[00:00:00] Speaker 03:
The final case for argument is 24-1164, Magnum Magnetics versus United States.

[00:00:31] Speaker 03:
All right, I think we're ready please proceed Good morning.

[00:00:36] Speaker 00:
May it please the court We're here today on scope ruling by commerce covering and dumping countervailing duty order on flexible magnets.

[00:00:44] Speaker 00:
It was that water cover Flexible magnets which are defined as magnets with a flexible binder polymers rubber combined with a material that can be permanently magnetized the order goes on to say

[00:00:57] Speaker 00:
that subject futsal magnets remain subject to the order if they are bonded with plastic or any other material regardless of composition.

[00:01:09] Speaker 00:
There's a single exclusion for printed magnets, not an issue here.

[00:01:14] Speaker 00:
And the order ends by saying every magnet that meets the physical description and is not specifically excluded is covered.

[00:01:22] Speaker 03:
OK, can I just

[00:01:25] Speaker 03:
You know, we've got statutory construction issues all the time.

[00:01:28] Speaker 03:
Then we have this claim construction move where we're construing claims all the time.

[00:01:33] Speaker 03:
And now we've got this.

[00:01:34] Speaker 03:
I mean, this language here, the regulation, the language of the regulation seems to me, so tell me why I'm wrong, to give pretty broad, very broad discretion to the secretary to decide whether or not whatever the language of the scope

[00:01:53] Speaker 03:
is whether he goes to the K-1 or not and what uses he makes.

[00:01:58] Speaker 03:
I think the regulation gives him really a lot of authority.

[00:02:02] Speaker 03:
One, because it uses may several times.

[00:02:04] Speaker 03:
Two, because it uses discretion several times.

[00:02:08] Speaker 03:
And three, all the language here points to he gets to decide whether or not he goes to the K-1 factors.

[00:02:17] Speaker 00:
And I think, Your Honor, in that situation here,

[00:02:21] Speaker 00:
It's in violation of this court's own instruction on how this is to occur.

[00:02:27] Speaker 00:
Jump right into K1.

[00:02:28] Speaker 00:
But in this court, just yesterday in Vandewater in 23-1093, talked about the meridian factors and about the K0 factor.

[00:02:36] Speaker 00:
That inquiry begins.

[00:02:38] Speaker 00:
The language of the order is paramount.

[00:02:43] Speaker 00:
And if the language of the order is unambiguous, it's dispositive.

[00:02:49] Speaker 03:
That was the rule.

[00:02:52] Speaker 04:
The rule was modified.

[00:02:54] Speaker 04:
And the rule was modified, as I understand it, to provide expressed discretion to the secretary in every case.

[00:03:09] Speaker 04:
Why am I wrong?

[00:03:12] Speaker 00:
Because the secretary

[00:03:14] Speaker 00:
when they revise the regulations, again, we're doing it in order to bring in Meridian and bring it in line with this court's instructions, and that if the unambiguous language is dispositive and they said this in there, that they may use it.

[00:03:30] Speaker 00:
And they explain when they may use it.

[00:03:32] Speaker 03:
But that's not this case.

[00:03:34] Speaker 03:
I mean, you're resting on the word appears.

[00:03:37] Speaker 03:
They didn't say, this language is clearly and unmistakably unambiguous.

[00:03:42] Speaker 03:
And it says, it said, it appears to fall within the scope of the order.

[00:03:47] Speaker 03:
We can quibble about what appears mean, but I don't think appears to fall within the scope of the order is a dispositive ruling that the language is clear and unambiguous and this falls within it full stop.

[00:04:00] Speaker 00:
They never identify what the ambiguity is, that they were using the interpretive sources to interpret.

[00:04:05] Speaker 00:
What were they interpreting?

[00:04:06] Speaker 00:
They themselves didn't say they were interpreting anything.

[00:04:09] Speaker 00:
They were just finding out if they could exclude a particular product that, again, appears to be covered, right?

[00:04:14] Speaker 00:
You have a magnet.

[00:04:15] Speaker 00:
Nobody disputes it.

[00:04:16] Speaker 00:
It's a subject-flexible magnet.

[00:04:18] Speaker 00:
And nobody disputes that it is bonded to a piece of plastic.

