14.5.2011   

EN

Official Journal of the European Union

L 128/1

(1)

The Commission, by Regulation (EU) No 1042/2010 (2) (‘the provisional Regulation’) imposed a provisional anti-dumping duty (‘the provisional measures’) on imports of coated fine paper (‘CFP’) originating in the People's Republic of China (‘PRC’).

(2)

The proceeding was initiated following a complaint lodged on 4 January 2010 by CEPIFINE, the European association of fine paper manufacturers (‘the complainant’) on behalf of producers representing a major proportion, in this case more than 25 % of the total Union production of coated fine paper. The complaint contained prima facie evidence of dumping of the said product and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding.

(3)

Subsequent to the disclosure of the essential facts and considerations on the basis of which it was decided to impose provisional anti-dumping measures (‘the provisional disclosure’), several interested parties made written submissions making known their views on the provisional findings. The parties who so requested were granted the opportunity to be heard.

(4)

The Commission continued to seek and verify all information it deemed necessary for its definitive findings.

(5)

One group of cooperating Chinese exporting producers (‘the exporting producer’) claimed that it should have been heard prior to the imposition of provisional measures given that, according to that group, a provisional Regulation is an individual measure in the sense of Article 41 of the Charter of Fundamental Rights of the European Union (3).

(6)

With respect to the above stated claim, the following points should be highlighted: The basic Regulation delineates the rights of parties in the framework of anti-dumping proceedings and in this particular matter Article 7 sets out the procedural steps for imposition of provisional measures. Article 7 of the basic Regulation states, inter alia, that provisional measures, if any, can be imposed within 9 months from the initiation of a case. In the present proceeding the Commission conducted its investigation in line with the provisions of Article 6 of the basic Regulation and imposed provisional measures in line with the provisions of Article 7 of the basic Regulation while all interested parties that had requested so were heard and had the adequate opportunities to submit information and make comments. The Court of Justice has consistently held that ‘even if … the principle of the right to a hearing requires exporters to be informed of the essential facts and considerations on the basis of which it is intended to impose provisional duties, a failure to respect that right cannot in itself have the effect of vitiating the regulation imposing definitive duties where, in the course of the procedure for the adoption of the latter regulation, the defect vitiating the procedure for the adoption of the corresponding regulation imposing provisional duties was remedied (4)’. In the present case, the Commission fulfilled its obligations to disclosure under the basic Regulation and the right to a fair hearing of the exporting producer was respected during the procedure leading to the adoption of this Regulation.

(7)

The provisional nature of measures adopted pursuant to Article 7 of the basic Regulation is inter alia reflected in the maximum period of six months for which they may be imposed as well as the fact that any provisional duty is secured only by guarantee. Furthermore, the Commission never prevented any party from coming forward with requests to hold more hearings prior to the 9 month deadline stipulated by law for the imposition of provisional measures should they have considered that there was a need to be heard further at that stage.

(8)

The exporting producer requested access to data used from the sole company in the United States of America (USA) that provided information in line with the provisions of Article 2(7)(a) for the establishment of normal value. It was claimed that otherwise the party was prevented from having access to the evidence on the basis of which provisional measures were imposed and that this both violated the party's rights of defence and was contrary to the principle of good administration. The same party claimed that disclosure of confidential data pertaining to specific parties could be made available to the legal representatives of the group of the exporting producer. The legal representatives would undertake the obligation to guarantee the confidentiality of companies’ business secrets. The claim was backed by reference to the USA and the Canadian systems and to the Court of Justice of the European Union in G.J. Dokter and Others v Minister van Landbouw, Natuur en Voedselkwaliteit.

(9)

These requests had to be rejected. The exporting producer's request referred to access of confidential data on prices provided by the aforesaid US company. The Commission could not grant the access to such detailed confidential business information. Giving access to such data would have been against Union law, notably Article 19 of the Basic Regulation since it would have led to an unauthorised disclosure of limited and sensitive business data of the US company. As to the proposed methodology on disclosing company's business secrets to legal representatives of other interested parties, unlike in the USA and Canadian systems, no such process is provided for by the basic Regulation. It is thus clearly outside the established EU legal framework for anti-dumping proceedings. In any event, the Court case cited above does not support any claim of access to confidential information. The judgment also refers to some inherent limits of the principle of the right of defence.

(10)

The exporting produceralso requested access to evidence concerning: rolls used in web-fed printing produced by the Union producers, detailed information about one representative Union producer's legal status, the activities and financial data of selected mills, detailed data related to the Union industry's cost of production and product control numbers of the products of representative Union producers. Some of the requested information was outside the scope of the investigation as it related to products not covered by the investigation or the activity of Union producers that does not involve the production of CFP. Concerning other information requested, the Commission was not in a position to grant access to it, since pursuant to Article 19 of the basic Regulation this would have constituted an unauthorised disclosure of confidential business secrets.

(11)

The exporting producer also requested the disclosure of the names of the companies which opposed the investigation and did not request confidential treatment. Such a disclosure would have revealed the identity and position of producers that requested confidentiality; therefore it was not possible to reveal this information.

(12)

The provisional disclosure was as detailed as possible without disclosing confidential information and was thus not in breach of the exporting producer's fundamental rights, its rights of defence or of the principle of good administration.

(13)

The injury analyses performed in the present anti-dumping and the parallel anti-subsidy investigation are identical, since the definition of the Union industry, the representative Union producers and the investigation period are the same in both investigations. For this reason, comments on injury aspects put forward in any of these proceedings were taken into account in both proceedings.

(14)

It is recalled that, as set out in recital (13) of the provisional Regulation, the investigation of dumping and injury covered the period from 1 January 2009 to 31 December 2009 (the ‘investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2006 to the end of the IP (‘the period considered’).

(15)

Following provisional measures, the exporting producer and the complainant submitted further comments concerning the product definition. Some of these comments were a repetition of comments already addressed in the provisional Regulation.

(16)

The exporting producer reiterated that there is no substantial difference concerning basic characteristics between CFP in sheets and rolls suitable for use in sheet-fed printing machines (‘the product concerned’) and rolls suitable for use in web-fed presses and that, therefore, CFP for web-fed printing should not have been excluded from the product scope. The party also argued that the Commission's finding that these products are not interchangeable was not supported.

(17)

It is recalled that the investigation found that CFP used in web-fed and sheet-fed printing processes are distinct product groups and are not interchangeable as described in recitals (18) and (20) of the provisional Regulation. The exporting producer itself also acknowledged that these products are not fully interchangeable.

(18)

It should be noted as well that no rolls for use in web-fed presses were imported from the PRC during the period considered. It may also be considered unlikely that these products would be imported in the future as sourcing these products from long distance is economically not viable for the reasons mentioned in recital (20) of the provisional Regulation.

(19)

It was further claimed by the exporting producer that the criteria defined in the provisional Regulation in recital (16), namely the technical characteristic of resistance to picking, was not appropriate to distinguish between CFP suitable for use in web-fed printing on the one hand and CFP used in sheet-fed printing on the other hand. It further claimed that the exclusion of web rolls was made on an arbitrary basis alleging that web-fed rolls produced by Union producers do not meet the criteria set in recital 16 of the provisional Regulation as regards the characteristics of resistance to picking.

(20)

The exporting producer also argued that the Commission fell short of its obligation to examine objectively the evidence presented by that exporting producer to the Commission's services before the provisional Regulation, namely the results of the testing conducted in its own laboratory measuring the resistance to picking of web rolls produced by the Union producers.

(21)

The test results presented by the exporting producer consisted of a summary of the test results performed in its own laboratory. Crucially, the results were not made available for inspection and comments by other interested parties, in particular, the Union industry, nor did the exporting producer submit a meaningful non-confidential summary thereof despite repeated reminders.

(22)

It is recalled that at the provisional stage the Commission concluded that the objectivity and reliability of the test was insufficient to base conclusions thereon. No further detailed information was provided by the exporting producer which could help further assess the reliability of the test. Since no non-confidential version of this test was provided, the companies whose web rolls were allegedly tested could not respond to the conclusions of the test. The Commission thus could not objectively check whether the submitted test results were reliable and correct and could be relied upon for the purposes of the investigation. On the basis of the facts available to the Commission, conclusions reached at provisional stage about the objectivity and reliability of the test could not be reconsidered since the information submitted under confidentiality could not be counterchecked by any reliable sources.

(23)

After the imposition of the provisional measures, the exporting producer presented the results of a further test conducted on its behalf by an external test laboratory and reiterated that CFP used in web-fed printing has been arbitrarily excluded from the scope of the investigation. The test reports stated that the resistance to picking has been measured on 25 samples of web-fed rolls provided and identified by the exporting producer to the laboratory as paper samples produced by Union producers. According to this report, none of the paper met both criteria set in recital 16 of the provisional Regulation.

(24)

The assessment of the test report brought to light that, first of all, the test report by the external laboratory related mostly to products for which these results were irrelevant as most of the samples tested were not in fact web rolls; secondly, the test report related to products which were not sufficiently identified as it could not be ascertained from the test report whether the paper tested was for sheet-fed printing or web-fed printing as the paper brand described in the report existed in both formats. Furthermore the test report provided no assurance that the sampled rolls indicated were indeed the ones that were tested.

(25)

In response to the external laboratory's test report, the complainant provided the results of the testing performed by one of the Union producers on the same samples of web rolls that were allegedly tested by the external laboratory. This test showed different results. The complainant attributed the differences to possibly different test conditions and thus a potential non-compliance with the ISO 3783:2006 standard, i.e. the standard according to which resistance to picking set in recital (16) of the provisional Regulation should be measured.

(26)

After disclosing the definitive findings, the exporting producer questioned the Commission's objectivity in rejecting the test result of the external laboratory. It claimed that the testing was carried out blindly by the independent expert and in accordance with the relevant ISO standard. It provided an affidavit of its manager explaining the sourcing process of the samples used in the testing in order to prove the independence, correctness and representativeness of the testing.

(27)

Firstly, the objectivity of the external laboratory test report was never questioned by the Commission and in this regard it is irrelevant that the testing was carried out blindly. On the other hand, doubts were raised as to the assurances on the selection and origin of the samples tested and not on the test itself. The arguments of the exporting producer did not remove these doubts as these were not comprehensive and were unclear in several aspects, for example the inclusion of products other than web rolls were claimed to have been caused by administrative errors or were blamed on mistakes by the suppliers in providing possibly wrong samples.

(28)

Since both the source as well as the samples of the allegedly tested products were not clear and the results of the testing by the different parties were contradictory, it was considered that the submitted test report of the external laboratory acting on behalf of the exporting producer did not conclusively demonstrate that the resistance to picking test was not appropriate to distinguish between CFP suitable for use in web-fed printing on the one hand and CFP used in sheet-fed printing on the other hand. Consequently, the test report did not demonstrate that CFP used in web-fed printing had been arbitrarily excluded from the scope of the investigation.

(29)

As regards the relevance of the resistance to picking as a distinguishing criterion for rolls suitable for web-fed printing, it is recalled that in the product definition the two product groups are distinguished from each other based on, among other things, the use of the products, i.e. whether the product is suitable for use in web-fed or sheet-fed printing as determined by the requirements of the presses on which they are used which is reflected in, inter alia, the characteristic of resistance to picking. Furthermore it is noted that resistance to picking is only one of the characteristics that distinguish CFP suitable for use in web-fed printing from CFP used in sheet fed printing; Recitals (16) and (18) of the provisional Regulation set out additional criteria which have not been contested by the exporting producer. The exporting producer claimed that humidity as defined in recital (18) of the provisional Regulation was not a distinct basic characteristic to distinguish products. During the investigation however differing claims in this regard were made by other parties. In any event, it was found that stiffness and resistance to picking are the most relevant factors.

(30)

In its responding submission the complainant acknowledged that there might be rolls that do not fully meet all the criteria for resistance to picking set in the provisional Regulation which could still be used in web-fed printing. However, it sustained its view that pick resistance is the only test that is able to identify with certainty that a roll is indeed suitable for web-fed printing, i.e. if a roll meets the picking resistance criteria in recital (16) of the provisional Regulation, it is certainly a web roll.

(31)

In support of the above claims concerning resistance to picking the exporting producer referred to arguments put forward by one of the complainant Union producers in anti-dumping and anti-subsidy investigations in the USA in which the Union producer allegedly acknowledged that web rolls cannot be differentiated based on pick resistance test or by any other measurement.

(32)

The complainant contested these statements of the exporting producer and claimed that contrary to what has been claimed, it follows from the proceedings in the USA that there is a clear dividing line distinguishing web rolls from CFP.

(33)

Firstly, it should be noted that the statements referred to by the exporting producer were presented in investigations under other jurisdictions and by different parties than the ones in the current proceeding and thus are not relevant. Secondly, the US authorities in the mentioned investigations concluded that there was a clear distinction between, on the one hand, CFP used in sheet-fed printing and, on the other hand, rolls suitable for use in web-fed printing. Cutter rolls were regarded as semi-finished products while rolls suitable for web fed printing were not considered as ‘product concerned’. The US authorities did not explicitly define web rolls in their definition of the product scope. For this reason, the criterion of resistance to picking was not relevant in the definition of the product scope in the mentioned investigations.

(34)

Based on the above comments, the technical characteristic ‘resistance to picking’ was confirmed as being a reliable characteristic to describe CFP suitable for use in web-fed printing.

(35)

The comments put forward have however also revealed that there exist web rolls that can be used in web-fed printing even if they do not fully meet all the criteria of resistance to picking. For this reason it was considered necessary to further refine the definition of rolls suitable for for use in web-fed printing.

(36)

In order to provide a further criterion to distinguish web rolls which do not fully meet all the criteria for resistance to picking, the complainant suggested that a roll which does not fully meet the picking resistance test but has an internal core size of less than 80 mm, should be considered as a web roll.

(37)

The government of PRC and the exporting producer claimed that the addition of core size as a new element into the product definition constituted a revision of the definition of web rolls and thus the product concerned. It also claimed that the internal core size is not a suitable criteria as there exist web rolls with higher than 80 mm core size and cutter rolls with lower than 80 mm core size.

(38)

The Commission endeavoured to further refine the definition of rolls suitable for use in web-fed printing and to give further clarification in order to distinguish even more clearly between the product concerned and other products, also with a view to minimizing the possibility of circumvention of the measures. The evidence submitted on the suitability of the core size as an alternative criterion in the definition however proved that this criterion would lead to the possible exclusion of the product concerned, i.e. cutter rolls with a core size of less than 80 mm from the measures. Therefore this criterion to define rolls suitable for use in web-fed printing was abandoned.

(39)

The above is without prejudice to the reliability of the method according to which rolls suitable for use in web-fed printing have been excluded from the scope of the investigation as it was claimed by the Chinese group of exporting producers.

(40)

No further comments were received concerning the exclusion of multi-ply paper from the product scope of the investigation.

(41)

Based on the above, recitals (14) to (26) of the provisional Regulation are hereby confirmed.

(42)

Since no comments were received with regard to the conclusions outlined in recital (27) of the provisional Regulation, the provisional findings with regard to the like product are hereby confirmed.

(43)

In the absence of any comments on sampling, recitals (28) to (30) of the provisional Regulation are hereby confirmed.

(44)

The four producers referred to in recital (29) of the provisional Regulation that were considered to be representative of the Union industry as defined in recital (77) of the provisional Regulation are further referred to as ‘representative Union producers’.

(45)

Only one Chinese cooperating group (APP, the exporting producer) submitted comments on dumping as a follow-up to the imposition of provisional measures.

(46)

With respect to criterion 1, APP alleged that the Commission's arguments relied solely on the alleged impossibility of verifying payment. It was consequently argued that the methods used by the party are in line with International Accounting Standards (‘IAS’).

(47)

This had to be rejected. In this respect it is noted that the investigation revealed that it was not possible to establish the existence of payments with respect to transfer of companies’ shares and cost of major raw material inputs. As to the accounting methods used it is noted that the methods followed were not in line with IAS (offsetting and related party disclosures).

(48)

With respect to criteria 1 and 2, APP submitted that the Commission had dismissed the opinion of a well-known firm of accountancy advisors in a summary fashion on the grounds that it was irrelevant. Such dismissal would amount to an inadmissible rejection of an independent witness statement, thereby violating APP's right to a fair process. APP argued that its accounting advisors found the Commission's analysis on accounting procedures and principles flawed while some of the points that the Commission identified were, according to those advisors, not material.

(49)

APP allegations were not backed by any evidence and had to be rejected. In this respect it is noted that the accountancy advisors referred to in the recital above do not appear to dispute the actual facts established in this investigation but rather attempted to present an analysis of some of the basic accounting principles, notably the prudence principle, the accrual principle, the principle of faithful representation and the materiality principle. It should be noted that those accountancy advisors were not present during the on-spot verification carried out by the Commission in the PRC in the course of which the Commission got first-hand knowledge about APP's actual practices relevant for the MET assessment. The Commission has explained in detail in writing to the party the deficiencies spotted and their links with the IAS accounting principles. The interpretation of these principles given by the accounting firm was not sufficiently substantiated or supported by evidence and could also not be reconciled with the actual facts established. Indeed, the evidence on file confirmed that the aforesaid accounting principles were not respected.

(50)

APP submitted that its fundamental rights were breached. It was argued that the Commission imposed an excessive burden of proof on the party when investigating MET.

(51)

This claim had to be rejected. In this respect it is noted that the Commission has informed APP fully on the type of information requested with respect to MET and endeavoured to verify at every stage of the proceeding any information provided by the party. The fact that the information provided by the party does not confirm the compliance with IAS of its accounting methods does not imply the existence of an excessive burden of proof. MET is an exception to the normal regime for companies located in non-market economy countries and parties in such cases are simply requested to show that they complied with the rules set out in Article 2(7)(c) of the basic Regulation, failure to one criterion being enough to justify the refusal for granting MET. In this particular proceeding the investigation established that APP was not able to show that it complied with the requirements of Criterion 2.

(52)

APP also argued that there was a lack of objectivity in the MET assessment. It submitted that the MET decision was possibly influenced by the Commission's knowledge about the impact of the MET rejection on the group's dumping margin.

(53)

Moreover, these claims are unsubstantiated and thus had to be rejected. There is no indication that the MET decision was influenced by the Commission's knowledge about the impact of the MET rejection on the group's dumping margin. The MET analysis is a technical analysis of the fulfilment of the five clear criteria set out under Article 2(7)(c) of the basic Regulation and the MET analysis presented by the Commission was carried out on the basis of the MET criteria and without considering the impact of the outcome of that analysis on the exporting producer's potential dumping margin. In this respect it is recalled that the scheduling of the various segments of the on-spot verifications and the difference in the calendars followed (MET claim forms, anti-dumping questionnaires, analogue country data, export sales via related Union parties) together with the periods within which parties filed replies and subsequent amendments to their submissions demonstrates that the Commission was not able to establish any effect of a MET decision on the party's potential dumping at the time of MET disclosure. Finally, APP kept up to a late stage submitting new information and replacing information already on file thus it cannot be upheld that the Commission could be able to compute dumping margins on the basis of information that it did not have.

(54)

APP also argued that the Commission did not need to verify in full the party's replies in order to have a detailed picture of the data included in the party's reply to the anti-dumping questionnaire and that suspicions exists that the Commission had all the necessary data in order to calculate a dumping margin.

(55)

This claim had to be rejected. In this respect it is noted that in line with the provisions of Article 16 of the basic Regulation, the Commission verified all the information submitted by interested parties in order to arrive at a representative finding. The findings of the investigation were based on verified facts during a period of time that spread across four months and not on mere suspicions or any type of unverified statements or allegations.

(56)

APP submitted that the MET criteria should be read in light of their objective to ensure that prices are the result of normal market forces. In this respect it is noted that the purpose of the MET criteria is clearly set out under Article 2(7) of the basic Regulation and the Commission applied with respect to APP these clearly set out rules when analyzing its MET claim.

(57)

APP also claimed that the MET assessment had shortcomings, given that the verification of the reply to the anti-dumping questionnaire had established a ‘reliable’ cost of production, while the MET assessment points to a lack of ability to establish payments for inputs.

(58)

This interpretation of the findings has to be rejected as erroneous. It is recalled that the basic Regulation explicitly conditions the granting of MET and thus the reliability and use of an exporting producer's own price and cost data for the purpose of establishing normal value on the company successfully showing that it meets the requirements set out in Article 2(7)(c). If the aforementioned claim by APP were to be accepted it would simply ‘by-pass’ the findings of the MET assessment and the provisions of Article 2(7)(c) by using other type of information collected for other purposes. This is not in conformity with the provisions of the basic Regulation.

(59)

It is recalled that for APP two out of the four related exporting producers were found to produce only the multi-ply paperboard. Account taken of the fact that multi-ply paper board is excluded from the product scope as confirmed in recitals (40) and (41) above, it is concluded that the MET findings with respect to the two related exporting producers that produce only multi-ply paperboard within the APP group are not relevant for this proceeding.

(60)

In the absence of any other comments concerning MET, recitals (31) to (51) of the provisional Regulation are hereby confirmed.

(61)

In the absence of any comments on IT, recitals (52) to (55) of the provisional Regulation are hereby confirmed.

(62)

No party disputed the selection of theUSA as an analogue country for the definitive determination.

(63)

In the absence of any comments concerning the selection of the analogue country, recitals (56) to (63) of the provisional Regulation are hereby confirmed.

(64)

It is recalled that the normal value was calculated on the basis of the data provided by the sole cooperating producer in the analogue country (i.e. USA). Thus, normal value was established on the basis of prices of domestic sales of one US producer of the like product produced in the USA. During the IP this producer produced and sold in the US market the great majority of the types of the like product.

(65)

APP submitted that the Commission did not provide necessary information in relation to the normal value in the analogue country, such as comparability of the products, representativeness, cost structure, fair comparison mechanics and adjustments.

(66)

These claims had to be rejected. In this respect it is noted that, as explained under recital (9) above, the Commission provided to the party all relevant information concerning the data used in order to calculate normal value that could be released without infringing the provisions of Article 19 of the basic Regulation, i.e. assuring at the same time that any confidential data provided by the sole US producer is treated as such and is not disclosed to other parties. The information provided to the exporting producer was meaningful and offered it the possibility to understand the methodology used in line with the provisions of Article 2 of the basic Regulation.

(67)

In the absence of any other comments, recitals (64) to (67) of the provisional Regulation are hereby confirmed.

(68)

APP argued that the export sales of one of its companies cooperating with the investigation should not have been disregarded from the dumping margin calculation even if there are no matching products. It was also argued that the export quantities of this company were not small but substantial.

(69)

With respect to these claims it is noted that the sales values of the transactions in question were considered for the establishment of the export prices but no normal value for these transactions could be established since there were no comparable product types in the analogue country and thus no comparison could be made. With respect to the export quantities of this particular company it is noted that they represented only a minor part of the total APP export sales and their price levels appeared to be in line with the overall APP export sales price levels. Finally, it should be pointed out that the great majority of export transactions were used for the purposes of determining whether or not the exports were dumped, i.e. those offering an absolute match to normal value established in the analogue country. Thus, APP claims with respect to export price had to be rejected as they cannot put into question the finding of injurious dumping given that the basis for the calculation is clearly representative. The fact, that a matching normal value in the analogue country does not necessarily exist for each and every export transaction is inherent to such a finding.

(70)

APP also submitted that the aforesaid export sales should have been used in the dumping margin calculations since the investigating authority has the possibility to identify similar product types used for the normal value calculation, adjust the export price to the normal value or construct a normal value to compare with the aforesaid export sales.

(71)

These claims had to be rejected as there were no product types in the analogue country that had been close enough to those exported to cover the differences by an adjustment for differences in physical characteristics. Equally, it was not possible to construct normal value for such product types. Neither similar product types in other normal value transactions were identifiable, nor any basis was available to make adjustments or otherwise construct normal value using selling, general administrative expenses and profit assumptions.

