Mere Membership in Chinese Union Not Enough to Establish Gov't Control, AD Respondent Tells CAFC

By saying that membership in a Chinese labor union by some of the ownership of an antidumping duty respondent precludes it from proving the absence of de facto Chinese government control, the Commerce Department "radically" changed its separate rate analysis, exporter Zhejiang Machinery Import & Export Corp. (ZMC) said in a June 14 reply brief. Arguing to the U.S. Court of Appeals for the Federal Circuit, ZMC said that the Commerce's new concept of potential government control created by this standard is "too abstract to be lawful" (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 (see 2204040031).

ZMC said that parts of Commerce's own decision memo stating that the Chinese government can control all union activity through China's one labor union admits that they only view union leadership and not just union membership "as a potential conduit" for government control. It also argued that given ZMC's unique corporate structure, Commerce improperly used an "overly broad interpretation of government control" via union membership that extends into non-union activities that is unsupported by record evidence and "well-established judicial precedent" guiding Commerce's practice.

"Allowing Commerce’s unprecedented denial of ZMC separate rate status based solely on union membership would radically change Commerce’s separate rates analysis, improperly opening the door for Commerce to deny separate rates to any and all companies who have owners, directors or managers that also happen to be union members," the brief said.

ZMC argued that Commerce's new standard defies the statutory obligation to create a "rebuttable" presumption of government control. "Although the separate rates test is supposed to establish a rebuttable presumption of Chinese government control, Commerce with this decision now relies on a stack of one presumption (i.e., Chinese government control of all companies) layered upon another presumption (i.e., majority shareholders control subsidiary companies) layered upon yet another presumption (i.e., Chinese government controls all unions and all union members even in non-union activities)," the brief said. No clear standard has been articulated by which ZMC can disprove the potential of state control that can be established via mere union membership, the respondent argued.