Two recent decisions by the U.S. Court of International Trade (“CIT”),[1]have cast doubt on the Commerce Department’s evolving practice concerning the investigation of respondents that are majority government-owned, in antidumping proceedings of non-market economy countries (“NME”),[2].

In order for a company within an NME to be eligible for a separate rate, it must demonstrate an absence of both de jure and de facto government control. With respect to de facto control, the Commerce Department typically considers four factors in evaluating whether an NME respondent has met its burden:

  • whether the export prices are set by, or subject to the approval of, a governmental authority;
  • whether the respondent has authority to negotiate and sign contracts and other agreements;
  • whether the respondent has autonomy from the central, provincial and local governments in making decisions regarding the selection of its management; and
  • whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses.[3]

Where a company does not demonstrate an absence of government control, it is assigned a countrywide antidumping margin.

In recent cases the Commerce Department has denied separate rate status to NME companies where a government entity, such as the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”),[4]holds a majority ownership share in the responding company (directly or indirectly).[5]

In Shandong Rongxin, the CIT remanded the Commerce Department’s denial of a separate rate to a majority government owned Chinese respondent. The Court sustained the Commerce Department’s finding, based on majority government ownership, that the Chinese respondent had not demonstrated it selects its own management. The Court, however, ordered the agency to consider the other de facto criteria, i.e., whether the export prices are set by, or subject to the approval of, a governmental authority, whether the respondent has authority to negotiate and sign contracts and other agreements, and whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. The Court left open the question of whether a respondent must satisfy each of the four criteria or whether a finding that a failure to establish autonomy from the government in the selection of management can alone justify the denial of a separate rate.

In CMA, the CIT remanded the Commerce Department’s assignment of the countrywide rate to a company that had been designated by the agency as a “mandatory respondent,” i.e., one that was subject to individual examination.[6] In the underlying review, the Commerce Department calculated a de minimis margin based on the company’s own data but assigned it a margin of 105.31%[7]based on its failure to demonstrate its eligibility for a separate rate. The Court, however, found that by designating the company as a mandatory respondent, it had “placed itself under a general obligation to assign” the company “an ‘individual weighted average dumping margin,’” not the countrywide margin.[8]

It remains to be seen how the Department will respond to these decisions on remand. Regardless, these decisions will have implications for investigations and administrative reviews of NME companies, particularly those that are majority government owned.