(72)

APP requested clarifications with respect to the reasonable profit margin used for constructing export price in accordance with Article 2(9) of the basic Regulation.

(73)

In this respect it is noted that the Commission revisited this point following new developments. It is recalled that as explained in recital (71) of the provisional Regulation a reasonable profit rate, much lower than the target profit for the Union industry was used. The Commission reviewed the available data and decreased the profit margin rate used for constructing export price to a rate equal to the weighted average rate reported by a series of unrelated Union importers of the product concerned, i.e. 4,5 %.

(74)

In the absence of any other comments, recitals (68) to (71) of the provisional Regulation, as modified above, are hereby confirmed.

(75)

APP claimed to be unable to understand the basis of calculations of certain allowances with respect to normal value (namely the type of adjustments and their impact on the normal value) and export price (namely the methodology used and calculations made in order to arrive at several ratios).

(76)

With respect to normal value adjustments, as explained under recitals (9) and (66) above, the Commission provided to APP all the relevant data that could be provided, account taken of the provisions on confidentiality in the basic Regulation. Furthermore, the Commission checked with the cooperating party in the analogue country whether further information relating to adjustments could be disclosed in order to improve transparency. Having obtained the analogue country producer's agreement, more detailed information was indeed provided to APP following provisional disclosure, further elaborating on the normal value adjustments.

(77)

With respect to export price adjustments it is noted that APP received full disclosure. Then, following APP's request, clarifications were provided to APP following provisional disclosure further elaborating on the export price adjustments.

(78)

In the absence of any other comments, recitals (72) and (73) of the provisional Regulation are hereby confirmed.

(79)

No pertinent comments with respect to the dumping margin were submitted. In the absence of any other comments, recital (74) of the provisional Regulation is hereby confirmed.

(80)

Taking into account the revised profit margin rate used for constructing export price for APP and on the basis of the methodology set out in recitals (31) to (73) of the provisional Regulation, the definitive dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(81)

On the basis of the facts stated in recital (76) of the provisional Regulation, the country-wide definitive dumping margin for the PRC was established using the definitive dumping margin established for the cooperating companies with the highest individual duty rate, i.e. 63 %. In the absence of any other comments, recital (76) of the provisional Regulation is hereby confirmed.

(82)

The government of PRC commented that one of the representative producers was allegedly related to a Chinese company and thus should be excluded from the definition of the Union industry. The investigation however revealed that the products produced by the Chinese company referred to are not product concerned. Therefore the relationship does not have any impact on the injury analysis nor on the inclusion of this Union producer in the definition of Union industry.

(83)

In the absence of further comments on Union production, recitals (77) to (79) of the provisional Regulation are hereby confirmed.

(84)

In the absence of comments on Union consumption, recitals (80) to (82) of the provisional Regulation are hereby confirmed.

(85)

In the absence of comments on the level of imports into the Union from the PRC, recitals (83) to (84) of the provisional Regulation are hereby confirmed.

(86)

To ensure that the dumping and undercutting and underselling calculations follow a coherent approach, and for the reasons set out in recitals (68) to (71), the undercutting calculation has been revised to exclude the export sales of a company within the group of one cooperating exporting producer.

(87)

Based on the modified dataset used for the calculation, and also due to a minor calculation correction, the rate of price undercutting in recital (87) was slightly revised. The dumped imports undercut the Union producers’ sales prices on average by 7,6 % in the IP.

(88)

One of the coooperating Chinese exporting producers (APP) claimed that the injury analysis should be done at the level of a properly defined Union industry that should be limited to Union producers that support the complaint and cooperate with the investigation. That producer suggests that the conclusions concerning material injury would be different, were some indicators such as market share established at the level of such ‘properly defined’ Union industry. The government of PRC commented that the injury analysis failed to analyze all injury indicators for the complainant and for the Union industry as a whole in a coherent and comprehensive fashion.

(89)

Firstly it is noted that the statements of that producer seem to have been drawn on the basis of indicators calculated from different datasets and information than those established during the investigation and presented below and in the provisional Regulation. Consequently, these conclusions are factually wrong and are thus irrelevant.

(90)

Secondly, it is the Commission's practice to evaluate macroeconomic factors for the indication of the injury suffered at the level of the Union industry as a whole, as it was explained in recital (89) of the provisional Regulation. In the present investigation, the Union industry was defined at the level of Union producers accounting for the total Union production (recital (77) of the provisional Regulation), regardless of whether producers supported the complaint or have been cooperating in the investigation. Given this broad definition, the exporting producer claims that Union industry has not been defined ‘properly’ is rejected.

(91)

Microeconomic factors are analyzed at the level of the representative Union producers, regardless of whether these support the complaint or not. The representative producers covered 58 % of the Union production. None of the other Union producers came forward claiming that the Commission's conclusions on microeconomic factors would be unreliable or not substantiated. Therefore there are no reasons to put into question the findings established based on the information provided by the representative Union producers only.

(92)

Further comments on the level of cooperation by one of the representative Union producers were received.

(93)

It was claimed that one of the representative Union producers cooperated only partially as it was allegedly related to another producer that did not cooperate in the investigation. The companies were alleged to be related as a consequence of transitional agreements concluded at the time of the acquisition by the cooperating Union producer of the CFP business segment of the other producer It was alleged that through these transitional agreements the cooperating Union producer controls some of the mills which remained in the ownership of the partially acquired producer. To support its claim the exporting producer made reference to the Commission Decision (5) examining at the time of the acquisition whether the transaction should be considered as an acquisition within the meaning of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (6).

(94)

This claim was already addressed in recital (91) of the provisional Regulation. It is recalled that the transitional agreements referred to did not show any relationship between the companies that would be extending beyond a normal business relationship between a buyer and a seller. In particular, the terms of the transitional agreements aim to administer the coated paper sales for a transitional period and according to these terms the Union producer only has functions comparable to a sales agent during the transitional period. Furthermore, in its consolidated audited accounts and in its reply to the questionnaire it reported commission income while acting as an agent for the mills concerned; no ownership and therefore no costs were recognized for these mills by the Union producer.

(95)

According to the Commission Decision referred to above, the transaction between the companies was considered as an acquisition by the Union producer of part of the other companies’ business, not the take-over of the company as such. The Decision does not suggest that the companies should be considered as one entity after the acquisition; in particular, there is no joint venture between the companies. It is also noted that the geographical scope examined in the above decision is EEA – wide and not EU wide. To note is also that in the Decision the Commission did not analyze the relationship between the companies in question within the meaning of Article 143 of the IPCCC (7).

(96)

In this regard, there are consequently no grounds to re-consider the provisional conclusions, i.e. that the two companies are not related in the sense of Article 143 of the IPCCC and that the Union producer in question cooperated fully with the investigation.

(97)

The exporting producer also claimed that each affiliated company of the Union producers should have filled in a separate questionnaire reply as they were separate legal entities. The exporting producer claimed discrimination as it was requested to provide a separate MET claim for each entity within the group.

(98)

It is noted that in case of MET claims, a group of companies has the burden of proof of showing that all companies in the group fulfill the MET-criteria as the determination of whether or not MET should be granted is specific to the group. In the case of the questionnaires for Union producers, the purpose is to determine whether material injury to the Union industry (as a whole) exists during the IP. The claim of discrimination disregards the clear difference between the objectives of an injury investigation and a MET determination.

(99)

In any event, in the case of the Union producer in question it was considered that one questionnaire reply would be sufficient for a meaningful reply and analysis of the injury aspects. In particular, the reply provided a detailed breakdown of information at individual paper mill level and all the necessary data relating to all of the related producers/sellers of the like product could be verified during the verification visits.

(100)

In a subsequent submission the exporting producer also claimed that the same company failed to fully cooperate as it filed its questionnaire reply on behalf of a non-existing entity and that the audited accounts of the company do not reflect the data provided in its questionnaire reply. The conclusions in the preceding recital are relevant also in this regard.

(101)

Therefore the conclusions in recital (88) to (91) remain unaffected.

(102)

The government of PRC argued that the macro-economic data used for the analysis is incomplete and inaccurate thus cannot be used as a positive evidence of material injury.

(103)

The on-spot verification at the complainant confirmed that the data used to establish macroeconomic indicators are directly collected from Union producers covering around 98 % of the total Union production and are sufficiently detailed to identify information about the product concerned. Assumption and / or estimations used were made on a reasonable and justifiable basis, e.g. cutter rolls were not taken into account because of their clearly insignificant volumes as witnessed in their proportion in the total sales volume of the representative Union producers. Therefore this claim had to be rejected.

(104)

The exporting producer claimed that the market share of the Union producers should also include imports from Switzerland as these come from a mill owned by one of the representative Union producer.

(105)

The geographical scope of anti-dumping investigations is the European Union. Therefore this claim had to be rejected.

(106)

It was also claimed that the complainant's market share increased remarkably during the period considered.

(107)

Market share is a macro indicator analyzed at the level of the whole Union industry and not at the level of the complainant. Secondly, the statement concerning the complainant's market share is factually erroneous.

(108)

In the absence of any further comments in this regard, the provisional findings set out in recitals (92) to (98) of the provisional Regulation are hereby confirmed.

(109)

The exporting producer commented that the injury analysis is flawed due to the fact that information about the paper mills that were acquired by the Union producer referred to in recital (93) was not included in the analysis of the microeconomic indicators for the years 2006-2008.

(110)

Following the arguments presented by this party the microeconomic indicators were adjusted to present a fully comparable trend over the years by excluding information about the acquired mills for all years under examination.

(111)

Following the modified scope of the data used for the analysis of the economic situation of the representative Union producers, as explained in the previous recital, the microeconomic indicators are definitively established as follows:

(112)

Despite the slightly modified figures, the basic trends and the findings in recital (99) in the provisional Regulation concluding that prices of coated fine paper remained stable over the years are confirmed.

Table 5

Prices of the Union producers

(113)

Stocks represented around 10 % of the production volume in the IP. The representative Union producers increased their stock levels by 10 % during the period considered, in particular between 2006 and 2007 and later between 2008 and the IP. Notably, this coincided with the surge in the low-priced dumped imports from the PRC.

Table 6

Stocks

(114)

Due to the paper mill closures and consolidation of the representative Union producers, the number of employees was reduced substantially by 20 % (almost 1 600 jobs) during the period considered. Efficiency gains have been achieved by raising and maintaining a high output per employee even at a time of significant layoffs. Labour costs increased steadily, totalling an 8 % increase over the period considered.

(115)

The conclusions presented in recital (102) of the provisional Regulation are thus further supported by the slightly modified figures.

(116)

The profitability rate throughout the period considered was corrected to reflect more accurately the profitability level. However, the basic trend concerning profitability remains unaffected by the change. The representative Union producers incurred losses in the years 2006 to 2008 and the financial situation only turned positive in 2009 when the world price of pulp, the main raw material exceptionally decreased significantly as a result of the economic downturn. The drop in the price of pulp (– 19 %) was considered an abnormally large drop that directly contributed to the improved financial situation in the IP. It is to be noted that since the IP, pulp prices have returned to their pre-IP levels.

(117)

Subject to the slight modification of the figures, the findings concerning cash flow, investment and return on investment presented in recital (104) and (105) of the provisional Regulation are hereby confirmed.

(118)

The exporting producer claimed that the improvement of profitability should not be considered as a limited instance based on an exceptional drop of raw material costs as explained in recital (107) of the provisional Regulation. The drop in costs benefited both: all local as well as Chinese producers, not only the complainant. Therefore the breakthrough in profitability was not exclusively based on the drop in costs but was rather the result of a change in the pricing behaviour of the complainant.

(119)

Furthermore the exporting producer claimed that the profitability is driven by CFP prices, rather than the price of pulp. It was found, however, that when pulp prices sharply fell in 2009, CFP prices remained stable and profits rose as a consequence. Therefore given that prices remained stable, no correlation can be made between prices and profitability in this specific time period.

(120)

The profitability rate is an indicator that is analysed at the level of the representative Union producers and not at the level of the complainant, as suggested by the party. The analysis of information gathered showed a direct link between the exceptional fall in pulp prices, the main raw material and the increased profitability; whereby stable prices of the finished products indeed played a role in the improvement of profitability. While this was probably the case for other producers on the market as well, this does not affect the conclusion that this temporary improvement of profitability is due to the exceptional drop in raw material prices in the IP.

(121)

The findings concerning the representative producers’ ability to raise capital presented in recital (106) of the provisional Regulation are hereby confirmed.

(122)

One exporting producer and the government of PRC claimed that there was no positive evidence that the complaining Union producers suffered material injury. On the contrary, the complainants presented overall stable economic results and increased profitability in the IP.

(123)

First of all, the state of the Union industry is analysed at the level of the representative Union producers and not at the level of complainants as suggested by the parties.

(124)

Secondly, as already pointed out in recitals (89) and (107) above, the conclusions of these parties seem to have been drawn from indicators calculated on the basis of different datasets and information than that which was established during the investigation and presented above and in the provisional Regulation. Consequently, these conclusions are factually wrong. Furthermore, the parties’ analysis was not consistent in the use of two different datasets for macro and micro indicators.

(125)

It was further claimed that the improvement of profitability should be regarded also as a consequence of the restructuring efforts of the industry including reduction of production, employment and increased productivity. In this case, the latter factors cannot be deemed to be the sole indicators of injury, but all injury indicators should be looked at together.

(126)

Article 3(5) of the basic Regulation lists the economic factors and indices to be evaluated in the examination of the impact of the dumped imports on the Union industry. Article 3(5) explicitly states that the list of factors is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance. Thus, while indicators have to be assessed individually, conclusions should be reached through the analysis of all factors.

(127)

Overall, the claims of the exporting producer and the government of China as presented above do not affect the conclusion reached at the provisional stage which is therefore hereby confirmed, i.e. that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation.

(128)

Parties also commented repeatedly on the possible threat of further material injury in view of the huge capacity build-up by Chinese producers supported by State policies and subsidies. The scope of the investigation was the existence of material injury and not the threat of further material injury. Therefore these comments could not affect the findings and had to be disregarded.

(129)

Based on the above, the provisional findings set out in recitals (107) to (111) of the provisional Regulation are hereby confirmed.

(130)

The Commission received several comments on the provisional findings concerning the causal link between dumping and injury.

(131)

Provisional findings concerning the effect of dumped imports were contested by several parties. The main argument brought forward was that Chinese imports did not have significant impact in terms of volume and prices. It was argued that there was no surge of Chinese imports but rather these grew gradually over the years and therefore their impact was quite limited which should not be exaggerated for the purpose of the injury determination. It was further argued that Chinese prices, even if they were below Union prices, did not have any impact on the relatively stable prices of the Union industry. One of the cooperating Chinese exporting producers questioned the Commission's finding that there would be price suppression caused by Chinese prices. It pointed out that in 2009 when the Chinese prices declined further, the Union industry's prices not only recorded an increase but in fact allowed the Union industry to make profits.

(132)

The evolution of Chinese imports was analyzed in detail in recitals (84) and (114) of the provisional Regulation. It was established that imports almost tripled over the period considered, especially in the years from 2006 to 2007 (+ 118 %) and from 2008 to the IP (+ 81 %). The increase in the volume therefore cannot be regarded as insignificant.

(133)

In terms of prices Chinese imports undercut the prices of the representative Union producers by 7,6 % which is considered significant in a market where price transparency is high. As depicted in recital (112) above, indeed prices of the representative Union producers were stable over the period considered, with an exceptional increase in 2007, the year where Chinese exports did not grow. In 2009 the Union producers could keep their prices stable at the expense of losing further market share and their profitability derived from the combination of these stable prices and the decreased cost of raw material.

(134)

The exporting producer claimed that CFP imports from PRC do not have an impact on the prices of the Union industry as these are not comparable to the CFP manufactured and sold by the representative Union producers as only 10 % of the sales of the representative Union producers were compared in the determination of the undercutting and non-injurious price level. It is noted that these determinations are made on the basis of fully comparable products that are directly matching in all characteristics so as to ensure a fair comparison. However, CFP produced by the Chinese and Union producers in general are comparable products as concluded in recital (42) and thus are competing with each other directly on the Union market.

(135)

It was furthermore alleged that the finding that the CFP market is a commodity-market characterized by a high degree of transparency is incorrect as the Union producers sell around half of their products directly to end users. In contrast to this claim the representative Union producers sold the majority of their products through merchants either directly or indirectly (so called ‘indent sales’ when products are directly shipped to the customer but ordering and invoicing process goes through merchants). Indeed merchants play a crucial role in both stocking products and providing price transparency to the market.

(136)

Based on the above, the provisional findings set out in recitals (113) to (117) of the provisional Regulation are hereby confirmed.

(137)

One of the cooperating Chinese exporting producers and the government of PRC claimed that the decrease in Union production was the consequence of the global financial crisis and the sharp decline in consumption on the Union market, as witnessed by the negative trends shown by the Union producers’ domestic sales, capacity utilization, employment and stock level, and should not be attributed to Chinese imports.

(138)

To support its claim, the government of PRC quoted a Manifesto for Competitiveness and Employment launched by the paper and pulp industry in June 2009 (‘Manifesto’). This document covers the whole paper and pulp industries sectors and serves a general policy purpose. On the basis of the information included in this document, no separate conclusions could be drawn for the production and sales of the product concerned. It is therefore not possible to conclude whether the statements or findings of the Manifesto in fact apply one-to-one to the product concerned. Since, in addition, the investigation did not bring to light a strong link between the financial crisis and the material injury suffered by the Union industry, this argument had to be rejected.

(139)

No new arguments were brought forward to reconsider the conclusions reached in recital (120) to (122) of the provisional Regulation and in recital (118) of this Regulation.

(140)

The revision of the microeconomic indicator as explained in recital (110) impacted the analysis of export performance of the representative Union producers to the extent that the decrease of their export sales in the period considered was 16 %. Export sales to unrelated parties made by these companies represented 26 % of their total sales.

(141)

Contrary to the claim of one exporting producer, the evolution of export of the product concerned by the representative Union producers was addressed in the provisional Regulation in recitals (123) to (124). The above revision does not affect these conclusions reached at the provisional stage.

(142)

The arguments and evidence brought forward concerning the effect of export performance of the Union industry thus did not cause a change in the conclusions reached at the provisional stage.

(143)

Arguments brought forward about the effect of imports from other third countries were already addressed in recitals (125) to (127) of the provisional Regulation.

(144)

It was claimed that injury suffered by the Union producers is caused by structural overcapacity. This factor was already analysed in recital (128) of the provisional Regulation.

(145)

The main argument brought forward in this respect is that restructuring efforts of the Union industry were completed in 2009 by the consolidation of two large producers that resulted in the immediate improvement of the situation of the Union industry. As described in recital (93) of the provisional Regulation, restructuring efforts took place since 2000 up until the IP. The positive effect of the mentioned consolidation should have been reflected in the improvement of capacity utilisation and at least in stable sales volume but both these indicators deteriorated in the IP. On the other hand, it had been established that the improved profitability of the Union industry in the IP was caused primarily and directly by the exceptional one-off drop in pulp prices. Therefore the conclusions reached in recital (128) of the provisional Regulation that the restructuring efforts of the industry were undermined by the dumped imports are maintained.

(146)

Based on the above, the provisional findings as set out in recitals (129) to (132) of the provisional Regulation that the dumped imports from the PRC caused material injury to the Union industry within the meaning of Article 3(6) of the basic Regulation are maintained. The provisional findings about the effect of the other known factors which could have caused injury to the Union industry were also confirmed: these factors are not such as to break the causal link established between the dumped imports from the PRC and the injury suffered by the Union industry.

(147)

No further comments or information was received regarding the interest of the Union producers and importers and traders. Therefore the provisional findings in recitals (134) to (138) of the provisional Regulation on the interest of these groups are hereby confirmed.

(148)

No further comments or information was received regarding the interest of importers and traders. Therefore the provisional findings in recitals (139) to (143) of the provisional Regulation on the interest of these groups are hereby confirmed.

(149)

Three additional printers and an association of European printers and publishers came forward after the publication of provisional measures. They claimed that the measures would have negative effects on the downstream industries as price increases could lead to the relocation of the printing industry leading to increased imports of downstream printed matter. The claim was supported by the fact that imports of printed matter from PRC increased rapidly in recent years and apparently took a considerable market share within European consumption for all printed matter.

(150)

It was also claimed that measures would cause a shortage of supply on the market and longer delivery times for users.

(151)

Most of these claims were not company specific and similar to claims already made at the provisional stage of the investigation and addressed in recitals (146) and (150) of the provisional Regulation. It is recalled that the cooperation of printers was limited and on the basis of the limited quantitative information received it was concluded that because of their profitability level and the share of CFP in their costs, printers are indeed sensitive to price increases. However, most printers had no or very limited direct purchases of Chinese paper in the IP and the amount of Chinese paper used by printers is in general low therefore the direct impact of the duty would be negligible. Most printers also stated that because of their need for short delivery times, the share of supplies directly from third countries would remain limited.

(152)

As regards the claims concerning downstream printed matter from PRC it should be noted that the import statistics of printed matter cover a wide range of products that include final printed matter that is not printed on coated fine paper. Based on the information available it could not be assessed what part of the products imported from PRC is printed on the product concerned and what is printed on other types of paper. However, from information submitted it is known that printed matter originating in PRC is mostly comprised of some specific categories of books, children's books, calendars, packaging and greeting cards. Products that are more ‘time sensitive’ such as weekly/monthly magazines and other newsprint are less susceptible to being imported from PRC because of the time needed for transportation. While the printing of some printed products may be more susceptible to relocation, on the other hand there exist product types for which proximity and service are crucial and therefore would not be affected by foreign competition. Furthermore, even though paper is an important cost element for the printing industry, it is also a labour-intensive industry and thus labour costs may be a more significant driver in relocation trends. In summary, it cannot be excluded that imports of printed products that are printed on CFP will increase but it is not possible to estimate with any accuracy what the level of increase might be and how far this would play a role in the competitiveness of printing producers and therefore what direct impact price increases might have on the downstream Union printing industry.

(153)

From information submitted, it is also known that the printing industry suffers from structural overcapacity that leads to the continuing restructuring of the sector. One of the driving forces towards the restructuring was also the consolidation of the paper manufacturers within the value chain. Any difficulty of the printing industry to increase prices is considered to be rather largely due to this structural overcapacity within the printing industry itself.

(154)

The interested parties claiming possible shortages of supply did not quantify or give an estimate of the possible shortages. The claims in any case do not seem to be supported by the capacity utilization rate of the Union producers that was at 83 % in the IP leaving around one million tonnes of free capacity. On this basis, it is unlikely that shortages would occur.

(155)

In view of the above, the provisional findings concerning Union interest are confirmed, i.e. there are no compelling reasons against the imposition of definitive measures on imports of CFP originating in the PRC.

(156)

One group of Chinese exporting producers requested further details for the method used to calculate the target profit of 8 % used for the calculation of the non-injurious price. It referred to the complaint in which the target profit suggested was lower.

(157)

The complainant on the other hand requested that the target profit should be set at minimum 10 %, basing its arguments on the expected profit margin used by independent rating agencies in their classification methodology and the profitability achieved by a producer active in another paper production segment that is not affected by Chinese imports.

(158)

It should be clarified that the target profit as suggested in the complaint was examined based on the questionnaire replies and verification visits to the representative Union producers. More specifically, the cost of investment in machinery was considered. The target profit set on this latter basis was found to reflect the high up-front investment needs and risk involved in this capital-intensive industry in the absence of dumped and/or subsidised imports. Therefore a target profit of 8 % is considered as the level that the industry could obtain in the absence of dumped imports. As stated in recital (86), to ensure that the dumping and undercutting and underselling calculations follow a coherent approach and for the reasons set out in recitals (68) to (71), the calculation of the injury elimination level has been revised to exclude the export sales of a company within the group of the cooperating Chinese exporting producers.

