On May 27, 2015, the Court of International Trade issued an opinion which approved the Department of Commerce’s decision to merge three Chinese Aluminum Extrusion companies in a Chinese Aluminum Extrusion Antidumping Duty Administrative Review.  The three companies, Zhongya, Guang Ya and Xinga, are each owned by members of the same family.  That family relationship led Commerce to determine that the companies were affiliated and thus should be collapsed into a single entity for the antidumping investigation.  Due to a lack of cooperation with the investigation by the individual entities, Commerce used the “adverse facts available” standard to assess the 33.28% China-wide entity AD margin to the consolidated entity. Specifically, Xinya did not answer any of Commerce’s questionnaires including the quantity, value and separate rate questionnaires and Guang Ya did not answer the main or separate rate questionnaires.

The Plaintiff Zhongya made several arguments contesting Commerce’s decision that the entities were affiliated and should be collapsed.  First, Zhongya argued that separate entities should be collapsed only if they “jointly produce the same subject merchandise,” which Zhongya contended the entities do not.  However, Commerce posited that producers may be collapsed when there “is a significant potential for the manipulation of a price or production.”  The Court sided with Commerce’s analysis and cited  Catfish Farmers of America v. United States, 33 CIT 1258, 1266, 641 F.Supp. 2d 1362, 1372 (2009), which stated “common family ownership…is a positive indicator of the significant potential for manipulation.”  The Court also quoted a separate portion of Catfish Farmers of America v. United States stating: “[T]he existence of the family group, and the significant controlling ownership by the family members, reasonably supports Commerce’s collapsing decision.”

Zhongya also argued that the entities operations were not intertwined and thus there was no significant potential for manipulation of price or production.  However, the Court again sided with Commerce because the entities could not prove they were not intertwined because Guang Ya and Xinga failed to cooperate and Zhongya failed to adequately explain inter-entity payments.  Zhongya also contested the collapsing decision on the grounds that the entities were not collapsed for the corresponding Countervailing Duty Investigation.  This argument failed because the analysis for collapsing in a CVD investigation is more limited than in an AD investigation.

In sum, this decision demonstrates the importance of cooperating with AD and CVD investigations.  As seen here, not only can a lack of cooperation injure the uncooperative entity but also affiliated entities.

If you have questions about antidumping duties or antidumping investigations, please contact Frohsin & Barger at 205-933-4006 ext. 5.