Shandong Rongxin Import & Export Co. v. United States

• Decision Date: 02 December 2019
• Docket Number: Slip Op. 19-151,Court No. 17-00145
• Citation: 415 F.Supp.3d 1319
• Parties: SHANDONG RONGXIN IMPORT & EXPORT CO., LTD., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

415 F.Supp.3d 1319

SHANDONG RONGXIN IMPORT & EXPORT CO., LTD., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 19-151

Court No. 17-00145

United States Court of International Trade.

December 2, 2019

John J. Kenkel, deKieffer & Horgan, PLLC, of Washington DC, argued for plaintiff. With him on the brief were Alexandra H. Salzman, Judith L. Holzman and J. Kevin Horgan.

Ashley Akers, Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Brendan Saslow, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

OPINION

Katzmann, Judge:

The court turns once again to the case of cased pencils. At issue is whether an exporter in a non-market economy ("NME")¹ has adequately established the independence from governmental control necessary to qualify for a separate antidumping duty rate apart from the countrywide antidumping duty rate. Before the court is the United States Department of Commerce's ("Commerce") Final Results of Redetermination Pursuant to Court Remand (Dep't Commerce May 8, 2019) ("Remand Results"), ECF No. 48-1, which the court ordered in Shandong Rongxin Import & Export Co. v. United States, 43 CIT ––––, 355 F. Supp. 3d 1365 (2019) ("Rongxin"). Shandong Rongxin Import & Export Co. ("Rongxin"), an exporter of pencils from the People's Republic of China ("China"), challenges Commerce's redetermination finding that Rongxin was not free of de facto government control and therefore is not entitled to a separate rate. Pl.'s Comments on Def.'s Results of Redetermination Pursuant to Court Remand ("Pl.'s Br."), June 7, 2019, ECF No. 51. Rongxin contends that the Remand Results do not accord with the court's remand order and that Commerce's conclusions are not supported by substantial evidence on the record. Pl.'s Br. The United States ("the Government") requests that the court sustain the Remand Results. Def.'s Resp. to Comments on Remand Results ("Def.'s Br."), June 24, 2019, ECF No. 52. The court sustains the Remand Results in its entirety.

BACKGROUND

The court set forth the relevant legal and factual background of the proceedings involving Rongxin in greater detail in Rongxin, 355 F. Supp. 3d at 1369–72. Information pertinent to the instant case is set forth below.

In antidumping duty proceedings involving merchandise from an NME country, Commerce presumes that all respondents to the proceeding are government-controlled and therefore subject to a single country-wide antidumping duty rate. Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1311 (Fed. Cir. 2017). This presumption is strengthened where there is direct or indirect government majority ownership because "in the context of majority government ownership, potential control is, for all intents and purposes, actual control because the majority shareholder can typically control the operations of a company without actually removing directors or management since it is clear that directors or management could be removed." Zhejiang Quzhou Lianzhou Refrigerants Co. v. United States, 42 CIT ––––, ––––, 350 F. Supp. 3d 1308, 1317 (2018) (internal quotations omitted) (emphasis original) (" Zhejiang"). Nevertheless, respondents may rebut the presumption of government control, and thus become eligible for a separate rate, by establishing the absence of both de jure and de facto government control. Diamond Sawblades, 866 F.3d at 1310–11. Relevant to Commerce's determination here, an exporter can demonstrate the absence of de facto government control by providing evidence that the exporter: (1) sets its prices independently of the government and of other exporters; (2) negotiates its own contracts; (3) selects its management autonomously; and (4) keeps the proceeds of its sales. Zhejiang, 350 F. Supp. 3d at 1314. If a respondent fails to establish its independence for even one of these prongs, Commerce continues to presume government control and applies the country-wide rate to that respondent. Id. at 1321.

On May 30, 2017, Commerce published the results of its administrative review of Certain Cased Pencils from the People's Republic of China for the period of review December 1, 2014 to November 30, 2015 ("POR") in which Commerce determined Rongxin had not demonstrated an absence of de facto government control and was thus ineligible for a separate antidumping duty rate. Certain Cased Pencils from China: Final Results, 82 Fed. Reg. 24,675 (Dep't Commerce May 30, 2017) ("Final Results"), and accompanying Issues and Decision Memorandum ("IDM").