(159)

In all other aspects recitals (153) to (161) of the provisional Regulation are hereby confirmed.

(160)

In view of the conclusions reached with regard to dumping, injury, causation and Union interest, and in accordance with Article 9(4) of the basic Regulation, a definitive anti-dumping duty should be imposed on imports of coated fine paper originating in the PRC at the level of the lower of the dumping and injury margins found, in accordance with the lesser duty rule. In this case, the duty rate should accordingly be set at the level of the injury found.

(161)

It is noted that an anti-subsidy investigation was carried out in parallel with the anti-dumping investigation concerning imports of coated fine paper originating in the PRC. Since, pursuant to Article 14(1) of the basic Regulation and Article 24(1), second subparagraph of Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Community (8) (‘the basic anti-subsidy Regulation’), no product shall be subject to both anti-dumping and countervailing duties for the purpose of dealing with one and the same situation arising from dumping or from export subsidisation, it was considered necessary to determine whether, and to what extent, the subsidy amounts and the dumping margins arise from the same situation.

(162)

As concerns the subsidy schemes that constituted export subsidies within the meaning of Article 4(4)(a) of the basic anti-subsidy Regulation, the definitive dumping margin established for two Chinese exporting producers are partly due (i.e. 0,05 %) to the existence of countervailable export subsidies. With respect to other subsidy schemes, in view of the use of the lesser duty rule in this case and the amount of subsidisation found in the anti-subsidy investigation carried out in parallel, it was not considered necessary to further examine whether and to what degree the same subsidies are being offset twice when anti-dumping and countervailing duties are simultaneously imposed on the same imported product.

(163)

As concerns the country-wide definitive dumping and subsidy levels it is recalled that they were established using the definitive dumping margin and the definitive subsidy margin established for the cooperating Chinese exporting producers with the highest individual duty rates i.e. 63 % for the definitive dumping margin and 16 % for the definitive subsidy margin.

(164)

It is recalled that the same injury elimination level applies for both the anti-dumping and the anti-subsidy investigations. In this respect it is noted that the injury elimination level is lower than the definitive dumping margins but higher than the definitive subsidy margins. It is thus considered appropriate to impose a definitive countervailing duty at the level of the established definitive subsidy margins and then impose a definitive anti-dumping duty up to the relevant injury elimination level.

(165)

On the basis of the above, and taking into account the findings set out in Council Regulation (EU) No 452/2011 of 6 May 2011 imposing a definitive countervailing duty on imports of coated fine paper originating in the People's Republic of China (9) and in light of Article 14 paragraph 1 last sentence of the basic Regulation that duty will not be imposed to the extent necessary to comply with the rule laid down in that sentence the rate of the definitive anti-dumping duty for the PRC and the rate at which such duties will be imposed are set as follows:

(166)

In view of the magnitude of the dumping margin found and in the light of the level of the injury caused to the Union industry, and taking into account that no provisional measures were imposed in the parallel anti-subsidy investigation, it is considered necessary that the amounts secured by way of provisional anti-dumping duty imposed by the provisional Regulation should be definitively collected to the extent of the amount of the provisional duty imposed.

(167)

One of the cooperating Chinese exporting producers claimed that the definitive collection of the provisional duty at the rates set out in Article 1(2) of Regulation (EU) No 1042/2010 would be contrary to Article 10 paragraph 3 second sentence of the basic Regulation. However, as clarified in this Regulation, and in particular in Article 1 paragraph 2 thereof, the definitive duty imposed by this Regulation is actually higher than the provisional duty which has been imposed. In these circumstances the provisional duty at the rates set out in Article 1(2) of Regulation (EU) No 1042/2010 should be definitively collected,

14.5.2011   

EN

Official Journal of the European Union

L 128/18

(1)

On 17 April 2010, the Commission published a notice in the Official Journal of the European Union  (2) (‘Notice of initiation’), on the initiation of anti-subsidy proceedings with regard to imports into the Union of coated fine paper originating in the People's Republic of China (‘PRC’ or the ‘country concerned’).

(2)

The anti-subsidy proceedings were initiated following a complaint lodged on 4 March 2010 by CEPIFINE, the European association of fine paper manufacturers, (‘the complainant’) on behalf of producers representing a major proportion, in this case more than 25 %, of the total Union production of coated fine paper. The complaint contained prima facie evidence of subsidisation of coated fine paper and of material injury resulting that subsidisation, which was considered sufficient to justify the initiation of proceedings.

(3)

Prior to the initiation of the proceedings and in accordance with Article 10(7) of the basic Regulation, the Commission notified the Government of the PRC (‘the GOC’) that it had received a properly documented complaint alleging that subsidised imports of coated fine paper originating in the PRC were causing material injury to the Union industry. The GOC was invited for consultations with the aim of clarifying the situation as regards the contents of the complaint and arriving at a mutually agreed solution. The GOC accepted the offer of consultations and consultations were subsequently held. During the consultations, no mutually agreed solution could be arrived at. However, due note was taken of comments made by the authorities of the GOC as regards the allegations contained in the complaint concerning the lack of countervailability of the schemes. Following the consultations, submissions were received from the GOC.

(4)

On 18 February 2010, the Commission published a notice in the Official Journal of the European Union  (3), on the initiation of an anti-dumping proceeding concerning imports into the Union of coated fine paper originating in the PRC.

(5)

On 17 November 2010, by Regulation (EU) No 1042/10 (4), the Commission imposed a provisional anti-dumping duty on imports of coated fine paper originating in the PRC.

(6)

The injury analyses performed in the present anti-subsidy and the parallel anti-dumping investigation are identical, since the definition of the Union industry, the representative Union producers and the investigation period are the same in both investigations. For this reason, comments on injury aspects put forward in both these proceedings were taken into account in both proceedings.

(7)

The Commission officially notified the complainant, other known Union producers, the known exporting producers in the PRC and an association of producers (a paper association), the representatives of the country concerned, known importers and known users of the initiation of the proceedings. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set in the Notice of initiation.

(8)

In view of the apparent high number of exporting producers, Union producers and unrelated importers, sampling was envisaged in the Notice of initiation in accordance with Article 27 of the basic Regulation. In order to enable the Commission to decide whether sampling would be necessary and if so, to select samples, all exporting producers and their known paper association, all Union producers and unrelated importers were asked to make themselves known to the Commission and to provide, as specified in the Notice of initiation, basic information on their activities related to the product concerned (as defined in section 2.1 below) during the period from 1 January 2009 to 31 December 2009. The authorities of the PRC were also consulted.

(9)

As explained in recital (51) below, two Chinese exporting producer groups provided the requested information and agreed to be included in a sample. On the basis of the above it was decided that sampling was not necessary for exporting producers in the PRC.

(10)

As explained in recital (53) below, it was decided that sampling was not necessary for Union producers.

(11)

As explained in recital (54) below, it was decided that sampling was not necessary for unrelated importers.

(12)

The Commission sent questionnaires to all parties known to be concerned and to all other parties that so requested within the deadlines set out in the Notice of initiation, namely the complainant, other known Union producers, the known exporting producers in the PRC and an association of producers, the representatives of the country concerned, known importers and known users.

(13)

Replies to the questionnaires and other submissions were received from two groups of Chinese exporting producers, CEPIFINE, the four complainant Union producers and one additional Union producer, 13 unrelated importers and traders, 5 users and one association of the printing industry.

(14)

The Commission sought and verified all information deemed necessary for the determination of subsidisation, resulting injury and Union interest. Verification visits were carried out at the premises of the following State authority and companies:

(15)

The investigation of subsidisation and injury covered the period from 1 January 2009 to 31 December 2009 (the ‘investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2006 to the end of the IP (‘the period considered’).

(16)

The product concerned is coated fine paper which is paper or paperboard coated on one or both sides (excluding kraft paper or kraft paperboard), in either sheets or rolls, and with a weight of 70 g/m2 or more but not exceeding 400 g/m2 and brightness of more than 84 (measured according to ISO 2470-1), originating in the PRC (‘the product concerned’ or ‘CFP’) currently falling within CN codes ex 4810 13 20, ex 4810 13 80, ex 4810 14 20, ex 4810 14 80, ex 4810 19 10, ex 4810 19 90, ex 4810 22 10, ex 4810 22 90, ex 4810 29 30, ex 4810 29 80, ex 4810 99 10, ex 4810 99 30 and ex 4810 99 90.

(17)

CFP is high quality paper and paperboard generally used for the printing of reading material such as magazines, catalogues, annual reports, yearbooks. The product concerned includes both sheets and rolls suitable for use in sheet-fed (‘cut star’) printing machines. Rolls suitable for use in sheet-fed presses (‘cutter rolls’) are designed to be cut into pieces before printing, and are thus considered to be substitutable and directly competitive with sheets.

(18)

The product concerned does not include rolls suitable for use in web-fed presses. Rolls suitable for use in web-fed presses are defined as those rolls which, if tested according to the ISO test standard ISO 3783:2006 concerning the determination of resistance to picking – accelerated speed method using the IGT tester (electric model), give a result of less than 30 N/m when measuring in the cross-direction of the paper (CD) and a result of less than 50 N/m when measuring in the machine direction (MD). Also, in contrast to rolls used in sheet-fed printing machines, rolls for use in web-fed presses are normally directly fed into the printing machines and are not cut beforehand.

(19)

One party claimed that the product scope of the investigation was too narrowly defined and that rolls of CFP suitable for web-fed printing should have been included. It was claimed that web-fed rolls and the ones included in the scope of the present investigation (cutter rolls and sheets) shared the same basic technical and physical characteristics and were not distinguishable from one another. Furthermore it was claimed that both were used for high quality printing and that they were therefore to some extent interchangeable.

(20)

However, contrary to the above claim, the investigation confirmed that there are indeed distinct technical and physical characteristics such as humidity and stiffness between paper used in web-fed and the one used in sheet-fed printing. The investigation further confirmed that the technical characteristics listed in recital (18) above are unique to rolls suitable for use in web-fed presses. Due to these differences paper used in web-fed or the one used in sheet-fed printing cannot be used in the same type of printing machine and they are therefore not interchangeable. It is noted that all parties agreed that the two types of paper are distinct as regards their surface strength and tensile strength.

(21)

Furthermore, the party in question claimed that customers view CFP in the form of sheets, cutter rolls and web rolls as a single market and thus distribution channels are the same. The different technical characteristics are only reflected in minor price differences among these product groups.

(22)

However, the investigation revealed that the two types of rolls are also non-interchangeable from an economic point of view because rolls for web-fed printing are used for mass-volume printing jobs and are generally made to order and require just-in-time delivery, therefore these products are not stocked by intermediaries but are shipped directly to the final users, i.e. they are also sold through a different distribution channel than rolls used in sheet-fed printing. The different production process and the different economies of scale in the printing process are reflected in distinct price differences.

(23)

Furthermore, no rolls for use in web-fed presses were imported from the PRC during the period considered. It may also be considered unlikely that these products would be imported in the future as sourcing these products from far away is economically not viable for the reasons mentioned in the previous recital.

(24)

On this basis, these claims were rejected.

(25)

The same party claimed that the resistance to picking was not a suitable technical characteristic for differentiating between products as this test would be of a general nature and test results may moreover be affected by the moisture content of the paper tested. The party further claimed that on the basis of some other tests conducted in its own laboratory measuring the resistance to picking of web rolls produced by the Union producers, it can be seen that these products would not fall into the current product definition which would show that the criterion of ‘resistance to picking’ for distinguishing CFP used in web-fed and sheet-fed printing is unsuitable. With this evidence the party alleged that the exclusion of web rolls was made on an arbitrary basis.

(26)

No evidence was submitted with regard to the claim that the moisture content of the paper may render test results for ISO test standard ISO 3783:2006 unreliable.

(27)

The test results presented by the exporting producer consisted of a summary of the test results performed in its own laboratory. Crucially, the results were not made available for inspection and comments by other interested parties, in particular the Union industry, nor did the exporting producer submit a meaningful non-confidential summary thereof despite repeated reminders.

(28)

After disclosure, no further detailed information was provided by the exporting producer which could help assess the reliability of the test. Since no non-confidential version of this test was provided, the companies whose web rolls were allegedly tested could not respond to the conclusions of the test. The Commission thus could not objectively check whether the test results submitted were reliable and correct and could be relied upon for the purposes of the investigation. On the basis of the facts available to the Commission, the objectivity and reliability of the test was found to be insufficient since the information submitted under confidentiality could not be counterchecked by any reliable sources.

(29)

After the disclosure of the findings, the same exporting producer presented the results of a further test conducted on its behalf by an external test laboratory and reiterated that CFP used in web-fed printing has been arbitrarily excluded from the scope of the investigation. The test reports stated that the resistance to picking has been measured on 25 samples of web-fed rolls provided and identified by the exporting producer to the laboratory as paper samples produced by Union producers. According to this report, none of the paper met both the criteria referred to in recital (18) above.

(30)

The assessment of the test report brought to light that, first of all, the test report by the external laboratory related mostly to products for which these results were irrelevant as the vast majority of the samples tested were not in fact web rolls; secondly, the test report related to products which were not sufficiently identified, as it could not be ascertained from the test report whether the paper tested was for sheet-fed printing or web-fed printing as the paper brand described in the report existed in both formats. Furthermore the test report provided no assurance that the sample rolls indicated were indeed the ones that were tested.

(31)

In response to the external laboratory's test report, the complainant provided the results of the testing performed by one of the Union producers on the same samples of web rolls that were allegedly tested by the external laboratory. This test showed different results. The complainant attributed the differences to possibly different test conditions and thus a potential non-compliance with the ISO 3783:2006 standard, i.e. the standard according to which resistance to picking set in recital (16) of the provisional Regulation should be measured.

(32)

After disclosing the definitive findings, the exporting producer questioned the Commission's objectivity in rejecting the test result of the external laboratory. It claimed that the testing was carried out blindly by the independent expert and in accordance with the relevant ISO standard. It provided an affidavit of its manager explaining the sourcing process of the samples used in the testing in order to prove the independence, correctness and representativeness of the testing.

(33)

Firstly, the objectivity of the external laboratory test report was never questioned by the Commission and in this regard it is irrelevant that the testing was carried out blindly. On the other hand, doubts were raised as to the assurances on the selection and origin of the samples tested and not on the test itself. The arguments of the exporting producer did not remove these doubts as these were not comprehensive and were unclear in several aspects, for example the inclusion of products other than web rolls were claimed to have been caused by administrative errors or were blamed on mistakes by the suppliers in providing possibly wrong samples.

(34)

Since both the source as well as the samples of the allegedly tested products were not clear and the results of the testing by the different parties were contradictory, it was considered that the submitted test report of the external laboratory acting on behalf of the Chinese exporting producer did not demonstrate conclusively that the resistance to picking test was not appropriate to distinguish between CFP suitable for use in web-fed printing on the one hand and CFP used in sheet-fed printing on the other hand. Consequently, the test report did not demonstrate that CFP used in web-fed printing had been arbitrarily excluded from the scope of the investigation.

(35)

As regards the relevance of the resistance to picking as a distinguishing criterion for rolls suitable for web-fed printing, it is recalled that in the product definition the two product groups are distinguished from each other based on, among other things, the use of the products, i.e. whether the product is suitable for use in web-fed or sheet-fed printing as determined by the requirements of the presses on which they are used which is reflected in, inter alia, the characteristic of resistance to picking. Furthermore it is noted that resistance to picking is only one of the characteristics that distinguish CFP suitable for use in web-fed printing from CFP used in sheet fed printing; recitals (18) and (20) above set out additional criteria which have not been contested by the exporting producer concerned. One party claimed that humidity as defined in recital (20) was not a distinct basic characteristic to distinguish products. During the investigation however differing claims in this regard were made by other parties. In any event, it was found that stiffness and resistance to picking are the most relevant factors.

(36)

In its responding submission, the complainant acknowledged that there might be rolls that do not fully meet all the criteria for resistance to picking referred to in recital (18) above, but which could still be used in web-fed printing. However, it maintained its view that resistance to picking is the only test that is able to identify with certainty that a roll is indeed suitable for web-fed printing, i.e. if a roll meets the criteria for resistance to picking referred to in recital (18) above, it is certainly a web roll.

(37)

In support of the above claims concerning resistance to picking the exporting producer referred to arguments put forward by one of the complainant Union producers in anti-dumping and anti-subsidy investigations in the USA in which the Union producer allegedly acknowledged that web rolls cannot be differentiated based on resistance to picking test or by any other measurement.

(38)

The complainant contested these statements of the exporting producer and claimed that contrary to what has been claimed, it follows from the proceedings in the USA that there is a clear dividing line distinguishing web rolls from CFP.

(39)

Firstly, it should be noted that the statements referred to by the exporting producer were presented in investigations under other jurisdictions and by different parties than the ones in the current proceedings and thus are not relevant. Secondly, the US authorities in the mentioned investigations concluded that there was a clear distinction between on one hand CFP used in sheet-fed printing and on the other hand rolls suitable for use in web-fed printing. Cutter rolls were regarded as semi-finished products while rolls suitable for web fed printing were not considered as product concerned. The US authorities did not explicitly define web rolls in their definition of the product scope. For this reason, the criterion of resistance to picking was not relevant in the definition of the product scope in the mentioned investigations.

(40)

Based on the above comments, the technical characteristic ‘resistance to picking’ was confirmed as being a reliable characteristic to describe CFP suitable for use in web-fed printing.

(41)

The comments put forward have however also revealed that there exist web rolls that can be used in web-fed printing even if they do not fully meet all the criteria for resistance to picking. For this reason it was considered necessary to further refine the definition of rolls suitable for web-fed printing.

(42)

In order to provide a further criterion to distinguish web rolls which do not fully meet all the criteria for resistance to picking, the complainant suggested that a roll which does not fully sat the picking resistance test but has an internal core size of less than 80 mm, should be considered as a web roll.

(43)

The GOC and the exporting producer claimed that the addition of core size as a new element into the product definition constituted a revision of the definition of web rolls and thus the product concerned. It also claimed that the internal core size is not a suitable criterion as there exist web rolls with higher than 80 mm core size and cutter rolls with lower than 80 mm core size.

(44)

The Commission endeavoured to further refine the definition of rolls suitable for use in web-fed printing and to give further clarification in order to distinguish even more clearly between the product concerned and other products, also with a view to minimize the possibility of circumvention of the measures. The evidence submitted on the suitability of the core size as an alternative criterion in the definition however proved that this criterion would lead to the possible exclusion of product concerned, i.e. cutter rolls with a core size of less than 80 mm from the measures. Therefore this criterion to define rolls suitable for use in web-fed printing was abandoned.

(45)

The above is without prejudice to the reliability of the method according to which rolls suitable for use in web-fed printing have been excluded from the scope of the investigation as it was claimed by the Chinese group of exporting producers.

(46)

During the course of the investigation, certain parties also claimed that multi-ply paper and multi-ply paperboard,as defined in the recital (47),should be excluded from the scope of the investigation. They claimed that multi-ply paper and multi-ply paperboard had different physical characteristics such as multiple plies, higher stiffness and lower density and that the final use of these products was different as these are usually used for folding carton and packaging applications. These parties finally claimed that single-ply and multi-ply paper and paperboard would be easily distinguished by their physical appearance.

(47)

Multi-ply paper and multi-ply paperboard, as defined in the Harmonised System Explanatory Notes to subheading 4805, are products obtained by pressing together two or more layers of moist pulps of which at least one characteristics different from the others. These differences may arise from the nature of pulps used (e.g. recycled waste), the method of production (e.g. mechanical or chemical) or, if the pulps are of the same nature and have been produced by the same method, the degree of processing (e.g. unbleached, bleached or coloured).

(48)

The investigation showed that multi-ply paper and paperboard have indeed some different physical and technical characteristics; more specifically they are composed of several layers of pulp, which increases rigidity. Multi-ply paper and paperboard are produced by a different production method requiring a different paper machine than the one used for the production of CFP, as in the production process several layers of pulp are layered into a single product. Finally, multi-ply paper and paperboard serve different purposes (mainly packaging) compared to CFP, which is used for high quality printing of promotional material, magazines, etc. Multi-ply paper and paperboard as defined in recital (47) is therefore considered as not being the product concerned. Consequently, the CN codes mentioned covering imports of multi-ply paper and multi-ply paperboard are excluded from the scope of the investigation.

(49)

Finally, one Chinese producer claimed that so called ‘paperboard’ should be excluded from the scope of the investigation as it does not fall under the definition of fine paper (whether coated or not) because of alleged differences in its weight, thickness and rigidity. It was found that the term ‘paperboard’ is generally used for paper with high substances making the paper in general heavier, i.e. ‘paperboard’ is commonly defined as paper with a basis weight of above 224 g/m2. However, the investigation revealed that the difference in weight does not have a significant impact on the remaining physical and technical characteristic and end uses which would it make distinguishable from the product concerned. It is also noted that, as outlined in recital (16), all CFP with a weight of 70 g/m2 or more but not exceeding 400 g/m2 were explicitly included in the definition of the product concerned. Therefore paperboard is considered as being ‘the product concerned’.

(50)

The product concerned, the product produced and sold on the domestic market of the PRC as well as the product manufactured and sold in the Union by the Union producers were found to have the same basic physical and technical characteristics as well as the same basic uses. They are therefore considered as ‘alike’ within the meaning of Article 2(c) of the basic Regulation.

(51)

Only two exporting producers groups in the PRC came forward and replied to the request for sampling data in the Notice of initiation. One group (Chenming) represents 2 related exporting producers while the other group (APP) represents 4 related exporting producers. The cooperating exporting producers represent the total exports of the product concerned from the PRC to the Union. In these circumstances, the Commission decided that sampling was not necessary for exporting producers in the PRC.

(52)

Two out of four related exporting producers of the APP group were found to produce only multi-ply paperboard referred to in recital (47) above. In this respect it is recalled that it was concluded that multi-ply paperboard should be excluded from the product scope of the current investigation. It is also recalled that the multi-ply paperboard was excluded from the product scope of the parallel anti-dumping proceedings. It is therefore concluded that the two related exporting producers found to produce only multi-ply paperboard are not concerned by the current proceedings. Thus the findings presented in this Regulation are not based on their information and data.

(53)

In view of the potentially large number of Union producers, sampling was envisaged in the Notice of initiation in accordance with Article 27 of the basic Regulation. However, after examination of the information submitted and given that only four Union producers came forward within the deadlines set in the Notice of initiation, it was decided that sampling was not necessary. Those four producers were considered to be representative (covering 61 % of total production) of the Union industry as defined in recital (372). The information provided by the four companies was verified on-the-spot and was used for the micro indicators as explained in recital (386).

(54)

In view of the potentially large number of importers, sampling was envisaged for importers in the Notice of initiation in accordance with Article 27 of the basic Regulation. However, after examination of the information submitted and given by the small number of importers which indicated their willingness to co-operate, it was decided that sampling was not necessary.

(55)

It is recalled that both the GOC and the four Chinese exporting producers submitted replies to the questionnaire and accepted on-the-spot visits in order to verify the replies.

(56)

With respect to the GOC, following the submission of the reply to the questionnaire, the Commission sent to the Chinese side three deficiency letters and a pre-verification letter. The Commission provided to the GOC ample time for the preparation and submission of its representations whenever this was requested and justified. Indeed substantial deadline extensions were granted to the GOC, i.e. two weeks extension for the reply to the questionnaire which led to a total deadline of 49 days for the submission of the reply to the questionnaire and three weeks for the reply to the first deficiency letter which led to a total deadline of 40 days.

