. Congress created this car about to allow for adjustments in price. And I think in this situation, the appellants could have sought a duty drawback. We don't dispute that they couldn't have. They didn't under these facts. That creates an adjustment to US price if these links are shown. If there's going to be a method of corrective situations like this, it's through the statute that exists. Because again, the rebates only affect export. So it makes sense to adjust US price, not to adjust cost of production, which affects both markets. But the appellants just simply didn't seek one. So it's not on review for it, Quart. Thank you, Mr. Margis. You want to yield the floor to Mr. Potem. Yes, Your Honor, and I thank you for your time. We'll have four minutes. Thank you, and good morning, Your Honors. Your Honors, the rebate of import duties has to be handled under the statute as price adjustment under 1677A
. Congress created this car about to allow for adjustments in price. And I think in this situation, the appellants could have sought a duty drawback. We don't dispute that they couldn't have. They didn't under these facts. That creates an adjustment to US price if these links are shown. If there's going to be a method of corrective situations like this, it's through the statute that exists. Because again, the rebates only affect export. So it makes sense to adjust US price, not to adjust cost of production, which affects both markets. But the appellants just simply didn't seek one. So it's not on review for it, Quart. Thank you, Mr. Margis. You want to yield the floor to Mr. Potem. Yes, Your Honor, and I thank you for your time. We'll have four minutes. Thank you, and good morning, Your Honors. Your Honors, the rebate of import duties has to be handled under the statute as price adjustment under 1677A. It can't be handled as a cost adjustment to normal value under 1677B. And so the question is for this sort of program, where is the potential imbalance? Where is the distortion? And the statute recognizes under the duty drawback provision that when you have a rebate of import duties only on the export side, it tends to lower your export prices. And when you're comparing that to a home market price that is priced to capture the full cost of production including the import duties, that's where the imbalance is. And so the way you remedy that imbalance is you adjust the price side, you increase the export price, so everything stated on an apples to apples basis. But they didn't request that adjustment. They didn't request an increase to the export price. I certainly think they could have. At the very, I mean, I know that they're arguing it would have been impossible to do so, but frankly, to preserve that argument, I think they at least had to try. They had to make their case to commerce. And if commerce was unsatisfied and deny it, well, they could certainly appeal that, but they didn't even try. What they're doing instead is seeking to reduce their costs. Instead of... But if commerce said no, you can't get it on duty drawback because you're not both the import or exporter. For that have changed anything that you're arguing to us today. I'm not sure that it would. I mean, that's not our case
. It can't be handled as a cost adjustment to normal value under 1677B. And so the question is for this sort of program, where is the potential imbalance? Where is the distortion? And the statute recognizes under the duty drawback provision that when you have a rebate of import duties only on the export side, it tends to lower your export prices. And when you're comparing that to a home market price that is priced to capture the full cost of production including the import duties, that's where the imbalance is. And so the way you remedy that imbalance is you adjust the price side, you increase the export price, so everything stated on an apples to apples basis. But they didn't request that adjustment. They didn't request an increase to the export price. I certainly think they could have. At the very, I mean, I know that they're arguing it would have been impossible to do so, but frankly, to preserve that argument, I think they at least had to try. They had to make their case to commerce. And if commerce was unsatisfied and deny it, well, they could certainly appeal that, but they didn't even try. What they're doing instead is seeking to reduce their costs. Instead of... But if commerce said no, you can't get it on duty drawback because you're not both the import or exporter. For that have changed anything that you're arguing to us today. I'm not sure that it would. I mean, that's not our case. I think that we don't get to sit here and sort of figure out equity. We only get to apply law. Well, you're on the other... The only issue in front of us is this or is this not fairly characterized as a cost of production? And in fact, that's not even the issue. Is the Congress making an unreasonable decision when they said it wasn't fairly characterized as a cost of production? No, but you're on a personal by statute. It has to be treated as a price adjustment under 1677A. And there's no distortion here that needs to be corrected. Ms. Chen, if you'd like... No, but they had sought it as a price adjustment on U.S. price and been denied, we might have to decide whether that decision was wrong or not. Right. But that wouldn't give us a basis to muck around with what is to find the production costs or not under this statute
