GUIZHOU TYRE CO., LTD. AND GUIZHOU TYRE IMPORT AND EXPORT CO., LTD., et al. v. UNITED STATES
Consol. Court No. 19-00031
UNITED STATES COURT OF INTERNATIONAL TRADE
January 24, 2022
Slip Op. No. 22-6
Before: Timothy C. Stanceu, Judge
OPINION AND ORDER
[Remanding to the issuing agency final determinations resulting from an antidumping duty investigation of imports of certain truck and bus tires from the People‘s Republic of China.]
Dated: January 24, 2022
Daniel L. Porter, Curtis, Mallet-Prevost, Colt & Mosle, LLP, of Washington, D.C., for consolidated plaintiffs Shanghai Huayi Grp. Corp. Ltd., formerly known as Double Coin Holdings Ltd., and China Manufacturers Alliance LLC. With him on the brief were James P. Durling and Kimberly Reynolds.
L. Misha Preheim, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were Jeanne E. Davidson, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., and Kara M. Westercamp, Trial Attorney. Of counsel on the brief was Elio Gonzalez, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.
Stanceu, Judge: Plaintiffs contest a final affirmative less-than-fair-value determination of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) in an antidumping duty investigation of certain truck and bus tires from the People‘s Republic of China (“China” or the “PRC“) and the resulting antidumping duty order. Before the court are plaintiffs’ motions for judgment on the agency record. Concluding that the less-than-fair-value determination is contrary to law in certain respects, the court remands this determination to Commerce for reconsideration.
I. BACKGROUND
A. The Parties to this Consolidated Case
There are two groups of plaintiffs in this consolidated action. One group, to which the court refers collectively as “Guizhou Tyre,” consists of Guizhou Tyre Co., Ltd. (“GTC“), a Chinese producer of truck and bus tires, and its affiliated exporter, Guizhou Tyre Import and Export Co., Ltd. (“GTCIE“), a Chinese exporter of this merchandise. Compl. ¶ 3 (Apr. 15, 2019), ECF No. 7. The other group of plaintiffs consists of a Chinese producer and exporter of truck and bus tires, Shanghai Huayi Group Corporation Ltd., to which its counsel refers by its former name, Double Coin
B. The Antidumping Duty Investigation and the Contested Determinations
Two related agency decisions stemming from an antidumping duty investigation are contested in this consolidated action.2 They are a Final “Less-Than-Fair-Value (“LTFV“)” Determination, Truck and Bus Tires From the People‘s Republic of China: Final Affirmative Determinations of Sales at Less Than Fair Value and Critical Circumstances, 82 Fed. Reg. 8,599 (Int‘l Trade Admin. Jan. 27, 2017) (the “Final LTFV Determination“), and the subsequently-issued antidumping duty order (“Order“), Truck and Bus Tires From the People‘s Republic of China: Antidumping Duty Order, 84 Fed. Reg. 4,436 (Int‘l Trade Admin. Feb. 15, 2019) (the “Order“). Incorporated by reference in the Final LTFV Determination is an “Issues and Decision Memorandum” containing specific findings and explanatory discussion. Truck and Bus Tires from the People‘s Republic of China: Issues and Decision Memorandum for the Final Affirmative Determinations of Sales at Less Than Fair Value and Critical Circumstances (Int‘l Trade Admin. Jan. 19, 2017) (P.R. Doc. 855) (“Final I&D Mem.“).3
Commerce initiated the antidumping duty investigation of certain truck and bus tires from the PRC (the “subject merchandise“) in early 2016, Truck and Bus Tires From the People‘s Republic of China: Initiation of Antidumping Duty Investigation, 81 Fed. Reg. 9,434 (Int‘l Trade Admin. Feb. 25, 2016), with a period of investigation (“POI“) of July 1, 2015 through December 31, 2015, id. at 9,435. Commerce published a Preliminary Affirmative LTFV Determination later that year, Truck and Bus Tires From the People‘s Republic of China: Preliminary Affirmative Determinations of Sales at Less Than Fair Value and Critical Circumstances, and Postponement of Final Determination, 81 Fed. Reg. 61,186 (Int‘l Trade Admin. Sept. 6, 2016), which incorporated by reference the “Preliminary Decision Memorandum.” Truck and Bus Tires from the People‘s Republic of China: Decision Memorandum for the Preliminary Affirmative Determinations of Sales at Less Than Fair Value and Critical Circumstances, and Postponement of Final Determination (Int‘l Trade Admin. Aug. 26, 2016) (P.R. Doc. 716) (“Prelim. Decision Mem.“). Commerce also published an Amended Preliminary LTFV Determination. Truck and Bus Tires From the People‘s Republic of China: Amended Preliminary Affirmative Determination of Sales at Less Than Fair Value, 81 Fed. Reg. 71,051 (Int‘l Trade Admin. Oct. 14, 2016).