(57)

Prior to the on-the-spot verification visit, the GOC requested the Commission to provide further information in writing, in particular a list of all the questions that it intended to ask during the verification plus a list of the Government departments which were expected to participate in the on-the-spot verification visit. In the absence of these, it was argued that the Commission would not fulfil its obligations as an investigating authority set out in the Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) and in particular those contained in paragraph 8 of Annex VI. The GOC also submitted that due to lack of such information it would not be in a position to guarantee the outcome of the verification.

(58)

The Commission respectfully disagreed with GOC's request. In this respect it is noted that the Commission has fulfilled all the relevant conditions of paragraph 8 of Annex VI of the SCM Agreement as well as of Article 26 of the basic Regulation. A detailed pre-verification letter was sent to the GOC confirming the agenda (days and group of schemes to be discussed per verification day) and requesting the presence of the authorities responsible for the relevant schemes and of the officials involved in the preparation of the GOC submissions. The Commission also explained before the on-the-spot verification visits that only the GOC knows the authorities responsible for the schemes under investigation as well as those officials whose are best placed to take part in the verification and answer questions. As regards the list of specific questions, the Commission explained before and during the on-the-spot verification visit that such a list is not required by WTO or EU legislation and that the purpose of the investigation is to verify the GOC reply to the questionnaire and the relevant supplementary submissions; therefore the verification would follow the structure of those documents. The Commission would also seek to obtain and clarify further information necessary for the ongoing proceedings, but precise questions in this context would depend on the GOC's replies to the initial verification of its replies. It was also made clear to the GOC before the on-the-spot verification visit that refusals to provide necessary information or to assist the investigating authority in verifying information and data deemed necessary for the purposes of the proceedings may seriously undermine the investigation process. The GOC was also reminded of the consequences of the provisions of Article 28 of the basic Regulation.

(59)

During the on-the-spot verification visit to the Chinese Ministry of Commerce in Beijing, the Commission endeavoured to verify information provided on the basis of the supporting documents that were used to prepare the GOC's response, in line with the provisions of Articles 11 and 26 of the basic Regulation. In doing so, the Commission came to the preliminary conclusion that the lack of information and supporting documents available did not allow a proper verification of the reply to the questionnaire. Moreover, certain information was not submitted at all although it was specifically requested, and certain questions had not been answered. The GOC has been made aware of the consequences of non-cooperation in accordance with Article 28(1) and (6) of the basic Regulation.

(60)

The GOC argued that the investigating authority should determine the necessity of information in a reasonable manner that would not amount to abuse of rights. It was also argued that even if information is considered not ideal in all aspects it should not be disregarded. On the basis of the above arguments the GOC submitted that it cooperated to the best of its ability and that its reply to the questionnaire was complete. It was also argued that the on-the-spot verification was poorly scheduled as the pre-verification letter failed to provide a reasonable understanding of what was to be verified and the Commission did not conduct specific on-the-spot visits at each government entity. It was also submitted that the Commission imposed an unreasonable burden on the GOC and requested irrelevant and unnecessary information.

(61)

With respect to the scheduling of the on-the-spot verification, it is recalled that the GOC agreed to the timing, the schedule of visit and the venue. Indeed, discussions on the timing of the on-the-spot visit took place in August 2010. The Commission initially proposed the on-the-spot verification visit to take place on the first week of October 2010 and subsequently amended its proposal twice, on the basis of Chinese requests, first for the second week of October 2010 and finally for the third week of October 2010. Thus there is no basis to any complaints concerning scheduling of on-the-spot visits as the Commission did its utmost to accommodate any duly justified request from the GOC. With respect to the information requested, it is noted that the GOC has never disputed the format of the questionnaire or the way information was requested. The Chinese Ministry of Commerce submitted the reply to the questionnaire and subsequent representations on behalf of the GOC. The Commission requested information that was deemed necessary for the purposes of arriving at a representative finding and remained consistent in its requests by asking for the same data and information during the investigating process and requesting the GOC to explain the information submitted and the implications of that information for the schemes under investigation.

(62)

On the basis of the information contained in the complaint and the replies to the Commission's questionnaire, the following schemes, which allegedly involved the granting of subsidies by the Governmental authority, were investigated:

(63)

It is alleged that Chinese producers of the product concerned benefit from low-interest rate loans from government policy banks and state-owned commercial banks (‘SOCBs’) pursuant to the GOC's policy to provide financial assistance in order to encourage and support the growth and development of the paper industry in China. As illustrated in the five-year plans and industrial policy, preferential financing initiatives were granted by the banking system to the papermaking industry.

(64)

On the basis of the information contained in the complaint, the Commission sought to investigate the bank which was lending to the coated paper industry. For these purposes it was considered necessary to ask the GOC to provide in its reply to the questionnaire and subsequent submissions specific information and data on a series of government plans and projects to encourage and support the development of China's paper sector. These plans and projects were:

(65)

The GOC only partially provided the information requested in relation to the plans. Only two of the plans requested were provided in full, i.e. in the Chinese version together with an English translation (Decision No. 40 and Directory Catalogue on Readjustment of Industrial Structure). For the three regional plans originally requested by the Commission, the Chinese authorities submitted that they were not relevant since the co-operating exporting producers are not located in these regions. They were thus not provided. The Commission accepted this but requested the development plans related to the areas (regions, provinces, municipalities) where the cooperating exporting producers are established. The GOC provided Chinese copies of the 11th Five year plan for Jiangsu Province and 11th Five year plan for Shandong Province, but no translation whatsoever, not even a translation of the table of contents. In relation to two plans that were not provided, the GOC submitted that they covered the period between 2000 and 2005 and were thus irrelevant. The Commission accepted this. The remaining plans were provided only in Chinese (Integration Project, 11th Five-year Plan, 11th five-year plan implementing circular, 2007 Papermaking Plan) together with English tables of the contents. The GOC claimed that the Commission's requests were too burdensome, that they only had limited resources and therefore could not translate the texts.

(66)

With respect to the above it is noted that the Commission requested information that was deemed necessary for the investigation as the abovementioned documents had been identified in the complaint. Moreover the Commission had repeatedly emphasized the need to provide the requested documents in English. This is necessary for this type of significant document given that, on the basis of the index only, it was not possible to determine which part of the document is relevant for the investigation. Moreover, the plans provided in Chinese were not voluminous and it appears that copies in English of the relevant documentation exist either from independent sources (legal firms that specialize in Chinese law) or from anti-subsidy investigations conducted in China by the United States of America (‘USA’).

(67)

Consequently, the Commission had the possibility to verify only the following documents: the Decision No. 40, the Directory Catalogue and the 2007 Papermaking Plan, an English version of which was in the complaint and it was also made available from an exporting producer.

(68)

In order to investigate the level of government intervention in the Chinese financial market and obtain the necessary overview of the financial sector in the PRC, the Commission requested information on the percentage of government ownership of financial institutions and on the records of amounts/percentages of loans given by State owned banks. The GOC claimed that they did not have any records on the bank shareholding although Article 61 of the Law on Commercial Banks [2003] No. 13 provides that banks report these data ‘to the banking regulatory organ of the State Council and People's Bank of China’. As regards the amounts/percentages of loans given by State owned banks, the GOC confirmed that although relevant data was kept, it could not provide it. The Commission further facilitated the work of GOC by limiting the requested information on the percentage of government ownership only to such financial institutions that were found to provide loans to the co-operating exporting producers. Nevertheless, the GOC did not provide relevant data even for this restricted segment of financial institutions operating in China.

(69)

In order to investigate the lending policies of the Chinese banks (e.g. methods used as regards the setting of the interest loan rates, assessment of loans etc), the GOC was asked to provide information with respect to the policies followed by the relevant state authorities namely the People's Bank of China (‘PBOC’) and the Bank Regulatory Commission. The GOC did not provide any relevant information on the loan policies. No document, regulation or guidelines addressed to the banking system from the PBOC was provided in order to substantiate the role of the PBOC in setting interest rates and its relation with the banking system. Furthermore no explanation was given, although specifically requested, with respect to the application of the Law on Commercial Banks [2003] No. 13 and particularly Articles 34, 38 and 39 that set out the basic rules governing loans and other businesses of commercial banks.

(70)

In order to investigate the lending policies of the Chinese banks that provided loans during the IP to the cooperating exporting producers, the Commission requested the GOC to arrange meetings with specific banks that have provided loans to the cooperating exporting producers in order to verify information concerning preferential lending to the CFP industry in China. The GOC claimed that it was unable to intervene with State-owned banks to arrange such meetings. Therefore, no evidence was collected from Chinese banks as to whether and, if so, how those banks evaluate credit risk when providing loans.

(71)

The GOC was made aware of the consequences of non-cooperation in accordance with Article 28(1) and (6) of the basic Regulation. In view of this lack of cooperation, it has been necessary, in addition to taking account of relevant GOC documents submitted by other parties, to use information from secondary sources, including the complaint and publicly available information retrieved from internet. The GOC disputed the use of facts available but did not provide any further new evidence.

(72)

The cooperating exporting producers were also asked to arrange meetings with specific banks that have provided loans to them during the IP in order to verify information concerning preferential lending to the CFP industry in China. However, no such meetings took place. The cooperating exporting producers communicated the repeated requests of the Commission for such meetings but the relevant banks refused to cooperate with the investigation. The co-operating exporting producers were made aware of the consequences of non-cooperation in accordance with Article 28(1) and (6) of the basic Regulation. In view of this lack of cooperation, it was considered necessary to base any findings with respect to the loans provided by banks to the co-operating exporting producers on facts available. The co-operating exporting producers disputed the use of facts available but did not provide any further evidence.

(73)

One Chinese exporting producer was requested to provide specific information concerning a specific debt restructuring agreement with three Chinese banks. The aforesaid exporting producer refused to provide the necessary information. Consequently, it was not possible to verify the relevant overall agreement and corresponding contract loans as well as all specific points like duration of loans, repayment schedules and interest rates. The co-operating exporting producer was made aware of the consequences of non-cooperation in accordance with Article 28(1) and (6) of the basic Regulation. In view of this lack of cooperation, it was considered necessary to base any findings with respect to the relevant loans provided by banks to that producer on facts available. The co-operating exporting producer disputed the use of facts available but did not provide any further evidence.

(74)

The investigation established the existence of specific policy plans with respect to the papermaking industry. These plans stipulate that the state authorities monitor closely the performance of the papermaking industry and implement special policies (e.g. implementing decrees) for the fulfilment of the goals of the policy plans. Furthermore, the investigation also established that the specific policy plans provide for preferential lending to the paper making industry.

(75)

Indeed, by examining Decision No 40 and the specific financing section of the 2007 Papermaking Plan, it is obvious that the Chinese state planning system directs banks to provide loans to the paper making industry.

(76)

With reference to Decision No 40, it is noted that that act is an order from the State Council i.e. the highest administrative body in the PRC and so legally binding for other public bodies and the economic operators. It classifies the industrial sectors into ‘Encouraged, Restrictive and Eliminated Projects’. This Act represents an industrial policy guideline that along with the Directory Catalogue shows how the GOC maintains a policy of encouraging and supporting groups of enterprises or industries, such as the paper industry, classified by the Directory Catalogue as an ‘Encouraged industry’. With respect to the number of industries listed as ‘Encouraged’ it is noted that there are in total 26, representing only a portion of the Chinese economy. Furthermore, only certain activities within these 26 sectors are given ‘encouraged’ status. Decision No 40 also stipulates under Article 17 that the ‘Encouraged investment projects’ shall benefit from specific privileges and incentives (financial support, import duty exemption, VAT exemption, tax exemption). On the other hand, with reference to the ‘Restrictive and Eliminated Projects’, Decision No 40 empowers the state authorities to intervene directly to regulate the market. In fact, Articles 18 and 19 ask the relevant authority to stop financial institutions from supplying loans; they also order the State price administrative department to raise the electricity price and instruct the electricity supply companies to stop supplying electricity to such ‘Restrictive and Eliminated Projects’. It is obvious from the above that Decision No 40 provides binding rules to all the economic institutions in the form of directives on the promotion and support of encouraged industries, one of which is the paper making industry.

(77)

The 2007 Papermaking Plan provides specific conditions, orientations and targets for the papermaking industry. It describes the state of the papermaking industry in China (e.g. number of enterprises, production, consumption and exports, statistics on the type of raw materials used). It sets out the policies and goals for the papermaking industry with respect to the industrial layout, the use of raw materials, the use of technology and equipment, the product structure and the organizational structure of the papermaking producers. The text also sets industry ‘admission criteria’, as it lays down specific assets/liability ratio requirements for the papermaking industry, sets specific credit ratings for the papermaking industry and specific targets for economies of scale, market share ratios, energy and water consumption to be achieved or attained by companies. It requests enterprises to formulate development plans based on the 2007 Papermaking Plan. It also instructs the local provinces and regions to participate in the implementation of the plan, while an entire chapter is devoted to ‘Investment and Financing’ of the papermaking industry. In this respect it is pertinent to note that the Plan clearly states that financial institutions shall not provide loans for any project which does not comply with its regulations. In sum it is clear from the reading of the text and the wording used that the 2007 Papermaking Plan is a specific state instrument aimed at regulating the papermaking industry in China and can only be considered as a compulsory industrial policy tool that has to be concretely implemented by relevant interested parties in China (state authorities, financial institutions and producers).

(78)

The GOC argued that the 2007 Papermaking Plan is to be considered a guideline plan without binding force. It was also submitted that in the same context none of the government plans and projects are legally binding and as a result no financial contribution or benefit can be granted in the framework of such plans and projects. However, a simple reading of the text on the 2007 Papermaking Plan and its above-stated specific provisions reveals that the text cannot be considered as a non-binding guideline. In this respect it is noted that the 2007 Papermaking Plan text inter alia reads ‘The industrial development policy is formulated based on the requirements of perfecting the reform of the socialist market economy and the related laws and regulations, so as to establish a fair market order and good development environment, solve the issues existing in the development of papermaking industry and direct the healthy development of the industry’. With respect to the remaining plans and projects as listed under recital (64) above it is noted that at least one refers to an implementing circular of the 11th Five Year Plan. It is difficult to understand how an allegedly non-legally binding document (a government plan) can have a legally binding implementing act (in this case a circular of the State Council).

(79)

In addition, Article 34 of the Law on Commercial Banks [2003] No. 13 states that banks ‘carry out their loan business upon the needs of the national economy and the social development and under the guidance of the state industrial policy’. In this particular case the relevant state industrial policy is the 2007 Papermaking Plan. Thus, it only logical to conclude that loans received by the CFP producers from SOCBs are made pursuant to government directives.

(80)

The role of the National Development and Reform Commission (‘NDRC’) was also investigated. It was submitted by the GOC that the NDRC is an agency of the State Council coordinating macro-economic policy and managing the Government investments. That state authority issued, inter alia, the 2007 Papermaking Plan. No available information was submitted, although explicitly requested, on the legal framework under which the NDRC was established and operates, e.g. its statute. The only explanation provided by the GOC was that the State Council, the highest governmental administrative body, gives the instructions which the NDRC has to follow and that in any event this information is irrelevant to the investigation. This argument cannot be accepted. The statutes of the authority that issues government plans are considered relevant to the investigation, in view of the fact that government plans and projects are under investigation in these proceedings. The Commission also enquired about the reasons why the NDRC collects, on a permanent basis, detailed information from companies. The GOC clarified that the information could be collected through industrial associations and other public sources. Nevertheless, the existence of a systematic mechanism to collect company related data to be used in government plans and projects reveals that these plans and project are considered as an important element of state industrial policy.

(81)

It follows from the above that any decision taken by financial institutions with respect to the papermaking industry would have to take into consideration the need to fulfil the goals of the relevant policy plans. Indeed, companies qualified by these specific policy plans as ‘Encouraged industries’ are considered of high credit rating, something that has direct consequences on the assessment of the creditworthiness by the Chinese financial system. Furthermore, from examining the specific financing section of the 2007 Papermaking Plan and a credit rating note that was made available from one co-operating exporting producer it is obvious that the Chinese state planning system directs banks to provide loans to the papermaking industry and companies are considered of high credit rating because they qualify for specific policy plans. It is pertinent to note that the particular credit rating note obtained during the investigation directly links the positive future prospects of the company with the existence of the papermaking policy plans and the fulfilment of their objectives. There is also evidence that the State authorities monitor the performance of companies as they examine annually their business licenses and retain in this way financial and performance statistics. Furthermore, there is also evidence, derived from information submitted from co-operating exporting producers, that the PBOC monitors, in line with the provisions of Article 9 of the Regulation on Registration and Consultation of Banks, the loan situation of companies through the annual examination of the loans companies avail themselves of each year.

(82)

All the above facts demonstrate the link between the specific policy plans and the financing of the papermaking industry.

(83)

With respect to the co-operating exporting producers the investigation established that two of them were, in the majority of cases, automatically granted the lowest possible interest rate within the limits set out by the PBOC while other two co-operating exporting producers benefited from a substantial rescheduling of their loans that took place in 2008. Indeed, Chinese state-owned banks purchased all loans due to foreign banks and the rescheduled loans did not provide for a significant risk premium over the PBOC interest rate benchmark.

(84)

In addition, the investigation has established that the Chinese financial market is characterised by government intervention because most of the major banks are state-owned. The Chinese authorities have provided only very limited information concerning shareholding/ownership of banks in China. However, as further outlined below, the Commission compiled available information in order to arrive at a representative finding. In performing its analysis whether banks are entities vested with or exercising government authority the Commission also sought information concerning not only the government ownership of the banks but also other characteristics such as the government presence on the board of directors, the government control over activities, the pursuit of government policies or interests and whether entities were created by statute.

(85)

From the available information it is concluded that the state-owned banks in China command the highest market share and are the predominant players in the Chinese financial market; according to the 2006 Deutsche Bank Research on China's banking sector, the state-owned banks’ share may amount to more than 2/3 of the Chinese market. For the same matter the WTO Trade Policy Review of China noted that ‘The high degree of state ownership is another notable feature of the financial sector in China’ (5). It is pertinent to note that the four big state-owned banks (Agricultural Bank, Bank of China, Construction Bank and Industrial and Commercial Bank) appear to represent more than half of the Chinese banking sector. Policy banks and other state-owned banks are more than 50 % state-owned. The Commission also requested information concerning the structure of government control in those Chinese banks and the pursuit of government policies or interests with respect to the Papermaking industry (i.e. board of directors and board of shareholders, minutes of shareholders/directors meetings, nationality of shareholders/directors, lending policies and assessment of risk with respect to loans provided to the cooperating exporting producers). Nevertheless, neither the GOC nor the banks provided such information. They only repeatedly referred to information in the Annual reports of the banks they had submitted. However, the information in the Annual reports of banks did not (and cannot) contain the required level of detailed information.

Consequently, the Commission had to use the information available. It concluded on the basis of the available data that those banks are controlled by the government and exercise government authority in a manner that their actions can be attributed to the State. The relevant data used in order to arrive at the aforesaid findings is derived from information submitted by the GOC, the annual reports of Chinese banks that were either submitted from GOC or publicly available, information retrieved from the 2006 Deutsche Bank Research on China's banking sector, information submitted from the co-operating exporting producers and information existing in the complaint. As for foreign banks, independent sources estimate that they represent a minor part of the Chinese banking sector and consequently play an insignificant role in policy lending; with relevant information suggesting that this may represent as little as 1 % of the Chinese market (6). Relevant public available information also confirms that Chinese banks, particularly the large commercial banks, still rely on state-owned shareholders and the government for replenishment of capital when there is a lack of capital adequacy as result of credit expansion (7). With respect to the banks that provided loans to the co-operating exporting producers, the great majority are state-owned banks. Indeed on the basis of the available information it was found that at least 13 out of the 19 reported banks are state-owned banks, including two Policy banks (Export-Import Bank of China, the China Development Bank) and the major Commercial banks in China like Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China.

With respect to the remaining state-owned banks, again the Commission requested the same information mentioned above concerning the government control and the pursuit of government policies or interests with respect to the Papermaking industry. Again, no such detailed information was provided apart from a repeated claim to refer to information in the relevant Annual reports of the banks which in the majority of cases was only in Chinese and without any English translation. However, information in the Annual reports of banks cannot provide the required level of detailed information. With respect to the Policy banks, the investigation established that there are no clear legal provisions regulating their role and their relationship with the government. Nonetheless, according to statements made by the GOC during the on-the-spot verification it appears that Policy banks supported government policies in China and are not operating for profit. All the above points confirm that the four banks are controlled by the government and exercise government authority in a manner that their actions can be attributed to the State.

(86)

The Commission also sought to investigate the difference between the Policy banks (according to available information these are the Export-Import Bank of China, the China Development Bank and the Agricultural Development Bank of China) and State Owned Commercial banks. The Commission requested clarifications on these two different types of financial institutions. The GOC submitted that the Policy banks do not have any written legal provisions regulating their sector, given that the Chinese authorities are currently drafting a law on Policy banks. It was also argued that one Policy bank (namely the China Development Bank) should not be considered as a Policy bank since it has become a shareholding company and is in a transitional period. Information submitted confirms that policy banks are treated differently to State Owned Commercial banks. Despite the lack of any rules governing the Policy banks sector or the way these banks act in the Chinese financial market, it appears from the PBOC circulars, where they are mentioned explicitly, that Policy banks have a special status as compared to the State Owned Commercial banks. As to the status of the China Development Bank, the Chinese State (through the Chinese Ministry of Finance) holds more than 50 % of the bank's shares and thus its transformation into a share-holding company has no impact on the government control.

(87)

Another factor that creates a distortion on the Chinese financial market is the role played by the PBOC in setting the specific limits on the way interest rates are set and fluctuate. Indeed, the investigation established that the PBOC has specific rules regulating the way interest rates float in China. According to the information available, these rules are set out in the PBOC's Circular on the Issues about the Adjusting Interest Rates on Deposits and Loans-Yinfa (2004) No 251 (‘Circular 251’). Financial institutions are requested to provide loan rates within a certain range of the benchmark loan interest rate of the PBOC. For commercial bank loans and policy bank loans managed commercially there is no upper limit range but only a lower limit range. For urban credit cooperatives and rural credit cooperatives there are both upper and lower limit ranges. For preferential loans and loans for which the State Council has specific regulations the interest rates do not float upwards. The Commission sought clarifications from the GOC on the definition and wording stated in the Circular 251 as well as to its preceding legislation (Circular of PBOC concerning expansion of Financial Institution's Loan Interest Rate Float Range – YinFa [2003] No. 250). The GOC explained that those Circulars formed part of the marketization reform of interest rates in China but gave no further explanation. The GOC was also asked to explain what are the preferential loans and other loans specified by the State Council.

GOC argued that the wording of the relevant Chinese text refers to an assumption of other loans specified by the State Council. No other explanation or relevant documentation was provided by the GOC to explain why preferential loans are defined in the Chinese legislation. As to the other types of loan, even if one accepts the argument of the GOC, it is unclear why the legislator felt it necessary to introduce the possibility of other loans set out by the State Council. The Commission also requested clarifications on the existence of policy loans managed commercially, as mentioned in Circular 251. No explanation or any evidence was provided by the GOC on this matter. The GOC was also requested to provide any updates or subsequent legislation issued on the aforesaid Circulars in relation to the loan policy of commercial and policy banks but no such information was provided.

(88)

Finally it is noted that no other data or statistics concerning the structure of the Chinese banking system was provided by the GOC.

(89)

On the basis of recitals (74) to (88) above and taking account of the lack of Chinese cooperation (and in the light of the considerations in recital (90) below), the Commission concludes that, the financing market in China is distorted by government intervention and interest rates charged by non-government banks and other financial institutions are likely to be aligned with government rates. Therefore, the interest rates charged by non-governmental banks and other financial institutions cannot be considered as appropriate commercial benchmarks when determining whether government loans confer a benefit.