. I think that we don't get to sit here and sort of figure out equity. We only get to apply law. Well, you're on the other... The only issue in front of us is this or is this not fairly characterized as a cost of production? And in fact, that's not even the issue. Is the Congress making an unreasonable decision when they said it wasn't fairly characterized as a cost of production? No, but you're on a personal by statute. It has to be treated as a price adjustment under 1677A. And there's no distortion here that needs to be corrected. Ms. Chen, if you'd like... No, but they had sought it as a price adjustment on U.S. price and been denied, we might have to decide whether that decision was wrong or not. Right. But that wouldn't give us a basis to muck around with what is to find the production costs or not under this statute. I agree. And regardless of what commerce would have done in terms of that price adjustment, what they did in terms of denying a cost adjustment is correct. Ms. Chen acknowledged that there's no refund of these import duties on their home market sales. And she acknowledged that those home market prices are not reduced thereby. In other words, if they're spending $100 a ton on resin, maybe they're getting $20 a ton back when they export. But they're still incurring the full $100 cost on their home market sales and they have to price it accordingly. Those home market prices are not reduced. It would be a mis... So the cost of production that you're comparing it to in the sales below cost comparisons, all shows should capture the full amount of that resin including the import duties. It's already stated on an Apple's to Apple's basis. If one includes... If one is not reduced by the BCR revenues, then the other shouldn't be reduced either. Everything already is on an Apple's to Apple's basis
. I agree. And regardless of what commerce would have done in terms of that price adjustment, what they did in terms of denying a cost adjustment is correct. Ms. Chen acknowledged that there's no refund of these import duties on their home market sales. And she acknowledged that those home market prices are not reduced thereby. In other words, if they're spending $100 a ton on resin, maybe they're getting $20 a ton back when they export. But they're still incurring the full $100 cost on their home market sales and they have to price it accordingly. Those home market prices are not reduced. It would be a mis... So the cost of production that you're comparing it to in the sales below cost comparisons, all shows should capture the full amount of that resin including the import duties. It's already stated on an Apple's to Apple's basis. If one includes... If one is not reduced by the BCR revenues, then the other shouldn't be reduced either. Everything already is on an Apple's to Apple's basis. If you were to make the adjustment that a pellens are seeking, then there would be a distortion that would be a mismatch because you'd be comparing a home market price which is not reduced to a cost of production that has been reduced now by these revenues. And that is distorted. Now, Judge Chen asked about the US deal case. I mean, that's a very different situation because you have normal value. But sometimes you have a... In the dumping calculations, that the home market is non-viable. You have to go to third-country sales as the comparison market. Essentially, you're comparing US prices to third-country prices. They're all export sales that involved in the dumping calculations. And if you're comparing third-country sales to cost of production, sometimes they're going to be export incentives buried in those third-country sales. And so if the third-country sales are reduced by the rebate of those taxes, you're comparing it to a cost which includes those taxes. That's a mismatch. And that's distorted. And the US deals a firm commerce decision to reduce cost of production by those import duties that were rebated upon export. That's now captured by the statute says, now specifically, that that's a reduction that is to be made. But it's only made when the comparison market is based on third-country sales
. If you were to make the adjustment that a pellens are seeking, then there would be a distortion that would be a mismatch because you'd be comparing a home market price which is not reduced to a cost of production that has been reduced now by these revenues. And that is distorted. Now, Judge Chen asked about the US deal case. I mean, that's a very different situation because you have normal value. But sometimes you have a... In the dumping calculations, that the home market is non-viable. You have to go to third-country sales as the comparison market. Essentially, you're comparing US prices to third-country prices. They're all export sales that involved in the dumping calculations. And if you're comparing third-country sales to cost of production, sometimes they're going to be export incentives buried in those third-country sales. And so if the third-country sales are reduced by the rebate of those taxes, you're comparing it to a cost which includes those taxes. That's a mismatch. And that's distorted. And the US deals a firm commerce decision to reduce cost of production by those import duties that were rebated upon export. That's now captured by the statute says, now specifically, that that's a reduction that is to be made. But it's only made when the comparison market is based on third-country sales. That's not the situation here. This is sort of the reverse of US deal. In that case, there really was a mismatch at the distortion that required an adjustment. Here, there's not. Everything's already stated on an apples-to-apples basis. Thank you, Mr. Schneiderman. As you see, your red light is on. Thank you, Your Honor. We will hear a bottle from Ms. Chen who has almost four minutes. If she needs you. Thank you, Your Honor. Respectfully disagree with Mr. Schneiderman. The cost of production is overstated when you don't make that adjustment for the export duties that were rebated and brought back into the company. Those are company revenues. That is other income to the company