[00:04:20] Speaker 00:
And nobody disputes that the order talks about us.

[00:04:23] Speaker 05:
Would you agree that under the current and applicable regulation that the secretary has the discretion

[00:04:31] Speaker 05:
to look at the language of the order and consult the K-1 materials.

[00:04:41] Speaker 05:
When the secretary issued the right... That is our precedent right now, isn't it?

[00:04:45] Speaker 00:
I'm sorry.

[00:04:46] Speaker 05:
That is our current precedent.

[00:04:48] Speaker 05:
That is the precedent.

[00:04:51] Speaker 00:
Where the language is unambiguous, as the court just said in Vandal Water, which was just issued yesterday.

[00:04:56] Speaker 05:
Let's put that aside.

[00:04:58] Speaker 05:
The issue is whether

[00:05:00] Speaker 05:
whether commerce can turn to K1 in interpreting the plain language of the order.

[00:05:10] Speaker 00:
Your Honor, I would agree, but the K1 sources are for interpretation of an order.

[00:05:16] Speaker 00:
Here, commerce didn't say that they were interpreting any particular term within the order.

[00:05:21] Speaker 00:
That's a key distinction here.

[00:05:23] Speaker 00:
And what the Commerce Secretary did when Commerce revised the regulations, they talked about that prior to the May, it's that determines the language of the scope is not itself dispositive.

[00:05:35] Speaker 00:
It is not dispositive using no interpretive tools whatsoever.

[00:05:38] Speaker 00:
They weren't using interpretive tools for any particular language within the orders itself.

[00:05:43] Speaker 00:
It was using these tools to say that this product is excluded.

[00:05:48] Speaker 00:
But we're not talking about the specific exclusion.

[00:05:51] Speaker 00:
The orders have a very specific exclusion from only a single exclusion.

[00:05:54] Speaker 03:
Can I go back, take you back to your reference to the case we issued Bandawatt?

[00:05:58] Speaker 03:
I don't remember what the name was.

[00:06:00] Speaker 03:
But my recollection of that case is they were dealing with the 2020 regulation and not with the 2021 regulation.

[00:06:07] Speaker 03:
They explicitly called that out.

[00:06:10] Speaker 03:
If they were relying on a regulation that said something else, that gives us free rein to rely on a different regulation that explicitly wanted to go farther than the earlier regulation, right?

[00:06:22] Speaker 00:
I would have to double check that, Your Honor.

[00:06:23] Speaker 00:
But as I noted, in this regulation has been- Well, if I'm right, am I right?

[00:06:27] Speaker 03:
I mean, if I'm right about what they said and what this was, I'm correct, right, that that doesn't help you.

[00:06:33] Speaker 03:
In fact, it may even cut the other way.

[00:06:35] Speaker 00:
Correct.

[00:06:36] Speaker 00:
But you'd still have to look, Your Honor, at when commerce issued its new regulations.

[00:06:40] Speaker 00:
And when it issued its new regulations, it talked about when it would exercise that discretion to use the K-1 interpretive sources.

[00:06:48] Speaker 00:
And that's when they talked about how it's not dispositive.

[00:06:51] Speaker 00:
Here, there is no language in the decision by commerce stating that there is any ambiguity or there's some uncertainty as to the language itself that needed to be reliant on these

[00:07:04] Speaker 03:
So you think your interpretation of the regulation is that that's what the secretary, before going to K-1, the secretary is required to establish that there's an ambiguity and describe what that ambiguity is before you go to K-1.

[00:07:21] Speaker 03:
And that is the way you read the regulation?

[00:07:23] Speaker 00:
Correct, Your Honor.

[00:07:24] Speaker 00:
That still remains the case.

[00:07:25] Speaker 00:
And again, that's what this court indicated in Meridian, which is what the revised regulations are going into.

[00:07:33] Speaker 00:
Leading is, oh, I'm sorry.

[00:07:35] Speaker 05:
Appendix 578.

[00:07:41] Speaker 00:
Yes, your honor.

[00:07:44] Speaker 05:
The language in the last complete paragraph says, according to base on the plain language of the scope, this one is talking about the plain language of the scope, Sifra's product appears to

[00:08:05] Speaker 05:
consulted the K-1 materials to reach its decision.

