Zhejiang Mach. Import & Export Corp. v. United States

Decision Date21 August 2020
Docket NumberSlip Op. 20-122,Court No. 19-00039
Citation471 F.Supp.3d 1313
Parties ZHEJIANG MACHINERY IMPORT & EXPORT CORP., Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Adams C. Lee, Harris Bricken McVay LLP, of Seattle, WA, argued for plaintiff.

Kelly A. Krystyniak, Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice and Nikki Kalbing, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce of Washington, DC, argued for defendant. With them on the brief and supplemental briefs were Joseph H. Hunt, Assistant Attorney General, Ethan P. Davis, Acting Assistant Attorney General, Jeanne E. Davidson, Director, L. Misha Preheim, Assistant Director and Patricia McCarthy for L.Misha Preheim, Assistant Director. Of counsel on the brief was James Henry Ahrens II, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Justice of Washington, DC.

OPINION

Katzmann, Judge:

This case involves whether an exporter in a non-market economy ("NME") has sufficiently established independence from government control to qualify for a separate duty rate and avoid a countrywide antidumping duty rate. It also presents questions about whether nominal ownership of majority shareholder rights by a labor union may prevent a company from rebutting a presumption of government control.

Plaintiff Zhejiang Machinery Import & Export Corporation ("ZMC" or "Plaintiff"), an exporter of tapered roller bearings and parts thereof ("TRBs"),1 brought an action against the United States ("the Government") to challenge a final determination by the United States Department of Commerce ("Commerce"). See Pl.’s Mem. of Points in Supp. of Mot. for J. on Agency R. at 1, Aug. 22, 2019, ECF No. 24 ("Pl.’s Br."); Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from the People's Republic of China, 84 Fed. Reg. 6,132, 6,132 –34 (Dep't Commerce Feb. 26, 2019), ("Final Results"). In its Final Results, Commerce denied ZMC a separate rate and applied the country-wide rate after finding ZMC failed to show an absence of de facto control by the government of China ("GOC"). See Final Results. ZMC requests that the court remand both this decision, because it is "unsupported by substantial evidence and is otherwise not in accordance with law," and Commerce's decision to reject one of ZMC's submissions, for the same reason. Am. Compl. at 5, May 24, 2019, ECF No. 17; see 30th Administrative Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People's Republic of China: Rejection of Untimely-Filed New Factual Information (Dec. 3, 2018), P.R. 253 ("Rejection Letter"). The Government responds that the court should deny ZMC's motion because substantial evidence supports Commerce's decisions and because ZMC failed to exhaust administrative remedies for several of its arguments. Def.’s Opp'n to Pl.’s Mot. for J. on the Agency R. at 7, 12, 25, Nov. 11, 2019, ECF No. 28 ("Def.’s Br."). The court remands this matter to Commerce for a more reasoned explanation of its denial of a separate rate and for consideration of the evidence it rejected.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. § 1516a(a)(2). The court sustains Commerce's antidumping determinations, findings, and conclusions unless they are "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i).

BACKGROUND
I. Legal and Regulatory Framework

Commerce may impose remedial duties on imported goods sold in the United States if the agency determines that a domestic industry is "materially injured, or is threatened with material injury" because the goods are sold at a less-than-fair value. 19 U.S.C. § 1673 ; see, e.g., Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306 (Fed. Cir. 2017) ; Shandong Rongxin Imp. & Exp. Co. v. United States, 42 CIT ––––, ––––, 331 F. Supp. 3d 1390, 1394 (2018) (" Rongxin III"). The measure of the remedial "antidumping duty is ‘the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise.’ " Rongxin III, 331 F. Supp. 3d at 1394 (quoting 19 U.S.C. § 1673 ). Commerce may conduct a yearly review of the antidumping duty at the request of an interested party and recalculate a new antidumping duty amount. 19 U.S.C. § 1675(a)(1)(2).

When the antidumping duties apply to goods 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." Rongxin III, 331 F. Supp. 3d at 1394 (citing Dongtai Peak Honey Indus. Co. v. United States, 777 F.3d 1343, 1349–50 (Fed. Cir. 2015) ); see also Sigma Corp. v. United States, 117 F.3d 1401, 1405 (Fed. Cir. 1997). To rebut this presumption and receive a rate separate from the country-wide rate, respondents must demonstrate that the government lacks both de jure and de facto control over their activities. Rongxin III, 331 F. Supp. 3d at 1394.