. That's not the situation here. This is sort of the reverse of US deal. In that case, there really was a mismatch at the distortion that required an adjustment. Here, there's not. Everything's already stated on an apples-to-apples basis. Thank you, Mr. Schneiderman. As you see, your red light is on. Thank you, Your Honor. We will hear a bottle from Ms. Chen who has almost four minutes. If she needs you. Thank you, Your Honor. Respectfully disagree with Mr. Schneiderman. The cost of production is overstated when you don't make that adjustment for the export duties that were rebated and brought back into the company. Those are company revenues. That is other income to the company. So if you don't adjust the COP, you may have a situation where certain home market sales actually fail the cost test. You should have inflated COP and home market sales that have been priced by the company based on their overall finances. So we'd say that this is actually distorted is not an apples-to-apples comparison. Now, as far as duty drawback is concerned, TDPI, they knew they could not qualify for duty drawback. They don't have the customs declaration forms. They don't have the documentation required to tie. The imports of resins and the exports of their products. They knew that. They made duty drawback claims for other exports. Now, in this case, commerce states that, well, it's either duty drawback or nothing. However, in the pipe and tube case from Turkey, when an export had actually not incurred the import duties, basically, according to the foreign government's program, they essentially it was a wash. They didn't pay the import duties and they didn't get the export duties rebated. There was no cost to them. And in that case, commerce actually forced them to redo their reporting to commerce. No, you still have to include the import duties that you arguably, ideally, hypothetically would have paid in your cost of production. So to say that, well, when the company is entitled to export rebates, no, this has nothing to do with cost of production, but in a situation where the company actually never paid the import duties because of the way the program was structured, no, you still have to include those in the cost of production. To admit respectfully, this is a situation where commerce, as it does with other cases, it drives the normal value high as high as possible. So to drive a higher margin
. So if you don't adjust the COP, you may have a situation where certain home market sales actually fail the cost test. You should have inflated COP and home market sales that have been priced by the company based on their overall finances. So we'd say that this is actually distorted is not an apples-to-apples comparison. Now, as far as duty drawback is concerned, TDPI, they knew they could not qualify for duty drawback. They don't have the customs declaration forms. They don't have the documentation required to tie. The imports of resins and the exports of their products. They knew that. They made duty drawback claims for other exports. Now, in this case, commerce states that, well, it's either duty drawback or nothing. However, in the pipe and tube case from Turkey, when an export had actually not incurred the import duties, basically, according to the foreign government's program, they essentially it was a wash. They didn't pay the import duties and they didn't get the export duties rebated. There was no cost to them. And in that case, commerce actually forced them to redo their reporting to commerce. No, you still have to include the import duties that you arguably, ideally, hypothetically would have paid in your cost of production. So to say that, well, when the company is entitled to export rebates, no, this has nothing to do with cost of production, but in a situation where the company actually never paid the import duties because of the way the program was structured, no, you still have to include those in the cost of production. To admit respectfully, this is a situation where commerce, as it does with other cases, it drives the normal value high as high as possible. So to drive a higher margin. To the company, this is fundamentally unfair. The statute recognizes there is a distortion. So for a situation where an importer is also an exporter, you have a duty drawback adjustment. When that's not available, as it's not available to TVBI, because it is not the importer and exporter, there should be another adjustment. Commerce has done that in the past with grant revenue, dividends, commissions, government income. There, it becomes a situation where there is no distinction between import, export duties, rebated, and other income. So we would submit that this court remand this case back to commerce to make that required adjustment. Thank you. Thank you, Mr. Jen. We'll take the case unrequited.