(90)

Furthermore, having regard to the totality of the evidence, it is concluded that the vast majority of loans to the two co-operating producers are provided by policy or other state-owned banks which are considered to be public bodies because of their close relationship to the government. They are more than 50 % state-owned and are thus considered controlled by the government. There is further evidence that these banks effectively exercise government authority since as it is explained in recital (65) there is a clear intervention by the State (i.e. PBOC) in the way commercial banks take decisions on interest rates for loans granted to Chinese companies while in some cases as explained in recital (83) companies were attributed quasi automatically the lowest possible rate within the limits set by the State. In these circumstances, the lending practices of these entities are directly attributable to the government. The fact that banks exercise government authority is also confirmed by the way the 2007 Papermaking Plan, Decision 40 and Article 34 of the Law on Commercial Banks act with respect to the fulfilment of the government industrial policies (see recitals (74) to (81) above). There is also a great deal of circumstantial evidence, supported by objective studies and reports, that a large amount of government intervention is still present in the Chinese financial system (see recital (312) below). Finally, China failed to provide information which would have enabled a greater understanding of the state-owned banks’ relationship with government (see recitals (68) to (70) and recital (84) to (86) above) Thus, in the case of loans provided by policy or other state-owned banks, the Commission concludes that there is a financial contribution to the coated paper producers in the form of a direct transfer of funds from the government within the meaning of Article 3(1)(a)(i) of the basic Regulation.

(91)

There is a benefit according to Articles 3(2) and 6(b) of the basic Regulation to the extent that the government loans are granted on terms more favourable than the recipient could actually obtain on the market. Since it has been established that non-government loans in China do not provide an appropriate market benchmark, this has been constructed using the method described in recitals (96) to (102) below.

(92)

The GOC was asked to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine the extent to which access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available in accordance with Article 28 of the basic Regulation. It is noted that Article 28(6) states that ‘If an interested party does not cooperate, or cooperates only partially, so that relevant information is thereby withheld, the result may be less favourable to the party than if it had co-operated’. The facts considered included the following:

(93)

In the light of the above, and in the absence of any cooperation by the GOC, the available evidence indicates that subsidies granted to companies in the paper industry are not generally available and are therefore specific under Article 4(2)(a) of the basic Regulation. In the light of the GOC's non-cooperation, there is nothing to suggest that eligibility for the subsidy is based on objective criteria or conditions under Article 4(2)(b) of the basic Regulation.

(94)

Accordingly, the financing of the papermaking industry should be considered a subsidy.

(95)

In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, this subsidy should be considered countervailable.

(96)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is considered to be the difference between the amount that the company pays on the government loan and the amount that the company would pay for a comparable commercial loan obtainable on the market.

(97)

As explained above, since the loans provided by Chinese banks reflect substantial government intervention in the banking sector and do not reflect rates that would be found in a functioning market, an appropriate market benchmark has been constructed using the method described below. Furthermore, due to the lack of cooperation by the GOC, the Commission has also resorted to facts available in order to establish an appropriate benchmark interest rate.

(98)

When constructing an appropriate benchmark, it is considered reasonable to apply Chinese interest rates, adjusted to reflect normal market risk. Indeed, in a context where the exporters’ current financial state has been established in a distorted market and there is no reliable information from the Chinese banks on the measurement of risk and the establishment of credit ratings, it is considered necessary not to take the creditworthiness of the Chinese exporters at face value, but to apply a mark-up to reflect the potential impact of the Chinese distorted market on their financial situation.

(99)

With respect to the above as explained in recitals (68) to (72) both GOC and the cooperating exporting producers were requested to provide information on the lending policies of the Chinese banks and the way loans were attributed to the exporting producers. Parties failed to provide such information although repeatedly requested to do so. Accordingly in view of this lack of cooperation and the totality of facts available, and in line with the provisions of Article 28(6) of the basic Regulation, it is deemed appropriate to consider that all firms in China would be accorded the highest grade of ‘Non-investment grade’ bonds only (BB at Bloomberg) and apply the appropriate premium expected on bonds issued by firms with this rating to the standard lending rate of the People's Bank of China. For loans received in foreign currency, the Commission applies the appropriate premium expected on bonds issued by firms with this rating to the standard lending rate as mentioned in the relevant Chinese loan contracts (LIBOR rate). However, given the total non-cooperation of the GOC as regards providing information on, or access to, state-owned banks, it is considered appropriate, in accordance with Article 28(6) if the basic Regulation, to use a credit rating of BB (non-investment grade-speculative), in view of the totality of the facts available.

(100)

The benefit to the exporting producers has been calculated by taking into consideration the interest rate differential, expressed as a percentage, multiplied by the outstanding amount of the loan, i.e. the interest not paid during the IP. This amount was then allocated over the total turnover of the co-operating exporting producers.

(101)

As explained in recital (73), one exporting producer refused to provide an important debt restructuring agreement. As a consequence it was not possible to verify basic information reported in relation to the loans falling under this agreement, such as interest rate, maturity of the loan, repayment schedule etc. The exporting producer could also not prove that it repaid the principals of the loans falling under this agreement. Therefore in the calculation of benefit these loans were considered as a grant and were allocated over the IP in addition to the interest not paid during the IP as explained in recital (100) above.

(102)

The subsidy rate established with regard to this scheme during the IP amounts to 5,37 % for APP companies and 1,26 % for Chenming companies.

(103)

This scheme allows a company that applies successfully for the Certificate of High and New Tech Enterprise to benefit from a reduced income tax rate of 15 %, compared to the normal rate of 25 %.

(104)

The scheme is provided as a preferential tax treatment by Article 28 of the Enterprise Income Tax Law of the PRC (n. 63 promulgated on 16 March 2007) along with Administrative Measures for the determination of High and New Tech Enterprises. The Notice of the State Administration of Taxation on the Issues concerning Enterprise Income Tax Payment of High & New Technology Enterprises (Guo Shui Han [2008] No. 985) also relates to this scheme, providing further details on its implementation.

(105)

Article 10 of Administrative Measures for the determination of High and New Tech Enterprises lists the eligibility criteria for the companies to benefit from this scheme. If the company fulfils all the conditions set out in Article 10, it has to submit an application to the relevant authorities according to the procedure in Article 11 of the same Act.

(106)

Any company that intends to apply for this scheme has to proceed to an on-line application to the local Science and Technology Bureau that will make a preliminary examination. Subsequently, the local Science and Technology Bureau will make a recommendation to the provincial Science and Technology department. Before taking any decision on the issuance of the certificate of High and New Tech Enterprise, the latter can also decide to carry out an investigation directly at the premises of the applicant.

(107)

This subsidy scheme was used by the 3 cooperating exporting producers who obtained benefits during the IP. Although no administrative rules were provided by the GOC, the exporting producers provided the available legal texts. Even from these texts, however, it is difficult to discern the application procedure which remains vague and non-transparent.

(108)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(109)

The GOC was asked to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1, in accordance with Article 28 of the basic Regulation.

(110)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme only to certain enterprises and industries classified as encouraged, such as those belonging to the coated paper industry. Indeed, in chapter 4 of the Enterprise Income Tax Law of the PRC (No. 63 promulgated on 16 March 2007) devoted to ‘Tax Incentive’, Article 25 provides that ‘the State grants enterprise income tax incentives to key industries and projects supported and encouraged by the State’. According to the Commission's understanding, the State Council in its Decision 40 (Article 14) and in the Guiding Catalogue of the Industrial Restructuring offers the principles and the classification to consider an enterprise as encouraged. In addition, there are no objective criteria to determine eligibility and no conclusive evidence to conclude that the eligibility is automatic in accordance with Article 4(2)(b) of the basic Regulation. Indeed, although some administrative rules have been collected during the visit to the exporting producers, the lack of cooperation from the GOC authorities do not permit to assess the existence of such objective criteria.

(111)

Accordingly, this subsidy should be considered countervailable.

(112)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients which is found to exist during the IP. The benefit conferred on the recipients is considered to be the amount of total tax payable according to the normal tax rate, after the deduction of what was paid with the reduced preferential tax rate. In accordance with Article 7(2) of the basic Regulation this subsidy amount (numerator) has been allocated over the total sales turnover of the cooperating exporting producers during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(113)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 1,22 % for the APP Group and 0,58 % for the Chenming Group.

(114)

This scheme provides a benefit to all companies that are recognized as carrying out R&D projects. This qualification permits that the corporate income tax is decreased by 50 % of the actual expenses for approved projects.

(115)

The scheme is provided as a preferential tax treatment by Article 30(1) of the Enterprise Income Tax Law of the PRC (n. 63 promulgated on 16 March 2007), Art. 95 of the Regulations on the Implementation of Enterprise Income Tax Law of the PRC, Decree n. 512 of the State Council of the PRC, promulgated in date on 6 December 2007 and the Guide to Key Fields (Notification n. 6, 2007).

(116)

This scheme provides a benefit to companies that are recognized as carrying out R&D projects. Only R&D projects of the companies of New and High Tech Sectors Receiving Primary Support from the State and projects listed in the Guide to Key Fields of High Tech Industrialization under the current Development Priority promulgated by the National Development and Reform Commission are eligible for the scheme.

(117)

Any company that intends to apply for this scheme needs to file detailed information about the R&D projects with the local Science and Technology Bureau. After examination, the tax bureau will issue the notice of approval. The amount subject to the corporate income tax is decreased by 50 % of actual expenses for approved projects.

(118)

This scheme was used by the cooperating exporting producers who obtained benefits during the IP. Although no administrative rules were provided by the GOC, the exporting producers provided the available legal texts. Even from these texts, however, it is difficult to discern the application procedure - which remains vague and non-transparent.

(119)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(120)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1, in accordance with Article 28 of the basic Regulation.

(121)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme only to certain enterprises and industries classified as encouraged, such as those belonging to the coated paper industry. In addition, there are no objective criteria to limit eligibility and no conclusive evidence to conclude that the eligibility is automatic in accordance with Article 4(2)(b) of the basic Regulation. Indeed, although some administrative rules have been collected during the visit to the exporting producers, the lack of cooperation from the GOC authorities does not permit to assess the existence of such objective criteria.

(122)

Accordingly, this subsidy should be considered countervailable.

(123)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. That benefit is considered to be the amount of total tax payable according to the normal tax rate, after the subtraction of what was paid with the additional 50 % deduction of the actual expenses on R&D for the approved projects. In accordance with Article 7(2) of the basic Regulation this subsidy amount (numerator) has been allocated over the total sales turnover of the cooperating exporting producers during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(124)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 0,02 % for the APP Group and 0,05 % for the Chenming Group.

(125)

The scheme concerns resident enterprises in China which are shareholders in other resident enterprises in China. The former are entitled to a tax exemption on income from certain dividends paid by the latter.

(126)

This scheme is provided as a preferential tax treatment by Article 26 of the Enterprise Income Tax Law of the PRC and further explained in Article 83 of the Regulations on the Implementation of Enterprise Income Tax Law of the PRC, Decree n. 512 of the State Council of the PRC, promulgated in date on 6 December 2007.

(127)

This scheme provides a benefit to all resident companies which are shareholders in other resident enterprises in China.

(128)

The companies may make use of this scheme directly through their tax return.

(129)

On the income tax statement of the cooperating exporting producers there is an amount exempted from income tax. This amount is referred to as Dividends, bonuses and other equity investment income of eligible residents and enterprises in line with the conditions in Appendix 5 to the Income tax return (Annual Statement of Tax Preferences). No income tax was paid by the relevant companies on these amounts.

(130)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(131)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1, in accordance with Article 28 of the basic Regulation.

(132)

This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme only to resident enterprises in China receiving dividend income from other resident enterprises in China, as opposed to those enterprises which invest in foreign enterprises.

(133)

In addition, since all the above tax schemes under Chapter 4 of the Enterprise Income Tax Law of the PRC are reserved exclusively to important industries and projects supported or encouraged by the State as stated in Article 25, also this scheme is specific because it is reserved only to certain enterprises and industries classified as encouraged, such as the coated paper industry. Indeed, according to the Commission's understanding, the State Council in its Decision No. 40 (Article 14) and in the Guiding Catalogue of the Industrial Restructuring offers the principles and the classification to consider an enterprise as encouraged. Furthermore, in that case there are no objective criteria to limit eligibility and no conclusive evidence to conclude that the eligibility is automatic in accordance with Article 4(2)(b) of the basic Regulation. Indeed, although some administrative rules have been collected during the visit to the exporting producers, the lack of cooperation from the GOC authorities does not permit to assess the existence of such objective criteria.

(134)

Accordingly, this subsidy should be considered countervailable.

(135)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. That benefit is considered to be the amount of total tax payable with the inclusion of the dividend income coming from other resident enterprises in China, after the subtraction of what was actually paid with the dividend tax exemption. In accordance with Article 7(2) of the basic Regulation this subsidy amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producers companies during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(136)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 1,34 % for the APP Group and 0,21 % for the Chenming Group.

(137)

This scheme provides benefits in the form of VAT exemption and duty free imports of capital goods to the FIEs or domestic companies which are able to obtain the Certificate of State-Encouraged projects issued by the Chinese authorities in line with relevant investment, tax and customs-related legislation.

(138)

The scheme is based on a set of legal provisions i.e. the Circular of the State Council on Adjusting Tax Policies on Imported Equipment No. 37/1997, the Announcement of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation [2008] No. 43, the Notice of the NDRC on the relevant issues concerning the Handling of Confirmation letter on Domestic or Foreign-funded Projects encouraged to develop by the State, No. 316 2006, dated 22 February 2006 and on the Catalogue on non-duty-exemptible Articles of importation for either FIEs or domestic enterprises-2008.

(139)

Eligibility is limited to applicants, either FIEs or domestic enterprises, which are able to obtain the Certificate of State-Encouraged projects.

(140)

According to the Notice of the NDRC on the relevant issues concerning the Handling of Confirmation letter on Domestic or Foreign-funded Projects encouraged to develop by the State, No. 316 2006, dated 22 February 2006, Article I.1. the foreign investment projects complying ‘with those of the encouraged category in the Catalogue of industries for Guiding Foreign Investment and the Catalogue of Priority Industries for Foreign Investment in Central-Western Region with technology transfer, the tariff and the VAT shall be exempted on the self-use equipment imported within the total investment and the technology, parts and components, and spare parts imported along with the equipment according to the contract; excluded are those commodities that are listed in the Catalogue of Import Commodities under Foreign Investment Projects not exempted from tax’. The Projects Confirmation Letter for foreign investment projects of the encouragement category with the total investment of USD 30 million or more shall be issued by the NDRC. The Project Confirmation Letter for foreign investment projects of the encouragement category with the total investment of less than USD 30 million shall be issued by the commissions or economic municipalities at the provincial level. Once they have received the Project Confirmation Letter of the encouragement category, the companies present the certificates and other application documents to their local Customs authorities in order to be eligible for customs and VAT exemption on equipment imports.

(141)

All co-operating exporting producers benefited from this scheme.

(142)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(143)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1, in accordance with Article 28 of the basic Regulation.

(144)

This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme only to enterprises that invest under specific business categories defined exhaustively by law (i.e. catalogue for guidance of industries for foreign investment and catalogue of key industries, products and technologies which the state currently encourages development). In addition, there are no objective criteria to determine eligibility and no conclusive evidence to conclude that the eligibility is automatic in accordance with Article 4(2)(b) of the basic Regulation. Indeed, although some administrative rules have been collected during the visit to the exporting producers, the lack of cooperation from the GOC authorities does not permit to assess the existence of such objective criteria.

(145)

Accordingly, this subsidy should be considered countervailable.

(146)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. That benefit is calculated by taking into consideration the VAT and duties exempted on imported equipment. In accordance with Article 7(3) of the basic Regulation this subsidy amount (numerator) has been allocated to the IP using a useful life corresponding to the average depreciation period of the industry concerned (i.e. 15 years). The resulting amount was then allocated over the total sales turnover of the co-operating exporting producers during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(147)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 1,17 % for the APP Group and 0,61 % for the Chenming Group.

(148)

This scheme provides benefits in the form of VAT rebates paid for purchase of domestically produced equipment by FIEs.

(149)

The scheme is based on the Circular of State Administration of taxation on the release of the provisional measures for the Administration of tax refunds for purchases of Domestically-Manufactured Equipment by Foreign Invested Enterprises No. 171, 1999, 20.9.1999 and terminated by the Circular on Terminating Tax Refund Policies on Purchase of Domestically-Manufactured Equipment by FIEs [Caishui 2008, No. 176]. The latter provides for a transitional period after the termination of the programme as of 1 January 2009.

(150)

Eligibility is limited to FIEs that purchase domestically-manufactured equipment.

(151)

The programme is aimed to refund VAT paid for purchase of domestically produced equipment by FIE if the equipment does not fall into the Non-Exemptible Catalogue and if the value of the equipment does not exceed the total investment limit on an FIE according to the ‘trial Administrative measures on Purchase of Domestically Produced Equipment’.

(152)

All co-operating exporting producers benefited from this scheme.

(153)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(154)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(155)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme to a certain type of enterprises (i.e. FIE’s). In addition, there are no objective criteria to determine eligibility and no conclusive evidence to conclude that the eligibility is automatic in accordance with Article 4(2) (b) of the basic Regulation. Indeed, although some administrative rules have been collected during the visit to the exporting producers, the lack of cooperation from the GOC authorities does not permit to assess the existence of such objective criteria.

(156)

Furthermore, the scheme is specific within the meaning of Article 4(4)(b) of the basic Regulation, given that the subsidy is contingent upon the use of domestic over imported goods.

(157)

Consequently, this subsidy should be considered countervailable.

(158)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. The benefit conferred on the recipients is calculated by taking into consideration the VAT reimbursed on the purchase of domestically produced equipment. In accordance with Article 7(3) of the basic Regulation this subsidy amount (numerator) has been allocated to the IP using a useful life corresponding to the average depreciation period of the industry concerned (i.e. 15 years). The resulting amount was then allocated over the total sales turnover of the co-operating exporting producers during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(159)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 0,03 %.for the APP Group and 0,05 % for the Chenming Group.

(160)

This scheme provides an exemption to FIEs from paying the local city maintenance and construction tax and education surcharge.

(161)

The scheme is based on the Interim Rules on City Maintenance Tax of the People's Republic of China (Guo Fa published 8 February 1985, No 19) and the Regulations of the Ministry of Finance on Several Specific Issues concerning the implementation of Interim Rules on City Maintenance Tax of the People's Republic of China (Cai Shui Zi, published 22 March 1985, No 69).

(162)

Eligibility is limited to the FIEs.

(163)

According to the Interim Rules on City Maintenance Tax of the People's Republic of China the tax basis of the city maintenance and construction tax ‘is the amount of product tax, VAT and business actually paid by the taxpayers, and it shall be paid at the same time respectively as the product tax, VAT and business tax’.

(164)

As explained under recitals (347) and (348), tax obligations with respect to this scheme are applicable from 1 December 2010 to all companies operating in China.

(165)

Accordingly and on the basis of information up to 30 November 2010, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies.

(166)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, excludes certain type of enterprises (i.e. FIE’s) from the payment of the city maintenance and construction tax.

(167)

Consequently, this subsidy should be considered countervailable.

(168)

Nevertheless, in view of the information provided by the GOC and the relevant cooperating exporting producers it is concluded that the parties were in a position to demonstrate that this scheme no longer confers any benefit on the exporters involved.

(169)

Thus the conditions lay down in Article 15 of the basic Regulation are fulfilled. It was therefore concluded that this scheme should not be countervailed.

(170)

From the various grant programmes mentioned in the complaint two were found to be used by co-operating exporting producers, i.e the Famous brands award and Special funds for encouraging foreign economic and trade development and for drawing significant foreign investment project in Shandong province. The remaining programmes found to be used were reported by the co-operating exporting producers. The GOC was made aware of the existence of these programmes and was requested to provide necessary information on them. The GOC submitted that any programme which was not included in the complaint cannot be investigated, as this is contrary to the WTO rules. It was thus argued by the GOC that the Commission request has to be considered inconsistent with the rules of evidence and consultation under the SCM Agreement. It was also submitted by the GOC that the information provided by the Commission with respect to these schemes was general and that, even assuming that these programs can be investigated, the Commission should send a new, sufficiently substantiated request to the GOC, requesting it to provide details on the newly-alleged subsidies that would be relevant to the investigation.

(171)

In this respect it is noted that it is standard EU practice to inform the authorities of the investigating country of the existence of any alleged subsidy scheme used by the cooperating exporting producers, other than the ones mentioned in the complaint, and request information and clarification thereon. The practice followed is in line with the relevant WTO rules. The Commission informed the GOC on the existence of such schemes at the time that these schemes were made known and provided the GOC with the information it has received from the Chinese co-operating exporting producers. The Commission provided the GOC with the opportunity for consultations with respect to the relevant schemes and consultations were subsequently held. Consequently, the provisions of Articles 12.1, 13.1 and 13.2 of the SCM Agreement as well as of Article 11(10) of the basic Regulation were fully honoured. The findings presented hereunder take into consideration the information submitted by the GOC with respect to the relevant programmes.

(172)

This scheme is implemented with the Notice of Shandong Province concerning the special award Fund Budget in 2008 for the Development of Self Exporting Brand [Lucaiqizhi (2008) No. 75]. This scheme provides grants to companies in order to boost exporting brands and increase the market share of famous brands.

(173)

Only the exporting famous brand enterprises established in the Shandong Province are eligible to get the award. No legal or administrative acts were submitted to substantiate the eligibility criteria.

(174)

The scheme aims to award the enterprises which have been recognized as the exporting famous brand enterprises of Shandong Province, so as to improve their development and competitiveness. The enterprise does not need to apply for this programme, so there is no approval document.

(175)

One co-operating exporting producer benefited from this scheme.

(176)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of direct transfer of funds which confers a benefit upon the recipient companies.

(177)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(178)

This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic Regulation as access to it is limited to certain enterprises i.e. exporting famous brand enterprises. In the light of the lack of any legal or administrative information on the eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(179)

Consequently, this subsidy should be considered countervailable.

(180)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(181)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers is negligible (less than 0,01 %) for the Chenming group.

(182)

The official document on this scheme is the Announcement of Shouguang People's Government on Commendation of advanced enterprises in 2008. This scheme, established on 9 February 2008, gives commendation to the enterprises which achieved excellent performance during 2008.

(183)

Companies which have been recognized as the ‘advanced enterprise on foreign investment attraction’ and the ‘advanced enterprise on foreign trade business performance’ with remarkable foreign trade business performance or significant foreign investment attractions are eligible for the scheme. No law or regulation concerning the policy or the definition of the ‘advanced enterprise on foreign investment attraction’ and the ‘advanced enterprise on foreign trade business performance’ was provided by the GOC.

(184)

Shouguang People's Government is responsible for awarding funds to enterprises which have been recognized as ‘advanced enterprise on foreign investment attraction’ and the ‘advanced enterprise on foreign trade business performance’.

(185)

According to the GOC, the enterprise does not need to apply for this scheme, so there is no approval document.

(186)

One co-operating exporting producer benefited from this scheme.

(187)

Accordingly, the scheme should be be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of direct transfer of funds which confers a benefit upon the recipient companies.

(188)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(189)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation as access to it is limited to certain enterprises i.e. to advanced enterprise on foreign investment attraction and advanced enterprise on foreign trade business performance. In the light of the lack of any legal or administrative information on the eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(190)

Consequently, this subsidy should be considered countervailable.

(191)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(192)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers is negligible (less than 0,01 %) for the Chenming group.

(193)

The official document on this scheme is the Rules for the Implementation of the Support Policy for the Anti-dumping, Anti-subsidy, Safeguard investigation Respondent. GOC claims that the scheme was terminated in 2008, but no relevant law legal notification was provided.

