Commerce Set Illegal Standard for Rebutting Chinese State Control, Exporter Tells CAFC

The Commerce Department ignored its own framework for "linking evidentiary findings to conduct" relevant to antidumping proceedings and perverted the "rebuttable" presumption of state control," exporters Double Coin Holdings and China Manufacturers Alliance argued in their opening brief to the U.S. Court of Appeals for the Federal Circuit on Nov. 28. The pair challenged Commerce's finding that Double Coin didn't rebut the presumption of Chinese state control in a review on off-the-road tires from China, saddling the firm with the 105.31% China-wide rate (China Manufacturers Alliance v. United States, Fed. Cir. # 23-2391).

Double Coin and China Manufacturers Alliance said Commerce violated its own policy regarding whether an individual company is free of government control in nonmarket economy proceedings, as set out in Policy Bulletin 05.1. This policy sets an explicit focus on "export functions" and not general business operations, and says that there is a special importance in establishing "the factual basis" for linking management control "to an ability to influence export activities."

But in the present review, Commerce and the Court of International Trade ignored this policy, the brief said.

In the underlying review, which covered entries fin 2012-13, Commerce admitted that the focus for the state control analysis centers on export functions. But while the agency and trade court reference export functions, neither one, at any point, points to "a single example of government control over Double Coin's export functions," the appellants said.

Double Coin argued that Commerce's treatment of its separate rate analysis as a "binary test," where exporters either rebut the presumption of state control or they don't, is "legally flawed and treats the presumption as a new standard of evidence rather than a tool for gauging whether the burden of substantial evidence has been met." Commerce does not consider the presumption rebutted when a respondent offers the "minimum quantum of evidence," as required by precedent, but instead "requires a respondent to prove that the presumption is affirmatively wrong."

The correct standard is actually "much lower, and all that is required to rebut a presumption is for a litigant to produce some evidence that is contrary to the fact for which the presumption initially substitutes," the brief said. In the underlying review, Commerce said Double Coin didn't rebut the presumption of government control since it failed to show that its majority shareholder, state-owned Huayi, doesn't have "near complete control over any shareholder decisions." The agency didn't lay out any examples of control Huayi actually showed over Double Coin's management decisions, the exporter said.

The legal basis for Commerce's finding is a "presumption of a specific factual conclusion for which Double Coin provided extensive contrary evidence," the brief claimed. Despite this evidence, Commerce continued to rely on the presumption as the legal ground for its conclusion instead of carrying out the statutorily mandated analysis. This is "inconsistent with the general principles of law," the brief said.

Double Coin also said that the evidence itself that Commerce relied on was insufficient to find that the exporter failed to rebut the presumption of Chinese state control. The agency had said that while "the overall legal environment in China" is permissive of individual firms keeping independent operations with respect to export activities, Double Coin is majority owned by a state-owned entity, making it wholly owned by the Chinese state.

The exporter argued that this finding misunderstands the operation of Chinese law, special regulations on publicly listed companies, Double Coin's own Articles of Association and the presence of independent directors. In fact, all the evidence Double Coin offered supports a contrary conclusion regarding who controls the company's export activities, the brief said. For instance, all of the firm's export pricing is handled by American employees of U.S. company CMA after import, depriving Double Coin's management of any chance to influence export pricing, let alone the exporter's shareholder, the brief said.

Double Coin's appeal marks the second time its case is at the Federal Circuit, after the appellate court previously ruled in the case that Commerce could use the China-wide rate on a fully cooperative respondent that fails to rebut the control presumption (see 2106100044). The trade court then sustained Commerce's finding that Double Coin failed to rebut the presumption of Chinese state control.