ADD Respondent, Not US, Responsible for Rebutting Presumption of Gov't Control, US Tells CAFC

In its argument disputing the Commerce Department's conclusion that the company is de facto controlled by the Chinese government, exporter Zhejiang Machinery Import & Export Corp. is asking the U.S. Court of Appeals for the Federal Circuit to "fundamentally rewrite" this element of antidumping proceedings, the U.S. argued. In its reply to ZMC's opening brief, DOJ said ZMC's stance, if upheld, would shift the burden to Commerce and require the agency to affirmatively prove the existence of government control by a majority shareholder, when the appellate court has already established that this burden is the respondents' (Zhejiang Machinery Import & Export v. U.S., Fed. Cir. #21-2257).

The case concerns an administrative review of the antidumping duty order on tapered roller bearings and parts thereof, finished or unfinished, from China. In the review, ZMC requested a separate rate, seeking to get a rate other than the China-wide 92.84% dumping margin. However, the agency said that the exporter failed to rebut the presumption of government control. ZMC took its case to the Court of International Trade.

The trade court, after looking at the evidence relating to ZMC's ownership structure, upheld Commerce's position (see 2106230033). ZMC is ultimately operated, through multiple layers of ownership, by the Zhejiang Provincial State-owned Assets Supervision and Administration Commission -- a state-run entity -- and a labor union for ZMC parent company Zhejiang Sunny I/E Corp. Commerce found that Sunny's government-run employee stock ownership committee (ESOC) runs this labor group. The court said Sunny's trade union was a subsidiary of the only legally allowed trade union in China, making it controlled by the government.

In its appeal to the Federal Circuit, ZMC argues that Commerce erred when it failed to examine each factor under the de facto presumption of government control standard and provide evidence that the Chinese state did or was likely to show actual control over ZMC through Sunny. In its reply brief, DOJ said this improperly applies the standard for Commerce to establish government control.

"This Court has clearly established that the burden of rebutting the presumption of control rests with the respondent -- not Commerce," the brief said. "Using a framework repeatedly reviewed and approved by this Court, Commerce found that ZMC failed to rebut the presumption because it is wholly-owned by Sunny, a company whose minority shareholder" is a State-Owned Assets Supervision and Administration Commission of the State Council-controlled entity and "whose majority shareholder is its labor union under the control of the Government of China."

DOJ also argued that record evidence shows that even if Sunny's union exercises majority shareholder rights, union membership means the Chinese government could control Sunny through the union members and, thus, have control over ZMC's export decisions. "ZMC points to no record evidence demonstrating that the union is barred from exercising its rights as majority shareholder should it ever determine it is in its best interest to do so," DOJ said. "Rather, Sunny’s Articles of Association clearly carve out majority ownership rights for the union, and do not even mention the ESOC."