C. Proceedings Before the Court
Guizhou Tyre and Double Coin commenced their respective actions on March 15, 2019. Summons, Ct. No. 19-00031, ECF No. 1; Compl. (Apr. 15, 2019), Ct. No. 19-00031, ECF No. 7; Summons, Ct. No. 19-00034, ECF No. 1; Compl. (Mar. 18, 2019), Ct. No. 19-00034, ECF No. 7. The actions were consolidated on June 7, 2019. Order, Ct. No. 19-00031, ECF No. 24.
Before the court are the
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980,
In reviewing a final determination, the court “shall hold unlawful any determination, finding, or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
B. Plaintiffs’ Motions for Judgment on the Agency Record
Guizhou Tyre raises three claims in contesting the Final LTFV Determination. One of its claims contests the legal basis for the Order: it asserts that the Order was invalid when issued because no affirmative finding of injury or threat by the U.S. International Trade Commission (“ITC” or “Commission“) was in effect at that time. Guizhou Tyre‘s Br. 39-41. Guizhou Tyre claims, second, that the denial of its separate rate application was contrary to law because Commerce, abandoning its prior test for separate rate status without proper notice or explanation, failed to consider whether the government control it found was, specifically, control over export activities. Id. at 19-24. Its remaining claim is that the Department‘s determination that Guizhou Tyre did not rebut Commerce‘s presumption of de facto government control is unsupported by substantial evidence on the record. Id. at 24-30.
Double Coin asserts four claims. It claims that Commerce lacked statutory authority to establish a dumping margin for a nationwide entity. Double Coin‘s Br. 7-27. Its second and third claims, which parallel those of Guizhou Tyre, are that Commerce failed to apply its established separate rate methodology, id. at 27-29, and that Commerce was unsupported by substantial evidence in deciding that Double Coin did not rebut Commerce‘s presumption of de facto government control, id. at 30-49. Finally, Double Coin claims that Commerce contravened the antidumping duty statute when it selected Double Coin for individual investigation and then failed to verify Double Coin‘s relevant factual information. Id. at 49-53.
C. Guizhou Tyre‘s Claim that the Antidumping Duty Order Was Invalid at the Time of Issuance
Guizhou Tyre claims that the Order was invalid when Commerce issued it on February 15, 2019, arguing that no affirmative injury or threat determination of the ITC had gone into effect as of that date. Guizhou Tyre‘s Br. 39-41. According to Guizhou Tyre, Commerce, before issuing the Order, should have awaited the outcome of litigation in this Court contesting the initial final determination of the ITC, which reached a negative finding of injury or threat to the domestic industry. Guizhou Tyre‘s Reply 18; see United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers, Int‘l Union, AFL-CIO, CLC v. United States, 42 CIT ___, 348 F. Supp. 3d 1328, 1339 (2018) (”USW I“). Upon the conclusion of that litigation on February 18, 2020—approximately a year after Commerce issued the Order—this Court entered a judgment sustaining an affirmative final injury determination that the ITC submitted on remand. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers, Int‘l Union, AFL-CIO, CLC v. United States, 44 CIT ___, 425 F. Supp. 3d 1374, 1381 (2020) (”USW II“). The court finds merit in Guizhou Tyre‘s claim.
Upon issuing the Order on February 15, 2019, Commerce, as background, referred to the Commission‘s initial, negative final determination, stating that “[o]n March 13, 2017, the ITC notified Commerce of its final determination that an industry in the United States is not materially injured or threatened with material injury within the meaning of
On April 14, 2017, the petitioner in the antidumping duty investigation commenced an action in this Court according to section 516A of the Tariff Act,
On January 30, 2019, the ITC issued its redetermination in response to this Court‘s order of remand in USW I. See Order, 84 Fed. Reg. at 4,436. This redetermination concluded that imports of truck and bus tires from China materially injured the domestic industry.5 See USW II, 44 CIT at ___, 425 F. Supp. 3d at 1377. On February 8, 2019, the ITC notified Commerce of its affirmative remand redetermination. Order, 84 Fed. Reg. at 4,436. Seven days later, on February 15, 2019, Commerce published the Order. Id. The ITC published a notice announcing its affirmative remand redetermination. Truck and Bus Tires From China, 84 Fed. Reg. 4,855 (Int‘l Trade Comm‘n Feb. 19, 2019).
On February 18, 2020, more than a year after Commerce issued the Order, the Court of International Trade sustained the ITC‘s remand redetermination. USW II, 44 CIT at ___, 425 F. Supp. 3d at 1381. This Court entered judgment the same day.6 Judgment (Feb. 18, 2020), Ct. No. 17-00078, ECF No. 120.
Guizhou Tyre argues that the ITC‘s remand redetermination had no legal effect at the time it was issued because it was merely a redetermination pending a decision of this Court. Guizhou Tyre‘s Br. 40 (“Just as all other trade redeterminations made on remand lack legal effect until
Disagreeing with Guizhou‘s Tyre‘s argument, defendant responds that Commerce issued the Order in compliance with
Diamond Sawblades IV, which affirmed the decision of this Court in Diamond Sawblades Mfrs. Coal. v. United States, 33 CIT 1422, 650 F. Supp. 2d 1331 (2009) (”Diamond Sawblades III“), arose from facts that were dissimilar, in a critical respect, to those of this case. As discussed below, the antidumping duty orders involved in the Diamond Sawblades litigation were issued after this Court sustained an affirmative ITC determination reached on remand during the litigation. The pertinent facts in the Diamond Sawblades litigation, as presented in the various judicial opinions, are as follows.
