Commerce Department Makes Final Affirmative CVD Finding on Mobile Access Equipment from China, and Discusses Currency Undervaluation and CCP; ITC Finds Threat of Injury
In July, we reported on the Commerce Department's preliminary determination that countervailable subsidies are being provided to producers and exporters of certain mobile access equipment (e.g. boom lifts, scissor lifts, and material telehandlers) and subassemblies thereof from China (case C-570-140), and we described the reasoning involved with the Department's rejection of the use of currency undervaluation as a factor to be considered in estimating the subsidies. Recently, the Commerce Department made its final determination in the case and the U.S. International Trade Commission found that a threat of material injury exists. As a result of the Commission’s affirmative threat determination, Commerce will issue a countervailing duty order on imports of these products from China.
With regard to the duties to be applied, pursuant to its final determination, the Commerce Department set the following estimated subsidy rates for specific companies:
Beyond the duties to be applied, we highlight here two interesting aspects of the Commerce Department's reasoning in its final determination: 1) currency undervaluation; and 2) the role of the Chinese Communist Party (CCP) in the Chinese companies under investigation as it relates to the issue of using adverse facts available to estimate the subsidy rate.
On currency undervaluation, as noted above, this issue came up in the preliminary determination. In the Issues and Decision Memorandum for the final determination, the Commerce Department set out the parties' comments and the Commerce Department's response on the currency undervaluation issue as follows, making clear that it would not reconsider either the Treasury Department’s findings or its preliminary determination:
Comment 4: Currency Undervaluation
[Government of China's] Comments:
- Commerce correctly found that currency undervaluation did not provide a countervailable benefit during the POI based upon the findings of the Department of Treasury (Treasury). However, Commerce should also find that the renminbi (RMB) is [not] undervalued because the International Monetary Fund found that the RMB is “broadly in line with fundamentals and desirable policies,” the RMB appreciated substantially in 2020, and various studies have found that the RMB is not undervalued.
Petitioner’s Comments:
- The GOC’s argument about whether the RMB is undervalued is both unnecessary and unsupported by record evidence. Treasury found the RMB to be undervalued, the GOC makes no compelling argument for Commerce to reconsider Treasury’s determination, and it would be inappropriate for Commerce to overturn Treasury’s analysis.
Commerce’s Position: In the Preliminary Determination, pursuant to the analysis of Treasury, we found that, while the RMB was undervalued, in accordance with 19 CFR 351.528(a)(2), the RMB’s undervaluation did not provide a benefit to producers/exporters of mobile access equipment during the POI. Consequently, the GOC’s arguments related to currency undervaluation are moot, and in this instance, we decline to reconsider Treasury’s findings or our determination.
Next, on the role of the CCP in some of the Chinese companies under investigation, the Issues and Decision Memorandum discusses this issue in relation to the use of adverse facts available. The Commerce Department found that the Government of China "withheld necessary information that was requested of it and that Commerce must rely on facts available" and determined that some government-owned domestic producers that supplied LGMG are "'authorities' within the meaning of section 771(5)(B) of the Act." The Department explained the role of information about the CCP on this issue as follows:
The Commerce Department said that "in the initial new subsidy questionnaire, we also asked the GOC to provide information regarding the role of Chinese Communist Party (CCP) officials in the companies that provided OTR tires to the respondent, including those for which the GOC did not report that the entities were majority-owned by the GOC. Specifically, we asked the GOC to “{p}lease coordinate immediately with the company respondents to obtain a complete list of each company’s {input} suppliers.” Furthermore we asked the GOC to: (1) provide information about the involvement of the CCP in any input supplier provider identified by LGMG, including whether individuals in management positions are CCP members, in order to evaluate whether the input suppliers that supplied the respondents are “authorities” with the meaning of section 771(5)(B) of the Act; and (2) identify any owners, members of the board of directors, or managers of the input suppliers who were government or CCP officials during the POR.