Right. This is what it is. This is what it is. Right. This is what it is. This is what it is. Oh, there it is. Right. Thank you, Your Honor. Next case is tied plastic bags industry versus United States. All the ETH-L-L-E-R-L-Carrier Bag Committee. 2014-1237. This is Chair. Good morning, Your Honor. May I please the court? My name is Irene Chen. I'm here on behalf of talent. The Department of Justice Ty Plastic Bag Industries in Master Packaging and Interplast Group limited. As we demonstrated in our brief, Commerce's denial of TPPI's reported blue corner rebate adjustment to its general and administrative expense was not supported by substantial evidence for an accordance with law. Now this error in turn rendered Commerce's dumping margin for TPPI unsupported by the evidence and not in accordance with law. Now, why does this all matter? Why is there denial of the flu-corner-revated just that matter in terms of the dumping margin calculation? Well, commerce stated in the final results that TPI could have claimed a duty drawback adjustment according to the statute, but it did not do so and the evidence didn't mandate such an adjustment. Well, for duty drawbacks, the way that it works in a dumping margin is when the home market price, when the foreign producer imports products that are subject to import duties, it's reasonable to assume that those duties are included in the home market price, which is in turn going to be compared to the US price. Now, for a duty drawback, in some situations, the foreign producer will be able to claim a rebate of those. I may be confused, but I don't understand this case having anything to do with duty drawbacks. Am I wrong? Isn't that sort of that errand sentence that commerce included that said, well, maybe you can get some love under the duty drawback provision, even if you can't get it here? But that's not actually what was decided by commerce and nor is it on appeal to us. Isn't that correct? Well, that's correct. I'm giving the following background on this issue. Stick to what's actually on appeal, which is, is there substantial evidence for commerce and determination that a rebate, which I don't think anybody denies, is given on the basis of exportation, is nonetheless a cost of production overall? Yes, well, to give the court some background on why duty drawback does not apply here, because it's a material issue in that commerce, as the court stated, stated that this, this is what they should have claimed for the adjustment. So with duty drawback, if the import duties are embedded in the normal value, the foreign market price, we disagree, we're not talking about duty drawback. So can you get, commerce may know decisions about duty drawback, there's nothing out of appeal to us about duty drawback. So focus on the only issue that is not appeal, which is whether or not there's substantial evidence in this record for commerce's determination about the export price rebate. Well, we would submit that there is not. The point here is that there is some imbalance by denying the adjustment the offset to GNA expense for duties that have been rebated to TPPI. TPPI paid a compensation fee to its raw material suppliers for the import duties they incurred upon importing the raw material products into Thailand. And in turn, when they exported that product to the US, they got a rebate. So in essence, their cost of production actually went down. And the appellate is talk about how there's, you know, some distinction between cost of production but one cost of production. The cost of production didn't go down for the domestically sold product, right? Well, yes. And but there's just one way to protect it. Is the answer yes or no? It did not go for the, go down for the domestic product. Right. But the key here is that there's only one cost of production. There's one cost of production for domestically sold and exported product. So for the domestically sold product where they pay the import duties or the compensation fee, those products are priced accordingly. Those, those are, that's embedded in that. And the cost of production analysis, it's to try to figure out what the normal value is of the domestically sold product, right? The, well, if there's a cost test, in certain situations where it commerce suspects that price, that the home market product is being sold under the cost of production, they will build a cost of production. They will, they will compile the cost of production of making the home market product. So when you look at that, that includes the cost of materials and DNA expense along with some other expenses. So that home market cost of production should not include exported goods that upon which they've received a rebate. Why? Because it's inflated the home market value. Because as I was saying about duty drawbacks, the reason why the statute talks about making an upward adjustment to export price is because they want, there's a cemetery here. They have to compensate for the fact that- I guess what I'm wondering is, why isn't, why is it wrong for us to say that the rebate program doesn't touch or doesn't inflate the home market price, but it does deflate the export price. And that's what's going on. Well, because the cost of production is just one cost of production, whether it's for home market or exported goods. When commerce compares export price to home market, export price is just that. It's just what the price they're charging to export these goods to the US. So there's no mechanism under duty drawback as stated. So there needs to be a secondary adjustment. What is that secondary adjustment? Otherwise, you have a home market cost of production that's artificially high. You have these duties in there that have been rebated to the Thai producer that have not been pulled out. But I think the problem, though, is the standard of review. You make a very logical case, but we have to