Commerce to Consider Separate Rate Status for Pirelli Before Being Bought by Chinese Firm, CIT Rules

The Commerce Department's denial of separate rate status to Pirelli Tyre Co. during the first 10 months of the review period in an antidumping duty administrative review was improper because the importer was not yet owned by a Chinese government-associated entity during that time frame, the Court of International Trade said in a Sept. 24 order. Remanding in part and sustaining in part Commerce's second remand results in the AD duty review of passenger vehicle and light truck tires from China, Judge Jennifer Choe-Groves also sustained Commerce's decision, under protest, to drop the downward adjustment for irrecoverable value-added tax to mandatory respondent Qingdao Sentury Tire Co.'s export price.

In the underlying review, Commerce denied Pirelli's application for separate rate status since the company failed to rebut the presumption of de facto government control by the Chinese government. This was due to the fact that Chinese company Chem China purchased Pirelli in the middle of the review period, which ran from Jan. 27, 2015, to July 31, 2016. The purchase occurred on Oct. 20, 2015. In the previous decision in the case, Choe-Groves said this denial was above board.

So, on remand, Pirelli applied for partial separate rate status for the first 10 months of the review when it was an Italian company. Commerce denied this request, finding that Pirelli failed to give complete ownership information during the period of review. Choe-Groves, though, ruled against the U.S., finding that "Commerce neglected to follow its own practice to first determine whether Pirelli was wholly foreign-owned or located in a market economy during the first ten months of the period of review.

"If Pirelli was a wholly-owned Italian company and located in Italy prior to Chem China’s acquisition, according to Commerce’s own practice, it would be unreasonable for Commerce to subject Pirelli to a full separate rate analysis to prove its independence from Chinese government control prior to Chem China’s acquisition," the opinion said.

In the case's previous decision, Choe-Groves found that a VAT is not an export tax but rather a domestic tax presumed to be included in the price of the subject good. So, the court found that Commerce's regulations allow for an upward adjustment to the export price, and consequently a decrease in the AD duty rate, for VAT refunded on exportation. But the agency cannot adjust the export price downward for VAT, even when it is not refunded, Choe-Groves found. Therefore, on remand, Commerce dropped this VAT adjustment to the export price under protest, met without contest from the litigants (see 2105100041).

(Qingdao Sentury Tire Co., Ltd., et al. v. United States, Slip Op. 21-128, CIT Consol. # 18-00079, dated 09/24/21, Judge Jennifer Choe-Groves. Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiff Sentury; Ashley Akers for defendant U.S. government)