Following an affirmative final LTFV determination by Commerce on May 22, 2006, the ITC, on July 11, 2006, published a negative final determination, concluding that the diamond sawblades industry in the United States was neither materially injured, nor threatened with material injury, by the subject imports from Korea and China. See Final Determination of Sales at Less Than Fair Value and Final Partial Affirmative Determination of Critical Circumstances: Diamond Sawblades and Parts Thereof from the People‘s Republic of China, 71 Fed. Reg. 29,303 (Int‘l Trade Comm‘n May 22, 2006), as amended by Notice of Amended Final Determination of Sales at Less Than Fair Value: Diamond Sawblades and Parts Thereof from the People‘s Republic оf China, 71 Fed. Reg. 35,864 (Int‘l Trade Comm‘n June 22, 2006); Diamond Sawblades Mfrs. Coal. v. United States, 32 CIT 134, 134 (2008) (”Diamond Sawblades I“). The petitioner in the antidumping duty investigation, the Diamond Sawblades Manufacturers Coalition, contested the Commission‘s negative final determination in an action brought in this Court, Diamond Sawblades I at 142, which ruled that the ITC had relied upon an unsupported finding and remanded the case to the Commission for further proceedings, id. at 150. On remand, the Commission, on May 14, 2008, reached a negative determination of injury, but an affirmative determination of threat, to the domestic industry; this Court sustained the ITC‘s remand redetermination on January 13, 2009. Diamond Sawblades Mfrs. Coal. v. United States, 33 CIT 48 (2009) (”Diamond Sawblades II“).
Court in Diamond Sawblades II announced that “[i]f the [Court of International Trade‘s] opinion in this case is not appealed, or is affirmed on appeal, then antidumping duty orders on diamond sawblades from the PRC and Korea will be issued.” Diamond Sawblades and Parts Thereof from the People‘s Republic of China and the People‘s Republic of Korea: Notice of Court Decision Not in Harmony With Final Determination of the Antidumping Duty Investigations, 74 Fed. Reg. at 6,570. On March 13, 2009, parties who had been defendant-intervenors in the litigation before this Court filed notices of appeal of the judgment sustaining the Commission‘s affirmative redetermination. Diamond Sawblades III, 33 CIT at 1425, 650 F. Supp. 2d at 1335.
The dispute in Diamond Sawblades III arose when the petitioner in the antidumping duty investigation, the Diamond Sawblades Manufacturers Coalition, claimed that Commerce erred in declining to issue antidumping duty orders, and declining to order the collection of cash deposits, until the judgment entered by this Court in Diamond Sawblades II became final and conclusive, i.e., when appeals had been exhausted. The petitioner sought as a remedy a writ of mandamus to compel Commerce to issue antidumping duty orders and order the collection of cash deposits.
Id., 33 CIT at 1425, 650 F. Supp. 2d at 1336. In Diamond Sawblades III, this Court issued the writ of mandamus, and the Court of Appeals affirmed that decision in Diamond Sawblades IV, 626 F.3d at 1383. The Court of Appeals stated that “the statutory scheme imposes a mandatory duty on Commerce to issue antidumping duty orders covering the subject entries upon being notified of the Commission‘s final determination, a notification that in this case occurred on January 22, 2009,” which was the date the ITC notified Commerce that the Court of International Trade, in Diamond Sawblades II, had sustained its remand redetermination. Id. The Court of International Trade had entered a judgment sustaining the Commission‘s remand redetermination on January 13, 2009, nine days prior to the ITC‘s notification. Diamond Sawblades II, 33 CIT at 48-49.
Commerce took the position that under the governing statutes it was not required to issue antidumping duty orders or to collect cash deposits until the final conclusion of the litigation challenging the predicates for entering antidumping duty orders, i.e., until Commerce received notice from the Commission that no appeal would be taken to this court or, if an appeal
was taken, until this court issued a “conclusive decision” upholding the decision of the Court of International Trade.
Diamond Sawblades IV, 626 F.3d at 1377. Rejecting the Department‘s position, the Court of Appeals resolved the issue before it by holding that Commerce erred in delaying the issuance of the antidumping duty orders, and ordering the collection of cash deposits, as it awaited a final and conclusive judicial determination in the parallel litigation contesting the ITC‘s negative final determination. Id. at 1383-84. The Court of Appeals ruled, therefore, that this Court had not abused its discretion in issuing the writ of mandamus to compel Commerce to issue the antidumping duty orders and collect cash deposits. Id.
