Commission Implementing Regulation (EU) 2021/2287 of 17 December 2021 imposing definitive countervailing duties on imports of aluminium converter foil originating in the People’s Republic of China and amending Implementing Regulation (EU) 2021/2170 imposing definitive anti-dumping duties on imports of aluminium converter foil originating in the People’s Republic of China

COMMISSION IMPLEMENTING REGULATION (EU) 2021/2287 of 17 December 2021 imposing definitive countervailing duties on imports of aluminium converter foil originating in the People’s Republic of China and amending Implementing Regulation (EU) 2021/2170 imposing definitive anti-dumping duties on imports of aluminium converter foil originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1), and in particular Article 15 and 24(1) thereof,

Whereas:

(1) On 4 December 2020, the European Commission (‘the Commission’) initiated an anti-subsidy proceeding with regard to imports of aluminium converter foil (‘ACF’) originating in the People’s Republic of China (‘China’, ‘PRC’ or ‘the country concerned’) on the basis of Article 10 of Regulation (EU) 2016/1037 (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (‘the Notice of Initiation’) (2).

(2) The Commission initiated the investigation following a complaint lodged on 21 October 2020 by six Union producers (‘the complainants’), representing more than 50 % of the total Union production of aluminium converter foil. The complaint contained evidence of subsidisation and of a resulting injury that was sufficient to justify the initiation of the investigation.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of China (‘GOC’) (3) that it had received a properly documented complaint, and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. Consultations were held on 30 November 2020. However, no mutually agreed solution could be reached.

(4) On 22 October 2020, the Commission initiated a separate anti-dumping investigation of the same product originating in the PRC (‘the separate anti-dumping investigation’). (4) The injury, causation and Union interest analyses performed in the present anti-subsidy investigation and the separate anti-dumping investigation are mutatis mutandis identical, since the definition of the Union industry, the sampled Union producers, the period considered and the investigation period are the same in both investigations.

(5) The GOC claimed before and after initiation that the investigation should not be initiated because the complaint did not satisfy the evidentiary requirements of Articles 11(2) and 11(3) of the WTO Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) and of Article 10(2) of the basic Regulation. According to the GOC, there was insufficient evidence of countervailable subsidies, injury and a causal link between the subsidised imports and the injury. In its submission following initiation, the GOC reiterated that the complaint, with regard to a number of claimed subsidy schemes, did not contain sufficient evidence to meet the evidentiary standard and, regardless of what information might be reasonably available to the complainant, there always needs to be sufficient evidence regarding the existence and nature of a subsidy, material injury and a causal link. The GOC also reiterated this claim after the final disclosure.

(6) In its submission following the initiation and also after the final disclosure, the GOC also claimed that the Commission memorandum on sufficiency of evidence and the anti-subsidy questionnaires went beyond the allegations raised in the complaint and that the Commission had added additional evidence to the complaint to justify the initiation of the investigation. The GOC claimed that by adding such elements the Commission broadened the scope of the investigation. More specifically, the GOC alleged that by adding references to documents such as a 2018 “report on Aluminium”, the “Made in China 2025” strategy, a U.S. DOC determination on aluminium products of 2018, and by adding the Chinese Export & Credit Insurance Corporation (‘Sinosure’) to the list of financial institutions to be investigated or asking information regarding the China Banking and Insurance Regulatory Commission (the ‘CBIRC’), the Commission had broadened the scope of the investigation.

(7) The Commission rejected the claim of the GOC concerning sufficiency of evidence. Indeed, the evidence submitted in the complaint constituted the information reasonably available to the complainant at that stage. As shown in the memorandum on sufficiency of evidence, which contains the Commission’s assessment on all the evidence at the disposal of the Commission concerning the PRC, and on the basis of which the Commission initiated the investigation, there was sufficient evidence at initiation stage that the alleged subsidies were countervailable in terms of their existence, amount and nature. The complaint also contained sufficient evidence of the existence of injury to the Union industry, which was caused by the subsidised imports.

(8) The Commission also rejected the claim concerning the scope of the investigation. The memorandum on sufficiency of evidence contains an examination of the elements available to the Commission, including, but not limited to, those brought forward by the complainant. The elements in the complaint were indeed analysed together and corroborated with other facts known by the Commission in accordance with established practice. As mentioned in the Notice of Initiation, in view of Articles 10(2) and 10(3) of the basic Regulation, the Commission prepared a memorandum on sufficiency of evidence containing the Commission’s assessment on all the evidence at the disposal of the Commission concerning the PRC and on the basis of which the Commission initiated the investigation. Thus, the scope of the investigation is not narrowed to the evidence and allegations in the complaint, but can be complemented by other information available to the Commission. Furthermore, during the investigation, the Commission may examine all information that is relevant to the alleged subsidies and is not limited to the information contained in the complaint. This applies also to the financial institutions providing preferential financing such as Sinosure and relevant regulatory bodies such as the CBRC.

(9) While the GOC reiterated its claims concerning sufficiency of evidence and the scope of the investigation also after final disclosure, it did not bring forward any new substantial arguments or evidence. Therefore, those claims were rejected.

(10) In its submission following initiation, the GOC alleged that the complainant used Chinese laws selectively and misinterpreted their connection with respect to the ACF industry. The GOC stated that policy documents, such as the 10-13th Five Year Plans, the Catalogue for the Guidance of Industrial Structure Adjustment (2005) and the Nonferrous Metal Development Plan (2016-2020) are just guidance documents that are not binding. The GOC also stated that the Five Year Plans do not specifically refer to ACF.

(11) The Commission noted that the GOC does not dispute the existence of such plans, programmes, or recommendations but only the extent to which they are binding for the ACF industry. The Commission further observed that the complainant provided evidence indicating that non-ferrous metals industries, of which the aluminium industry is part, are mentioned in several government documents. The GOC failed to produce any evidence showing that those documents would not be applicable to the product concerned.

(12) The GOC also stated that State-owned enterprises (‘SOEs’), State-owned banks (‘SOBs’) or Sinosure cannot be qualified as public bodies and that the complainant unjustifiably relied on formal indicia of control such as the GOCs ownership and alleged power to appoint or nominate management officials to draw an unwarranted conclusion that all SOEs/SOBs acted as public bodies. The GOC also claimed that the complainant relied on previous cases of the Commission or the Department of Commerce of the USA in evaluating the nature of functions that the banks performed and the nature and scope of the governmental authority vested in them. The GOC also claimed that past findings of the Commission for unrelated industries could not constitute sufficient evidence in the complaint and they also do not substantiate that State-owned banks and Sinosure acted as public bodies in the current investigation.