(194)

Subsidy provided by regional/provincial financial bureau in order to facilitate company's participation in the US anti-dumping investigation. Eligible companies must be registered in Shandong Province (excluding Qingdao City), and shall work in compliance with the instructions of the Ministry of Commerce and provincial authorities.

(195)

The scheme is regional specific (only available in Shandong Province but with the exception of its largest city Qingdao) with eligibility criteria that are not objective by law.

(196)

According to the relevant law, 40 % of the lawyer fees will be granted to the applicant.

(197)

One co-operating exporting producer benefited from this scheme.

(198)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a direct transfer of funds which confers a benefit upon the recipient companies.

(199)

This subsidy scheme is specific within the meaning of Article 4(3) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme to companies within a designated geographical region.

(200)

Consequently, the subsidy should be considered countervailable.

(201)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(202)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers is negligible (less than 0,01 %) for the Chenming group.

(203)

The programme was implemented according to the Opinion to accelerate high-tech industry development (Trial Implementation) (Shoufa [2005] No. 37) issued by the Shouguang Municipal Government. The GOC claimed that relevant legal framework for the scheme exists but it did not provide a copy of it.

(204)

The scheme is a subsidy provided to enhance competitiveness of enterprises. No legal or administrative acts were submitted to substantiate the eligibility criteria.

(205)

According to GOC this programme is a local grant to encourage R&D, energy-saving and environmental protection. There is no application procedure. The regional Government issues form time to time notices informing the exporting producers that are awarded a grant of a certain amount.

(206)

One co-operating exporting producer benefited from the scheme.

(207)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a direct transfer of funds which confers a benefit upon the recipient companies.

(208)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated in Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(209)

This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic Regulation as access to it is limited to certain enterprises. In the light of the lack of any legal or administrative information on the eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(210)

Consequently, the subsidy should be considered countervailable.

(211)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(212)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 0,59 % for the Chenming group.

(213)

The scheme is implemented in accordance with the Interim Measures on Strengthening the Work of Suzhou Industrial Park Intellectual Property Right and the Administrative Rules on Suzhou Industrial Park Intellectual Property Right Fund.

(214)

The scheme is provided only to company established in the Suzhou Industrial Park that have obtained Certificate of Registry of Computer Software Copyright, Certificate of Registry of Integrated Circuit Layout Design and has newly obtained famous brand products.

(215)

An eligible company to obtain a grant for patent application or trademark award has to fill in an application form for the Famous Brand Award of Suzhou Province or level–above and submit it to the Science and Technology Bureau of the Park. Grants are provided by the Suzhou Industrial Park. No information exists on the Park's financing and from which state authorities it receives the grants amounts.

(216)

One co-operating exporting producer benefited from the scheme. However, the Commission notes the total lack of any relevant documentation concerning the cooperating exporting producer as no application to the scheme or decision granting the award was provided.

(217)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a direct transfer of funds which confers a benefit upon the recipient companies.

(218)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(219)

This subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation as access to it is limited to certain enterprises. In the light of the lack of any legal or administrative information on the eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(220)

In addition, the subsidy scheme is specific within the meaning of Article 4(3) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme to companies within a designated geographical region. The scheme is only available for companies established in the Suzhou Industrial Park.

(221)

Consequently, the subsidy should be considered countervailable.

(222)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(223)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to less than 0,01 % for the APP Group.

(224)

No legal basis was provided by the GOC or by the exporting producers. The programme foresees financial assistance to companies in the Suzhou Industrial Park and according to the GOC, this scheme aims to accelerate the reforming and upgrading of Suzhou Industrial Park and to promote the improvement of scientific research quality of enterprises in the Park.

(225)

The scheme is provided only to companies established in the Suzhou Industrial Park that comply with the requirements set out in a number of plans as well as the existence of relevant scientific research projects. The GOC submitted the description of the programme however did not provide copies of the relevant plans.

(226)

Assistance is provided to companies that invest in the Park and request grants for specific types of action (research and development; new products assistance; intellectual property administration; overseas market development; project coordination with government; public technology service). Grants are provided by the Suzhou Industrial Park. No information exists on the Park's financing and from which state authorities it receives the grant amounts.

(227)

One co-operating exporting producer benefited from the scheme.

(228)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of direct transfer of funds which confers a benefit upon the recipient companies.

(229)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(230)

The subsidy scheme is specific within the meaning of Article 4(2)(a) of the basic Regulation as access to it is limited to certain enterprises. In the light of the lack of any legal or administrative information on the eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(231)

In addition, the subsidy scheme is specific within the meaning of the Article 4(3) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme to companies within a designated geographical region. The scheme is only available for companies established in the Suzhou Industrial Park.

(232)

Consequently, the subsidy should be considered countervailable.

(233)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total sales turnover of the co-operating exporting producer during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(234)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 0,03 % for the APP Group.

(235)

No legal basis was provided by the GOC or by the exporting producers. The GOC states that the programme is implemented according to the Opinion of Suzhou Industrial Park on Promoting Smooth, Stable and Rapid Growth and its aim is to accelerate industrial structure growth and foreign trade.

(236)

The scheme is provided only to companies established in the Suzhou Industrial Park. No eligibility criteria have been clearly set out by the Chinese authorities. However, in order to receive this grant, enterprises established in the park must reach a higher export performance in 2009 than the previous year's actual performance.

(237)

According to the GOC the enterprises does not need to apply for this scheme, although the relevant cooperating exporting producer has submitted an application form of Suzhou Industrial Park for hi-tech Industrial Development Fund. As submitted by the GOC, the scheme is related to the export performance of the enterprises with companies receiving a set amount of RMB for every dollar of growth in increased export quantities and values. The RMB incentive is also differentiated on the basis of type of products and models. Grants are provided by the Suzhou Industrial Park. No information exists on the Park's financing and from which state authorities it receives the grants amounts.

(238)

One cooperating exporting producer benefited from the scheme.

(239)

Accordingly, the scheme should be considered a subsidy within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a direct transfer of funds which confers a benefit upon the recipient companies.

(240)

The GOC was requested to provide information on the eligibility criteria for obtaining this subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available, as stated under Section 4.1 above, in accordance with Article 28 of the basic Regulation.

(241)

The subsidy scheme is specific within the meaning of Article 4(3) of the basic Regulation given that the legislation itself, pursuant to which the granting authority operates, limited the access to this scheme to companies within a designated geographical region. The scheme is only available for companies established in the Suzhou Industrial Park.

(242)

In addition, the scheme is contingent in law upon export performance, and therefore deemed to be specific and countervailable under Article 4(4)(a) of the basic Regulation. The grant is linked and calculated according to the export performance since benefit received is based on the increase of export quantities and values from one year to the next.

(243)

Consequently, the subsidy should be considered countervailable.

(244)

The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. This amount (numerator) has been allocated over the total export turnover of the co-operating exporting producer during the IP, because the subsidy is contingent upon export performance.

(245)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 0,05 % for APP Group.

(246)

The following schemes and programmes related to energy saving and environment protection were reported from the cooperating exporting producers:

(247)

In view of the small amount of benefits involved, it was not considered necessary to pursue our investigation of these schemes and programmes.

(248)

The allegation in the complaint was that the GOC had provided land-use rights to the cooperating exporters for less than adequate remuneration. In response to this, GOC provided the Land Administration Law and the Provisions on the Assignment of State-Owned Construction Land-Use Right through Bid Invitation, Auction and Quotation, No. 39, dated 28 September 2007. The GOC refused to provide any data with respect to actual land-use rights prices, minimum land price benchmarks that they claim that exist, the way of evaluating minimum land price benchmarks as well as the methodology followed when the State expropriates land from former users.

(249)

According to Article 2 of the Land Administration Law, all land is government-owned since, according to the Chinese constitution and relevant legal provisions, land belongs collectively to the People of China. No land can be sold but land-use rights may be assigned according to the law: the State authorities assign it through public bidding, quotation or auction.

(250)

The cooperating exporting producers have reported information regarding the land they hold as well as the relevant land-use rights contracts/certificates, but no information was provided by the GOC about pricing of land-use rights.

(251)

Accordingly, the provision of land-use rights by the GOC should be considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation in the form of provision of goods which confers a benefit upon the recipient companies. As explained in recitals (260) to (262) below, there is no functioning market for land in China and the use of an external benchmark demonstrates that the amount paid for land-use rights by the cooperating exporters is well below the normal market rate.

(252)

The GOC was requested to provide information on the eligibility criteria for obtaining the subsidy and on the use of the subsidy, in order to determine to what extent access to the subsidy is limited to certain enterprises and whether it is specific according to Article 4 of the basic Regulation. The GOC provided no such information. The Commission, mindful of the requirement of Article 4(5) of the basic Regulation that any determination of specificity shall be ‘clearly substantiated’ on the basis of positive evidence, therefore had to base its findings on the facts available in accordance with Article 28 of the basic Regulation. It is noted that Article 28(6) states that ‘If an interested party does not cooperate, or cooperates only partially, so that relevant information is thereby withheld, the result may be less favourable to the party than if it had co-operated’. The facts considered included the following:

(253)

The evidence of specificity submitted by the complainants.

(254)

The findings (see recitals (77) and (78)) that specific subsidies are channelled to the papermaking industry through a specific sectoral plan i.e. the Papermaking Plan. In this respect it is noted that Articles 7 to 11 of the aforesaid Plan set out specific rules on industrial layout by stating what type of papermaking industries shall be established in various geographical regions of the country.

(255)

The evidence (see recital (76)) that the papermaking industry is an ‘encouraged industry’ (Decision No 40).

(256)

The findings (see recitals (260) to (262)) that there is no functioning market for land in China.

(257)

The findings from the cooperating exporting producers, as confirmed in the parallel anti-dumping investigation, that land was allocated to them in view of their papermaking projects (8).

(258)

In the light of the above, and in the absence of any cooperation by the GOC, the available evidence indicates that subsidies granted to companies in the paper industry are not generally available and are therefore specific under Article 4(2)(a) of the basic Regulation. In the light of the GOC's non-cooperation, there is nothing to suggest that eligibility for the subsidy is based on objective criteria and conditions under Article 4(2)(b) of the basic Regulation.

(259)

Consequently, this subsidy should be considered countervailable.

(260)

Accordingly, it should be concluded that the situation in China with respect to land-use rights is not market-driven. Indeed, there appear to be no available private benchmarks at all in China. Therefore, an adjustment of costs or prices in China is not practicable. In these circumstances it is considered that there is no market in China and, in accordance with Article 6(d)(ii) of the basic Regulation, the use of an external benchmark for measuring the amount of benefit is warranted. Given that the GOC did not cooperate and failed to submit any proposal for an external benchmark the Commission had to resort to facts available in order to establish an appropriate external benchmark. In this respect it is considered appropriate to use information from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matscu (Chinese Taipei), hereafter mentioned as ‘Taiwan’, as an appropriate benchmark.

(261)

The Commission considers that the land prices in Taiwan offers the best proxy to the areas in China where the cooperating exporting producers are based. All the exporting producers are located in the east part of China, in developed high-GDP areas in provinces with a high population density surrounding Shanghai. The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the IP. The benefit conferred on the recipients is calculated by taking into consideration the difference between the amount paid by each company for land-use rights and the amount that should have been normally paid on the basis of the Taiwanese benchmark.

(262)

In doing this calculation, the Commission used the average land price per square meter established in Taiwan corrected for currency depreciation as from the dates of the respective land-use right contracts. The information concerning industrial land prices was retrieved from the website of the Industrial Bureau of the Ministry of Economic Affairs of Taiwan. The currency depreciation was calculated on the basis of inflation rates for Taiwan as published by the IMF in its 2009 World Economic Outlook. In accordance with Article 7(3) of the basic Regulation this subsidy amount (numerator) has been allocated to the IP using the normal life time of the land-use right for industrial use land in China, i.e. 50 years. This amount has then been allocated over the total sales turnover of the co-operating exporting producers during the IP, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(263)

The subsidy rate established with regard to this scheme during the IP for the cooperating exporting producers amounts to 2,81 % for APP companies and 0,69 % for Chenming companies.

(264)

It was found that the cooperating exporting producers did not benefit from this scheme during the IP. Therefore there was no need to asses whether this scheme is countervailable or not.

(265)

It was found that the cooperating exporting producers did not benefit from this scheme during the IP. Therefore there was no need to asses whether this scheme is countervailable or not.

(266)

The GOC, two groups of cooperating exporting producers (APP and Chenming) and the EU complainant submitted comments on the definitive disclosure.

(267)

The EU complainant supported the findings of the Commission.

(268)

The GOC, APP and Chenming disputed the findings of the Commission. To the extent that arguments have already been fully addressed in the definitive disclosure they are not repeated in this Regulation.

(269)

The GOC argued that the proposal for countervailing measures amounts to a double remedy. It was submitted that under the EU practice in anti-dumping investigations against China normal value is determined by reference to data obtained from producers in a third market-economy country. Thus, in such cases countervailing duties would provide a double remedy to address the same matter since the anti-dumping duties effectively ‘offset’ any subsidy allegedly granted to Chinese companies.

(270)

APP claimed that if the normal value is based on domestic sales in the analogue country, the rejection of the MET claim and the use of non-subsidised normal value have the effect of increasing the duty by the amount of subsidisation and the subsidies would be counted twice.

(271)

GOC submitted that the same alleged distortions have already been addressed in the parallel anti-dumping proceedings. GOC also submitted that that the practice of the Commission is in violation of EU and WTO law and that the Commission should either terminate the CVD proceedings or grant MET to the co-operating exporting producers in the parallel anti-dumping proceedings. The GOC also submitted that it does not accept the Commission's argument that there is no double counting by virtue of the injury margin that is lower than the dumping margin. Finally the GOC argued that on the basis of the findings of the WTO Appellate Body on the US – PRC dispute DS379 (9) with respect to double remedy the current proceedings should be terminated.

(272)

Those claims had to be rejected. In this respect it is noted that double remedy does not play any role in these proceedings. Whether or not the simultaneous imposition of anti-dumping and countervailing duties in the case of a non-market economy can lead to a potential ‘double remedy’, this situation, by definition, could only occur where there is a cumulation of the dumping margin and the amount of subsidy i.e. where the combined level of two types of duty exceeds the higher of the dumping margin or the amount of subsidy. As will be explained below, this is not the case here.

(273)

First of all it is recalled that the EU is applying the lesser duty rule when imposing anti-dumping and countervailing duties on the same product. In other words in EU investigations the Commission establishes the level of dumping, subsidization and injury caused to the Union industry. The level of duties can never be higher than the injury margin and the injury margin here is the same for both proceedings. In the parallel anti-dumping proceedings the Commission established a margin of dumping that is much higher than the injury margin. In line with the lesser duty rule the Commission proposed the imposition of measures that are based on the injury margin (see Council Regulation (EU) No 451/2011 of 6 May 2011 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of coated fine paper originating in the People's Republic of China (10)). Thus the subsidy margin found in the current ant-subsidy investigation will not provide any additional protection to the Union industry as compared to the dumping margin because the anti-dumping duty will already be capped by the injury margin. Therefore there is no overlap or cumulation of duties in the two parallel proceedings and consequently, even assuming that there is a potential for a double remedy as described in recital (269) above, there can be no requirement by law to ‘offset’ dumping against the subsidy. Indeed, the difference between the dumping and injury margins found in the anti-dumping proceedings was much higher than the amount of subsidization found in the present investigation. It should be also highlighted that when it comes to the actual composition of the duties to be paid the Commission has a practice to first impose the duty amount resulting from the CVD investigation. If there is still a gap between the aforementioned duty level and the injury margin, this gap can be filled with the duty resulting from the anti-dumping investigation. However, this does not mean that there is double counting because the combined level of duties could already have been justified as a result of the anti-dumping investigation alone.

(274)

Secondly, it should be noted that the remedies proposed by the GOC are not permitted by law since (i) the investigation established the existence of countervailing subsidies that caused material injury to the Union industry and imposition of measures was found to be in the Union interest thus these proceedings cannot be terminated, (ii) not all Chinese parties requested MET in the parallel anti-dumping proceedings, (iii) MET cannot be granted automatically to parties that have not requested and (iv) for those parties where MET was refused this was done because of the serious deficiencies found with respect to Criteria 1, 2 and 3 of Article 2(7)(c) of the basic anti-dumping Regulation.

(275)

The GOC also argued that the Commission used illegally adverse inferences as a result of the insufficient cooperation. In this context, they refer to Article 28(6) of the basic Regulation that inter alia mentions that if an interested party does not cooperate or cooperates partially the result may be less favourable to the party than if it had cooperated. According to the GOC the application of adverse inferences is in violation of Article 12(7) of the SCM Agreement as well as of Annex II of the WTO Anti Dumping Agreement.

(276)

With respect to this point it is noted that the GOC understanding of Article 28(6) of the basic Regulation is groundless. The Commission did not impose any ‘adverse inferences’ to the GOC, in that the Commission did not deliberately choose a less favourable outcome for the exporters concerned, nor did it seek to impose a punitive option with regard to the existence of subsidies or amount of countervailing duties. The Commission as investigating authority requested a set of information from the GOC within a reasonable period of time. However, the GOC failed to provide the information deemed necessary for the investigation (e.g. copies of plans, information on banks, the assessment that banks carried out when attributing loans to the cooperating exporting producers, pricing of land-use rights). Under these circumstances the Commission was forced to use the provisions of Article 28 of the basic Regulation concerning facts available in order to arrive at a representative finding. It is pertinent to underline that this was not done by imposing punitive findings to the GOC. By way of example, it is noted that the Commission did not reject information concerning LUR; rather, the GOC did not submit all the required information on the pricing of LUR. In the same way the Commission did not apply any adverse inferences to the GOC with respect to preferential lending to the coated paper industry but had to find the missing information with respect to plans, the role of the banks and the lending policies of the banks to the cooperating exporting producers, since such information was simply not provided by the GOC. Thus the Commission used whatever information provided by the GOC. Whenever information submitted was not sufficient or not found to be probative the Commission had to complement it with other relevant data in order to make its findings. In some instances, it cannot be excluded that the result was less favourable to the GOC than if it had fully cooperated but this outcome was not sought by the Commission.

(277)

The Commission's approach in this case can be contrasted with the manner in which the notion of ‘adverse inferences’ under paragraph 7 of Annex V of the SCM Agreement has been applied by WTO panels. For example, the EC-Aircraft panel applied adverse inferences on two occasions with regard to the Spanish ‘PROFIT’ R&D programme in cases where insufficient data was provided by the EU. With regard to both the amount of funding and the issue of de-facto specificity, the panel disregarded the evidence submitted by the EU and substituted the solution proposed by the complainant (the USA) for its findings (11). This was not the case in the present investigation as the Commission did not disregard any data provided by the GOC and simply substitute the solution proposed by the complainant but rather used the totality of information it had available to come to a conclusion. In view of the above it is concluded that the aforesaid claims had to be rejected.

(278)

As the Commission did not use adverse inferences in relation to the GOC or any exporter, the claim that the application of adverse inferences to a government is in violation of the WTO legal provisions is devoid of any purpose.

(279)

This had to be rejected as this allegation is not supported by the actual facts. The Commission informed the GOC on the provisions of Article 28 and on which cases these provisions may apply in the first letter the GOC received upon the initiation of these proceedings as well as in the last letter the GOC received before the on-the-spot verification visit. Furthermore the GOC was made aware of the consequences of non-cooperation as explained under recital (59) above.

(280)

The GOC also claimed that the Commission never requested it to arrange meetings with state-owned banks.

(281)

That claim had to be rejected. In this respect it is noted that the Commission requested the direct involvement of the GOC when arranging meetings with those banks that have provided loans to the cooperating exporting producers. For this purpose, the GOC was also provided with a list of the banks that had provided such loans. The GOC was also requested to ensure that policy banks and other financial institutions would be present during the on-the-spot verification visit at the premises of the GOC in order to reply to questions referring to the part of the questionnaire intended for these parties. None of the above requests was ever acted upon by the GOC.

(282)

The GOC argued that the use of adverse inferences is unjustified in the present case as the GOC provided to its best of its abilities the information it had available. GOC submitted that banks are third parties to these proceedings and not interested parties as defined in Article 12(9) of the SCM Agreement and thus there is no obligation for them to cooperate. It was also submitted that the Commission displayed arbitrariness and acted inconsistently to WTO rules since GOC provided sufficient information with respect to lending from banks and land-use rights.

(283)

Those claims had to be rejected. In this respect it is recalled that the Commission did not apply adverse inferences to the GOC. Furthermore, as it is stated under recital (276) above, the Commission used whatever information the GOC provided but since significant information was missing it had to complement data provided with other available sources in order to arrive at a representative finding.

(284)

With respect to the claims made on interested parties it is recalled that Article 12(9) of the SCM Agreement clearly states that domestic or foreign parties other than the ones mentioned therein could be included as interested parties. With respect to these proceedings the Commission, on the basis of the complaint, requested information concerning the preferential lending to the coated paper industry. Moreover, such information is directly linked to banks that are majority State-owned. Both the cooperating exporting producers and the GOC were made aware of this. The fact that sufficient information with respect to lending from banks was simply not provided forced the Commission to resort in the application of facts available in line with the provisions of Article 28 of the basic Regulation.

(285)

APP claimed that the Commission is prevented from discarding information that is not ideal in all respects if the interested party that supplied the information has, nevertheless, acted to the best of its ability. APP further claimed thatEeven in cases where a party failed to cooperate to the best of its ability, when using facts available to it, the Commission must take into account all the substantiated facts provided by an interested party even if those facts may not constitute the complete information requested of the party. The Commission is therefore compelled, under both the basic Regulation and the SCM Agreement, not to disregard such information.

(286)

The GOC submitted that recourse to facts available is not permissible if an interested Member or interested party has demonstrated that it has acted to its best of its abilities and provided information that was verifiable, appropriately submitted so it can be used in the investigation, supplied in timely fashion and in a medium or computer language requested by the investigating authorities.

(287)

This was not the case here. In this respect it is recalled that the Commission resorted to facts available in line with the provisions of Article 28 of the basic Regulation and Article 12(7) of the SCM Agreement because the GOC and exporting producers, although repeatedly requested to do so, did not provide information that was considered necessary for the investigation in order to arrive at a representative finding. Indeed, the Commission had to seek to repair the fundamental problem it encountered as investigating authority i.e. the fact that the GOC refused access or failed to provide actual information on plans, role of the banks, evaluation of credit risk when granting loans to cooperating exporting producers, pricing of LUR or legal documents referring to the various investigated schemes. In the same way the co-operating exporting producers failed to provide information concerning loans attributed by Chinese banks. Therefore, the way the GOC and the exporting producers cooperated does not meet the standards established by the WTO Appellate Body in United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, which concluded that the level of cooperation required of interested parties is a ‘high’ one and that interested parties must act to the ‘best of their abilities’ (12). The Commission fails to understand why it was not possible to the GOC and the exporting producers to submit/arrange the missing items and no credible explanation was provided by the GOC or the exporting prodcuers. The GOC also submitted that the conditions for resorting to the use of best information available were not fulfilled and that GOC may have failed to provide certain information simple because such information does not exist, is no longer relevant or is unavailable, it was not requested in the questionnaire or in advance before verification.

(288)

That argument had to be rejected. In this respect it is noted that as it has been clearly demonstrated under the Subsidisation section (recitals (64)-(73)) that the use of facts available was the only available option for the Commission as investigating authority in order to arrive at a representative finding. With respect to the type of information requested it is recalled that the Commission requested information that existed (e.g. information on plans, role of the banks, evaluation of credit risk when granting loans to cooperating exporting producers, pricing of LUR or legal documents referring to the various investigated schemes) and offered the possibility to the GOC to provide such information on numerous occasions following the initiation of these proceedings.