The opinion in Diamond Sawblades IV contains the following passage:
To be sure, as we have noted, the Commission in this case issued its notification to Commerce at the time of the court decision upholding its remand determination, rather than at the time of the remand determination itself. In that respect, the Commission appears to have erroneously assumed that its obligation to issue a notice under
section 1673d(d) was triggered by the court decision upholding its remаnd determination, rather than by the issuance of the remand determination itself. Nonetheless, the Commission‘s notice, even if late, still constituted a valid notification of the Commission‘s final determination on remand for purposes ofsection 1673d(d) , and it therefore triggered Commerce‘s obligation to issue an antidumping duty order undersection 1673e(a) . Nothing in Timken [v. United States, 893 F.2d 337 (Fed. Cir. 1990)] or any other decision of this court is to the contrary.
Id. at 1381. Earlier in the Diamond Sawblades IV opinion, in a footnote, the Court of Appeals stated that:
The Commission waited until after the Court of International Trade sustained its remand determination, even though the governing statute,
19 U.S.C. § 1673d(d) , requires that notification of a determination be made “[w]henever the ... Commission makes a determination” undersection 1673d ; the statute does not require or contemplate that the notification will issue only after court review of the Commission‘s remand redetermination.
Guizhou Tyre argues that the conclusion by the Court of Appeals that the Commission‘s obligation to issue the Timken notice was triggered by the ITC‘s remand redetermination does not state the holding of Diamond Sawblades IV and is, instead, dicta. Guizhou Tyre is correct. The issue on appeal in Diamond Sawblades IV was whether Commerce unlawfully delayed the issuance of antidumping duty orders and
Unlike Diamond Sawblades IV, this case squarely presents the question of whether Commerce, as Guizhou Tyre claims, erred in issuing the Order, and directing the collection of cash deposits pursuant to that Order, before the Court of International Trade had decided whether the ITC‘s affirmative remand redetermination should be sustained or remanded back to the Commission. The court next turns to this question.
The court considers, first, the immediate effect, and the continuing effect, of the ITC‘s negative final determination. The Commission notified Commerce of this determination on March 13, 2017.8 See Order, 84 Fed. Reg. at 4,436. On March 17, 2017, the Commission published this determination in the Federal Register. Truck and Bus Tires From China, 82 Fed. Reg. at 14,232. According to the Tariff Act, the immediate effect of publication was to terminate the antidumping duty investigation, both as to the Commission and as to Commerce. See
be terminated upon the publication of notice of that negative determination.“)9 The statute directed, further, that upon the publication of the Federal Register notice required by
The continuing effect of the ITC‘s negative final determination is also defined by
The court considers, next, the effect of the Commission‘s submitting its remand redetermination for this Court‘s consideration on January 30, 2019, during the USW litigation, and its notifying Commerce of its remand redetermination on February 8, 2019. The court concludes that neither event invalidated the ITC‘s negative final determination, and neither put the ITC‘s affirmative remand redetermination into effect.
The negative ITC determination was a final determination (as defined in
While it is well established that the Court of International Trade, in conducting judicial reviews under section 516A of the Tariff Act, has the power to issue interlocutory orders, including orders for reconsideration of contested determinations of Commerce or the Commission, section 516A also contemplates that judicial review in the Court of International Trade will result in an agency “disposition” that is “consistent with the final disposition of the court.”
In addition to arguing that the Department‘s action was in accord with the decision of the Court of Appeals in Diamond Sawblades IV, defendant also argues that Commerce was required to issue the Order when it did to comply with the directive in
The court‘s conclusion is further illustrated by an example. If, for instance, a contested final determination of the ITC were an affirmative one instead of a negative one (followed, necessarily, by the publication of an antidumping duty order), and were the ITC‘s affirmative final determination contested in this Court with the result that the Commission submitted a negative determination on remand, it could not correctly be argued that the ITC‘s mere notification to Commerce of that negative remand redetermination, or the submission of that decision for the consideration of this Court, would have been sufficient to revoke the antidumping duty order. The ITC‘s negative determination on remand would not have been the equivalent of a negаtive determination under
In summary, the ITC‘s remand redetermination was not a determination described by
The court next addresses the issue of the procedure Commerce should have followed with respect to issuance of an antidumping duty order. In provisions that do not refer specifically to judicial review, the Tariff Act specifies the normal procedures for issuance of an antidumping duty order when Commerce and the ITC have issued affirmative final determinations: “If the determinations of the administering authority and the Commission under subsections (a)(1) [
In issuing the Order on February 15, 2019, Commerce announced a series of implementing steps. It stated, first, that “Commerce will direct CBP to assess, upon further instruction by Commerce, antidumping duties equal to the amount by which the normal value of the merchandise exceeds the export price (or constructed export price) of the merchandise, for all relevant entries of truck and bus tires from China.” Order, 84 Fed. Reg. at 4,436. “These antidumping duties will be assessed on unliquidated entries of truck and bus tires from China entered, or withdrawn
As the court noted previously, the effect of the publication of the ITC‘s initial, negative determination on March 17, 2017, as provided by
D. The Department‘s Denial of Separate Rate Status for GTCIE
In antidumping duty investigations of imports from nonmarket economy (“NME“) countries, including the PRC, the Department‘s practice is to begin “with a rebuttable presumption that all companies within the country are subject to government control.” Final I&D Mem. at 6. Under this practice, Commerce assigns all exporters and producers of investigated merchandise a single rate unless “an exporter can demonstrate that it is sufficiently independent to be entitled to a separate rate.” Id. (footnote omitted). To rebut the presumption, an exporter or producer must demonstrate “de jure” and “de facto” independence from government control. See id. Commerce concluded that GTCIE had not rebutted its presumption of de facto control by the PRC government. Id. at 27.
