Commerce Continues to Find de Facto Gov't Control Over Chinese Exporters After CIT Remand

The Commerce Department continued to deny two groups of plaintiffs in an antidumping case -- led by Guizhou Tyre Co. and Double Coin Holdings -- separate rate status, finding on remand ordered by the Court of International Trade that the companies still failed to rebut the presumption of Chinese government control. Commerce said that Guizhou Tyre and Double Coin are not free from government control regarding how they pick their management and thus are under government control for the purposes of the antidumping duty investigation on truck and bus tires from China (Guizhou Tyre Co. v. United States, CIT #19-00031).

In AD investigations, Commerce said that a company must clear four hurdles when proving that it is not controlled by a non-market economy government. Those factors are whether the export prices are set by the state, whether the respondent has the authority to negotiate and sign contracts, whether the company has the authority to make management decisions, and whether the respondent retains the proceeds of its export sales and makes independent decision regarding its profits or losses.

In the tire investigation, Commerce said that Guizhou Tyre was 25.2% 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 of 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. In a January opinion, Judge Timothy Stanceu said that Commerce disregarded this evidence and that Commerce must look at whether the Chinese government actually controlled the companies' export functions. The judge ruled that for both Guizhou Tyre and Double Coin, the agency's reasoning was "vague and ambiguous" relating to the government's control of the companies' export activities (see 2201250035).

On remand, Commerce dug in its heels, continuing to find that Guizhou Tyre and Double Coin failed to rebut the presumption of Chinese government control but addressing the court's concerns about the lack of autonomy over export activities. "We clarify that Commerce did not find that a lack of autonomy in management selection equates to a direct finding of government control of export activities," the remand said. "Rather, Commerce found that record evidence indicating a lack of autonomy in management selection did not satisfy the third prong of the de facto analysis and, thus, that [Guizhou Tyre] was unable to rebut the presumption of government control.

"Notably, under the presumption of government control (which has been upheld repeatedly by the courts) Commerce does not affirmatively establish in each instance that the government is controlling the respondent’s export activities, including pricing decisions. Rather, it is the burden of the respondent to rebut the presumption by providing sufficient evidence to establish that it operates autonomously from the government in certain key aspects (i.e., those enumerated in the de facto criteria)."

Commerce used this same rationale in its defense of its government control position for Double Coin. The agency said the fact that it did not find a lack of autonomy in management equates to direct government control of export activities, but that evidence indicating a lack of control over management picks did not satisfy a part of the de facto analysis. This means Double Coin failed to rebut the presumption of government control.

In comments on the draft remand, Guizhou Tyre argued that Commerce itself has repeatedly found that government ownership alone does not preclude separate rate eligibility. The exporter further said that "it defies credulity" to treat the court's order as a mere request for confirmation that the record lacks any indication of state control over export activities in order to deny the separate rates. "Rather, the CIT was clear that such findings were a legal prerequisite to denying the separate rates in stating the continued denials must be" backed by valid findings that the Chinese government controlled the price setting for ihr tire exports, the company argued.