(289)

Furthermore, it should also be highlighted that the Commission, as investigating authority, had to investigate allegations made in the complaint and for which sufficient evidence had been provided to initiate an investigation (e.g. use of five-year plans and industrial policies for preferential lending to the coated paper industry, role of the banks as public bodies, existence of direct/indirect tax and grant programmes) and thus the GOC as interested party was requested to provide all the information deemed necessary. However, the GOC took a different approach that was tantamount to substituting themselves for the investigating authority. Indeed, the GOC wanted to judge for itself what they considered relevant and limit their submissions to documents that they considered relevant without allowing the investigating authority to examine these matters. This is perfectly illustrated by the GOC's approach to state-owned banks (see recital (282) above).

The GOC claimed that such banks were ‘third parties’: however, the complainant had provided sufficient evidence that they are ‘public bodies’ and the Commission was therefore entitled to require the GOC to provide the requested information on their activities. In response, the GOC took it upon itself to decide that these banks were not public bodies and to refuse to provide any information on them. However, this decision belongs to the investigating authority i.e. the Commission and not to the GOC. Such behaviour is clearly not in line with the abovementioned WTO case law stating that interested parties must act to the ‘best of their abilities’. It is hard to see how it fits with the Appellate Body's conclusion in United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan that ‘… cooperation is a process, involving joint effort, whereby parties work together towards a common goal’ (13). It should also be noted that the Commission provided ample time to any interested party to submit requested information and conducted the investigation in line with the provisions of Annex VI of the SCM Agreement setting out the rules for on-the-spot verifications which inter alia allow requests made on-the-spot for further details in light of the information obtained.

(290)

The GOC argued that the requested Plans were voluminous as they contain 282 000 pages and thus it is an unreasonable extra burden to translate them. It also claimed that it is not aware of Plans appearing in independent translations and that it did not provide the National Five Year Plans in the U.S. proceedings.

(291)

That argument had to be rejected. The plans mentioned in recital (65) above that the GOC provided in Chinese amounted to less than 300 pages. The claim of 282 000 pages is not confirmed by what the GOC submitted on record. The claim is nevertheless worrying because it may point to an even much more detailed government intervention than found in the current investigation and in the parallel anti-dumping investigation. With respect to plans appearing in independent translations it is noted that the Commission received such documentation from other interested parties and to the extent that such translated plans were received they were used for the purposes of this investigation. Finally, it should be clarified that the Commission did not wish to allege that the GOC had submitted plans to the USA proceedings. Recital (66) above only mentions that it appears that translated information exists in this respect.

(292)

The GOC argued that the Commission, before applying best information available, must conduct an analysis as required by Article 28(3) of the basic Regulation and conclude whether the specific conditions set thereon are fulfilled.

(293)

In this respect it is noted that the Commission resorted to the use of facts available in line with the provisions of Article 28 of the basic Regulation because the specific conditions set out under Article 28(3) were not fulfilled. As explained above, the GOC either provided information that was deficient or in many instances it did not even provide requested information. It is recalled that information on plans was either not provided at all or partially provided, information on the role of the banks was incomplete or non-conclusive, evaluation of credit risk by banks when granting loans to cooperating exporting producers was not provided, pricing of LUR was not provided and a number of legal documents referring to certain tax and grant programmes were also not provided. Account taken of the deficiencies or the non-existence of the information the Commission was not in a position to verify certain information submitted. Given the above, the fact that in these circumstances the GOC could not be considered as acting to the best of its abilities and the undue difficulties in arriving at a reasonably accurate finding, the Commission was forced to resort to the application of facts available.

(294)

The GOC also argued that the Commission should have used as best information available the information already provided by the GOC.

(295)

In this respect it is noted that the Commission used the totality of information provided by interested parties (including whatever information was submitted by the GOC) and found from publicly available sources in order to arrive at a representative finding.

(296)

With respect to loans it was argued that in the absence of information from specific banks in order to evaluate credit risk when providing loans, the Commission should have resorted to the explanations provided by PBOC and the CBRC as well as the Annual Reports of the Commercial Banks.

(297)

That argument had to be rejected. In this respect it is noted that banks, although explicitly requested to do so, did not provide the necessary data. The information provided by PBOC and CBRC was only of a very general nature and was in no way directly linked to the loans provided to the co-operating exporting producers. The GOC placed on file a number of Annual Reports of Commercial Banks (some of which where only in Chinese) and claimed that Commercial Banks make their own decisions regarding their business operations in accordance with law without any interference from unit or individual. However, these are simple statements that do not allow to verify whether and how the banks evaluated the credit risk when providing loans to the co-operating exporting producers and must be set against specific instances encountered in the investigations where firms clearly obtained loans with no apparent assessment of their credit risk.

(298)

With respect to LUR it was argued that the Commission should have used the information submitted by the GOC which, according to the GOC, demonstrates the existence of a functioning market. It was asserted that information required by the Commission on minimum prices of land-use rights was massive and it was not requested in the questionnaire or in advance before verification.

(299)

That argument had to be rejected. In this respect it is recalled that without having information on pricing on LUR it is not possible to arrive at any conclusion with respect to the existence of a functioning land market in China that reflects supply and demand forces. It is also noted that the Commission has offered ample time to the GOC to provide such information for the areas where the co-operating exporting producers are established but the GOC failed to submit even a single figure in this respect. In any event the Commission followed the provisions of Annex VI of the SCM Agreement setting out the rules for on-the-spot verifications which inter alia allow requests made on-the-spot for further details in light of the information obtained.

(300)

The GOC argued that Government ownership is not a reasonable basis for finding a bank or a utility to be a public body and for such an analysis the Commission should use the EU State aid rules. The GOC also requested that on the basis of the findings of the WTO Appellate Body on the US – PRC dispute DS379 with respect to the definition of public body the current proceedings should be terminated.

(301)

That argument had to be rejected. In this respect it is noted that the Commission has explained under recital (90) above the definition of a public body. This definition is in line with the relevant WTO case law on anti-subsidy proceedings including the aforesaid Appellate Body report. Thus, there is no need to depart from what is generally accepted and use another benchmark (i.e. the EU State aid rules) that applies to a very different branch of the law. Note that State aid law operates in a completely different context, i.e. not in order to regulate international trade in goods but as a complement to the common market. Finally there is no legal or factual basis to confirm the claim that the current proceedings should be terminated.

(302)

The GOC submitted with respect to preferential lending to the coated paper industry that the Commission failed to provide sufficient evidence of specific subsidization as required by Article 2(1)(a) of SCM Agreement and Article 4(2)(a) of the basic Regulation. It was submitted that the Commission analysis failed to fulfil its burden to establish de jure specificity of the alleged subsidy.

(303)

Two cooperating exporting producers also claimed that the loans granted Chinese state owned banks were not specific.

(304)

Those claims had to be rejected. In this respect it is recalled that specificity was established on the totality of information on file, including the information provided by the GOC, as listed under recital (92) above. This information confirms the existence of de jure specificity in line with the provisions of Article 2(1)(a) of SCM Agreement and Article 4(2)(a) of the basic Regulation.

(305)

The GOC also argued that the Commission failed to provide positive evidence of subsidisation in line with the provisions of Article 2(4) of the SCM Agreement and Article 4(5) of the basic Regulation since the evidence used by the Commission cannot be considered as positive evidence as it is not of an affirmative, objective and verifiable character which is credible.

(306)

That argument had to be rejected. In this respect it is noted that the facts described under recital (92) above demonstrate positive evidence of specificity (i.e. specific subsidies granted through a sectoral industrial plan, the papermaking industry considered as an encouraged industry, the role of commercial banks and of the Chinese state planning system as well as the high credit rating of companies because they qualify for specific policy plans). This information is affirmative since it is clear, objective and convincing. It is derived from various sources and was provided by interested parties or found in the public domain.

(307)

With respect to the 2007 Papermaking Plan it was argued that it does not provide specific subsidies or preferential treatment to the papermaking industry. According to the GOC the fact that this plan states that financial institutions shall not provide loans for any project which does not comply with its regulation is only a provision aimed to suspend projects which caused serious pollution.

(308)

That argument had to be rejected. In this respect it is noted that the wording used in the 2007 Papermaking Plan, as explained in detail in recital (77) above, leaves no doubt on the existence of specific subsidies and preferential treatment to the papermaking industry. The claim that the detailed rules referring to financial institutions exist only for environmental reasons is not borne out by the actual wording of the relevant texts.

(309)

With respect to the policy plans as well as accompanying documents such as the Integration Project and the Directory Catalogue, GOC repeated again that they are not as such legally binding in line with the Chinese Law on Legislation. They rather needed a legally binding implementing act. It was also argued that plans are too vague to be considered for the determination of specificity and the mere fact that the papermaking industry is an encouraged industry does not prove that GOC explicitly limits access to a subsidy to certain enterprises.

(310)

Those claims had to be rejected. In this respect it is recalled that the investigation established that plans are legally binding for the reasons detailed in recital (78) above. The investigation also established that the status of ‘encouraged industry’ for the papermaking industry entails specific benefits to the relevant enterprises.

(311)

With respect to the attribution of loans it was argued that the analysis of the Annual Reports of Chinese banks that provided loans to cooperating exporting producers does not reveal that loans were granted because of policy plans.

(312)

That argument had to be rejected. As noted above the Annual Reports of banks do not provide specific information on loan attribution to cooperating exporting producers. Indeed Annual Reports are general documents that do not provide any information on the way Chinese banks attributed loans to the co-operating exporting producers and the way the banks evaluated credit risk for the co-operating exporting producers. This information was repeatedly requested from interested parties and is considered crucial inter alia account taken of the finding of the IMF 2006 report which suggested that the bank liberalisation in China is incomplete and credit risk is not properly reflected (14), the IMF 2009 report which highlighted the lack of interest rate liberalization in China (15), the IMF 2010 Country Report which stated that cost of capital in China is relatively low, credit allocation is sometimes determined by non-price means and high corporate saving is partly linked to low cost of various factor inputs (including capital and land) (16), the OECD 2010 Economic Survey of China (17) and OECD Economic Department Working Paper No. 747 on China's Financial Sector Reforms (18) which stated that ownership of financial institutions remains dominated by the State raising issues as the extent which banks’ lending decisions are based purely on commercial considerations while banks’ traditional role appears to be that of government agencies with ties to the government.

(313)

With respect to the aforementioned credit rating note the GOC argued that a single credit rating note cannot be regarded as positive evidence on specificity. According to the GOC, unless most or even all of the loans granted to the cooperating exporting producers show that the industrial policy enables them to have higher credit rating during the IP, the Commission cannot apply the conditions of one specific instance to all loan decisions.

(314)

That argument had to be rejected. In this respect it is recalled that the credit rating note mentioned in recital (81) above links directly the positive future prospects of a cooperating exporting producer with the existence of the papermaking policy plans and the fulfilment of their objectives. In order to arrive at its conclusions, the Commission placed considerable emphasis on this document in conjunction with the Papermaking plan because other information requested in this context, such as the risk assessment for loans, was not provided despite repeated requests, as described above.

(315)

The GOC also argued that the Commission failed to take into account when analyzing allegations on preferential lending the PBOC Circular on Improving the Administration of Special Loans YINFA [1999] No. 228. According to the GOC the aforesaid circular confirms that preferential lending or special loans have been eliminated.

(316)

That claim had to be rejected. In this respect it is recalled that as explained in recital (87) above the Commission found that more recent PBOC circulars than the 1999 circular exist that clearly mention the existence of preferential loans and other loans specified by State Council. Thus, the arguments of GOC on the abolition of preferential lending and special loans cannot be supported by the actual case facts. Notwithstanding the above, it is pertinent to note that the 1999 circular states that wholly State-owned banks shall actively communicate with the authorities in charge of the relevant industries with a view to gaining their understanding and support. This again is a statement that confirms the control that State authorities exercise over wholly State-owned banks.

(317)

With respect to the evidence of specificity submitted by the complainant it was argued that this is only references of findings of the various U.S. investigations where specificity was established, inter alia, by reference to five-year plans.

(318)

In this respect it is noted that the Commission used all the relevant information it had in its disposal in order to arrive at a representative finding. In this manner, the publicly available information stated in the complaint, even if referring to findings of other investigating authorities, was deemed to be relevant and its use was appropriate.

(319)

With respect to Decision 40 and the Directory Catalogue it was argued that they do not explicitly define the coated fine paper industry as encouraged industry or encouraged projects. It was also argued that the term ‘encouraged projects’ in China spans broad sectors of economy activity, covering various industries.

(320)

Those claims had to be rejected. In this respect it is recalled that Decision 40 and the Directory Catalogue define the papermaking industry, to which the coated fine paper industry belongs, as an encouraged industry or encouraged projects. With respect to encouraged projects it is recalled that these cover only certain activities within 26 sectors and thus this categorisation, covering only a subset of enterprises in China, cannot be considered as of a general nature and non-specific. The Commission considered this as the most natural interpretation in the absence of any explanation (and corroborating documents) as to how the GOC precisely applied the notion of the ‘papermaking industry’ e.g. for the purposes of Decision 40 and the Directory Catalogue.

(321)

With respect to the Law on Commercial Banks, the GOC argued that Article 34 is of a general nature and that, in line with the provisions of Article 41 of the same law, there is no mandatory obligation for commercial banks to provide loans based on the industrial policies.

(322)

Those claims had to be rejected. In this respect it is noted that the wording of Article 34 links directly commercial banks’ loan business with the State's industrial policies. Thus, it cannot be considered of a general and non-compulsory nature. With respect to Article 41 of the aforesaid law it is noted that this refers to the prerogative of a commercial bank to provide loans to parties but it does not refer to the conditions that banks will have to take into consideration when taking loan decisions.

(323)

APP claimed it has provided the Commission with sufficient information and documents showing that APP was rated A-1 by Moody's in 2007 and 2008 and therefore it was not correct that the Commission disregarded this rating and applied Bloomberg's BB rating.

(324)

The Commission closely analysed credit rating reports submitted by APP group. These credit rating reports are linking the promising future outlook of the paper industry to the promulgation of the Paper Industry Development Policy. Therefore information in these documents actually confirms the Commission's findings that the exporter's current financial state has been established in the distorted market and therefore the creditworthiness of Chinese exporters could not be taken at its face value. This claim had to be rejected.

(325)

APP also claimed that the internal financial management reports mentioned under this point in APP's comments on general disclosure are ‘far more satisfactory than the facts currently relied on’.

(326)

That claim had to be rejected. The figures calculated in these reports result from the financial situation of the company achieved on the distorted market which is of course affected by the preferential lending as established by the Commission. It is therefore a circular issue, i.e. the company receives preferential lending which has a positive impact on its financial indicators and subsequently these have positive impact on the conditions of future loans.

(327)

APP claimed that the methodology used by the Commission in calculating benchmarks for loans in USD and EUR is wrong and claimed that the Commission double counted the spread over LIBOR and thereby inflated the benchmark interest rate.

(328)

That claim has to be rejected. The Commission did not double count the spreads over the LIBOR. As explained in the definitive disclosure, in order to establish benchmarks for the USD and EUR loans with term exceeding 1 year the Commission added to the relevant 1 year LIBOR rate a spread between BB rated corporate bonds with maturity of 1 year and BB rated corporate bonds with maturity of n years, n being the number of years representing the term for which the ‘long-term USD LIBOR’ rate was calculated (i.e. 2, 3, …, 15 years). It should be stressed that the spread as described above was added to ‘clean’ 1 year LIBOR rates (i.e. not increased by x basis points as APP claimed).

(329)

With respect to this scheme the GOC submitted that the Commission failed to established specificity on the basis of positive evidence. It was submitted that Article 25 of the Enterprise Income Tax Law is a general piece of legislation that applies across the entire Chinese economy and not only to coated fine paper producers.

(330)

GOC also argued that the eligibility criteria for this scheme are objective and defined in detail, that eligibility is automatic and thus the scheme cannot be considered specific in line with the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(331)

Those claims had to be rejected. Thus the findings of the Commission were established on the basis of positive evidence. In this respect it is noted that Article 25 of the Enterprise Income Tax Law limits the access to this scheme only to certain enterprises and industries that are classified as ‘encouraged’ i.e. to a specific subset of enterprises in China. As noted above, the Commission concluded that the coated paper industry falls under this category and therefore benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. With respect to eligibility criteria it is noted that the relevant provisions mention inter alia the obligation that products are within the range described in the High and New Tech Fields under the Key Support of the State and that enterprises have been incessantly carrying out research and development activities for the purpose of acquiring new knowledge of science and technology, innovatively employing new knowledge or substantially improving technologies or products. These conditions, taken as a whole, cannot be considered as objective eligibility criteria that lead to automatic granting of the subsidy according to the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(332)

APP wondered whether the amount of countervailable subsidies resulting from these schemes should not rather be calculated on the basis of the tax return and payment of the year 2008 instead of 2009 (IP). They claimed that these two schemes are related to income tax, which is usually fully paid and settled in the following calendar year to the taxation period in China. Therefore the income tax of 2009 or any preferential treatment granted thereto was only decided in 2010.

(333)

That claim had to be rejected. The actual amounts of benefits received were confirmed and verified with the tax returns for the year 2009, therefore they are benefits relating to sales and income generated in 2009, i.e. the IP.

(334)

With respect to this scheme the GOC submitted that the Commission failed to established specificity on the basis of positive evidence. It was thus submitted that the eligibility criteria for this scheme are objective and defined in detail and eligibility is automatic and thus the scheme cannot be considered specific in line with the provisions of Article 2(1)(b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(335)

That claim had to be rejected. In this respect it is recalled that the investigation established the existence of preferential tax treatment for certain companies that are recognized as carrying out certain type of R&D projects i.e. to a specific subset of enterprises in China. As noted above these are companies falling under the New and High Tech Sectors Receiving Primary Support from the State and projects listed in the Guide to key Fields of High-Tech Industrialization, such as those belonging to the coated paper industry, and therefore benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. With respect to eligibility criteria it is noted that the relevant provisions submitted by the cooperating exporting producers are vague and non transparent and thus cannot be considered as objective eligibility criteria that lead to automatic granting of the subsidy. Thus the findings of the Commission were established on positive evidence in line with the provisions of Article 2(1)(b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(336)

With respect to this scheme the GOC submitted that the Commission failed to established specificity on the basis of positive evidence. It was argued that dividend exemption is not a subsidy under the SCM Agreement as dividend exemption is not a subsidy by nature and the relevant Chinese provisions aim to clarify tax basis so to avoid double taxation.

(337)

APP claimed that this scheme is not specific it is generally and uniformly applied all over China on the basis of objective criteria, i.e. the source of dividend income. It also claimed that this scheme does not constitute a subsidy.

(338)

Those claims had to be rejected. In this respect it is noted that income from dividends from resident enterprises is exempted from the corporate income tax obligations of resident enterprises. First of all it is recalled that the investigation established the existence of preferential tax treatment for certain companies, i.e. resident enterprises receiving dividend from other resident enterprises and in addition to important industries and projects supported or encouraged by the State such as the coated paper industry i.e. to a specific subset of enterprises in China. Therefore benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. Secondly, this is a tax incentive that leads to government revenue forgone in line with the definition of a subsidy as set out in Article 1(1)(a) of the SCM Agreement and Article 3(a) of the basic Regulation. As to the claim that this incentive aims at avoiding double taxation it is noted that although the SCM Agreement has recognized that WTO Members are not limited from taking measures to avoid double taxation (see SCM Agreement, Annex I, footnote 59), this provision is an ‘affirmative defence’ and no concrete evidence was provided to corroborate the claim that e.g. dividends from resident and non-resident enterprises are treated differently because of legal obligations that the PRC has undertaken under relevant bilateral double taxation agreements with third countries.

(339)

It was also submitted that the scheme is totally irrelevant to enterprises and industries classified as encouraged but by definition applies to all resident companies. The GOC also submitted that Article 2(2) of the SCM Agreement provides that setting of generally applicable tax rates shall not be deemed a specific subsidy. It was thus submitted that the eligibility criteria for this scheme are objective and defined in detail and eligibility is automatic thus the scheme cannot be considered specific in line with the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(340)

Those claims had to be rejected. In this respect it is recalled that the legal provisions setting out this scheme fall under Chapter 4 ‘Preferential Tax Treatments’ of the Enterprise Income Tax Law that foresees specific tax incentives for important industries and projects supported or encouraged by the State. As explained above under these conditions benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. The investigation did not find objective criteria to limit eligibility and conclusive evidence to conclude that the eligibility is automatic. With respect to the claim on the provisions of Article 2(2) of the SCM Agreement it is noted that the present scheme does not refer to the setting of a generally applicable tax rate but to the existence of an exemption from tax of a certain type of revenue stemming from a certain type of companies.

(341)

With respect to this scheme the GOC submitted that the Commission failed to establish specificity on the basis of positive evidence. It was argued that the specific business categories defined exhaustively by law are not specific because they span broad sectors of economic activity covering various industries. It was thus submitted that the eligibility criteria for this scheme are objective and defined in detail and eligibility is automatic thus the scheme cannot be considered specific in line with the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(342)

Those claims had to be rejected. In this respect it is recalled that this scheme is only available to companies that invest under specific business categories defined exhaustively by law (i.e. catalogue for guidance of industries for foreign investment and catalogue of key industries, products and technologies which the state currently encourages development). The fact that eligibility is restricted to specific business categories confirms that the scheme is not generally available to broad economic sectors and therefore benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. Furthermore the investigation did not find objective criteria to limit eligibility and conclusive evidence to conclude that the eligibility is automatic. Thus the findings of the Commission were established on positive evidence in line with the provisions of Article 2(1)(b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(343)

APP claimed that the depreciation period used by the Commission in the calculation of benefit resulting from this scheme attributable to the IP is not correct and the Commission should have used the depreciation period as reported by companies of APP Group. According to APP this methodology is in breach of Article 7(3) of the basic Regulation.

(344)

That claim had to be rejected. The depreciation period reported by APP is determined for the accounting and financial purposes. Other cooperating exporting producers and the Union Industry reported different depreciation periods. Therefore the Commission, in line with its usual practice, and with Article 7(3) of the basic Regulation, used the period of 15 years as the useful life of the machinery for the purpose of this calculation, which is considered as the ‘normal’ depreciation period by the industry concerned.

(345)

With respect to this scheme the GOC submitted that the Commission failed to establish specificity on the basis of positive evidence. It was argued that the GOC explained the eligibility criteria of this scheme and as a result there is no basis for the application of facts available.

(346)

Those claims had to be rejected. In this respect it is recalled that this scheme is reserved to FIEs that purchase certain type of domestically-manufactured equipment, i.e. to a specific subset of enterprises in China and therefore benefits under this programme are specific under Article 4(2)(a) of the basic Regulation. Furthermore the investigation did not find objective criteria to limit eligibility and conclusive evidence to conclude that the eligibility is automatic. Thus the findings of the Commission were established, by using the submitted information and the provisions of Article 28 of basic Regulation, on positive evidence in line with the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation.

(347)

Both APP and Chenming claimed that since according to the Notice on Unifying the Urban Maintenance Construction Tax and Education Surcharges for Domestic and Foreign-invested Enterprises and Individuals issued by the State Council of China on 18 October 2010 and applicable from 1 December 2010 the above mentioned tax and surcharge are now universally applicable to all companies and individuals in China, without any exception. According to these claims this subsidy scheme is not longer countervailable.

