CIT Upholds Commerce Finding That Tire Exporter Failed to Rebut Presumption of Chinese State Control

Though he agreed with Double Coin that the issue of government control was not adjudicated by the U.S. Court of Appeals for the Federal Circuit in this case's previous appeal, Judge Timothy Stanceu ultimately sided with the Commerce Department.

The agency rooted its government control analysis in how much influence a government-controlled majority shareholder had in the selection and control of Double Coin's management. Stanceu ruled that absent a statute or regulation governing the presumption of government control in AD cases, "the court lacks a basis to conclude that Commerce acted contrary to law in exercising its broad discretion in this way." While the exporter put forward evidence related to independence of government control, "it did not show that it was free from all material aspects of government control that emanated from the authority of the board to select and oversee the company’s management personnel," the judge said.

Stanceu remanded the case back to Commerce so the agency could assign Double Coin the China-wide rate, allowing the court to enter judgment and put into effect the Federal Circuit's mandate.

In the prior appeal, the Federal Circuit ruled that country-wide rates can still be based on adverse facts available even if no members of the country-wide entity were found to be uncooperative (see 2106100044). Back at the trade court, Double Coin and the U.S. argued over whether the issue involving Commerce's analysis into the presumption of state control for Double Coin was resolved. Stanceu sided with Double Coin, finding that the issue had not been.

In its analysis, Commerce relied on Double Coin's corporate ownership structure, which had the government-owned Huayi Group owning a 65.66% share of the company. Double Coin's articles of association provided that a majority shareholder had near complete control over any shareholder decisions. Meanwhile, the exporter claimed that Huayi's influence does not automatically mean that it controls all of the company's decisions.

Stanceu ruled that Commerce had "considerably broad" discretion, since it has not grounded its exercise of this authority in a provision of the Tariff Act or its own implementing regulations. "Thus, there is no statutory language, legislative history, or regulatory language or preamble to guide a court when ruling on the Department’s decision to apply its methodology," the judge said.

As a result, the judge upheld Commerce's, even though the methodology marked a shift in the agency's analysis as a result of a separate CIT decision. Noting that this other decision, Advanced Tech. & Materials Co. v. U.S., is not precedential, Stanceu said that nothing stopped Commerce from being guided by the case.

The judge also addressed evidence from Double Coin concerning its independence from the Chinese government. The exporter said that despite Huayi's influence, the majority shareholder did not control the board, since the board must act in the best interest of Double Coin, because independent, minority shareholders can bring suits against board members that fail this duty.

"Double Coin’s arguments are unconvincing because they are based on a presumption that the effect of government control is manifested only when there is conflict or 'interference' between the governmental and commercial interests of a company," the opinion said. "Double Coin fails to explain why Commerce, when examining the effect of government ownership in the context of a company’s governing structure, was required to construe the influence and effect of government control so narrowly."

(China Manufacturers Alliance v. United States, Slip Op. 23-75, CIT #15-00124, dated 05/16/23, Judge Timothy Stanceu. Attorneys: Daniel Porter of Curtis Mallet-Prevost for plaintiffs China Manufacturers Alliance and Double Coin; Ned Marshak of Grunfeld Desiderio for plaintiffs Guizhou Tyre Co. and Guizhou Tyre Import and Export Co.; John Todor for defendant U.S. government)