Trade Court Remands Commerce's de Facto Government Control Positions in AD Investigation

The Commerce Department must reconsider its final determination in an antidumping duty investigation into truck and bus tires from China, the Court of International Trade said in a Jan. 24 decision. Judge Timothy Stanceu sent the matter back to Commerce so it could reconsider its decision to deny the two groups of plaintiffs -- led by Guizhou Tyre Co. and Double Coin Holdings -- separate rate status in the investigation. The judge said that the agency's reasoning was "vague and ambiguous" as to whether its inquiry focused on the Chinese government's control of the plaintiffs' export activities.

In the investigation, Commerce said that both Guizhou Tyre and Double Coin failed to rebut the presumption of control by the Chinese government and thus were not entitled to a dumping margin separate from the China-wide rate. For Guizhou Tyre, the agency said that the company was 25.20% controlled by the Guiyang Industry Investment Group Co., which was 100% controlled by the Chinese state. In all, Guizhou Tyre failed to rebut the presumption of government control over its selection of the board, management and profit distribution, Commerce said.

When finding that the Chinese government controlled board selection, Commerce referred to two shareholders' meetings that took place in May and July 2015 that supposedly were not available to all shareholders. However, Guizhou Tyre said that they were in fact available to all shareholders, placing evidence on the record establishing as much. Stanceu said that Commerce disregarded this evidence.

"Because Commerce had no basis for a finding that the meetings were not open to all shareholders the court also must reject the derivative finding, that 'record evidence demonstrates that GIIC intentionally selected a shareholders meeting that is most favorable to it to elect members of GTC’s board,'" the judge said. "The Department’s invalid assumption concerning the unavailability of the meetings to all shareholders necessarily invalidates the Department’s assumption about 'the specific nature of the election of the board members.'”

Stanceu said that Commerce must look at whether the Chinese government actually controlled the companies' export functions -- one of the factors in establishing de facto government control. In both decisions, the judge said that Commerce failed to explain whether its government control findings extended to Guizhou Tyre's and Double Coin's export activities.

"Overall, the Department’s analysis is unclear and ambiguous as to whether, upon a finding by Commerce of majority ownership by a government entity allowing control of the selection of board and management, the Department’s presumption of control of export activities by the PRC government remains rebuttable or, in effect, becomes irrebuttable," the opinion said. "Despite some indications to the contrary in the Issues and Decision Memorandum, the latter would appear to be the case, although the Department’s explanation of its decision, considered on the whole, is ambiguous on this point."

Guizhou Tyre also mounted a challenge as to when the ADD order itself took effect. Originally, the International Trade Commission issued a negative injury determination in 2017, ending the AD duty investigation without any order. However, a lawsuit that was brought at CIT ultimately resulted in the trade court sustaining an affirmative injury finding. The issue now is when the final determination took effect. The Justice Department said it took effect on Jan. 30, 2019, since this was the date the ITC switched its determination to affirmative on remand during the litigation. Guizhou Tyre said that the date was Feb. 18, 2020, since this was the date the court sustained the ruling.

Stanceu sided with Guizhou Tyre, ruling that the remand didn't put the affirmative determination into effect. Since further litigation from that point could have changed the outcome before a final ruling, Commerce's issuance of an ADD order on Feb. 15, 2019, was "premature," the judge said. As a result, the court said it "intends to order Commerce to direct Customs to liquidate these entries without regard to antidumping duties and to refund all cash deposits collected on these entries, with interest as provided by law, when it enters a judgment to conclude this judicial review proceeding."

The court also sustained Commerce's adverse facts available China-wide rate as applied to Double Coin. The court relied on the U.S. Court of Appeals for the Federal Circuit decision in China Manufacturers Alliance v. U.S. (see 2106100044), which found that China-wide rates can still be based on AFA even if no members of the countrywide entity were found to be uncooperative in an ADD matter.

(Guizhou Tyre Co. Ltd., et al. v. United States, Slip Op. 22-6, CIT Consol. #19-00031, dated 01/24/22, Judge Timothy Stanceu. Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiff Guizhou Tyre; Daniel Porter of Curtis Mallet-Prevost for plaintiff Double Coin Holdings; L. Misha Preheim for defendant U.S. government)