(13) The Commission noted that this claim of the GOC is connected to the claim already mentioned above, and that the complaint, among others, mentioned the Bank Law in China, which the GOC does not dispute is Chinese legislation. The Commission highlights that recent EU anti-subsidy investigations related to the same subsidy programmes as those alleged in the complaint, that had also examined the whether SOEs/SOBs acted as public bodies, had concluded that this was the case (5). The fact that these investigations covered industries unrelated to the ACF industry does not invalidate the qualification of the above institutions as public bodies. Moreover, evidence of government ownership may be considered to amount to evidence “tending to prove or indicating” that an entity is a public body capable of conferring a financial contribution. (6)

(14) In its submission following initiation, the GOC furthermore submitted that substantial changes and reforms had occurred in the financial sector in recent years, and that the complaint could thus not rely on any pre-existing situation. However, the Commission noted that the complainant also provided additional evidence in the complaint of the continued existence of the subsidy programmes. The Commission further recalls that the GOC failed to provide evidence rebutting the continuation of the relevant programmes. Thus, at the stage of initiation, the evidence available tended to show that there was no relevant change in the subsidy programmes at issue.

(15) In the same submission the GOC also claimed that some of the guidance documents including The Temporary Provisions on Promoting Industrial Structure Adjustment (Decision No 40 2005 of the State Council) (‘Decision No 40’) with reference to the “Eleventh Five-year Plans” are outdated and no longer applicable during IP.

(16) Decision No 40, Chapter III refers to ‘Catalogue for the Guidance of Industrial Structure Adjustment’ which is composed of three kinds of contents, namely encouraged project contents, limited projects content and eliminated projects content.

(17) To the Commission’s knowledge, the latest amendment of the Guiding Catalogue for Industry Restructuring was approved by Decree of the National Development and Reform Commission of the People’s Republic of China No 29 of 27 August 2019 and entered into force on 1 January 2020 (7). This new ‘Guiding Catalogue for Industry Restructuring (2019 Version)’ was adopted and entered into effect during the investigation period. Therefore, ‘The Guiding Catalogue for Industry Restructuring’ referred to in Decision No 40 was applicable during the investigation period.

(18) After final disclosure the GOC reiterated its claim that the Commission had misinterpreted the role of the Chinese Government’s plans and projects and maintained that these are purely guidance documents and not legally binding. It also disagreed with relying on facts established in previous investigations, as well as with the use of references from the 2017 Commission staff working document on Significant Distortions in the Economy of the People’s Republic of China for the purposes of Trade Defence Investigations (8), which the GOC considers to be inaccurate and not objective, as it was written specifically to facilitate the initiation of trade defence investigations. The GOC furthermore objected to the Commission’s view that the laws, regulations and Government plans can reasonably be assumed to remain applicable unless it is demonstrated that they are repealed or replaced.

(19) First, the Commission noted that the GOC did not bring forward any new substantial arguments or evidence concerning the general role of the Chinese Government’s plans and projects, and their binding nature.

(20) Second, concerning the use of information contained in the China Report, the fact that the document was issued bearing in mind its potential use in trade defence investigations does not render the objective evidence contained therein incorrect or impartial as such, as claimed by the GOC. The Commission also notes that it only referred twice to this document in the current investigation, once as a general introduction to the system of five-year plans, and once in the context of establishing a link between planning documents and encouraged sectors. These references were used in combination with and corroborated by other references, including documents issued by the GOC itself.

(21) Third, the Commission maintains that established laws, regulations and Government plans can reasonably be assumed to remain applicable until it is demonstrated that they are repealed or replaced. Indeed, as part of the investigation the Commission sent to the GOC a list of reference documents concerning the general legal framework, rules and procedures applicable in the PRC, as well as some specific documents concerning the industry concerned. The GOC was requested to review the completeness and validity of these documents and to update or complement them wherever applicable. After receiving a substantiated reply and updated reference documents from the GOC, the Commission considered it could reasonably assume that those documents that were not repealed or replaced were still applicable.

(22) Therefore, the claims of the GOC in this respect were rejected.

(23) Following initiation, the GOC further argued that the complainant did not establish the conditions for applying an out-of-country benchmark for land use rights (‘LUR’). The Commission found, however, that the allegations contained in the complaint are supported by recent EU anti-subsidy investigations concluding on those matters the need for external benchmarks adjusted to the prevailing conditions in the PRC (9).

(24) Furthermore, the GOC claimed that various subsidy schemes alleged by the complainant could not be considered a subsidy as the complaint did not provide for detailed evidence concerning the existence, amount and nature of these subsidies, or the direct relationship between the subsidy and the product concerned. The GOC further claimed, in relation to various subsidies, that the complainant failed to provide evidence of benefit and specificity.

(25) The Commission is of the view that the complainant provided sufficient evidence of the existence, amount, nature, benefit and specificity as was reasonably available to it. Furthermore, the Commission highlights that recent EU anti-subsidy investigations related to the same subsidy programmes alleged in the complaint had also examined benefit and specificity of the same programmes and had concluded differently on these matters9. In any event, the Commission examined the evidence in the complaint and provided its own assessment of all relevant elements in the memorandum of sufficiency of evidence, which was put on the open file upon initiation. The GOC reiterated its comments following initiation, but did not provide any further evidence.

(26) Therefore, the Commission concluded that there was sufficient evidence provided in the complaint tending to show the existence of the alleged subsidisation by the GOC.

(27) In its submission following initiation the GOC indicated that the tax scheme providing VAT rebates on domestically produced equipment had been terminated. The Commission took note of this comment, but highlighted the tax schemes relating to VAT rebates, or import tariff and VAT exemptions on imported equipment, could still procure ongoing benefits such as depreciation over the lifespan of the relevant equipment, possibly covering the investigation period.

(28) Following initiation, the GOC also argued that the complainants incorrectly set aside the fact that the ACF industry in the Union benefits from several direct and indirect subsidies, support and incentives in various forms from the EU and Member State authorities and that the Commission should not apply double standards. After final disclosure the GOC also reiterated this claim.

(29) This claim concerning subsidies in the EU had no weight on the Commission’s assessment underlying the initiation of this case, as they do not fall within the factors considered for this purpose.

(30) The Union industry did not submit a request for registration of imports pursuant to Article 24(5) of the basic Regulation.

(31) On 6 August 2021, in accordance with Article 29a(2) of the basic Regulation, the Commission informed the interested parties of its intention not to impose provisional countervailing measures and to continue the investigation. Since no provisional countervailing measures were imposed, the Commission did not register imports under Article 24(5a) of the basic Regulation. The Commission continued seeking and checking all information it deemed necessary for its definitive findings.

(32) The investigation of subsidisation and injury covered the period from 1 July 2019 to 30 June 2020 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2017 to the end of the investigation period (‘the period considered’).

(33) Both the current anti-subsidy investigation and the separate anti-dumping investigation mentioned in recital (4) have the same investigation period and the same period considered.