Commerce noted, and it is not contested, that during the period of investigation the Guiyang Industry Investment Group Co., Ltd. (“GIIC“) held a 25.20% ownership stake in GTC (which owned 100% of GTCIE), and that GIIC was 100% owned by a government entity, the Guiyang State-owned Assets Supervision and Administration Commission (the “Guiyang SASAC“). See id. at 24. In the Preliminary Decision Memorandum, Commerce preliminarily determined “that Guizhou Tyre Import & Export Co., Ltd. [GTCIE] did not
Guizhou Tyre argues that “Commerce‘s analysis is directly contrary to the record, which establishes that GTC‘s shareholders’ meetings, in fact, were available to all shareholders.” Guizhou Tyre‘s Br. 24. Guizhou Tyre identifies record evidence in support of its contention that the two shareholders’ meetings that took place in May 2015 and July 2015, to each of which Commerce alluded in the Issues and Decision Memorandum, were announced to, and made available to, all shareholders. Id. at 25 (citing GTCIE Second SRA Suppl. Ex. 3D at “Resolution of the 2014 Annual Shareholders’ General Meeting” ¶ I.1.6.). Commerce appears to have disregarded this evidence detracting from its conclusion.
Alluding to the July 2015 meеting, at which, as Guizhou Tyre acknowledges, “proposals favored by GIIC passed,” id. at 24, defendant argues that “Commerce did not conclusively state and find that the shareholder meeting was not available to all shareholders.” Def.‘s Br. 14. This argument is unconvincing. Unquestionably, Commerce reached its decision after assuming that the meetings were not open to all shareholders. Defendant‘s assertion to the contrary impliedly acknowledges that this assumption might well have been false.
Under the standard of review it must apply, the court cannot sustain an agency determination that relies, in whole or in part, upon an invalid finding of material fact. Commerce built upon its invalid factual finding in stating that “[b]ecause of the type of shareholders meetings in which GIIC elected GTC‘s board members, we do not find any practical difference between electing board members or appointing board members” and that “GIIC‘s election of GTC‘s board members was like an appointment of board members.” Final I&D Mem. at 27. The evidence upon which Commerce relied, which is that GIIC‘s shareholders succeeded in electing board members at the July 2015 meeting after being unsuccessful in attempting to do so at the May 2015 meeting, is less than substantial evidence for the Department‘s conclusion that GIIC effectively “appointed” board members at the July 2015 meeting. Because Commerce had no basis for a finding that the meetings were not open to all shareholders the court also must reject the derivative finding, that “record evidence demonstrates that GIIC intentionally selected a shareholders meeting that is most favorable to it to elect members of GTC‘s board.” Id.
Having begun its analysis with an unwarranted assumption that shareholder meetings, including in particular the July 2015 meeting, were not open to all shareholders, Commerce proceeded to conclude that:
Although the articles of association: (1) require the election of senior managers by the board members and (2) prevents [sic] a person who is in a position other than a board of the controlling shareholders or the actual controllers of GTC from serving as a senior manager of GTC, we find that, given the specific nature of the election of the board members and the appointment of senior managers by the board, these provisions do not ensure the absence of the de facto control from the selection of management.
Id. The Department‘s invalid assumption concerning the unavailability of the meetings to all shareholders necessarily invalidates the Department‘s assumption about “the specific nature of the election of the board members.” Id. As a result of these errors, Commerce proceeded to deny GTCIE a separate rate without a basis in substantial evidence for its finding that GIIC controlled the selection of board members and management of GTC and GTCIE.
The deficiency in the Department‘s analysis with respect to the findings on board member and manager selection, and on profit distribution, is not the only reason the court must remand to Commerce the decision to deny separate rate status to GTCIE. The court concludes, further, that the Department‘s reasoning is flawed, being vague and ambiguous as to whether its inquiry is focused on government control of export activities.14
In its Preliminary Decision Memorandum, Commerce stated that “[a]ccording to this separate rate test, the Department will assign a separate rate in NME proceedings
(1) whether the prices are set by, or are subject to the approval of, a government agency; (2) whether the respondent has authority to negotiate and sign contracts and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding the disposition of profits or financing of losses.
Id. Commerce explained that in instances of minority government ownership, “we will analyze the impact of government ownership within the context of the de facto criteria.” Id. at 13.
