CAFC Says Management Selection Need Not Be Tied to Export Activities in Separate AD Rate Bids
The Commerce Department's third factor for assessing a foreign government's de facto control over an exporter, which addresses the selection of management, doesn't require a link to export activities, the U.S. Court of Appeals for the Federal Circuit held on Feb. 11. Judges Sharon Prost, Richard Taranto and Raymond Chen also held that Commerce properly requires separate rate respondents to "carry a burden of persuasion to justify a separate rate," rejecting exporter Pirelli Tyre Co.'s claim that the agency shouldn't have conflated a rebuttable presumption with a requirement to carry a burden of persuasion.
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Turning to the evidence of whether Pirelli established independence from the Chinese state in the 2017-18 administrative review of the antidumping duty order on passenger vehicle and light truck tires from China, the judges said Commerce's decision to reject the exporter's separate rate bid was supported. Taranto, the author of the opinion, noted six pieces of evidence the agency provided demonstrating a lack of independence, finding there to be "no basis for doubt that Commerce made a reasonable factual determination on the entirety of the evidence."
In the review, Pirelli filed a separate-rate application that disclosed an "indirect relationship" between itself and two Chinese state-owned enterprises owned by the Central State-owned Assets Supervision and Administration Commission of the State Council (SASAC): the Silk Road Fund and China National Chemical Corp., referred to as Chem China. These two entities had "indirect ownership interests" in Pirelli's Italian holding company and Pirelli.
At the Federal Circuit, Pirelli argued that the Court of International Trade and Commerce committed two legal errors. The exporter said the agency erred in not explicitly linking the selection of management to "export functions" and by using an "unlawful interpretation of 'rebuttable presumption.'" The appellate court rejected both claims.
Pirelli claimed that Commerce's policy bulletin in which the agency established the four factors for assessing independence from a foreign government requires a link between management selection and "influence over export activities." Relying on the trade court's decision, Taranto held that "Pirelli’s view is counter to the text of the accepted Separate Rate Policy Bulletin." The third factor "omits the restrictions to 'export prices' or 'export sales'" that are found in two of the other factors.
The court said there's "no persuasive reason to read such restrictions into this factor, contrary to the facially plain reading: Control of selecting management may reasonably be thought to entail control of all significant management decisions such as the ones at issue here."
As for Pirelli's second claim, Taranto said he reads the argument as claiming that "overcoming the rebuttable presumption here is distinct from having to carry a burden of persuasion and that the latter is not required.” The judge said that regardless of "variations in usage" found generally in law, "it is clear in this context that Commerce requires the respondent in present circumstances to carry a burden of persuasion to justify a separate rate," noting that CAFC has repeatedly "upheld that practice."
Since the agency said Pirelli "did not carry that burden, it does not matter whether the burden of persuasion is part of, or additional to, the presumption," the opinion said.
Taranto then turned to Pirelli's evidentiary arguments, which largely relied on claims about Italian law that Commerce declined to consider, since "the record did not contain the relied-on provisions of Italian law, English translations of them, or expert analyses of relevant Italian law." The appellate court said the rejection of these arguments was "reasonable" due to the insufficient record, which was missing even "full citations to specific provisions of Italian law that Pirelli now argues should have been considered," the judge said.
The decision then noted six pieces of evidence Commerce relied on, which include, among other things, the fact that Pirelli's Italian holding company picks most of Pirelli's board members, shared board members and managers between Pirelli and Chem China, and the fact that Chem China "is the single largest indirect shareholder in" Pirelli's Italian holding company.
(Pirelli Tyre Co. v. United States, Fed. Cir. # 23-2266, dated 02/11/25; Judges: Sharon Prost, Richard Taranto and Raymond Chen; Attorneys: Daniel Porter of Curtis Mallet-Prevost for plaintiff-appellants Pirelli Tyre/Pirelli Tire; Sosun Bae for defendant-appellee U.S. government; Nicholas Birch of Schagrin Associates for defendant-appellee United Steelworkers union)