(34) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, the GOC, other known Union producers, the known exporting producers, known importers and users about the initiation of the investigation and invited them to participate.

(35) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(36) Several parties requested a hearing with the Commission services. Parties who made a request within the stipulated deadlines were granted an opportunity to be heard. Xiamen Xiashun Aluminium Foil Co. Ltd. requested an intervention from the Hearing Officer, and a hearing with the Hearing Officer took place on 8 April 2021.

(37) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the volume of production and sales of the like product in the Union during the investigation period. The sample consisted of three Union producers. The sampled Union producers accounted for more than 50 % of the estimated total production and 40 % of the estimated total Union sales volume of the like product. The Commission invited interested parties to comment on the provisional sample. No comments were received and therefore the sample was confirmed.

(38) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

(39) Two unrelated importers provided the requested information and agreed to be included in the sample. Given the small number of replies, sampling of unrelated importers was not necessary.

(40) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in China to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People’s Republic of China to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(41) Nine exporting producers or groups of exporting producers in the PRC provided the requested information and agreed to be included in the sample. In accordance with Article 27(1) of the basic Regulation, the Commission selected a sample of three groups of exporting producers on the basis of the largest representative volume of exports to the Union that could reasonably be investigated within the time available. These companies represented over 90 % of the estimated total Union imports of the product concerned.

(42) In accordance with Article 27(2) of the basic Regulation, all known exporting producers concerned and the authorities of the country concerned were given the opportunity to comment on the selection of the sample. No comments were received.

(44) Four of the Chinese exporting producers that returned the sampling form informed the Commission of their intention to request individual examination under Article 27(3) of the basic Regulation. The Commission made the questionnaire available online on the day of the initiation. Moreover, the Commission informed the non-sampled exporting producers that they were required to provide a questionnaire reply if they wished to be examined individually. However, none of the companies provided a questionnaire reply. As a result, no individual examinations were possible.

(45) The Commission sent a questionnaire to the complainant and the questionnaires for the Union producers, importers, users, and exporting producers in China were made available online on the day of initiation (10).

(46) The Commission also sent a questionnaire to the GOC, which included specific questionnaires for Sinosure, the banks and other financial institutions that provided financing or export credits to the sampled exporting producers, and for the top 10 producers and distributors of the input materials used by the sampled exporting producers. The GOC was also asked for administrative convenience to gather any responses provided by these financial institutions and producers or distributors of input materials, and to send them directly to the Commission.

(47) The Commission received a questionnaire reply from the GOC, which included a questionnaire reply from the Export-Import Bank of China (‘EXIM bank’) and Sinosure. However, no reply was received from any of the other banks or financial institutions, or from the main producers and distributors of the input materials.

(48) The Commission also received questionnaire replies from all sampled exporting producer groups, from the three sampled Union producers, nine users and one unrelated importer.

(50) The RCC scheduled with Manreal could not be finalized due to its insufficient cooperation. Manreal requested the intervention of the Hearing officer, who confirmed that the termination of the RCC did not violate Manreal’s rights of defence. The questionnaire reply of Manreal was thus not considered for the definitive findings. However, this did not impact the conclusions on Union Interest. Despite the termination of the RCC, this company was still considered as an interested party and its comments in the investigation were taken into account.

(51) On 3 November 2021, the Commission informed all parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-subsidy duty on imports of the product concerned (‘final disclosure’).

(52) All parties were granted a period within which they could make comments on the final disclosure. Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(53) The Commission addressed in this regulation comments submitted during the anti-subsidy procedure. Comments submitted in the context of the separate anti-dumping investigation were not addressed in this regulation unless the parties explicitly indicated that the comments submitted covered both procedures.

(54) The product concerned is aluminium converter foil of a thickness of less than 0,021 mm, not backed, not further worked than rolled, in rolls of a weight exceeding 10 kg (‘the product concerned’).

(57) The Commission decided at this stage that those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

(58) Several parties submitted product exclusion requests concerning the following products: ACF of gauge below 6 microns (‘ACF< 6’) and ACF for electric car batteries (‘car battery ACF’).

(59) Several users, Walki, Gascogne and Alupol, claimed that Union producers do not offer ACF < 6. This is allegedly evidenced by the fact that Union producers do not promote such products on their webpages, in their brochures and by their refusal of orders of such products. Neither are the Union producers interested in offering ACF< 6, since their production capacity is filled with other product orders, taking into account also the expected demand for automotive battery foil. Union producers are not in a position to provide the requested “commercial” quality, especially regarding porosity/permeability, measured in maximum pinholes per square meters. The use of thinner ACF is furthermore more environmentally friendly and should also for this reason be excluded from the scope.

(60) In addition, Huhtamäki argued that the Union industry has supply constraints for thinner ACF.

(61) The Commission has requested all nine users that cooperate with the investigation to specify their current demand for and sources of ACF< 6. Only one user confirmed to have purchased during the IP an amount of ACF< 6 that surpassed the quality threshold for commercial production, from a single Chinese producer. However, even for this user ACF< 6 represents a very small part of its ACF consumption. Other users only indicated requests from their respective customers for products that included ACF< 6, which have triggered trial orders both to the Union ACF industry and to Chinese producers post IP.

(62) The replies indicated that the demand for ACF< 6 has only very recently started and is in an increasing trend. There was some limited demand for it over the past 10 years, but no clear pattern. This is in line with explanations from the Union producers that in the past there was also a gradual movement into thinner gauges of ACF, from the 7-8 microns range being the lower range in the past into 6 and 6,35 microns becoming the current standard for many applications.

(63) While a survey amongst the Union producers has shown that, apart from direct negotiations, none of them currently actively markets ACF< 6, the Commission has collected ample evidence that the Union producers are capable to produce ACF< 6. This includes test roll production post IP, which according to testing documentation met the purchaser’s technical demands. Furthermore, the Commission could confirm sales of ACF< 6 of various Union producers in commercial production quantities, even if on a limited scale, over a period of 10 years prior to the IP. The Commission could also observe investments in quality control. The Commission therefore concluded that the Union industry can provide quality to fit the market demand.

(64) Second, the capacity to produce ACF< 6 is limited by the last step i.e. the rolling mills. Therefore, the Commission has analysed the capacity of various Union producers in this last step, also taking into account the demand for other products in the various production steps. All sampled Union producers have sufficient free capacity to enable them to provide ACF< 6, even if demand for car battery foil increases in the future. The Commission could therefore not confirm the risk of a supply shortage for a future increase in ACF< 6 demand.

(65) Third, regarding the argument that the use of thinner ACF is more environmentally friendly, the Commission recalled that the intended effect of trade defence measures in the form of duties is not to prevent imports of a given product but to ensure that those imports are traded at non-injurious prices. The Commission also recalled the capability of the Union producers to manufacture ACF< 6.