Commerce did not indicate in the Issues and Decision Memorandum that it intended to make a change to the methodology Commerce described in the preliminary phase of the investigation. Nevertheless, the analysis as to GTCIE in that document does not focus specifically on export activities or functions in addressing government control. As a result, the separate rate analysis Commerce applied to GTCIE failed to show a factual relationship between the findings it made as to selection of board members and distribution of profits and the purpose it identified for applying its de facto separate rate criteria in the preliminary phase, which was to determine whether the government of the PRC exercised control of GTCIE‘s “export activities” or “export functions.”
In its brief, defendant argues that Commerce “may deny a request for a separate rate if an applicant fails to demonstrate separation from the government with respect to any one of the de jure or de facto criteria.” Def.‘s Br. 9 (citing Yantai CMC Bearing Co. v. United States, 41 CIT ___, ___, 203 F. Supp. 3d 1317, 1326 (2017) (”Yantai“); Advanced Tech. & Materials Co. v. United States, 37 CIT 1487, 1490, 938 F. Supp. 2d 1342, 1345 (2013) (”Advanced Tech. III“), aff‘d, 581 Fed. App‘x 900 (Fed. Cir. 2014)). Defendant further elaborates that, “if an applicant fails to establish any one of the de jure or de facto criteria, Commerce is not required to continue its analysis and determine whether the applicant has, or has not, established the other applicable criteria.” Id. (citing Yantai, 203 F. Supp. 3d at 1326). For this argument, defendant relies on Yantai and Advanced Tech. III, but neither decision was based on facts analogous to those in this investigation, in which ownership by government-controlled entities was only 25.20%, with 74.80% owned by public shareholders. Final I&D Mem. at 24; Guizhou Tyre‘s Br. 5; Def.‘s Br. 10. In Yantai, the respondent had a “chain of ownership” that “extended to the Chinese government because Yantai CMC is more than majority owned by CMC, which is, in turn, more than majority owned by Genertec, and Genertec is wholly-owned by the State-owned Assets Supervision and Administration of the State Council (‘SASAC‘).” 41 CIT at ___, 203 F. Supp. 3d at 1323 (footnote omitted) (citation omitted). In Advanced Tech. III, the respondent was similarly majority owned by a company that was wholly-owned by the SASAC. 37 CIT at 1494, 938 F. Supp. 2d at 1348.15
Guizhou Tyre introduced evidence to support its contention that the Chinese government did not control GTCIE‘s export activities and in particular its export prices. See Guizhou Tyre‘s Br. 6–15, 24–30. Under the “rebuttable presumption” method of the Department‘s separate rate analysis, the information Guizhou Tyre put forward was sufficient to require Commerce to consider the record as a whole and make a factual determination on whether the Chinese government actually controlled Guizhou Tyre‘s export functions and export pricing decisions during the period of investigation. Having failed to address this pivotal inquiry, Commerce must do so on remand and reach a result supported by the record evidence.
E. Double Coin‘s Challenge to the Establishment of a Rate for the PRC-Wide Entity and the Assignment of that Rate to Double Coin
Double Coin claims that, on the facts shоwn by the record of the subject investigation, Commerce acted without statutory authority in establishing an estimated dumping duty rate for the PRC-wide entity (specifically, 22.57%) and assigning that rate to Double Coin. Double Coin‘s Br. 7–27. Directing the court‘s attention to section 735(c)(1)(B)(i) of the Tariff Act,
The Tariff Act requires that Commerce, when making its final determination of whether the subject merchandise is being, or is likely to be, sold at less than fair value in the United States, “determine the estimated weighted average dumping margin for each exporter and producer individually investigated, and . . . determine . . . the estimated all-others rate for all exporters and producers not individually investigated.”
A related provision,
producers accounting for the largest volume of the subject merchandise from the exporting country that can be reasonably examined.” Id. Commerce did not invoke this exception, either as to an individual investigation of Double Coin (which, to the contrary, it selected for individual investigation) or as to the PRC-wide entity, which Commerce did not identify as an entity that it was declining to investigate because of the large number of exporters or producers involved in the investigation.16 Moreover, Commerce did not
determine the AFA rate for the PRC-wide entity.” Final I&D Mem. at 7. In using the term “AFA,” Commerce used its acronym for “adverse facts available,” by which it meant a combination of the use of “facts otherwise available” under
In its response to Double Coin‘s Rule 56.2 motion, defendаnt argues that “Commerce‘s PRC-wide rate is an individually investigated rate pursuant to
The provision at issue contains two specific requirements. In taking an action under this provision, Commerce must determine an “estimated weighted average dumping margin,” and it must assign that margin to “each exporter and producer” that is “individually investigated,”
The Court of Appeals provided the answers to both questions in China Mfrs. Alliance, LLC v. United States, 1 F.4th 1028 (Fed. Cir. 2021), a precedential decision on material facts analogous to those of this case (and in which the plaintiff-appellee was Double Coin). Upon applying the facts of this investigation to the holding in China
Mfrs. Alliance, which the court considers controlling on the claim Double Coin raises in this proceeding, the court concludes that the rate Commerce assigned to the PRC-wide entity qualifies as an “estimated weighted average dumping margin” within the meaning of that term as used in
China Mfrs. Alliance involved the fifth administrative review of an antidumping duty order on certain off-the-road tires from China. In the investigation resulting in the antidumping duty order, “Commerce sent quantity and value questionnaires to ninety-four identified Chinese exporters, and received responses from only thirty.” China Mfrs. Alliance, 1 F.4th at 1037. The Court of Appeals noted that “[b]ased on that information, Commerce identified an entity composed of uncooperative exporters, who had failed to rebut the presumption of government control and for whom Commerce had no individual data” and that “[a]ccordingly, Commerce calculated an AFA rate for this PRC-wide entity.” Id. The Court of Appeals concluded from these facts that “[t]he PRC-wide entity rate resulting from Commerce‘s initial investigation constitutes an ‘individually investigated’ weighted average dumping margin within the meaning of
investigation.‘” Id. (citation omitted). The Court of Appeals held, further, that on the facts presented, Commerce may recognize a single NME-wide entity to include all exporters that fail to rebut the presumption of government control. Id.