[00:08:14] Speaker 05:
I think that's pretty, that impacts your argument quite heavily.

[00:08:23] Speaker 05:
You seem to, at this point, lose both under the 2020 regulations and the new regulations.

[00:08:32] Speaker 00:
I'm not reading it that way.

[00:08:34] Speaker 00:
Commerce talks about exactly what the order specifies.

[00:08:37] Speaker 00:
Its language is a flexible magnet bonded to plastic or material of any composition, undisputed that the product for them met those limitations.

[00:08:47] Speaker 00:
Now they use the word appears, but they don't identify which particular element apparently is not met by it.

[00:08:54] Speaker 00:
They go to the K-1 factors, as they say, to find out if it should be excluded from the scope of the order.

[00:09:01] Speaker 00:
But the purpose of the scope ruling is to determine if a product in front of them is within the same class or kind of merchandise that's discussed in an order.

[00:09:10] Speaker 00:
It's not talking about exclusions from it.

[00:09:12] Speaker 00:
It's talking about whether it actually meets the limitations within the language of the anti-dumping duty order.

[00:09:18] Speaker 00:
Yes, they use the word appears, but they don't identify what specifically they're actually looking at here but I would like to turn to the k1 factors themselves your honor because It's not unsupported by substantial efforts even you were to accept.

[00:09:31] Speaker 00:
They could go to the k1 factors They make two arguments that somehow there's some functional flexibility requirement one and two that there's a substantially different product on the

[00:09:43] Speaker 00:
functionally inflexible, they rely on two sources.

[00:09:48] Speaker 00:
The first being the USITC's report.

[00:09:52] Speaker 00:
And in that one, Your Honor, they say that it indicates that, the ITC indicated that if a product that is included with a flexible magnet

[00:10:01] Speaker 00:
It's twisted and so forth, and it's broken.

[00:10:04] Speaker 00:
It's no longer covered by the order.

[00:10:06] Speaker 00:
ITC said no such thing.

[00:10:08] Speaker 00:
The ITC had no discussion about products bonded.

[00:10:12] Speaker 00:
It merely said that a flexible magnet can be twisted, punched, slit, bent, and it doesn't lose magnetic properties.

[00:10:21] Speaker 00:
There's no evidence that doing anything of that kind to this product results in a loss of magnetic properties.

[00:10:28] Speaker 00:
The orders don't talk about

[00:10:30] Speaker 00:
you know, the product itself being damaged and so forth.

[00:10:34] Speaker 00:
It talks about the loss of magnetic properties in the ITC report.

[00:10:38] Speaker 00:
Interdesign dealt with a rigid product.

[00:10:41] Speaker 00:
Leaving aside, I would argue that was wrongly decided, but that dealt with a rigid metal that was bonded to a flexible magnet.

[00:10:48] Speaker 00:
Here we don't have it rigid.

[00:10:50] Speaker 00:
Now, commerce tried to shoehorn it, calling it a rigid plastic blade.

[00:10:53] Speaker 00:
All the evidence shows that it can be flexed, that it's not rigid, that it can be bent.

[00:10:57] Speaker 00:
And even commerce had conceded

[00:10:59] Speaker 00:
that it could be bent.

[00:11:00] Speaker 00:
And so what they fall back on is...

[00:11:01] Speaker 00:
Well, it's not pretty anymore, essentially.

[00:11:03] Speaker 00:
That once it gets bent to an extreme degree, you know, it's marred.

[00:11:08] Speaker 00:
Well, the orders don't talk about aesthetics.

[00:11:10] Speaker 00:
The orders talk about whether you have flexible magnet bonded to plastic or material, any other composition.

[00:11:18] Speaker 00:
And that's what you have here.

[00:11:19] Speaker 00:
They're adding something and they're using these K1 factors going beyond the K1 factor sources, reinterpreting them way to create a new exclusion that doesn't exist anywhere

[00:11:31] Speaker 00:
in the order itself.

[00:11:32] Speaker 00:
And there's no evidence from the underlying investigation that there is any concern with the aesthetics of a product.

[00:11:40] Speaker 00:
Their final point on this was on the substantially different product because now you've attached a piece of plastic to a flexible magnet and they rely on NAI, which dealt with surgical drapes.