say is there's substantial evidence for commerce's determination here. And why isn't it enough that they say these rebates may well have implicated something of value to the company, but they're nonetheless not related to production costs. And production costs are all well out of the consider. These rebates are related solely to a different act, which is exportation. And exportation related expenses are not part of production costs. Well, respectfully, we would disagree that it's not related to production costs. And in fact, in a prior case, commerce stated that there is only one cost of production, whether it's domestically sold goods or exported goods. When they buy the resins from these raw material suppliers, they're just buying a whole lot of them. This is, so it's summer going to go into domestically produced, summer cost of production, shipping to the US, for example. Suppose that you produce all the goods, here are your goods, boo. Now you're going to pay a freight of 10 cents on the goods, in order to get it shipped on a giant ship that's going to sail it to the US. Is that shipping cost you're going to pay fairly characterized as cost of production? Is a cost incurred only in the exportation? Is that part of cost of production? The statute does account for differences in freight, shipping, taxation to essentially create a symmetry between the export price and the home market price. And so in a situation where you have an importer who's also an exporter, duty drawback takes care of that. But in this case, TVBI is not the importer of the goods upon which it received the export rebate. So that's the question. Then you have to go to the next level. There's still needs to be an adjustment. I guess the problem is you have identified in the duty drawback setting, something that works to the disadvantage of your client, because he's not both importer and export. But you're asking us to more come versus what seems like a reasonable determination on these facts, namely the expense incurred or the benefit gained by virtue of exportation is simply not a part of the cost of production. It may be resultant unfairness to your client, in this case, because this other provisions I could let them garner some benefit. But I'm a little nervous about messing around with what would otherwise reasonably be encapsulated in the notion of production costs. Like you admit, freight costs to export, not a part of production costs, in fact, are separately called out. Well, the export tax, or in this case, export rebate, feels a lot more like something related to freight and shipping related to purely export. Here's the main, with duty drawback, it's a dollar to dollar adjustment. So it's a very direct and material adjustment. In this case, it's not so much that it's export. It's almost like other income. As the cases we cited with grant income, commissions, dividends, it's sort of this part of other income that needs to reduce the cost of production. And we cite in the case of the cost of shipping. Why doesn't it simply reduce the cost of shipping? You've got to pay freight to get it over there. How come the rebate isn't just offsetting debt costs? Why is it suddenly a part of that? Because that matters because we're comparing a home market price to an export price. So the statute takes that very seriously. They want it. It's a magical price to price comparison that's apples to apples as much as possible. Now with cost of production, in light wall rectangular pipe and two for Turkey, I mean, the commerce says that the part of uniformly calculates a single cost of production, which incorporates the cost of producing both exported and domestically sold finished product. Now, I understand your honor's nervousness with stating that, okay, well, this is relating to export, but think of it more as other income. It's an offset to gene access, which is not. It's more to be nervous. It's not. I'm sure you wanted to save time. You can finish your thought. Sure, I would finish my thought. It's not a dollar to dollar adjustment. We're talking about an offset to overhead of the company as a whole. Thank you. There's a rest of your time. And the Kelly argument is split between this to Majorist for the government. Yes, Your Honor. You're going to take 11 minutes. Yes, Your Honor. And you're going to watch the clock for the benefit of your colleague, Mr. Schneider. I will, Your Honor. Right. May I please the court? As the appellate noted, the appellate raises one issue in this appeal. Was the trial correct in sustaining commerce's decision to exclude blue corner rebate revenue from the appellance cost of production, or more specifically, was commerce reasonable in deciding that the appellance calculation of GNA expenses should not be offset by blue corner rebate revenue? Now, the overall framework of this case is calculation of normal value. And as your honors are aware, under the below cost test, commerce has the ability to disregard sales if they're below cost of production. That's what led to this case, because the appellance's file or commerce request of the Section D questionnaire and the appellant responded. And that's where we get the underlying facts that are critical to this case. So what happens is, as the appellant noted, is the appellant purchases risk from one of its suppliers. The domestic suppliers incur an import duty. They in turn charge a compensation fee to the appellant for those import duties. And then the critical point, which your honors emphasized in the appellance presentation, is that upon export, the appellants can use tax certificates that they receive from paying those compensation fees. They can provide these tax certificates to the Thai government upon export. They only get the blue corner rebate, spawn export. And that's critical because this court noted, there is only one cost of production here, and it applies in