In the investigation at issue, Commerce stated that “the Department did not receive responses to its Q&V [quantity and value] questionnaire from certain PRC exporters and/or producers of the merchandise under consideration that were named in the Petition and received the Q&V questionnaires the Department issued.” Prelim. Decision Mem. at 17. “Because non-responsive PRC companies have not demonstrated that they are eligible for separate rate status, the Department finds that they have not rebutted the presumption of government control and, therefore, considers them to be part of the PRC-wide entity” and “preliminarily [is] determining the PRC-wide rate on the basis of AFA.” Id. In the final phase of the investigation, Commerce made no change to this methodology in determining “the AFA rate for the PRC-wide entity” by selecting “the highest petition rate,” Final I&D Mem. at 7, which was 22.57%, Final LTFV Determination, 82 Fed. Reg. at 8,604.
The material facts concerning the PRC-wide entity in the investigation at issue do not differ materially from the facts pertaining to the investigation that resulted in the antidumping duty order, and the establishment
establish a rate for a PRC-wide entity and assign that rate to Double Coin, the сourt may not grant a remedy on this claim. Accordingly, the court next considers Double Coin‘s claim that Commerce erred in denying separate rate status to Double Coin on a factual determination that Double Coin had failed to rebut the Department‘s presumption of de facto control by the government of the PRC.
F. The Department‘s Denial of Separate Rate Status for Double Coin
In the Issues and Decision Memorandum, Commerce noted, as stated in Double Coin‘s response to Section A of the Department‘s questionnaire, that “Double Coin is 72.15 percent owned by Shanghai Huayi, which is 100 percent owned by Shanghai SASAC.” Final I&D Mem. at 12. Here also, the Department‘s reference to a “SASAC” was to a “State-owned Assets Supervision and Administration Commission.” Id. at 3. In the Preliminary Determination, Prelim. Decision Mem. at 16, and again in the Final LTFV Determination, Commerce found that “Shanghai SASAC controls Double Coin through Shanghai Huayi.” Final I&D Mem. at 22. Moreover, Commerce found that:
As the majority shareholder, Shanghai Huayi has rights to elect directors at the shareholders’ general meetings in accordance with the number of shares it owns, i.e., 72.15 percent. Double Coin‘s board appoints its general manager and the general manager appoints other managers, including deputy general managers. Three of four directors are general manager and deputy general managers.
Id. at 12 Commerce concluded from these facts that “[t]herefore, Shanghai SASAC controls the selection of Double Coin‘s management and the de facto control over
Double Coin exists.” Id. (citing Double Coin‘s Section A Response 11–19 (May 23, 2016)). While not contesting these factual findings, Double Coin argues, inter alia, that the record evidence does not establish “Chinese Government control over Double Coin‘s export activities.” Double Coin‘s Br. 31. Double Coin argued that it placed evidence on the record, which included excerpts from Double Coin‘s Articles of Association, demonstrating, for example, that Double Coin, as a publicly listed company subject to China‘s “Company Law,” was not under the control of its majority shareholder as to its “business” or its “financial and accounting activities.” Id. at 34 (quoting, inter alia, Article 25 (“. . . Controlling shareholders shall respect the financial independence of the company and shall not interfere with the financial and accounting activities of the company.“) & Article 27 (“A listed company‘s business shall be completely independent from that of its controlling shareholders.“)).
The court concludes that it must remand to Commerce the decision to deny separate rate status to Double Coin. A court is obligated to review a decision of an administrative agency according to the reasoning the agency puts forth. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168–69 (1962). To do that, a court must be able to discern and evaluate that reasoning according to the applicable standard of review. Because, as discussed below, the reasoning underlying the Department‘s decision, as stated in the Issues and Decision Memorandum, is unclear and ambiguous, the court is unable to proceed further in adjudicating Double Coin‘s claim and instead
must issue an order of remand with respect to the denial оf separate rate status for Double Coin.
does not refute the fact that a government-owned entity appears to have near complete control of shareholder decisions of Double Coin.” (footnote omitted)).