(66) Finally, as to the argument of Huhtamäki concerning the supply constraint, the investigation revealed that the production capacity of the Union industry of ACF< 6 is considerably greater than the demand.

(67) In view of the above considerations, the Commission rejected the request for exclusion of ACF < 6 from the product scope of the product under investigation.

(68) Gascogne requested that its arguments made in the separate anti-dumping procedure concenring the same product originanting from the PRC were incorporated into this anti-subsidy investigation. The Commission already addressed the same arguments in recitals 25 to 28 Regulation (EU) 2021/2170.

(69) Walki also requested that its arguments made in the separate anti-dumping investigation were incorporated into this anti-subsidy investigation. In this respect, the Commission refers to its findings in recitals 29 to 32 of Regulation (EU) 2021/2170.

(70) In addition, Walki explained during its hearing after final disclosure, that post-IP in October 2021, there was still no active open market sales or marketing of European producers for ACF< 6. Walki submitted evidence that post-IP it did not receive a positive response to its requests for quotation on ACF< 6 and explained that only one Union producer would be in the position to accept orders of ACF< 6 in commercial quantity. The Commission already addressed the same arguments in recital 28 Regulation (EU) 2021/2170

(72) In response, the Commission first noted that all the alloys named by the interested party share the same characteristic in that they all contain more than 98 % of aluminium and the complaint is not limited to a specific alloy. The use of different alloys for different product variations is not unusual and cannot serve as an exclusion criteria.

(73) Second, the bright/dull surface is a consequence of rolling two layers of ACF together in the last rolling mill, where the sides of ACF facing each other during the rolling turn out dull. This production method was covered by the complaint, which explicitly stated that both surfaces of ACF can be bright if specified by the customer. The intended use of ACF for car batteries cannot therefore justify any exclusion from the product scope as the physical characteristics of the product are the same. The same applies to the higher cost due to single layer rolling.

(74) Third, the car battery production in the Union is still in its starting phase. The Commission collected evidence demonstrating that the Union producers are preparing to meet the demand of this emerging market segment. Furthermore, the argument runs counter to the claim made by Walki related to the exclusion of ACF< 6, that the Union industry might focus so much on car battery foil that they would potentially not be interested in dedicating sufficient production capacity to ACF< 6.

(75) Fourth, the fact that currently there are no major exports from the PRC reflects the fact that the electric car battery production in the EU is still in its infancy, and this is thus not a viable argument for an exclusion.

(76) The analysis has shown that ACF for electric car batteries is technically ACF included in the defined scope of the investigation.

(77) In view of the above considerations, the Commission rejected the request for exclusion of ACF for electric car batteries from the product scope of the product under investigation.

(78) Following the final disclosure, Xiamen Xiashun argued that the four arguments by the Commission in support of the rejection of the exclusion are erroneous, do not respond to the arguments raised by Xiamen Xiashun and fail to provide the substantive data based on which the Commission reached those conclusions. The Commission failed to provide any factual evidence that responds to Xiamen Xiashun’s exclusion request in its submissions and the hearing on 23 February. The refusal to indicate on which evidence the Commission based its rejection on infringes Xiamen Xiashun’s rights of defence. Xiamen Xiashun further argued that a late submission of evidence by the complainant in respect of the battery foil exclusion request in the anti-dumping proceeding raises doubts as to what evidence was actually considered by the Commission in the anti-subsidy investigation. Xiamen Xiashun argued that a submission of the complainant dated 19 July 2021 was made after the deadline of the deadline of comments at the provisional stage of the anti-dumping investigation and should not be considered. Further, an excessive confidentiality in the submission renders it impossible for Xiamen Xiashun to meaningfully respond.

(79) The Complainants’ submission of 19 July 2021 was a reaction to Xiamen Xiashun’s submission of 5 July 2021, in which Xiamen Xiashun provided arguments for the exclusion of ACF for electric car batteries from the scope. The open version of that submission was not redacted excessively. The redaction of the name of the company, which prepared the technical details of the submission as well as the redaction of details on their technical production were necessary not to reveal confidential details on the company’s business. The Commission therefore rejects the argument that it infringed Xiamen Xiashun’s rights by considering that submission. Further the Commission rejects the claim that it did not specify, which evidence it took into account. The Commission necessarily took into account all evidence on the case file.

(80) Xiamen Xiashun had argued that due to different usage and technical characteristics aluminium foil for electric car batteries would be a new product for the industry, even if it is aluminium foil. The Commission however, had responded to all of these arguments, clearly stating that also ACF for electric car batteries shares the technical characteristics and production steps. The technical differences on which Xiamen Xiashun had elaborated did only show a distinction to other kinds of ACF, but did not demonstrate that ACF for electric car batteries would not share the characteristics defined in the product scope of the investigation. The Commission also responded to the argument that the Union industry would not be capable to produce ACF for electric car batteries. The Commission therefore rejected the claim.

(81) Xiamen Xiashun argued that the Commission committed manifest errors of assessment and acted in breach of the principle of sound administration, as it did not examine with all due care and impartiality the evidence provided and did not take due account of all relevant evidence when making its determinations by not providing a meaningful summary on the plans of Union producers to increase their capacity to meet the demand for battery foil and dismissing the evidence provided by Xiamen Xiashun in respect of the expected demand for battery foil.

(82) Xiamen Xiashun claimed that the Commission’s statements that the “substantial spare capacity of the Union industry can meet the demand on the emerging battery foil market” contradicted its statement that “data showing the preparation of Union producers to meet the demand of battery foil is highly confidential and not susceptible of being summarised since these projects are not yet public and thus highly sensitive”.

(83) Xiamen Xiashun also claimed that the Commission dismissed its comprehensive overview on the expected demand on the basis that the realisation of several battery projects was indicated to take place at an undetermined moment in the future. Xiamen Xiashun claimed that this is inherent to data relating to planned projects.

(84) The Commission’s statement that the Union industry can meet the demand on the emerging battery foil market relates to the overall spare capacity in the rolling mills. The data showing the preparation of Union producers to meet the demand of battery foil relates to the efforts of the Union industry to be able to produce according to the specific characteristics requested by battery producers. By providing a summary of these efforts, the Commission would reveal business strategies of Union producers. There is no thus contradiction between the aforementioned statements. The Commission therefore rejected this claim.

(85) In assessing the overview on the expected future demand that Xiamen Xiashun provided from a publically available source, the Commission differentiated between projects in a planning phase with a specific timeframe and intended projects for which there is no indication of the year in which they will become operational. This is not a dismissal of evidence provided by Xiamen Xiashun, but a thorough analysis of the actual demand to be expected. Indeed, the assessment of whether the Union industry can fulfil the expected future demand was appropriately based on battery projects, whose realisation is scheduled to take place at a specific year in the future. The claim was thus rejected.

