Input Suppliers Not Government-Controlled, Chinese Flooring Exporter Says

A Chinese exporter of multilayered wood flooring argued Aug. 29 that its 16 input suppliers weren’t under government control. The government policies in question didn’t contradict a Chinese government claim that party officials didn’t hold any ownership positions in a number of input suppliers, it said (Baroque Timber Industries (Zhongshan) Co. v. United States, CIT # 23-00136).

Exporter Baroque Timber Industries brought its case to CIT in 2023 arguing that the Commerce Department had, on the basis of adverse facts available, wrongly countervailed its purchases of inputs from Chinese suppliers (see 2308010050). In response, the U.S. said that Baroque’s claim that the suppliers were owned by individuals failed to appreciate the difference between government ownership and government control (see 240626004).

AFA was applied because the Chinese government hadn’t provided any of the information requested regarding those input suppliers, the U.S. said: During the review, Commerce asked Beijing to identify any government officials who owned or were employed by those input suppliers. The Chinese government responded that there were none, but this, the U.S. said, conflicted with a Chinese Communist Party opinion document, which required CCP committees to implement ideological work at all levels of the private sector, as well as with a party constitutional provision that required establishment of a committee or branch in any enterprise with three or more party members.

Baroque denied conflating government ownership and control. Rather, it said, AFA was applied in response to “missing ownership information and missing information regarding CCP … involvement as to every supplier.”

The determinations should also have been made individually for each supplier, the exporter said. It explained that specific information had been provided for each, meaning each had its own unique record. But Commerce made its government control finding for all of the suppliers together, meaning “it was incorrect as to certain suppliers that had no government ownership” and the issue raised by those suppliers was whether information about Chinese government involvement was missing.

It also argued that a determination of government authority is based solely on an analysis of “meaningful control.” Rather, it said, that determination must also consider whether “the company ‘possesses, exercises, and is vested with governmental authority.’”

“Thus, the threshold legal question in this appeal is whether there is sufficient information on the record to make this determination or whether instead the information is missing or deficient warranting the application of facts available with adverse inferences,” it said.

There is, the exporter claimed.

It said that no supplier ownership information was missing from its response questionnaires. Rather, the government’s only concern is about “the ‘control’ information” Commerce identified as missing and deficient; and, “in these instances, it is critical for the Court to pay attention to the particular question being asked” in the questionnaire, it said. It called it “axiomatic” that Commerce, not the respondent, must ask “clear” questions to let the respondents know what it is seeking.

“In many instances the questions asked do not request supporting documentation and, yet, Commerce found the answers deficient for just that reason,” it said.

It said the Chinese government responded to Commerce’s supplemental questionnaire by disagreeing that there was a discrepancy between the CCP opinion and Beijing’s claim that none of the input suppliers’ owners were party officials. The Chinese government said that there was “no possibility that the CCP would interfere with the operation and determination process of the companies in the private economy sector.

“Instead, the document only refers to the purpose of improving the rule of law and moral standards of private economic personnel,” Beijing said.

Baroque argued that this is no different than “local governments working with local business everywhere” and that the CCP policy doesn’t mean that CCP officials actually serve as owners or exert economic control.

The party constitution, too, doesn’t contradict the Chinese government’s claim that it does not exert control over the input suppliers, it said. That constitution means no primary party, or committee, must be formed if there are not three party members in a company, and this is reasonable because only 7% of the Chinese population are party members, it said.