During the POR, Rongxin was a corporation owned by eleven shareholders and led by a six-member board of directors ("Board"), nominated by the largest shareholders. Rongxin's Case Br. [to Commerce] at 16–17, P.R. 82. Rongxin was majority owned by Shandong International Trade Group ("SITG"). Decision Memorandum for the Preliminary Results of the 2014-2015 Antidumping Duty Administrative Review ("Decision Memo") at 6, P.R. 27. SITG is wholly-owned by the State-Owned Assets Supervision and Administration Commission, a Chinese government entity. Id. Furthermore, two months into the POR, Rongxin implemented new Articles of Association ("New Articles") to change its shareholder voting structure to allow for "one shareholder, one vote" and maintained that "each of the six largest shareholders can nominate only one candidate for election to the board of directors." Rongxin's Case Br. [to Commerce] at 16–17, P.R. 82. In the final month of the POR, Rongxin became privately owned. Decision Memo at 6, P.R. 27. In the Final Results, Commerce concluded that the record indicated that the New Articles were not in operation during the POR and thus analyzed whether Rongxin was de facto government controlled by assuming the old Articles of Association ("Old Articles") still governed. Final Results and IDM at 15–16, P.R. 5. Commerce determined that Rongxin was "indirectly majority owned by a Chinese government entity, and that the company did not operate autonomously from the government in the selection of management," and therefore failed to rebut the presumption of de facto government control. Id. at 16.

Rongxin appealed the Final Results to the court, arguing that Commerce's disregard of the New Articles and resulting determination that Rongxin was de facto government controlled were not supported by substantial evidence on the record and contrary to law. Pl.'s Compl., June 13, 2017, ECF No. 3. In Rongxin, the court sustained the Final Results in part, but, after holding that "Commerce's decision to replace the New Articles with the Old Articles ... was unsupported by substantial evidence and contrary to law," remanded to Commerce for reconsideration of the issue "whether Rongxin has established de facto independence from the Chinese government such that it is entitled to a separate rate." 355 F. Supp. 3d at 1377. The court held Commerce's decision not to analyze the New Articles because of an absence of an explanation of their operation was arbitrary and granted Commerce the discretion to reopen the administrative record if needed. Id.

On April 19, 2019, Commerce issued its Draft Remand Redetermination. A.R. 1, May 21, 2019, ECF No. 49-3. Rongxin submitted timely comments in response to Commerce's Draft Remand Redetermination. Id. Commerce issued its Remand Results on May 8, 2019. Id. Commerce again found that "Rongxin has not demonstrated an absence of de facto governmental control, and, therefore, is not entitled to a separate rate." Remand Results at 1. In the redetermination, Commerce examined evidence of de facto government control in Rongxin's selection of management. Remand Results at 7–9. Commerce's analysis centered on evidence on the record that SITG, wholly owned by a state-owned enterprise, was the majority shareholder of Rongxin. Commerce ultimately concluded that Rongxin failed to rebut the presumption of de facto government control because SITG was its majority shareholder and record evidence indicated that SITG retained actual or potential influence over the Board, which in turn selects management. Remand Results at 9–10. Thus, Commerce concluded that Rongxin did not rebut the presumption of de facto government control and was not entitled to a separate rate. Remand Results at 18. Furthermore, despite becoming privately owned in the last month of the POR, Rongxin did not have any sales during that month, and, therefore, Commerce could not calculate an individual cash deposit rate, as Commerce explained in its response to Rongxin's comments. Remand Results at 25.

Rongxin submitted its comments on the Remand Results to the court on June 7, 2019, including an attachment of its comments to Commerce's Draft Remand Redetermination. Pl.'s Br. Rongxin argues that Commerce did not address the court's concern on remand and that the Remand Results again are not supported by substantial evidence on the record. Pl.'s Br. at 1. Rongxin contends that Commerce's decision, instead of accepting the implementation of the New Articles as dispositive of independence from de facto government control, relies on conclusions and inferences that are not supported by substantial evidence on the record in its analysis of the New Articles. Pl.'s Br. at 3–4. Finally, Rongxin argues that the cash deposit rate for future entries should not be determined based on any adverse finding in the administrative review regarding government control because Rongxin was privately owned during the last month of the POR. Pl.'s Br. at 6.

The Government filed its reply to these comments on June 24, 2019 arguing that the Remand Results are consistent with the court's order in Rongxin. Def.'s Br. The court held oral argument on November 7, 2019. Oral Argument...