Tire Exporter's Challenge to Presumption of NME State Control Sunk by CAFC Case Law, Petitioner Says

The Commerce Department has not established an "irrebuttable presumption" of state control for exporters in nonmarket economies, antidumping duty petitioner the United Steelworkers labor union argued in a Jan. 5 reply brief at the U.S. Court of Appeals for the Federal Circuit (Pirelli Tyre Co. v. United States, Fed. Cir. # 23-2266).

A strong amount of case law from the Federal Circuit firmly established that the burden is on an NME respondent to show a lack of de jure and de facto foreign state control to get its own rate, the labor union noted. The appellate court has recently affirmed the idea that an NME respondent must show that it "sets its prices independently, negotiates its own contracts, selects its management autonomously, and keeps its sales proceeds."

Contrary to exporter Pirelli Tyre Co.'s claims in its suit on the 2017-18 AD review of passenger vehicle and light truck tire from China, Commerce doesn't "bear the burden to prove the minutia of an NME respondent's operations to show 'day-to-day' government control over specific activities," the petitioner said.

Pirelli's argument is that once the company offers any evidence of a lack of state control, the presumption must "completely vanish," the labor union said. That ignores how the presumption of NME state control actually works, since the "affirmative burden is on the respondent to demonstrate a lack of control on a number of points" to show that the presumption of state control doesn't apply "in any of those ways."

Changing the presumption mechanism to suit Pirelli also would be "illogical," the petitioner claimed. "It would be virtually impossible for the agency to ever show control over specific export activities in the face of a respondent whose interest will be to not ... explain to the agency where in its records such evidence may in fact be found," the brief said. The labor union relied heavily on case law from the Federal Circuit cutting against Pirelli's claim that "any evidence of independence terminates the presumption of control," shifting the burden to the agency to prove control.

In the administrative review, Pirelli sought a separate AD rate by claiming that it rebutted the presumption of Chinese government control. The company was bought by Chinese state-owned Chem China in 2015, and Commerce found it was owned by the Chinese government because Chem China appointed the members of Pirelli's board.

Unlike in previous reviews, Pirelli showed Commerce that it made changes to its corporate structure, including the fact that Chem China and the Silk Road Fund decreased their majority ownership in Pirelli Italy and Pirelli China to indirect minority ownership. The company also altered the composition of its board of directors to require a majority to be designated as "independent" under Italian law. Commerce still said the respondent failed to rebut the state control presumption. That position was upheld by the Court of International Trade in June (see 2306120055).

At the Federal Circuit, Pirelli said Commerce's state control finding based on the control of Pirelli's board was "insufficient to meet Commerce's burden to show how that control resulted in a control of export activities." The petitioner challenged this argument, claiming that the exporter is the one who must show that they are not being controlled in a number of areas.

The labor union added that the respondent also must address not only actual NME state control but "potential government control." Issues concerning potential control, "such as the ability to appoint a majority of a board that sets the business plans for a company as Commerce has addressed in case of Pirelli, go directly to the underlying concerns with an NME economy" expressed by the Federal Circuit in prior cases, the brief said.

The petitioner also challenged Pirelli's claim that Commerce didn't meaningfully address evidence regarding Chinese state control of Pirelli, claiming that the exporter "simply disagrees with how Commerce addressed that evidence" and just asks the court to reweigh the evidence.