Commerce Used Wrong de Facto Gov't Control Analysis for Minority SOE Ownership, Exporter Tells CAFC

The Commerce Department misapplied the four factors used in determining whether companies are de facto controlled by a foreign government in finding exporter Guizhou Tyre was controlled by the Chinese state in the antidumping duty investigation on truck and bus tires from China, the exporter argued. Filing its opening brief at the U.S. Court of Appeals for the Federal Circuit, Guizhou Tyre said that Commerce improperly used its government control analysis for firms majority owned by a state-owned enterprise in finding it failed to rebut the presumption of state control, since the exporter is only minority owned by an SOE (Guizhou Tyre Co. v. United States, Fed. Cir. # 23-2165).

The agency should have followed Court of International Trade precedent by "considering all four factors," which include (1) whether the export prices are set by a government authority, (2) whether the respondent has the authority to negotiate and sign contracts, (3) whether the respondent has freedom from the government pertaining to management selection, and (4) whether the respondent retains the proceeds of its exports and makes independent decisions about its profits or losses, the brief said. What Commerce has taken to doing is only centering on this third criteria for companies majority owned by the Chinese state.

The appellate court has sustained that practice, though the trade court has found it untenable "to minority SOE-ownership, since such respondents are not necessarily government-controlled."

Guizhou Tyre's claims echo those made in the firm's companion case, brought with exporter Aeolus Tyre Co., pertaining to the 2014-15 AD review of new pneumatic off-the-road tires from China (see 2310310048). The company made an identical claim in that suit, which is also currently being litigated before the Federal Circuit.

Additionally, as in the companion case, Guizhou Tyre said it rebutted the presumption of state control, "which vanishes upon minimal contradictory evidence." The exporter said it can point to "substantial evidence" showing the firm's independence from the Chinese state, including information on the separation between its SOE minority owner and Guizhou, "and the absence of state control over" its "export pricing, contracting, management selection, and profit distribution."

The AD respondent also objected to Commerce's reliance on 2012 and 2015 meetings in which the minority owner, Guiyang Industry, voted to elect the board. Tyre said the minority shareholder's voting only shows that the owner "may participate in [Guizhou Tyre's] decision-making through the normal courses available to all shareholders." Guizhou Tyre also said Commerce's evidence against its rebuttal needed to be especially strong, given that the agency had previously granted the exporter a separate rate.