(86) This case was initiated during the transition period following the withdrawal of the United Kingdom (‘UK’) from the EU. During this transition period, the UK remained subject to Union law. The transition period ended on 31 December 2020. Consequently, as of 1 January 2021, companies and associations located in the UK no longer qualified as interested parties in this proceeding. In conclusion, as the UK is no longer subject to the Union law, the findings on subsidy and injury are based on the EU-27 market data.

(87) Before analysing the alleged subsidisation in the form of subsidies or subsidy programmes, the Commission assessed government plans, projects, and other documents, which were relevant for the analysis of the investigated subsidy programmes. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC’s central planning to encourage the ACF industry for the following reasons.

(88) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist at all levels of government and cover all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in the PRC results in resources being allocated to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (12).

(89) ACF is regarded as a key product by the GOC, as found in public policy documents and lists. Such categorisation is of significant importance as it qualifies given sectors for coverage by a variety of specific policies and support measures designed to spur development in each sector (13). ACF is also integrated within the new materials in the Made in China 2025 strategy (14) and is included in numerous plans, directives and other documents, which are issued at national, regional and municipal level, and are mutually interlinked. Examples of such key policy documents include the following plans, projects and other documents.

(90) The “10th Five Year Plan of Economic and Social Development (2001-2005)” indicates that the acceleration of industrial restructuring and reorganization would be undertaken with the objective of the development of industrial products, including the raw materials industry, and more specifically, alumina (15).

(91) The “National 11th Five-Year Plan of Economic and Social Development (2006-2010)” calls for the development of aluminium processing and enhancement of the “comprehensive utilization level of aluminium industrial resources.” (16)

(92) The “National 12th Five-Year Plans of Economic and Social Development (2011-2015)” indicates that the restructuring of key industries should include new progress in R & D, integrated resources utilization, energy conservation, and emission reduction by the smelting and building material industries (17).

(93) The 13th Five Year Plan for National Economic and Social Development of the PRC (‘the 13th Five Year Plan’), which covers the period 2016-2020, highlights the strategic vision of the GOC for improvement and promotion of key industries. The 13th Five-Year Plan emphasised the GOC’s intention to strengthen the development of strategic high technologies and displays how the GOC favours “key” industries, which should be promoted and improved. This Plan identifies the nonferrous metals industry, of which the aluminium foil industry is a part, as one of such “key” industries for which the service supporting system, including finance, taxation, insurance, and investment platforms should be perfected (18).

(94) The “Decision of the State Council on Promulgating the Interim Provisions Promoting Industrial Structure Adjustment for Implementation (Guo Fa (2005) No 40)” (‘Decision 40’) indicates that the “Catalogue for the Guidance of Industrial Structure Adjustment” is an important basis for investment guidance and government administration of policies such as public finance, taxation, and credit. Decision 40 further indicates that projects in “encouraged” industries shall be provided credit support in compliance with credit principles. (19)

(95) The “Catalogue for the Guidance of Industrial Structure Adjustment” specifically includes aluminium, and the development of production technology within it, as encouraged (20). This is confirmed in the Guiding Catalogue for Industry Restructuring (2019 Version), according to which aluminium rolling processing, vacuum aluminizing for packing and aluminium alloy processing are all encouraged.

(96) The “Nonferrous Metal Development Plan (2016-2020)” describes the nonferrous metal industry as an important foundation of the manufacturing industry and support for the “realization of manufacturing power.” Further, priority is indicated for the development of aluminium foil (21).

(97) The “Notice of Guidelines on Accelerating the Adjustment of Aluminium Industry Structure (2006)” indicates that, “Aluminium is an important raw material for the development of the national economy.” (22) This document indicates targeted financial support for the aluminium sector: “According to the national macro-control, industrial policy and credit requirements, the financial institutions shall conduct reasonable allocation of credit funds. For alumina enterprises and electrolytic aluminium enterprises that meet the national industrial policies, market access conditions and credit principles, it is required to continue to give credit support; for enterprises non-compliant with national industrial policy and market access conditions, with backward technology and listed in prohibited items or eliminated, they shall not be provided with any form of credit support.” (23)

(98) The China High-Tech Products Catalogue issued by the Ministry of Science and Technology, the Ministry of Foreign Trade and the General Administration of Customs lists 1 900 high-tech products in categories, which are targeted for preferential export policies provided by the government. One of the categories is the so-called "New materials" category, which includes ACF (24).

(99) By being an encouraged industry in the Made in China 2025 strategy, the ACF industry is eligible to benefit from considerable State funding. A number of funds had been created to support the Made in China 2025 initiative (25) and hence the ACF industry (26).

(100) Furthermore, The Made in China 2025 Roadmap (27) gives 10 strategic sectors, which are the key industries for the GOC. It includes in Sector 9 ‘New materials’ and spells out the objectives to “actively develop special new materials for both military and civilian use, speed up two-way transfer and transformation of technologies and promote integrated military and civilian development of new material industry as well as accelerate the upgrading of basic materials” (28). ACF as part of new materials fall under the development priorities of this sector. The new materials thus benefits from the advantages stemming from the support mechanisms listed in the document, including, among others, financial support policies, fiscal and taxation policy, and State council oversight and support.

(101) The approach of the GOC to define encouraged industries and products in catalogues in order to allocate resources accordingly, based on their strategic or political importance as attributed by the GOC, and to implement and supervise the plans at each administrative level can be further observed by examining the Catalogue of Strategic and Emerging Products and Services of the National Development and Reform Commission (‘NDRC’) from 2016 (29). ACF is included under new materials.

(102) Decision No 40, Chapter III refers to ‘The Guiding Catalogue for Industry Restructuring’ which is composed of three kinds of contents, namely encouraged project contents, limited projects content and eliminated projects content. According to Article XVII of the Decision, if “the investment project belongs to the encouragement content it shall be examined and approved and put on records according to the relevant national regulations on investment; all financial institutions shall provide credit support according to the credit principles; the self-using equipment imported in the total amount of investment, with the exception of commodities in the Non-exempt Imported Commodities Content of Domestic Invested Projects (amended in 2000) issued by the Ministry of Finance, can be exempt from import duty and import links value-added tax, unless there are new regulations on the non-exempt investment projects content. Other favorite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations”.

(103) Consequently, Decision No 40 read together with the Guiding Catalogue for Industry Restructuring provides for specific treatment of certain projects within certain encouraged industries.

(104) Considering the above-mentioned plans and programmes, the ACF industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective. On the basis of the policy documents referred to in this section, the Commission concluded that the GOC intervenes in the ACF industry to implement the related policies and interferes with the free play of market forces in the ACF sector, notably by promoting and supporting the sector through various means.