[00:11:52] Speaker 00:
But again, that ruling

[00:11:55] Speaker 00:
is irrelevant here.

[00:11:57] Speaker 00:
That ruling dealt with textile drape that had pockets into which flexible magnets were just inserted.

[00:12:04] Speaker 00:
It was the lack of bonding is what was at issue in MAI.

[00:12:08] Speaker 00:
The flexible magnets were not bonded to other material.

[00:12:11] Speaker 00:
That's not the issue here.

[00:12:13] Speaker 00:
So MAI has no relevance whatsoever to the question presented here.

[00:12:18] Speaker 00:
And again, it runs square into

[00:12:22] Speaker 00:
the language itself saying that a flexible magnet remains subject even if it is bonded with a plastic or material of any other composition.

[00:12:33] Speaker 00:
That's not a substantially different product that somehow is excluded.

[00:12:35] Speaker 00:
The order itself contemplates that a flexible magnet would be covered if it's attached to another material of another composition.

[00:12:45] Speaker 00:
I see my time is almost out.

[00:12:46] Speaker 00:
If you have any other further questions, I'll save it for a bottle.

[00:12:49] Speaker 00:
Thank you, John.

[00:12:58] Speaker 02:
Good morning, Your Honors.

[00:12:59] Speaker 02:
May it please the Court, Christopher Barrage, on behalf of the United States.

[00:13:03] Speaker 02:
The United States respectfully requests that the Court affirm the judgment of the Court of International Trade because commerce reasonably determined that Siffron shelf dividers were outside the scope of the anti-dumping and countervailing duty orders.

[00:13:14] Speaker 02:
As the Court has

[00:13:16] Speaker 02:
essentially previewed in speaking to my colleague, this case should be decided under the new regulations that do permit Commerce to look at the K-1 factors when interpreting what the language of the scope is.

[00:13:30] Speaker 02:
And as the court mentioned when my colleague was speaking, the Van de Water case is referring to the previous.

[00:13:36] Speaker 03:
So is it your view that under the new regulation, if they said, commerce said, language is unambiguous, but we can still go, can they still go to the K1 factors if there's a conclusion of an, this language is fudgy.

[00:13:51] Speaker 03:
So it appears to, I don't know what appears to mean.

[00:13:53] Speaker 03:
But if they had said, this line, we construe this language to be unambiguous.

[00:13:57] Speaker 02:
So they're permitted under the new regulations to just look at the scope and say, the language of the scope is clear.

[00:14:05] Speaker 02:
This product falls within the scope.

[00:14:06] Speaker 02:
And they can end the inquiry there.

[00:14:08] Speaker 02:
In this case, they didn't do that.

[00:14:10] Speaker 02:
They said it appears.

[00:14:11] Speaker 02:
But that doesn't end the inquiry.

[00:14:12] Speaker 02:
It's not dispositive.

[00:14:13] Speaker 02:
And that's what the new regulations could possibly say.

[00:14:15] Speaker 04:
Could they say, this language is clear, but we want to take a look and look at the K1 factors and see if perhaps some further light can be shed on this?

[00:14:26] Speaker 02:
I think that commerce could look at the language and say, it appears clear on its face, or that the language itself, there's not a term that we're particularly concerned about necessarily, but we want to take a look at the K1 factor to see if this product actually fits the scope.

[00:14:42] Speaker 02:
So in this case, we have plastic shelf dividers, which you would see at a CVS, splitting at and from.

[00:14:47] Speaker 03:
Well, can I just make sure we have your answer to the question?

[00:14:50] Speaker 02:
Of course.

[00:14:51] Speaker 03:
I think there's judgment, and I'm getting at the same thing.

[00:14:53] Speaker 03:
If they said the language is unambiguous under the regulation, can they say, I think what you said is, yes, it's unambiguous, but we still think that despite the unambiguous language, other things may shed light on how we should construe it?

[00:15:10] Speaker 02:
Yes, Your Honor.

[00:15:11] Speaker 02:
As the court was saying from my colleague, with my colleague,

[00:15:14] Speaker 02:
there is broad discretion here in the new regulations that they may consider.