While the GOC provided an explanation of the role of the CCP, when asked to identify any owners, members of the board of directors, or managers of the input suppliers who were government or CCP officials during the POR, the GOC explained that there is “no central informational database to search for the requested information.” The GOC concluded its response to this question by stating “{i}f the Department insists on the necessity of this information, the Department should collect this information through the respondents, via their suppliers directly.” In Citric Acid 2012 AR, we found that the GOC was able to obtain the information requested independently from the companies involved, and that statements from companies, rather than from the GOC or CCP themselves, were not sufficient for these purposes. In the absence of record evidence requiring that we revisit this prior finding, we find that the GOC was able to obtain the information requested independently, and thus failed to provide the information requested of it for the non-majority-owned OTR tires suppliers of LGMG.
By failing to respond to the questionnaire, the GOC withheld information requested of it regarding the CCP’s role in the ownership and management of LGMG’s OTR tires producers. Record evidence demonstrates that the CCP exerts significant control over economic activities in China. Record evidence also demonstrates that the GOC exercises meaningful control over these entities and uses them to effectuate its goals of upholding the socialist market economy, allocating resources, and maintaining the predominant role of the state sector. With respect to the reportedly non-majority government-owned input producers that supplied the respondents during the POI, while the GOC provided website screenshots of the business registrations, the GOC failed to provide other relevant documentation specifically requested by Commerce, such as company by-laws, annual reports, tax registration documents, and articles of association. Thus, we find, as we have in prior CVD proceedings and continue to do so in this investigation, that the information requested regarding the role of CCP officials and CCP committees in the management and operations of the respondents input suppliers and ocean shipping service providers is necessary to our determination of whether these producers are “authorities” within the meaning of section 771(5)(B) of the Act.
We find that the GOC withheld necessary information that was requested of it and that Commerce must rely on facts available in conducting its analysis of the producers that supplied the respondents with OTR tires during the POI. As a result of the GOC’s failure to provide the necessary information, we find that the GOC failed to cooperate by not acting to the best of its ability to comply with our requests for information. Consequently, we determine that the GOC withheld information, and that an adverse inference is warranted in the application of facts available, in accordance with sections 776(a)(2)(A) and 776(b) of the Act. In drawing an adverse inference, we find that CCP officials are present in each of the respondents’ input producers as individual owners, managers and members of the boards of directors, and that this gives the CCP, as the government, meaningful control over the companies and their resources. As explained in the Public Bodies Memorandum, an entity with significant CCP presence on its board or in management or in party committees may be controlled, such that it possesses, exercises, or is vested with governmental authority. Therefore, as AFA, we find that the non-majority government-owned domestic producers that supplied LGMG with OTR tires during the POI are “authorities” within the meaning of section 771(5)(B) of the Act.
In the analysis of comments from interested parties as part of the Issues and Decision Memorandum, the issue came up again and was discussed as follows:
As discussed in the Preliminary Determination, in order to analyze whether the domestic producers and suppliers are “authorities” within the meaning of section 771(5)(B) of the Act, we sought information regarding the ownership of the input producers identified by the mandatory respondents. We specified that such information should include articles of incorporation, capital verification reports, articles of groupings, company by-laws, annual reports, articles of association, business group registrations, business licenses, and tax registration documents. Moreover, we requested information concerning whether any individual owners, board members, or senior managers involved with these producers were either government or CCP officials, and the role of any CCP primary organization within the producers. Specifically, to the extent that the owners, managers, or directors of a producer are CCP officials or are otherwise influenced by certain CCP-related entities, Commerce requested information regarding the means by which the GOC may exercise control over company operations and other CCP-related information.
The GOC objected to Commerce’s questions regarding the role of CCP officials and organizations in the management and operations of input suppliers. However, we explained our understanding of the CCP’s involvement in China’s economic and political structure. Commerce determined that “available information and record evidence indicates that the CCP meets the definition of the term ‘government’ … for the limited purpose of applying the U.S. CVD law to China.” Additionally, publicly available information indicates that Chinese law requires the establishment of CCP organizations “in all companies, whether state, private, domestic, or foreign-invested” and that such organizations may wield a controlling influence in the company’s affairs.