(105) Following final disclosure, the GOC claimed that the documents mentioned above in this section do not provide basis for specific support or encouragement for ACF industry. According to the GOC, there is insufficient evidence to prove that ACF industry is an encouraged industry and the documents that refer to nonferrous metals, aluminium industry and/or new materials do not cover ACF.

(106) The Commission disagreed. Firstly it maintains that it can be reasonably assumed that the description of products such as new materials, nonferrous metals and aluminium industry also covers aluminium foil. Second, some of the documents listed above, such as the “Nonferrous Metal Development Plan (2016-2020)” referred to in recital (96) and the China High-Tech Products Catalogue in recital (98) also explicitly mention aluminium foil as such. Third, the investigation established that the cooperating exporting producers had benefited from subsidies that are only eligible to encouraged industries as stipulated in the Decision No 40 and analysed in detail in relevant sections below. The Commission therefore rejected the claims of the GOC.

(107) Following final disclosure, the GOC made some general remarks concerning the Commission’s decision to apply the provisions of Article 28(1) of the basic Regulation with regard to preferential lending, export credit insurance, and input materials.

(108) The GOC claimed that all of the Commission’s requests for information to which the GOC could not provide responses, were unreasonable, since these requests assumed the existence of legal powers which the GOC did not possess.

(109) Furthermore, the GOC argued that the Commission did not properly evaluate the facts before it and did not provide a proper explanation of why the facts available reasonably replaced any necessary information that was missing.

(110) As set out below in recital (118) the Commission was of the opinion that the GOC did have the legal power to obtain the requested information, as shareholder or responsible authority of the entities for which the Commission requested the information. The Commission did set out in its communication to the GOC, repeated in sections 3.2.1 to 3.2.3 below, why it had to rely on facts available. The Commission considered publicly available information to be a reasonable replacement for the information that was not provided by the GOC. The Commission therefore rejected the claims of the GOC.

(111) For administrative convenience, the Commission requested the GOC to forward specific questionnaires to any financial institution that provided loans or export credits to the sampled companies.

(112) At first, only a reply from EXIM bank and Sinosure was received. The GOC did not respond to the Commission’s request to provide questionnaires to all financial institutions that provided loans or export credits to the sampled companies. In the deficiency letter, the Commission therefore repeated its request with regard to the financial institutions with a view to maximising their engagement in the investigation by providing the necessary information for the Commission to make findings on the existence and extent of the alleged subsidisation.

(113) Following the deficiency letter, the GOC indicated that it was not authorized to request information from commercial banks. The Commission disagreed with this view. First, it is the Commission’s understanding that the information requested from State-owned entities is available to the GOC for all entities where the GOC is the main or major shareholder. In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the CBIRC.

(114) In the end, the Commission only received information on corporate structure, governance and ownership from EXIM bank but not from any of the other financial institutions, which had provided loans to the sampled companies. Moreover, the Commission did not receive any verifiable company-specific information from any of the banks or financial institutions.

(115) Since it has received no information in relation to most of the banks that provided loans to the sampled companies, the Commission considers that it has not received crucial information relevant to this aspect of the investigation.

(116) Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

(117) In reply, the GOC objected to the application of Article 28(1) of the basic Regulation. It argued that the GOC is not obliged to provide the requested information, that questions should be asked directly to the entities concerned, and not to the GOC in its capacity as investor or shareholder, and that the requested information does not constitute necessary information.

(118) The Commission agrees that answers should be received from the entities directly concerned. However, the Commission requested the GOC for administrative convenience to forward specific questionnaires to all relevant financial institutions, which it did not do. Furthermore, as mentioned in recital (113) above, the Commission maintained its position that as the regulatory body, the GOC is the authority to request answers to the specific questions from the financial institutions that provided financing to the sampled exporting producers.

(119) Finally, the Commission considered the requested information to be crucial to assess the control of the GOC over the conduct of the financial institutions with respect to its lending policies and assessment of risk, where they provided loans to the ACF industry.

(120) The Commission thus concluded that it had to rely partially on facts available when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

(121) For administrative convenience, the Commission requested the GOC to forward a specific questionnaire to Sinosure.

(122) Although a questionnaire reply was received, Sinosure failed to give the supporting documentation requested concerning Sinosure’s corporate governance, such as its Articles of Association. Furthermore, no specific information about the export credit insurance provided to the ACF industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business were received from the GOC or Sinosure.

(123) In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation. Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through export credit insurance.

(124) In its reply, and following final disclosure, the GOC maintained its position that Sinosure did not provide subsidies specific to the ACF industry and that it follows market-oriented principle to carry out relevant insurance business and has no specific preferential treatment concerning the ACF industry. In addition, export credit insurance was not included in the complaint, therefore the information requested was not necessary or crucial for the Commission’s determinations.

(125) As mentioned in recital (8) above, during the investigation, the Commission has the discretion to investigate all information that is relevant to the alleged subsidies and is not limited to the information contained in the complaint. The Commission furthermore notes that more broadly, schemes related to preferential financing and to direct transfer of funds, which encompass also export credit insurance, were included in the complaint and in the Notice of Initiation. The Commission also considered that the information that the GOC provided with regard to Sinosure was incomplete and did not allow the Commission to draw conclusions on crucial parts of the investigation regarding export credit insurance, specifically whether Sinosure is a public body and whether the premiums charged to the sampled companies were market-based. This claim was thus rejected.

(126) The Commission thus concluded that it had to rely partially on facts available for its findings concerning export credit insurance.

(127) The Commission requested the GOC to forward a specific questionnaire to the top 10 producers and distributors of the input materials used in the production of ACF, as well as to any other suppliers of the materials in question, which have provided inputs to the sampled companies. In its reply to the questionnaire, the GOC claimed that it did not have control over the input materials suppliers to provide the confidential information requested in the questionnaire, and that it would be an unreasonable burden for the GOC to coordinate the process with a very significant number of input materials suppliers of the sampled companies.

(128) The GOC did not provide an overview with the names and the ownership structure of Chinese suppliers of input materials under investigation, claiming that this was confidential information. Furthermore, the GOC failed to provide detailed information on most of the characteristics of the domestic market in China of input materials for ACF, among which: the share of SOE in the domestic production and consumption, the size of the domestic market, the State’s and/or SOEs’ pricing policies, actual prices of input materials in the domestic market, and statistics.

(129) Since the Commission received no information from the GOC concerning all elements listed above, among which the domestic market structure, price-setting mechanisms and prices, and shareholding of companies, the Commission considered that it had not received crucial information relevant to the investigation.

(130) The Commission thus concluded that it had to rely partially on facts available for its findings concerning input materials.

(131) According to the subsidy questionnaire, related companies providing inputs and assets for the production process of the sampled exporting producers are required to provide a reply to sections A and E of the questionnaire. However, Yongxin, a related input supplier of the sampled exporting producer Xiamen Xiashun, initially did not provide such a reply. Xiamen Xiashun stated that due to the nature of the relationship, it had no way to compel Yongxin to reply to a questionnaire and that the lack of cooperation by Yongxin should not have any impact on the present investigation.