[00:15:19] Speaker 02:
So in K1, now it reads that in determining whether the product is covered by the scope of the order, the secretary will consider the language of the scope.

[00:15:30] Speaker 02:
So the language obviously has to be considered.

[00:15:32] Speaker 02:
But then they may make a determination on this basis of loan if it's within the language of the scope, if it's dispositive.

[00:15:40] Speaker 02:
So if it's not dispositive, then they can move on to the other factors.

[00:15:45] Speaker 03:
Just as a policy matter, I know we don't do policy, but doesn't your construction of the regulation

[00:15:55] Speaker 03:
dislodge any reasonable reliance that I think were in the system and the people you would want people out there to know if there's a clear order out there, what's covered and what's not.

[00:16:09] Speaker 03:
Shouldn't people be able to rely on that going forward?

[00:16:13] Speaker 03:
And if so, how does that coincide with your interpretation that even if everyone in the world would construe the scope order to cover something,

[00:16:21] Speaker 03:
20 years down the road, commerce can reinterpret it based on other things and say, never mind.

[00:16:29] Speaker 02:
Yes, Your Honor.

[00:16:30] Speaker 02:
So the clear language of the scope order, there would be cases where it would be unambiguous and commerce would find that it's within the scope.

[00:16:39] Speaker 02:
And I take the court's point that there may not be clarity with certain importers.

[00:16:46] Speaker 02:
But the K1 factors are not unlimited.

[00:16:49] Speaker 02:
There are descriptions of the merchandise containing the petition, descriptions of the merchandise in the initial investigation, previous determinations by Commerce, and determinations of the ITC.

[00:17:00] Speaker 02:
So it's not indefinitely unbounded.

[00:17:03] Speaker 02:
There are things that importers could look at and say, OK, does this fall within the scope?

[00:17:08] Speaker 02:
We're not sure.

[00:17:09] Speaker 02:
So we're going to ask for a scope request, which in scope requests,

[00:17:15] Speaker 02:
you're looking at, that's why they're submitted, that's why lawyers submit them for their clients to see whether they fall into the actual scope.

[00:17:24] Speaker 02:
But in this case, you see in Cifron's scope request, they talk about these four factors under the K1, under the new regulations.

[00:17:31] Speaker 02:
They say, this is how we interpret it.

[00:17:33] Speaker 02:
We're not sure how commerce interprets it, but this is how we interpret it.

[00:17:37] Speaker 02:
And so it's not a situation where

[00:17:41] Speaker 02:
an importer would have no idea.

[00:17:43] Speaker 02:
There are some things that would be factored in in the K-1 factors.

[00:17:47] Speaker 02:
It's not completely unlimited.

[00:17:49] Speaker 02:
And as the court held last year in Sahatai Steel that was just denied on that, that if the scope order doesn't clearly answer the scope inquiry, so if there's a scope inquiry that is submitted, if the scope inquiry is submitted, then

[00:18:10] Speaker 02:
The current regulations would permit, if not mandate, that commerce would look at the K-1 materials.

[00:18:19] Speaker 02:
And as the court quoted, this is particularly true where a scope ruling is requested, subsequently disputed, and eventually appealed to this court.

[00:18:27] Speaker 02:
So it makes sense that the K1 factors as currently written in the new regulation would be used to actually look and see, as I was stating earlier, are these shelf dividers, these plastic shelf dividers, are they actually flexible magnets?

[00:18:42] Speaker 02:
And they're not flexible magnets because they're not flexible.

[00:18:45] Speaker 02:
They don't fit within the scope.

[00:18:47] Speaker 02:
And so it makes sense in this case that commerce were just to look at the actual regulations and say, okay, this covers flexible magnets.

[00:18:53] Speaker 02:
What are we dealing with here in the scope request?

[00:18:55] Speaker 02:
It's a shelf divider.

[00:18:56] Speaker 02:
It's a plastic rigid shelf divider.

[00:18:58] Speaker 02:
It doesn't fit within the scope of the actual language if you look at the K1 factors.

[00:19:03] Speaker 02:
So that's why they permissibly went to those other factors.

[00:19:13] Speaker 02:
Thank you.

[00:19:24] Speaker 01:
Thank you, Your Honor.