The GOC’s response to our requests for information, or lack thereof, is fully described in the Preliminary Determination and Post-Preliminary Analysis. The GOC did not provide a complete response to Commerce’s questions regarding the input producers identified by the mandatory respondents. When asked to provide detailed information (e.g., company by-laws, articles of incorporation, licenses, capital verification reports, etc.) for all non-majority government-owned enterprises that produced inputs and provided services purchased by the mandatory respondents during the POI, the GOC only provided partial information (i.e., basic registration and shareholder structure).
The GOC stated in its initial questionnaire response that the information obtained from the Enterprise Credit Information Publicity System (ECIPS) “is authoritative evidence of the ownership structure of enterprises in China,” suggesting this was sufficient to understand the ownership structure of these producers. However, the ownership structure and basic registration information that the GOC provided does not indicate whether the owners and shareholders of the companies have any CCP involvement. And while the GOC provided a long narrative explanation of the role of the CCP, when asked to identify any owners, members of the board of directors, or managers of the input producers who were government or CCP officials during the POI, the GOC explained that there is “no central informational database to search for the requested information.” However, based on our analysis of the GOC’s responses, we find that they lack the necessary information Commerce requested and hinder Commerce’s ability to determine whether the producers constitute “authorities.”
The information we requested regarding the role of CCP officials in the management and operations of these producers is necessary to our determination of whether these producers are “authorities” within the meaning of section 771(5)(B) of the Act. Commerce considers information regarding the CCP’s involvement in China’s economic and political structure to be relevant because record evidence suggests that the CCP exerts significant control over activities in China and is part of the governing structure in China. As explained in the Public Bodies Memorandum, record evidence demonstrates that producers in China that are majority-owned by the government, possess, exercise, or are vested with, governmental authority. Record evidence further demonstrates that the GOC exercises meaningful control over these entities and uses them to effectuate its goals of upholding the socialist market economy, allocating resources, and maintaining the predominant role of the state sector.
Therefore, we determine that necessary information is not available on the record, and that the GOC withheld information that was requested of it regarding purchases by the mandatory respondents. Accordingly, pursuant to sections 776(a)(1) and (a)(2)(A) of the Act, Commerce must rely on facts otherwise available in reaching a determination in this respect. Furthermore, we find that the GOC failed to cooperate by not acting to the best of its ability to comply with requests for information regarding the ownership and government involvement in the management of producers and providers of the inputs and services from whom the mandatory respondents purchased said inputs during the POI.
Consequently, in accordance with section 776(b) of the Act, we find that an adverse inference in selecting from the facts available is warranted in the application of facts available. As AFA and considering our prior findings and the GOC’s failure to provide rebuttal information to the contrary, we determine that non-majority government-owned input producers and service providers that supplied Dingli and LGMG are “authorities” within the meaning of section 771(5)(B) of the Act. In prior CVD proceedings, we found that the GOC was able to obtain the requested information independently regarding the companies involved.
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We continue to find that necessary information is missing from the record, and that the GOC withheld necessary information that was requested of it and significantly impeded this proceeding, pursuant to sections 776(a)(1) and (a)(2)(A) and (C) of the Act. Therefore, we must continue to rely on facts otherwise available in conducting our analysis of the respondents’ input producers. Moreover, considering the incomplete responses from the GOC to Commerce’s supplemental questionnaire, we also continue to find that the GOC failed to cooperate by not acting to the best of its ability to comply with our requests for information. Consequently, we continue to determine that an adverse inference is warranted in selecting from the facts available, pursuant to section 776(b)(1)(A) of the Act. As AFA, we find that CCP officials are present in each of the respondent’s privately-owned input producers as individual owners, managers, and members of boards of directors, and that this gives the CCP, as the government, meaningful control over the companies and their resources. As explained in the Public Bodies Memorandum, an entity with significant CCP presence, on its board or in management or in party committees, may be controlled such that it possesses, exercises, or is vested with governmental authority. Thus, for the final determination, we continue to find, as AFA, that all the non-majority government-owned the input producers and service providers of Dingli and LGMG are “authorities” within the meaning of section 771(5)(B) of the Act.