(348)

The arguments provided were analyzed in line with the submitted documentation and evidence provided by parties. The GOC was requested to confirm the aforesaid information. The GOC, an interested party in these proceedings and the granting authority for this programme, notify the Commission that this scheme was withdrawn and was not replaced by any other incentive referring to the same tax obligation. On the basis of information submitted by cooperating exporting producers it is concluded that both groups have demonstrated that they are no longer benefiting from any subsidy derived from this scheme. In this respect it is recalled that in line with Article 15 of the basic Regulation no measures shall be imposed if the subsidy is withdrawn or it has been demonstrated that the subsidy no longer confers any benefit on the exporters involved. Accordingly and on the basis of information on file it is concluded that the subsidy under this scheme no longer confers any benefit to the exporters involved. Thus the findings presented under recitals (160) to (169) above were amended accordingly.

(349)

With respect to these schemes the GOC submitted that the Commission failed to establish specificity on the basis of positive evidence. It was argued that the GOC provided sufficient information with respect to these schemes and that there is no law or regulation concerning these schemes.

(350)

Those claims had to be rejected. In this respect it is recalled that these schemes were found specific and countervailable on the basis of information submitted by the GOC and the cooperating exporting producers notwithstanding the fact that no actual legal provisions were submitted. The fact that, as the GOC argued, there are no legal provisions for these schemes confirms beyond any doubt that objective criteria or conditions set by the law governing these schemes simply do not exist. Thus the findings of the Commission were established, by using the submitted information and the provisions of Article 28 of basic Regulation, on positive evidence in line with the provisions of Article 2(1)(b) of the SCM Agreement and Article 4(2)(b) of the basic Regulation. In the absence of any criteria or conditions, the government appears to have wide discretion and access to the subsidy is considered to be limited to certain enterprises.

(351)

With respect to these schemes the GOC argued that the Commission misinterpreted Article 2(2) of the SCM Agreement since Industrial Parks are not designated geographical regions.

(352)

That argument had to be rejected. In this respect it is recalled that the Suzhou Industrial Park is clearly an economic and administrative subdivision within the jurisdiction of the PRC and thus a designated geographical region in line with the provisions of Article 2(2) of the SCM Agreement. Notwithstanding the above, it should also be noted that even if the above were not confirmed by the actual facts of the investigation, an industrial park by its very definition can only host a sub-set of enterprises within the territory of a country or the granting authority and thus in line with the provisions of Article 2(1)(a) of the SCM Agreement the subsidies provided by the industrial park would be considered as specific.

(353)

With respect to LUR the GOC argued that the use of an external benchmark is illegal by making reference to Article 14(d) of the SCM Agreement and the Appellate Body in US – Softwood Lumber IV. It was submitted that EU and WTO law restricts the use of external benchmarks to very exceptional circumstances i.e. only when private market prices are distorted because of the government's predominant role as a provider of the good or service in question. According to the GOC the Commission has not proven that private market prices are distorted by the GOC's predominant role as a provider.

(354)

Those claims had to be rejected. First of all it is noted that WTO rules, as confirmed by the Appellate Body in US – Softwood Lumber IV (DS257) and the Panel in US – China countervailing duties (DS379) do not prohibit the use of external benchmarks. Secondly, the Commission approach took fully into account the special conditions requested by the WTO case law in order to resort to an external benchmark. Indeed, as it has been demonstrated under recitals (248) to (259) above, land is government-owned in China and provided by the government on a lease basis. Furthermore, the Chinese authorities control the supply and allocation of land to enterprises including in secondary markets and land assignment to enterprises is linked to a strict set of rules, while any type of change in land assignment, e.g. a transfer of a LUR contract from one enterprise to another enterprise, has to be approved by the State and recognized by a new LUR contract between the assignee with the relevant State authority. In view of the above, it is concluded that GOC has a predominant role in the distribution of LUR and that any Chinese ‘private’ market prices (to the extent that they exist, none have been provided in this investigation) are bound to be distorted because of the GOC's predominant role as a provider and its monopoly role as a regulator of land transactions. Consequently, the GOC's financial contribution would effectively determine the level of any private prices.

(355)

GOC also argued that by choosing Taiwan as an external benchmark the Commission failed to use an external benchmark which relates or refers to, or is connected with, the prevailing market conditions in China. It was submitted that the use of Taiwanese benchmark to offset differences in comparative advantages between countries is expressly prohibited by WTO rules.

(356)

Those claims had to be rejected. The Commission considers Taiwan (19) as an appropriate external benchmark because of the totality of the information on the file i.e. (i) the level of economic development and economic structure prevailing in Taiwan and the relevant Chinese provinces where the co-operating exporting producers are established, (ii) the physical proximity of these two Chinese provinces with Taiwan, (iii) the high degree of infrastructure that both Taiwan and these two Chinese provinces have, (iv) the strong economic ties and cross border trade between Taiwan and the PRC, (v) the similar density of population in the Chinese provinces concerned and in Taiwan, (vi) the similarity between the type of land and transactions used for constructing the relevant benchmark in Taiwan with those in the PRC and (vii) the common demographic, linguistic and cultural characteristics in both Taiwan and the PRC. Furthermore, Jiangsu and Shandong provinces are considered top manufacturing provinces in the PRC (20). Although the GDP per capita of Taiwan and the two Chinese provinces is not identical, the GDP of these Chinese provinces has grown rapidly in recent years i.e. they are catching up with Taiwan.

In addition, recent data suggest that the both PRC and Taiwan have similar real GDP growth rates (21). However, it is important to note that the exact comparison made between the GDP of a non-market economy (the PRC) and the GDP of a well established market economy (Taiwan) is not a decisive fact because it is normal for a non-market economy to lag behind a functioning market economy in terms of GDP. In addition, many other factors e.g. planning rules, environmental policy may affect the supply and demand of industrial land. The real issue is what would be the ‘prevailing market conditions’ with regard to LUR in the PRC if it was a functioning market economy and on the basis of all evidence they would be very similar to those of Taiwan.

(357)

Based on the totality of the above information it is considered that the benchmark chosen is in line with the requirements of the Appellate Body in US – Softwood Lumber IV (Para.103) which concluded that ‘the benchmark chosen must, nevertheless, relate or refer to, or be connected with, the prevailing market conditions in that country, and must reflect price, quality, availability, marketability, transportation and other conditions of purchase or sale, as required by Article 14(d)’. Indeed, the totality of conditions in Taiwan relate to the prevailing market conditions in the two Chinese provinces. Land is available in similarly dense areas, the physical proximity of the areas ensures that quality of land is similar while the fact that both Taiwan and the two Chinese provinces share the same language and culture, have export- oriented economies and important manufacturing sectors confirm that price, marketability and other conditions of purchase or sale of land are closely connected.

(358)

Cooperating exporting producers claimed that the information available to the Commission was sufficient to conclude that there is a market for land in China.

(359)

That claim had to be rejected. From the information made available to the Commission it was not possible to come to a conclusion that there is a functioning land market in China. From the legislation made available to the Commission by the GOC it is obvious that all of the land in PRC is government-owned and it is provided only on the lease basis. The Chinese authorities are in full control of the supply and allocation of land to enterprises, including transactions in the secondary market. No evidence was submitted that there is any market mechanism in the distribution of land-use rights, despite the Commission's requests to this effect. The situation is explained in detail in recital (354) addressing similar claims of the GOC.

(360)

APP submitted that today's Chinese LUR prices should be used as benchmark or in the alternative today's land prices in the Indian state of Maharashtra. Chenming also suggested Indian state of Maharashtra for benchmark.

(361)

As already described in the recital (359) above, there is no functioning land market in China. Therefore it is not appropriate to use today's Chinese LUR prices as a benchmark. Exporting producers based its claim that the land prices in Maharashtra could be used as a benchmark on the comparison of the Indian state of Maharashtra in terms of GDP per capita and the population density at the time of purchase of LURs. As explained above the Commission is of the opinion that the GDP per capita and the population density cannot be the only decisive factors when choosing a country/region for the purpose of application of external benchmark. In any event the methodology proposed by co-operating exporting producers is not consistent with their claims. In the IP, Mumbai, the capital of Maharashtra and by far the most developed area of the state had per capita income is USD 2 675 (Rs 1,28 lakh) which is in fact lower than the Chinese national average of USD 3 529 (22) let alone the GDP par capita in the highly developed regions of Shandong and Jiangsu (USD 5 255 and USD 6 550 respectively). As far as population density is concerned, this is also not by itself a decisive factor, but, for the record, the population density is 314/km2 in Maharashtra, 736/km2 in Jiangsu and 600/km2 in Shandong, i.e. not in the same level. Furthermore, other factors, such as the lack of physical proximity and common characteristics between India and China lead to the conclusion that the Maharashtra benchmark does not relate or refer to, and is not connected with, the prevailing market conditions in China. For the reasons explained in recital (357), Commission maintains the opinion that the prices of land in Taiwan are far more suitable external benchmark.

(362)

APP claimed that some of the LUR taken in account by the Commission in the calculation of benefit resulting from this scheme are no longer held by APP. APP also argued that by using information from the website of the Industrial Bureau of the Ministry of Economics Affairs of Taiwan it has arrived in a different average land price per square meter and the Commission did not make any effort in order to find representative offers for the industrial land.

(363)

With respect to the total surface of the land used by APP, the Commission took APP's claim into account and on the basis of information and evidence presented in the comments on definitive disclosure it was accepted. The corrected information was reflected in subsidy calculation. With respect to information derived from Taiwan it is noted that this claim had to be rejected. Although this party did not propose to use this price for the calculation of an appropriate benchmark the following should be highlighted. The Commission used the information that was available on file with respect to land prices in Taiwan and the methodology on how it arrived to the benchmark price was disclosed to parties and explained in the Note for the file of 11 February 2011. On the other hand the data presented by APP refer to February 2011 only, i.e. a different time period as used in the Commission's calculation and it appears that it refers only to a list of examples of some data derived from some areas in Taiwan. Furthermore, the Commission can not address the calculation of the benchmark performed by APP, as APP did not provide any details on the methodology it used for this calculation and did not substantiate why its calculation represents more accurately average land prices in Taiwan.

(364)

Cooperating exporting producers claimed that any subsidy in the form of the provision of land-use right for less than adequate remuneration would not be specific.

(365)

That argument had to be rejected. As already explained in the definitive disclosure document, the GOC provided insufficient information in relation to this scheme which had to be complemented with other information and facts in the record. Consequently, the findings were made on this basis and are explained and analysed in recitals (253)-(258).

(366)

APP claimed that the interest rate used by the Commission in order to transform the face value of the subsidy into the value prevailing during the investigation period is not correct.

(367)

The Commission took APP's claim in account and on the basis of information and evidence presented in the comments on definitive disclosure it was accepted. The interest rate suggested by APP was used in the subsidy calculations. This change is already reflected in the recitals dealing with the calculation of subsidy margins and in the resulting subsidy margins for the individual schemes concerned.

(368)

APP claimed that the subsidy amounts must be expressed as a percentage of their reported CIF price and not as a percentage of the turnover and that the Commission should apply this methodology for the calculation of subsidy margins.

(369)

The arguments provided were analyzed in line with the submitted documentation and evidence provided by the party. It is noted that, except for one of the subsidy schemes found to be countervailable, no other scheme was found to be contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported. Therefore the amount of subsidy was allocated over the total sales turnover of the companies of APP group in line with Article 7(2) of the basic Regulation which reads as follows: ‘Where the subsidy is not granted by reference to the quantities manufactured, produced, exported or transported, the amount of countervailable subsidy should be determined by allocating the value of the total subsidy, as appropriate, over the level of production, sales or exports of the products concerned during the investigation period for subsidisation’. Since this subsidy is not linked to production of any particular product or exports, the total sales turnover of the company is the most appropriate denominator. In that respect, it should be noted that the relevant turnover has been determined on a basis which ensures that it reflects as closely as possible the sales value of the products sold by the recipient company. This change is already reflected in the recitals dealing with the calculation of subsidy margins and in the resulting subsidy margins for the individual schemes concerned. Any other proposed methodology in calculating the amount of countervailable subsidy would be contrary to the relevant provisions of the basic Regulation (Articles 7 and 15) and the administrative practice followed by the Commission in its anti-subsidy proceedings when selecting the appropriate numerator/denominator for the allocation of the amount of the countervailable subsidy.

The party also invoked the part of the Guidelines (23) referring to the calculation of the subsidy per unit as a basis for their claim. However, and for the same reasons as described before, aper unit approach was not considered appropriate in the circumstances of this case. Indeed the proposed methodology is considered non representative as it mixes turnover and units produced only for the product concerned while it disregards units of other products produced. No information was submitted or verified with respect to the total units produced for all products by the respective companies and subsidies where not granted in any event by reference to quantities. As to CIF prices, it is pertinent to note that evidence on file suggests that they vary within and between product types. In any event, the subsidies in question are not product-specific. Furthermore, the Commission established the amount of subsidization in the PRC and denominated it by allocating the value of the total subsidy over the turnover in China account taken of the specific modalities of the respective cooperating Chinese exporting producers. This ensures the use of the verified amount of subsidies and the most appropriate turnover. Finally it is noted that account taken of the practical circumstances of these proceedings, i.e. the imposition of anti-dumping and countervailing duties at the level of the injury margin, it is concluded that there is no impact whatsoever to the APP's position irrespective of what methodology one chooses in allocating the amount of countervailable subsidy and the countervailing duty.

(370)

The amount of countervailable subsidies in accordance with the provisions of the basic Regulation, expressed ad valorem, for the investigated companies are set out in the table below:

(371)

Based on the information available from the complaint and the cooperating Chinese exporting producers, there are other known producers of the product concerned in the PRC. Nevertheless, given the fact that the reported export volume was found to be higher than the import data derived from Eurostat, the level of cooperation was considered high. It was therefore considered appropriate to set the subsidy level for the non-cooperating exporting producers at the level of the highest subsidisation found for the cooperating exporting producers i.e. 12,04 %, in order to ensure effectiveness of the measures.

(372)

During the IP, the like product was manufactured by 14 known and some other very small producers in the Union. The data provided by CEPIFINE is estimated to be covering 98 % of the production of Union producers. On this basis, the total Union production was estimated to be around 5 270 000 tonnes during the IP. The Union producers accounting for the total Union production constitute the Union industry within the meaning of Article 9(1) of the basic Regulation.

(373)

The coated fine paper industry is energy and capital intensive. For this reason economies of scale apply that explain the concentration of the production within a few large players, complemented by smaller producers that focus on the geographically close markets. Five similarly large producers cover most of the Union market with production facilities spread over Europe. The large part of CFP is a commodity-type product and is mainly traded through paper merchants and wholesalers. These distribution channels are characterized by a high degree of concentration of buying power and price transparency through price quotations.

(374)

As mentioned in recital (19) above, one interested party claimed that CFP suitable for web-fed printing should have been included in the scope of the present investigation. On this basis, the same party argued that the complainant Union industry would not have enough standing in the present proceedings. Based on the conclusions outlined above in recitals (22) and (25), however, i.e. that CFP suitable for web-fed printing and CPF for sheet-fed printing are two different products, this claim had to be rejected.

(375)

The government of China commented that one of the representative producers was allegedly related to a Chinese company and thus should be excluded from the definition of the Union industry. The investigation however revealed that the products produced by the Chinese company referred to are not product concerned. Therefore the relationship does not have any impact on the injury analysis nor on the inclusion of this Union producer in the definition of Union industry.

(376)

Consumption was established on the basis of the following:

(377)

On that basis, total Union consumption was established as follows:

Table 1

Union consumption

(378)

Overall, Union consumption decreased by 14 % during the period considered. It was found that the consumption first increased by 4 % between 2006 and 2007, after which it dropped by 18 % between 2007 and the IP. The decline in consumption in 2008 and the IP was the result of a lower demand, especially in the first half of 2009, due to the economic downturn.

(379)

As mentioned above in recital (376), the verified total sales volume of the product concerned of the Chinese cooperating exporting producers on the Union market was found to be higher than the import volumes reported by Eurostat. Since it was considered that the verified information is more accurate than the available statistics, total import volume from the PRC was established on the basis of the verified information provided by the cooperating companies. The sales volumes of the cooperating companies that were found to have been exporting only multi-ply paperboard during the period considered, were excluded from the total imports, because it was concluded, as explained in recital (47), that multi-ply paper and paperboard should not be considered as the product concerned. Since the import data relating to the product concerned only refer to two companies, it was considered appropriate for confidentiality reasons to show them in indexed form.

Table 2

Total subsidised imports from the PRC

(380)

The volume of total imports from the PRC increased dramatically, almost tripling over the period considered. As a result, their market share increased significantly from approx. 1 % in 2006 to over 4 % in the IP. This has to be seen against the background of a decreasing consumption which dropped by 14 % during the same period. Average prices of the subsidised imports from the PRC showed a decrease of 8 % during the period considered.

(381)

For the purposes of analysing price undercutting, the weighted average sales prices per product type of the Union producers to unrelated customers on the Union market, adjusted to an ex-works level, were compared to the corresponding weighted average prices of the imports from the PRC to the first independent customer on the Union market, established on a CIF basis with appropriate adjustments for the existing duties and post-importation costs.

(382)

As explained in recital (51), cooperation from the Chinese exporters was very high and considered to be covering the total export volume from the PRC to the Union during the IP. Given the fact that two Chinese exporting producers who originally came forward were found not to be exporting the product concerned to the Union market, as explained in recital (52) their imports have not been taken into account for the purpose of the price undercutting analysis. Export sales of a company within the group of one cooperating exporting producer were also excluded from the comparison as none of the representative Union producers produced comparable product types. With respect to the export quantities of this particular company it is noted that they represented only a minor part of the total export sales of the group and their price levels appeared to be in line with the overall export sales price levels of the group.

(383)

The comparison showed that during the IP, the subsidised product concerned originating in the PRC sold in the Union undercut the Union producers’ sales prices on average by 7,6 %. The level of the undercutting margin is to be seen against the background of the high level of price transparency supported by price quotations that characterizes the CFP distribution market.

(384)

In accordance with Article 8(4) of the basic Regulation, the examination of the impact of the subsidised imports on the Union producers included an evaluation of all economic indicators for an assessment of the state of the Union producers from 2006 to the end of the IP.

(385)

The macroeconomic elements (production, capacity, capacity utilization, sales volume, market share, growth and magnitude of the amount of countervailable subsidies) were assessed at the level of the whole Union industry, on the basis of the information provided by CEPIFINE.

(386)

The analysis of microeconomic elements was carried out at the level of the Union producers (average unit prices, employment, wages, productivity, stocks, profitability, cash flow, investments, return on investments, ability to raise capital) on the basis of their information, duly verified.

(387)

It was claimed that the injury analysis failed to analyze all injury indicators for the complainants and for the Union industry as a whole in a coherent and comprehensive fashion. Parties suggested that conclusions concerning material injury would be different, were some indicators such as market share established at the level of complainants.

(388)

Firstly it is noted that the statements of these parties seem to have been drawn on the basis of indicators calculated from different datasets and information than those established during the investigation and presented below. Consequently, these conclusions are factually wrong and are thus irrelevant.

(389)

Secondly, it is the Commission's practice to evaluate macroeconomic factors for the indication of the injury suffered at the level of the Union industry as a whole as explained above. In the present investigation the Union industry was defined at the level of Union producers accounting for the total Union production as explained in recital (372) above, regardless of whether producers supported the complaint or have been cooperating in the investigation.

(390)

Microeconomic factors are analyzed at the level of the representative Union producers, regardless of whether these support the complaint or not. The representative producers covered 58 % of the Union production. None of the other Union producers came forward claiming that the Commission's conclusions on microeconomic factors would be unreliable or not substantiated. Therefore there is no reason to question the findings established based on the information provided by the representative Union producers only.

(391)

It was claimed that one of the four representative producers failed to fully cooperate as it would be related to another producer in the European Union that did not cooperate in the investigation. The companies were alleged to be related as a consequence of transitional agreements concluded at the time of the acquisition by the cooperating Union producer of the CFP business segment of the other producer. It was alleged that through these transitional agreements the cooperating Union producer controls some of the mills which remained in the ownership of the partially acquired producer. To support its claim the exporting producer made reference to Commission Decision of 31.10.2008 (24) (‘Decision’) examining at the time of the acquisition whether the transaction should be considered as an acquisition within the meaning of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (25).

(392)

The investigation on the other hand confirmed that the number of shares held by the EU producer in question was minor and below the threshold set in Article 143 of the IPCCC (26). Furthermore, the transitional agreements referred to did not show any relationship between the companies that would be extending beyond a normal business relationship between a buyer and a seller. In particular, the terms of the transitional agreements aim to administer the coated paper sales for a transitional period and according to these terms the Union producer only has functions comparable to a sales agent during the transitional period. Furthermore, in its consolidated audited accounts and in its reply to the questionnaire it reported commission income while acting as an agent for the mills concerned; no ownership and therefore no costs were recognized for these mills by the Union producer.

(393)

According to the Decision, the transaction between the companies was considered as an acquisition by the Union producer of part of the other companies’ business, not the take-over of the company as such. The Decision does not suggest that the companies should be considered as one entity after the acquisition; in particular, there is no joint venture between the companies. It is also noted that the geographical scope examined in the above decision is EEA wide and not EU wide. To note is also that in Decision the Commission did not analyze the relationship between the companies in question within the meaning of Article 143 of the IPCCC.

(394)

In view of the above, it was considered that the two companies are not related in the sense of Article 143 of the IPCCC and therefore the Union producer in question cooperated fully with the investigation.

(395)

In the analysis of microeconomic indicators information about paper mills that have been acquired by the above mentioned Union producer were excluded for all years under examination in order to present a fully comparable trend over the years.

(396)

The exporting producer also claimed that each affiliated company of the Union producers should have filled in a separate questionnaire reply as they were separate legal entities.

(397)

In the case of the Union producer in question it was considered that one questionnaire reply would be sufficient for a meaningful reply and analysis of the injury aspects. In particular, the reply provided a detailed breakdown of information at individual paper mill level and all the necessary data relating to all of the related producers/sellers of the like product could be verified during the verification visits.

(398)

In a subsequent submission the exporting producer also claimed that the same company failed to fully cooperate as it filed its questionnaire reply on behalf of a non-existing entity and that the audited accounts of the company do not reflect the data provided in its questionnaire reply. The conclusions in the preceding recital are relevant also in this regard.

(399)

After disclosure of the findings, the GOC and one Chinese exporting producer argued that the macro-economic data used for the analysis is incomplete and inaccurate thus cannot be used as a positive evidence of material injury.

(400)

The on-the-spot verification at the complainant association confirmed that the data used to establish macroeconomic indicators are directly collected from Union producers covering around 98 % of the total Union production and are sufficiently detailed to identify information about the product concerned. Assumption and / or estimations used were made on a reasonable and justifiable basis, e.g. cutter rolls were not taken into account because of their clearly insignificant volumes as witnessed in their proportion in the total sales volume of the representative Union producers. Therefore this claim had to be rejected.

(401)

As shown in the above table, the production volume of the Union industry decreased by 20 % over the period considered. It should be noted that although Union consumption increased by around 1 % between 2006 and 2008, the production of the Union industry fell by 2 % during that period, while it decreased significantly between 2008 and the IP, following the drop in the Union consumption.

(402)

Since 2000, Union producers have undertaken major restructuring efforts aiming at addressing structural overcapacity. Through consolidations and mill closures the Union industry decreased its CFP production capacity by approximately 770 000 tonnes between 2006 and the IP, i.e. by 11 %.

(403)

Despite the drop in total capacity, utilisation rates still declined from 92 % in 2006 to 83 % in the IP. The main decrease occurred in the period between 2008 and the IP. It is noted that high capacity utilization is an important factor in the long-term viability of the paper producing producers because of high investment in fixed assets. Therefore, the capacity utilisation rate during the IP was considered to be low.

(404)

The sales figures in the table below relate to the volume sold to the first independent customer on the Union market.

Table 4

Sales volume and market share