A respondent may show an absence of de jure government control by presenting evidence of "legislation and other governmental measures that suggest sufficient company legal freedom." AMS Assocs., Inc. v. United States, 719 F.3d 1376, 1379 (Fed. Cir. 2013) (citation omitted). A respondent may show an absence of de facto government control by establishing that it does each of the following: "(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 (taxation aside)." Rongxin III, 331 F. Supp. 3d at 1394 (citing AMS Assocs., 719 F.3d at 1379 ); see also Yantai CMC Bearing Co. v. United States, 41 CIT ––––, ––––, 203 F. Supp. 3d 1317, 1326 (2017). If a respondent fails to demonstrate its independence, for which it has the burden of establishing, Commerce may deny it a separate rate and instead apply the country-wide antidumping rate. See, e.g., Sigma Corp., 117 F.3d at 1405–06.

Commerce's antidumping determinations must be supported by substantial evidence; otherwise, the court will hold them unlawful. Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1559 (Fed. Cir. 1984) ; see also Suramerica de Aleaciones Laminadas, C.A. v. United States, 44 F.3d 978, 982 (Fed. Cir. 1994) (citing 19 U.S.C. § 1516a(b)(1)(B) ). Substantial evidence is measured by being "more than a mere scintilla." Altx, Inc. v. United States, 370 F.3d 1108, 1116 (Fed. Cir. 2004) (quoting Atl. Sugar, 744 F.2d at 1562 ). Substantiality of the evidence is also met by "something less than the weight of the evidence." Id. (quoting Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) ). Furthermore, a determination by Commerce "is supported by substantial evidence if a reasonable mind might accept the evidence as sufficient to support the finding." Maverick Tube Corp. v. United States, 857 F.3d 1353, 1359 (Fed. Cir. 2017) (citing Consol. Edison Co. of N.Y. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938) ).

II. Factual and Procedural History

In 2009, Commerce updated the antidumping duty rate on TRBs for the People's Republic of China ("PRC") to 92.84 percent, after first setting an antidumping duty on TRBs in 1987. See Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from the People's Republic of China, 74 Fed. Reg. 3,987, 3,989 (Dep't Commerce Jan. 22, 2009) ("the Order"); Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from the People's Republic of China, 52 Fed. Reg. 22,667, 22,667 (Dep't Commerce June 15, 1987) ; see also Decision Memorandum for the Preliminary Results of the 2016–2017 Antidumping Duty Administrative Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China at 14 (Dep't Commerce July 12, 2018), P.R. 223 ("Preliminary Decision Memo"). In June 2017, Commerce published a notice of opportunity to request review of the Order. Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation: Opportunity to Request Administrative Review, 82 Fed. Reg. 26,441, 26,441 (Dep't Commerce June 7, 2017).

In response, a domestic interested party requested that Commerce conduct an administrative review of ZMC's entries during the period of June 1, 2016 to May 31, 2017. Administrative Review of Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China (06/01/16–05/31/l7): The Timken Company's Request for Administrative Review (June 30, 2017), P.R. 5; see also Def.’s Br. at 2. The domestic interested party then submitted files indicating GOC ownership of ZMC, and ZMC responded with its own submissions. See Administrative Review of the Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China: The Timken Company's Submission of Factual Information in Response to Certain Separate Rate Certifications Filed on August 31, 2017 (Sept. 14, 2017), P.R. 93; see, e.g., Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People's Republic of China: Factual Information Regarding Zhejiang Machinery (Oct. 2, 2017), P.R. 109 ("Oct. Submission"); 20162017 Administrative Review of Tapered Rollers Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China: Separate Rate Supplemental Questionnaire (Apr. 13, 2018), P.R. 169; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People's Republic of China: Supplemental Questionnaire Response & Separate Rate Application (May 4, 2018), P.R. 184 ("May Submission").

Included in ZMC's submissions were details of its ownership structure. ZMC stated it was 100 percent owned by...

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