both markets, because we're talking about two markets here, the home market. And the rebate equal to the amount of the compensation fee? Yes, your honor. Because the purpose is to promote exportation. And so it covers those. So would you say that this is a very, very close cousin or maybe even almost identical to a duty drawback adjustment? It's a similar situation. Now I would notice, the court noted that the appellants don't note in their brief and don't argue that they sought a duty drawback under the statute that they sought a rebate. What would have happened if they had? So they would have needed to submit paperwork essentially tracing together these various steps that I talked about. They would have to show the link between the compensation fee and the import duties. It would largely be an issue of providing receipts. But in commerce's view, just the fact that there's this intervening player, the supplier, that's actually importing the resin into Thailand. That doesn't somehow break the chain and then deny Thai plastic bags the opportunity for a duty drawback adjustment. Is that correct? Yes, your honor, in the sense that there's only one situation where commerce has created a carve out and that's under the duty drawback statute. There's nothing in that statute that prohibits the appellant in this case from having sought a duty drawback. Now as your honor noted, that what I want to understand is what is commerce's position. Not the fact that someone could request it. Of course they can request it. But what would commerce do in response to that request? Is commerce's understanding interpretation position of the statute on this score amenable to actually granting that adjustment? Or does commerce have some other view where it rules that, no, forget it. You weren't the actual direct and porter of the resin so you can't have the adjustment. Now obviously those are different facts and what's before us. But there's nothing in the statute that precludes in these circumstances the appellant seeking a duty drawback. But that wasn't an issue. Okay, then you've went back to you, understand. Do I need to ask my question again? Make sure that I get an answer on it. I mean, if you want to say commerce today has no position that we reserve the right to completely deny someone in typistic bag's position, duty drawback adjustment by virtue of the fact that there happened to be some intervening supplier that was actually importing the resin. Then go ahead and tell me that. But don't tell me again that, okay, of course anybody can request it and we'll accept the request. I apologize, you're on the right. Commerce doesn't have a, I think what you're on is asking is there a absolute position in commerce's view that in these circumstances with an importer in between that they could not seek a duty drawback and that is not commerce's position. This would be a very different case had the appellant sought a duty drawback and provided paperwork showing the link between the compensation fees and the import duties. And that is something that was recognized in the prior review in this case. So this exact issue came up in the prior administrative review. Commerce noted that the appropriate adjustment in this circumstance, if one were to be made, would be to increase the appellant's US price under the statute. Now to answer your honors point, commerce specifically said, we only make such adjustments under the duty drawback statute where there is a sufficient link between the import duty or taxes and the rebate and whether there are sufficient imports of the imported material to account for the duty drawback received. So the point being that appellant didn't make any effort to do this, so we don't have those facts before. They didn't seek a dues drawback. But commerce doesn't have a view that it's prohibited that they could seek one, and the statute doesn't prohibit them from seeking one. But it was never an issue in the case, because they never sought one period. What they're trying to do is shoehorn this situation into the duty drawback statute. And as your honor pointed out, it's a different circumstance. The duty drawback statute deals with an adjustment to export price. Here what they're trying to do is say, well, our cost of production should be offset. Our DNA expenses should be offset. And there's no statute that allows them to do that. And moreover, I think it's critical to note that the appellants never even argue that the blue corner rebates an issue, our DNA, that their general and administrative expenses, they never argue that in their brief. That's what we're talking about here. They're arguing, they never say it's part of DNA, but they argue it should be offset from it. And considering the standard of review applicable here, whether commerce made a reasonable determination, it strains reasons to say that they didn't, when there's no statute saying they have to do something like this. There's no statute that speaks to what the appellant is asking them to do. Does that answer your honor's question? I did. So that's the bottom line issue. And I would also stress that there is one cost of production applicable in this case. So in the circumstance where goods are sold domestically, that is going to lead to an increase in home market price and normal value because they have to recruit that cost. That the cost has to be recouped because there's no rebate. This, the principal at play here, these blue corner rebates only apply upon exportation. And so the appropriate adjustment of one to where to be made would be to US price, not to reduce and cost of production. Just to touch on a couple more issues, appellant, the cases that are relied upon by the appellant in their briefs just deal with different circumstances. Now they rely upon cases to concern government grants. Those situations are quite different than what we have here because