By Doug Heffner and Richard Ferrin

If you import goods that are subject to an antidumping duty (AD) order from a Chinese exporter that is owned and controlled by the Government of China (GOC), your imports may be liable for U.S. AD duties based on the “China-wide” rate calculated in the AD investigation or review.

In AD investigations involving countries designated as “non-market economies” (such as China or Vietnam), the U.S. Department of Commerce (DOC) starts with the presumption that all exporters are part of the government.  In order for an exporter to obtain a separate AD rate, it must demonstrate that it is free from governmental control over export activities.  The DOC’s traditional test has been relatively easy to satisfy, even for companies that are majority-owned by state-owned entities.  However, in recent decisions, the DOC has held that its traditional test is deficient in situations where a government-controlled entity has significant ownership of the exporter.

In a recent preliminary determination in connection with the DOC AD investigation of 1,1,1,2-Tetrafluroethane from China, the DOC held that six of the exporters requesting “separate-rate” status were under control of the State-Owned Assets Supervision and Administration Commission (SASAC).  The DOC held that where SASAC, or a similar government entity, holds a majority ownership share in the exporter, either directly or indirectly, the majority ownership in and of itself means that the government exercises or has the potential to exercise control over the company’s operations generally.  This latest decision is consistent with a decision earlier this month by the DOC to deny separate-rate status to a Chinese exporter in the final results of an administrative review of the AD order on certain new pneumatic off-the-road tires from China.  The DOC’s decision in that case resulted in a huge increase (from essentially a zero dumping margin to more than 100 percent dumping margin) in AD liability for imports from that Chinese exporter.

The bottom line for importers is that they must be more careful than ever when importing merchandise from China that is subject to an AD order.  Even if the Chinese exporter supplying the U.S. importer may have had a low separate rate in the original investigation or administrative reviews, if the exporter is controlled by SASAC or a similar Chinese government entity, the DOC may conclude that the exporter is not entitled to a separate rate, and therefore assess a high PRC-Wide Entity dumping rate, regardless of the pricing practices of the particular exporter.

For further information, please contact one of the authors listed above or your regular Customs & International Trade Team contact.

Source: Client Alert