Commerce Established 'Irrebuttable' Presumption of Govt. Control in AD Reviews, Exporter Tells CAFC
The Commerce Department did not reasonably find that Chinese exporter Zhejiang Machinery Import & Export Corp. failed to rebut the presumption of de facto government control, barring the company from receiving a separate antidumping rate, the exporter argued to the U.S. Court of Appeals for the Federal Circuit in its Oct. 26 opening brief. Contesting the Court of International Trade's June ruling upholding Commerce's position that ZMC did not rebut this presumption, ZMC argued that Commerce was unwilling to address arguments presented by it that explained that it wasn't possible for the Chinese government to control ZMC through the labor union that owns most of its shares. This established an "irrebuttable presumption that cannot be rebutted by any factual or legal arguments," contrary to law, the brief said.
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The case concerns an antidumping administrative review on tapered roller bearings and parts thereof, finished or unfinished from China. In an antidumping review concerning a non-market economy, such as China, an exporter can request a separate rate if can prove it is not de facto controlled by the government. Commerce said ZMC failed to meet this standard. The exporter, through multiple layers of ownership, is ultimately operated by the Zhejiang Provincial State-owned Assets Supervision and Administration Commission within the government of China and a labor union for ZMC parent company Zhejiang Sunny I/E Corp. Commerce found that Sunny's government-run employee stock ownership committee (ESOC) runs this labor group.
After initially remanding the case to Commerce to reconsider evidence it previously rejected concerning the link between the labor union and the ESOC, CIT then upheld Commerce's unchanging finding that the government had the ability to control ZMC (see 2106230033). The agency said that Sunny's trade union was a subsidiary of the All-China Federation of Trade Unions -- the only legally allowed trade union in China. However, to fully establish government control, Commerce had to draw a link between the trade union and the ESOC. Since all individual members of the ESOC were members of Sunny's labor union, the Chinese Communist Party controlled Sunny, Commerce said -- a claim CIT upheld.
ZMC then appealed the decision, introducing the first case before the Federal Circuit over a denied separate rate where a labor union is the majority shareholder, the brief said. Kicking off litigation in the appeal, the exporter now attacks Commerce's decision-making process and refusal to weigh the record evidence.
"If the Department is allowed to continuously stack a presumption (i.e., Chinese government control of all companies) on a presumption (i.e., majority shareholders control subsidiary companies) on yet another presumption (i.e., Chinese government controls all unions and all union members even in non-union activities), without addressing specific facts or substantive arguments presented by producers and exporters showing how their export activities are conducted independent of these presumptions of government control, then it fundamentally erodes the due process an administrative review is intended to provide as Chinese exporters would have no meaningful opportunity to prove its export activities are conducted without Chinese government intervention," the brief said.
By eroding the integrity of the agency procedure in this way, further unnecessary litigation will be spawned since the ability of a company to prove the absence of de facto government control "would be nullified by this new additional requirement that the company not have any union members at all," the brief argued. Many Chinese companies have a labor union and nearly all employees at Chinese firms participate as union members, so it now appears very difficult as to how any company could rebut government control, the exporter argued.
Setting larger departmental-wide policy aside, ZMC turned to the substance of Commerce's determination, arguing that union membership by ESOC members alone is not enough to find potential or actual control of Sunny or ZMC, and that the record evidence itself shows no actual or potential control of ZMC through Sunny's labor union. "Even accepting DOC’s findings based on the NME Status Memo that the GOC controls ACFTU and ACFTU controls all Chinese labor unions, Sunny’s ESOC members participated in ESOC activities as shareholders, not as union members," the brief said. "There is no evidence that any labor union controls or potentially could control Sunny’s ESOC."