(132) The Commission noted that Xiamen Xiashun and Yongxin had set up a joint venture company, Yongshun, due to which these companies were related within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447 (30). Furthermore, the joint venture company Yongshun was an important provider of raw materials for the production of ACF by Xiamen Xiashun. Consequently, it should submit a subsidy questionnaire reply, as per instructions of the questionnaire and the deficiency letter of 19 February 2021.

(133) Concerning the lack of impact on the investigation, the Commission noted numerous intercompany transactions between Yongxin and Yongshun, relating to land, raw materials and financing. The Commission thus considered that in the absence of a reply from Yongxin, it was impossible to determine the full extent of the subsidies received by the group.

(134) Therefore, on 15 March 2021 the Commission informed Xiamen Xiashun that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through Yongxin. In response to the Commission’s letter, Xiamen Xiashun requested a hearing with the Hearing Officer on 23 March 2021. The Hearing Officer suggested that Xiamen Xiashun make a further effort with Yongxin to provide the requested information. Finally, a reply to the Commission’s specific questions was received from Yongxin on 7 May 2021, and the data received were verified during a remote cross check on 2 June 2021.

(135) According to the subsidy questionnaire, the sampled companies, as well as their related companies, were requested to provide data and supporting documentation as regards purchases of the LURs, including the LUR certificates and purchase contracts of the original transactions with the Land Bureau, specifying the conditions under which the LURs were received. However, the companies in the Nanshan Group had not provided the requested documentation, making it impossible for the Commission to verify the conditions, including the purchase price, of the LURs.

(136) Also, some of the companies in the Nanshan Group had not filled in the requested tables concerning imported and domestic machinery and therefore not provided the requested information concerning purchases of imported and domestic machinery and the related VAT exemptions and import tariff rebates for the use of imported equipment and technology.

(137) Finally, the cooperation by the parent company of the Nanshan Group, namely Nanshan Group Co., Ltd., was limited in terms of (i) availability of its staff to reply to the questions of the Commission and (ii) the documents provided. For example, documentation concerning purchase of land, attribution of a number of grants and loans was not provided at all, or it was incomplete. This limitation significantly impeded the investigation, notably since many of the companies within the Nanshan Group had received their LURs and financing through Nanshan Group Co., Ltd.

(138) Therefore, by letter of 3 September 2021, the Commission informed Nanshan Group that it might have to resort to the use of facts available in accordance with Article 28(1) of the basic Regulation with respect to the missing information as mentioned in recitals (135) to (137) above.

(139) In their comments to the abovementioned Article 28 letter, the Nanshan Group made several claims as described below.

(140) As regards the LURs, the Nanshan Group claimed that, as the other companies of the group reported their purchases from Nanshan Group Co. Ltd., the price of these intra-company transactions should be used to determine the purchase price of the LURs purchased by Nanshan Group Co. Ltd. from third parties. It also claimed that the prices of intra-company land transfers were established based on the land value provided in the Land Appraisal Report made by an independent evaluator. The Nanshan Group also claimed that, alternatively, other land use transactions by other group companies could be used as proxy in order to determine the price of the transactions of Nanshan Group Co. Ltd.

(141) As regards the requested information concerning purchases of imported and domestic machinery and the related VAT exemptions and import tariff rebates for the use of imported equipment and technology, the Nanshan Group claimed that it had provided fixed assets register for most of the companies. It further claimed that the VAT exemption programme was terminated already in 2009 and that any benefit potentially received in this context would be fully depreciated before the start of the investigation period.

(142) As regards the fact that the cooperation by Nanshan Group Co., Ltd., was only limited, the Nanshan Group argued that it had acted to the best of its ability and that the lack of cooperation was due to the timing of the RCC and other challenging conditions. The Nanshan Group claimed that the Commission should not discard all the information provided by Nanshan Group Co., Ltd., and that the Commission should complement this data by data from comparable land and loan transactions by the company or other companies of the group. The Commission disagreed with the comments concerning the LURs. It is the price of the original transaction with the Land Bureau which determines the amount of subsidisation for the group, not the intra-company transfers of land, and in the absence of the necessary documentation from the company which was party to the original purchase transaction, i.e. Nanshan Group Co., Ltd., it was impossible to determine the full extent of the subsidies received by the group..

(143) As regards the requested information concerning purchases of imported and domestic machinery and the related VAT exemptions and import tariff rebates, the Commission disagreed with the comments made by Nanshan Group. First, although Nanshan Group provided a fixed assets register for some of the group companies, it failed to provide comprehensive data about the VAT exemptions and import tariff rebates that the Commission had requested. Second, the Commission identified exemptions of both VAT and import duty during the investigation period in the sampled companies. These included exemptions for equipment purchased in previous years, but for which the benefit was amortized over the lifespan of that equipment and was thus partially allocated to the investigation period. Thus, the Commission established that the sampled companies still availed itself of benefits under this programme.

(144) Finally, the claim that other transactions by Nanshan Group Co., Ltd., or other companies of the Nanshan Group, could be used as a proxy for transactions concerning LURs or equipment where no sufficient data was provided was unsubstantiated, since none of the companies in the group provided the complete information requested.

(146) According to the information provided by the three sampled groups of exporting producers, 48 financial institutions located within the PRC had provided financing to them. Of these 48 financial institutions, 47 were State-owned. The remaining financial institutions were either privately owned or the Commission was not able to determine whether they were State-owned or privately owned. However, only one State-owned bank filled in the specific questionnaire, despite a request to the GOC that covered all financial institutions which had provided loans to the sampled companies.

(147) The Commission ascertained whether the State-owned banks were acting as public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. In this respect, the applicable test to establish that a State-owned undertaking is a public body is as follows (31): “What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.”

(148) The Commission sought information about State ownership as well as formal indicia of government control in the State-owned banks. It also analysed whether control had been exercised in a meaningful way. For this purpose, the Commission had to partially rely on facts available due to the refusal of the GOC and the State-owned banks to provide evidence on the decision making process that had led to the preferential lending.

(149) In order to carry out this analysis, the Commission first examined information from the State-owned bank that had filled in the specific questionnaire.

(150) Only one State-owned bank, namely EXIM bank, provided a questionnaire reply.

(151) Based on the information received in the questionnaire reply, the Commission established that the GOC held, either directly or indirectly, more than 50 % of the shares in this financial institution.

(152) Concerning the formal indicia of government control of the cooperating State-owned bank, the Commission qualified it as a ‘key State-owned financial institution’. In particular, the notice ‘Interim Regulations on the Board of Supervisors in Key State-owned Financial Institutions’ (32) states that: “The key State-owned financial institutions mentioned in these Regulations refer to State-owned policy banks, commercial banks, financial assets management companies, securities companies, insurance companies, etc. (hereinafter referred to as State-owned financial institutions), to which the State Council dispatches boards of supervisors”.