As to “shareholder decisions,” Commerce explained that “[r]egardless of the restrictions of the PRC laws and the protection afforded to minority shareholders, Double Coin‘s articles of association demonstrate that a majority shareholder—and particularly one with 72.15 percent ownership—would be expected to have near complete control over any shareholder decisions, including decisions which may affect the management and operations of the company.” Id. (footnote omitted). Despite the evidence Double Coin placed on the record, including that pertaining to Articles 25 and 27 of the Articles of Association, which place restrictions on the authority of controlling shareholders, the court is asked to speculate that “shareholder” decisions ”may affect” the management and operations of Double Coin. Id. (emphasis added). Even were the court to do so, it would require further speculation to conclude that the affected operations were equivalent to government control over Double Coin‘s export activities during the period of investigation.
The Department‘s analysis calls for other speculation as well. Addressing Double Coin‘s contention that “the price negоtiations with unaffiliated U.S. customers for sales of subject merchandise were conducted by Double Coin‘s U.S. subsidiary, which is far removed from the PRC government,” id. at 22, Commerce responded that “the price negotiations between Double Coin‘s U.S. subsidiary and the unaffiliated U.S.
customers do not rebut the presumption of the PRC government control.” Id. at 23. Commerce reasoned that “[t]he actual setting of price is only one of the four de facto criteria, ‘whereas government manipulation of the cost of inputs, . . . or rationalization of industry or output are among numerous other scenarios of concern that can affect seller pricing.‘” Id. at 23–25 (quoting Advanced Tech. & Materials Co., Ltd., et. al. v. United States, 36 CIT __, 885 F. Supp. 2d 1343, 1359–60 (2012)). Commerce would infer that majority ownership of Double Coin by a government-owned entity affected export pricing in these ways without pointing to record
Overall, the Department‘s analysis is unclear and ambiguous as to whether, upon a finding by Commerce of majority ownership by a government entity allowing control of the selection of board and management, the Department‘s presumption of control of export activities by the PRC government remains rebuttable or, in effect, becomes irrebuttable. Despite some indications to the contrary in the Issues and
Decision Memorandum, the latter would appear to be the case, although the Department‘s explanation of its decision, considered on the whole, is ambiguous on this point. While Commerce described the presumption as a rebuttable one, the Issues and Decision Memorandum appears to conclude that a majority shareholder would be “expected to” have control of the company through its “near complete control of any shareholder decisions,” Final I&D Mem. at 23, regardless of the absence of evidence to support a factual finding that a majority shareholder actually exercised control of business decisions, including, in particular, those involving export activities, during the period of investigation and regardless of evidence, such as, in this instance, evidence in the company‘s Articles of Association, that would detract from any such finding.
Commerce has not promulgated a rule of general applicability for NME country investigations or reviews that addresses the question of whether government control of selection of board and management is either a rebuttable or irrebuttable presumption of government control over export activities.18 In the absence of suсh a rule, it is possible to construe some, but not all, of the relevant discussion in the Issues and Decision
Memorandum to mean that the Department‘s current practice, as applied to Double Coin in the investigation under review, is that government control of selection of board and management is, in effect, an irrebuttable presumption of control of export activities. But if that is the current Commerce position, the discussion Commerce put forth in the Issues and Decision Memorandum cannot suffice as an explanation for adoption of such a rule or policy.
In light of the unclear and ambiguous reasoning the court has identified, the court is unable to sustain the Department‘s decision to deny Double Coin separate rate status. In its redetermination upon remand, Commerce must address the court‘s concerns by presenting a statement of the reasoning underlying any decision it reaches.
G. The Department‘s Decision Not to Conduct a Verification of Double Coin‘s Information
Double Coin claims that Commerce unlawfully denied it separate rate status without verifying the factual information
III. CONCLUSION AND ORDER
Upon consideration of plaintiffs’ motions for judgment on the agency record, all papers and proceedings had herein, and upon due deliberation, it is hereby
ORDERED that Commerce shall submit a redetermination upon remand (“Remand Redetermination“) that complies with this Opinion and Order, in which it reconsiders its decisions not to accord separate rate status to GTCIE and to Double Coin; it is further
ORDERED that Commerce shall submit its Remand Redetermination within 90 days of the date of this Opinion and Order; it is further
ORDERED that comments of plaintiffs on the Remand Redetermination must be filed with the court no later than 30 days after the filing of the Remand Redetermination; it is further
ORDERED that the response of defendant to the aforementioned comments must be filed no later than 15 days from the date on which the last comment is filed; and it is further
ORDERED that the joint request for oral argument of plaintiffs Guizhou Tyre and Double Coin, Joint Mot. for Oral Arg. (Mar. 30, 2020), ECF No. 53, is denied.
/s/ Timothy C. Stanceu
Timothy C. Stanceu
Judge
Dated: January 24, 2022
New York, New York