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CIT Upholds Exporters' Failure to Rebut Presumption of Gov't Control Despite 'Inartful' US Defense

The Court of International Trade on May 22 upheld the Commerce Department's finding that both Guizhou Tyre Co. (GTC) and Double Coin Holdings failed to rebut the presumption of Chinese government control in the antidumping duty investigation on truck and bus tires from China. Despite Commerce's "inartful and internally-inconsistent approach" to the question of whether a company majority-owned by a government entity could ever prove to be free of government control, Judge Timothy Stanceu said the agency did enough to show that Double Coin did not pick its managers independently of the government-owned shareholder.

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The judge ruled that the proceeding "does not present the question of whether a majority-government-owned respondent could place on the record evidence demonstrating that the majority shareholder could not control the selection of management," adding that the evidence doesn't "demonstrate such a possibility." Commerce showed that the majority shareholder of Double Coin, state-run Shanghai Huayi (Group) Co., had the power to pick members of the board of directors, that the board appointed the company's general manager and that the general manager appointed the other managers.

Double Coin claimed that Commerce's denial of the company's separate rate status was contradicted by evidence that its U.S. affiliated importer CMA negotiated its prices free of government control. Stanceu said this claim takes issue with the agency's criteria and its practice of requiring a separate respondent to satisfy all four of the standards for rebutting the presumption of government control, and "a court must afford Commerce the discretion to devise and apply reasonable criteria for deciding the composition" of the China-wide entity, Stanceu said.

The four factors Commerce considers in deciding whether a respondent is subject to government control of its export functions are (1) whether the export prices are set by a government agency, (2) whether the company has the authority to sign contracts, (3) whether the respondent has autonomy from the state in making decisions on the selection of management, and (4) whether the company retains the proceeds of its export sales and makes independent decisions with that money.

GTC ran into a similar issue when it tried to prove independence from government control. Commerce said GTC satisfied the first two factors but failed the last two because the exporter's largest shareholder, while not a majority, was still run by the government, and the shareholder influenced the selection of management and the distribution of profits. GTC argued that evidence does not support the rejection of its separate status and that Commerce illegally imposed a new analysis inconsistent with its past practice.

Stanceu first held that GTC incorrectly assumed that Commerce lacked any discretion to apply its four-part test. "The breadth of this discretion requires the court to reject Guizhou Tyre’s general objection to the methodology Commerce applied in the Remand Redetermination, which placed weight on the ability of a single, government-owned shareholder to control the selection of board members and to control indirectly the selection of the senior managers who operated the company," the opinion said.

The court also handled an issue that arose related to the preemptive issuance of the AD order in the case. When the order was issued, the underlying injury determination made by the ITC was being litigated. The result led this court, in a previous opinion, to find that the earliest date the order could have been legally imposed was Feb. 21, 2020. As a result, the plaintiffs argued for the court to order refunds on all entries liquidated with the duties brought in before this date but after Feb. 15, 2019 -- the original date the order was imposed. Stanceu ordered the agency to publish an amended AD order and to direct CBP to liquidate without duties and refund all estimated duties deposited on entries of truck and bus tires exported by GTC made prior to Feb. 21, 2020.

(Guizhou Tyre Co. v. United States, Slip Op. 23-81, CIT Consol. #19-00031, dated 05/22/23; Judge: Timothy Stanceu; Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export Co., Ltd.; Daniel Porter of Curtis Mallet-Prevost for consolidated plaintiffs Shanghai Huayi Grp. Corp. Ltd. and China Manufacturers Alliance LLC; and Kara Westercamp for defendant U.S. government)