the cases that are cited concern what we typically think of as subsidies or government grants. Those that might be used for the benefit of the company as a whole or to free up company funds to be used elsewhere in the business, they're not tied to subsequent actions. Here, you only get the rebate if you export your goods. And so those cases from our perspective just aren't on point. I would also note that this is not being new. Commerce addressed this exact same issue in the prior review and reached these and has been consistent on this point. And not only that in other reviews as well, Commerce has consistently refused to allow adjustments to cost calculations for revenue derived from export promotion programs. Just as a couple examples, Commerce held this in the certain hot-rolled Carbons Deal flat product committee review and also from the certain frozen and canned warm water shrimp from Brazil review. What about the US Steel case? Right. So in that case, the tabla we relied upon by the appellant and we are perspective is it's distinguishable for a lot of reasons. Now we would note this is an old case. It's from 1998, so it's prior to the Urgway round. That case is dealt with situation where normal value was based on third-party sales. So sales from Argentina to China. And the issue there was not import duties like we have here at the issue there was value added taxes. So essentially what happened in that case is that Argentine VAT type taxes. Connected to exports, all right? Well, yes, but the distinction in that case from here is the fact that there was a mismatch that was corrected via statute after the case was decided. So in that case, what was going on is that third-country prices between China, Argentina and China excluded these VAT taxes for the cost of production included them. And so commerce did to correct or what Congress did to correct this imbalance happened in 19 USC section 1677B sub part B3 where they provided for reduction of cost of production for these VAT taxes. And it was to correct the imbalance. We don't have that situation here. There is no imbalance. And arguably doing what the appellants are asking would create an imbalance because as I noted before, in sales to the home market, those prices are increased because the import duties are incurred but there's no rebate. So that cost has to be recouped through the price. But by making a reduction to cost of production, that affects both markets. So you arguably created a distortion in that circumstance. In US Steel, the statute corrected an imbalance. But aside from that, the case felt a very different fact because it dealt with the VAT tax, not import duties. And also because it dealt with this third party situation. And the statute's not applicable for these circumstances. Do you think there's an imbalance on the facts here? No, because I think the big distinction is, that's why the duty drawback adjustment statute was written, right? Right. There was a perceived imbalance distortion and that's what the statute was designed to correct. Right, right. And you even fact admitted that this fact pattern is very, very similar to what's going on with duty drawback adjustments. Right, that's the statute. Congress created this car about to allow for adjustments in price. And I think in this situation, the appellants could have sought a duty drawback. We don't dispute that they couldn't have. They didn't under these facts. That creates an adjustment to US price if these links are shown. If there's going to be a method of corrective situations like this, it's through the statute that exists. Because again, the rebates only affect export. So it makes sense to adjust US price, not to adjust cost of production, which affects both markets. But the appellants just simply didn't seek one. So it's not on review for it, Quart. Thank you, Mr. Margis. You want to yield the floor to Mr. Potem. Yes, Your Honor, and I thank you for your time. We'll have four minutes. Thank you, and good morning, Your Honors. Your Honors, the rebate of import duties has to be handled under the statute as price adjustment under 1677A. It can't be handled as a cost adjustment to normal value under 1677B. And so the question is for this sort of program, where is the potential imbalance? Where is the distortion? And the statute recognizes under the duty drawback provision that when you have a rebate of import duties only on the export side, it tends to lower your export prices. And when you're comparing that to a home market price that is priced to capture the full cost of production including the import duties, that's where the imbalance is. And so the way you remedy that imbalance is you adjust the price side, you increase the export price, so everything stated on an apples to apples basis. But they didn't request that adjustment. They didn't request an increase to the export price. I certainly think they could have. At the very, I mean, I know that they're arguing it would have been impossible to do so, but frankly, to preserve that argument, I think they at least had to try. They had to make their case to commerce. And if commerce was unsatisfied and deny it, well, they could certainly appeal that, but they didn't even try. What they're doing instead is seeking to reduce their costs. Instead of... But if commerce said no, you can't get it on duty drawback because you're not both the import or exporter. For that have changed anything that you're arguing to us today. I'm not sure that it would. I mean, that's not our case. I think that we don't get to sit here and sort of figure out equity. We only get to apply law. Well, you're on the other... The only issue in front of us is this or is this not fairly characterized as a cost of production? And in fact, that's not even the issue. Is the Congress making an unreasonable decision when they said it wasn't fairly characterized as a