[00:19:24] Speaker 01:
William Marshall on behalf of CIFRON.

[00:19:27] Speaker 01:
I'll keep my comment short.

[00:19:29] Speaker 01:
I just want to say a couple of things.

[00:19:31] Speaker 01:
One about plaintiff Appelli's position is internally contradictory.

[00:19:37] Speaker 01:
They want you to rely on the plain meaning of the scope, but they want you to exclude certain words from the scope, i.e.

[00:19:42] Speaker 01:
flexible.

[00:19:44] Speaker 01:
In the ITC's definition of a flexible magnet subject to the order, they specifically identified how they would

[00:19:52] Speaker 01:
properly identify a flexible magnet subject to the order, something that could be bent and twisted that maintains its magnetic properties, i.e.

[00:20:00] Speaker 01:
both flexible and magnetic.

[00:20:02] Speaker 01:
In this case, the substantial evidence clearly establishes that Sifron's shelf divider is not flexible and therefore not covered by an order covering flexible magnets.

[00:20:14] Speaker 01:
And so to buy into plaintiff appellant

[00:20:18] Speaker 01:
interpretation would require ignoring certain terms from the scope language that they themselves say is plain on its face, which is internally contradictory.

[00:20:29] Speaker 01:
And I think another point to raise here is whether or not the plain language of the scope is a threshold question.

[00:20:35] Speaker 01:
In fact, it isn't.

[00:20:37] Speaker 01:
I mean, commerce gave itself, in its notice of final rulemaking, commerce itself said that the K-1 factors are tools to help it interpret the plain language of the scope.

[00:20:47] Speaker 01:
They could find, make a scope determination on the language in certain cases, but they recognize that that's

[00:20:54] Speaker 01:
probably the exception and not the common rule.

[00:20:57] Speaker 01:
And so commerce need not make a first determination, a so-called K-0, where they say, yes, the scope language here is dispositive and we cannot go further.

[00:21:08] Speaker 01:
In fact, the rules give commerce discretion to either stop at the interpretation of the scope language, if and when appropriate,

[00:21:16] Speaker 01:
and or proceed to the K1 factors, which are, in commerce, its own words, and it's known as the final rulemaking tools to interpret the plain language of this group.

[00:21:27] Speaker 01:
And that's consistent with Meridian.

[00:21:31] Speaker 01:
Thank you.

[00:21:31] Speaker 01:
Thank you very much.

[00:21:40] Speaker 00:
Your Honors, I would point you to at least Appendix 349, 350,

[00:21:46] Speaker 00:
332 to 335, 348 to 350, 361, 365 to 68, all of this shows flexing.

[00:21:56] Speaker 00:
Your Honor, they all show flexing of the divider.

[00:22:03] Speaker 00:
It's clearly being flexed.

[00:22:04] Speaker 00:
It's been twisted.

[00:22:05] Speaker 00:
This is not a rigid product.

[00:22:07] Speaker 00:
It is a flexible product.

[00:22:08] Speaker 00:
And all the evidence on the record shows that.

[00:22:11] Speaker 00:
To the other point, Your Honor, as we've been talking about the regulations,

[00:22:16] Speaker 00:
They never said it wasn't dispositive.

[00:22:18] Speaker 00:
They never explain why it wasn't dispositive.

[00:22:20] Speaker 00:
They go through what the order says.

[00:22:22] Speaker 00:
They go through what the undisputed shelf dividers have.

[00:22:27] Speaker 00:
It squarely falls on there.

[00:22:28] Speaker 00:
They never say that it wasn't dispositive or the reasons why.

[00:22:31] Speaker 00:
And I submit, Your Honor, that that discretion used the K-1 factors as interpretive guides, which is what they are, interpretive guides.

[00:22:38] Speaker 00:
There has to be a reason, because it's not dispositive.

[00:22:41] Speaker 00:
How and why is it not dispositive?

[00:22:43] Speaker 00:
Silent on that they just went to the Cayman factors because they wanted to well.

[00:22:47] Speaker 00:
That's whim That's not any sort of reliance me reliance interests that people need to have and how these orders are interpreted If there's no further questions your honor Asking you to vacate the decision.

[00:22:59] Speaker 03:
Thank you