cost of production? No, but you're on a personal by statute. It has to be treated as a price adjustment under 1677A. And there's no distortion here that needs to be corrected. Ms. Chen, if you'd like... No, but they had sought it as a price adjustment on U.S. price and been denied, we might have to decide whether that decision was wrong or not. Right. But that wouldn't give us a basis to muck around with what is to find the production costs or not under this statute. I agree. And regardless of what commerce would have done in terms of that price adjustment, what they did in terms of denying a cost adjustment is correct. Ms. Chen acknowledged that there's no refund of these import duties on their home market sales. And she acknowledged that those home market prices are not reduced thereby. In other words, if they're spending $100 a ton on resin, maybe they're getting $20 a ton back when they export. But they're still incurring the full $100 cost on their home market sales and they have to price it accordingly. Those home market prices are not reduced. It would be a mis... So the cost of production that you're comparing it to in the sales below cost comparisons, all shows should capture the full amount of that resin including the import duties. It's already stated on an Apple's to Apple's basis. If one includes... If one is not reduced by the BCR revenues, then the other shouldn't be reduced either. Everything already is on an Apple's to Apple's basis. If you were to make the adjustment that a pellens are seeking, then there would be a distortion that would be a mismatch because you'd be comparing a home market price which is not reduced to a cost of production that has been reduced now by these revenues. And that is distorted. Now, Judge Chen asked about the US deal case. I mean, that's a very different situation because you have normal value. But sometimes you have a... In the dumping calculations, that the home market is non-viable. You have to go to third-country sales as the comparison market. Essentially, you're comparing US prices to third-country prices. They're all export sales that involved in the dumping calculations. And if you're comparing third-country sales to cost of production, sometimes they're going to be export incentives buried in those third-country sales. And so if the third-country sales are reduced by the rebate of those taxes, you're comparing it to a cost which includes those taxes. That's a mismatch. And that's distorted. And the US deals a firm commerce decision to reduce cost of production by those import duties that were rebated upon export. That's now captured by the statute says, now specifically, that that's a reduction that is to be made. But it's only made when the comparison market is based on third-country sales. That's not the situation here. This is sort of the reverse of US deal. In that case, there really was a mismatch at the distortion that required an adjustment. Here, there's not. Everything's already stated on an apples-to-apples basis. Thank you, Mr. Schneiderman. As you see, your red light is on. Thank you, Your Honor. We will hear a bottle from Ms. Chen who has almost four minutes. If she needs you. Thank you, Your Honor. Respectfully disagree with Mr. Schneiderman. The cost of production is overstated when you don't make that adjustment for the export duties that were rebated and brought back into the company. Those are company revenues. That is other income to the company. So if you don't adjust the COP, you may have a situation where certain home market sales actually fail the cost test. You should have inflated COP and home market sales that have been priced by the company based on their overall finances. So we'd say that this is actually distorted is not an apples-to-apples comparison. Now, as far as duty drawback is concerned, TDPI, they knew they could not qualify for duty drawback. They don't have the customs declaration forms. They don't have the documentation required to tie. The imports of resins and the exports of their products. They knew that. They made duty drawback claims for other exports. Now, in this case, commerce states that, well, it's either duty drawback or nothing. However, in the pipe and tube case from Turkey, when an export had actually not incurred the import duties, basically, according to the foreign government's program, they essentially it was a wash. They didn't pay the import duties and they didn't get the export duties rebated. There was no cost to them. And in that case, commerce actually forced them to redo their reporting to commerce. No, you still have to include the import duties that you arguably, ideally, hypothetically would have paid in your cost of production. So to say that, well, when the company is entitled to export rebates, no, this has nothing to do with cost of production, but in a situation where the company actually never paid the import duties because of the way the program was structured, no, you still have to include those in the cost of production. To admit respectfully, this is a situation where commerce, as it does with other cases, it drives the normal value high as high as possible. So to drive a higher margin. To the company, this is fundamentally unfair. The statute recognizes there is a distortion. So for a situation where an importer is also an exporter, you have a duty drawback adjustment. When that's not available, as it's not available to TVBI, because it is not the importer and exporter, there should be another adjustment. Commerce has done that in the past with grant revenue, dividends, commissions, government income. There, it becomes a situation where there is no distinction between import, export duties, rebated, and other income. So we would submit that this court remand this case back to commerce to make that required adjustment. Thank you. Thank you, Mr. Jen. We'll take the case unrequited