(153) The Board of Supervisors of the key State-owned financial institutions is appointed according to the ‘Interim Regulations of Board of Supervisors of Key State-owned Financial Institutions’. Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating State-owned bank’s business activities.

(154) In addition to these generally applicable indicia, the Commission found the following with respect to EXIM bank. EXIM bank was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council, as well as the Articles of Association of EXIM bank. According to its Articles of Association, the State directly nominates the management of EXIM bank. The Board of Supervisors is appointed by the State Council in accordance with the ‘Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions’ and other laws and regulations, and it is responsible to the State Council.

(155) The Articles of Association also mention that the Party Committee of EXIM bank plays a leading and political core role to ensure that policies and major deployment of the Party and the State are implemented by EXIM bank. The Party’s leadership is integrated into all aspects of corporate governance.

(156) The Articles of Association also state that EXIM bank is dedicated to supporting the development of foreign trade and economic cooperation, cross-border investment, the One Belt One Road Initiative, cooperation in international capacity and equipment manufacturing. Its scope of business includes short-term, medium-term and long-term loans as approved and in line with the State’s foreign trade and “going out” policies, such as export credit, import credit, foreign contracted engineering loans, overseas investment loans, Chinese government foreign aid loans and export buyer loans.

(157) Furthermore, in its annual report of 2019, EXIM bank stated that it fully implemented all major policies and decisions made by the CPC Central Committee and the State Council.

(158) The Commission also found that State-owned financial institutions, including EXIM bank, have changed their Articles of Associations in 2017 to increase the role of the China Communist Party (‘CCP’) at the highest decision-making level of the banks (33).

(160) This evidence shows that the GOC exercised meaningful control over the conduct of these institutions.

(162) Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC’s industrial policy objectives when taking financial decisions, for the following reasons.

(163) With respect to EXIM bank, its public policy mandate is established in the notice of establishing EXIM bank as well as in its Articles of Association.

(164) At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that “commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State”. Although Article 4 of the Bank Law states that, “commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property”, the investigation showed that Article 4 of the Bank law is applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions.

(165) In addition, Article 15 of the General Rules on Loans provides that “In accordance with the State’s policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas”.

(166) Similarly, Decision No 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. As already explained in Section 3.1 and more specifically in recital (94), projects of the ACF industry belong to the ‘encouraged’ category. Decision No 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations.

(168) The Bank law is legally binding. The mandatory nature of the Five Year Plans and of Decision No 40 has been established above in Section 3.1. The mandatory nature of the CBIRC regulatory documents derives from its powers as the banking regulatory authority. The mandatory nature of other documents is demonstrated by the supervision and evaluation clauses which they contain.

(169) Decision No 40 of the State Council instructs all financial institutions to provide credit support only to encouraged projects and promises the implementation of ‘other preferential policies on the encouraged projects’. On this basis, banks are required to provide credit support to the ACF industry.

(170) Furthermore, even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. In fact, one of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues in companies. In this respect, the Three Year Action Plan of the CBIRC for the years 2020 to 2022 instructs to ‘further implement the spirit embodied in General Secretary Xi Jinping’s keynote speech on advancing the reform of corporate governance of the financial sector’. Moreover, the Plan’s section II aims at promoting the organic integration of the Party’s leadership into corporate governance: ‘we shall make the integration of the Party’s leadership into corporate governance more systematic, standardised and procedure-based […] Major operational and management issues must have been discussed by the Party Committee before being decided upon by the Board of Directors or the senior management.’

(171) Also, the GOC has recently stipulated that even shareholders of financial institutions need to facilitate the exercise of the GOCs control via the institution’s corporate governance framework, as follows: ‘Large shareholders of bank and insurance institutions shall support bank and insurance institutions in establishing an independent and sound corporate governance structure with effective checks and balances, and encourage and support banks and insurance institutions to ensure the organic integration of Party leadership with corporate governance’ (37).

(172) Finally, the performance evaluation criteria of the CBIRC for commercial banks now, notably, take into account how financial institutions ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ (38).

(173) Therefore, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors of the cooperating State-owned bank, who are appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on this normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the ACF industry.

(174) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete loans provided to the sampled exporting producers. In its questionnaire reply, the cooperating State-owned bank explained that it uses sophisticated credit risk assessment policies and models (rating system) when granting the loans at issue. EXIM bank further explained that there is no policy difference regarding the industry in which the borrower operates, the credit situation and capital status, etc.; nevertheless, such factors impact the credit rating assessment and the cost of the risk of the borrower. It may refer to relevant plans and policies in providing loans; however, in determining individual loan projects it applies a market-based assessment.

(175) However, the cooperating State-owned bank refused to provide concrete examples of its credit risk assessment relating to the sampled companies on the ground that the information requested is of internal nature and contains business confidential information that is not permitted to be disclosed even though the Commission had a written consent from the sampled companies waiving their confidentiality rights.

(176) In the absence of concrete evidence of creditworthiness assessments, the Commission therefore examined the overall legal environment as set out above in recitals (161) to (169), in combination with the behaviour of the cooperating State-owned bank regarding loans provided to the sampled companies. The investigation revealed that this behaviour contrasted with the bank’s official stance, as in practice the bank was not acting based on thorough market-based risk assessments.

(177) In the course of the investigation, the Commission found that loans were provided to the three sampled groups of exporting producers at interest rates below or close to the People’s Bank of China (‘PBOC’) Loan Benchmark Rate and below or close to the Loan Prime Rate as announced by the National Interbank Funding Center (‘NIFC) that was introduced on 20 August 2019 (39), regardless of the companies’ financial and credit risk situation. Hence, the loans were provided below market rates when compared to the rate corresponding to the risk profile of the sampled exporting producers.

(178) The Commission therefore concluded that the GOC exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk concerning the ACF industry.

(179) Following final disclosure, the GOC claimed that the Commission did not demonstrate that the cooperating State-owned bank, namely EXIM bank, is a public body and that the GOC exercised meaningful control over EXIM bank. The GOC claimed that the formal links are not sufficient to demonstrate meaningful control by the government and the existence of a public body. Also, the GOC claimed that the Commission did not demonstrate the lack of independence of the management of EXIM bank by arguing that the GOC exercises control over EXIM bank only in supervising the appointment of the management of the bank and its board. Further GOC claimed that the Commission relied excessively on Article 34 of the Chinese Banking law, which it considers to be only a guiding document without specificity to deduct that EXIM or other financial institutions would be vested with public authority.

(180) The GOC further claimed it has not exercised meaningful control over EXIM bank or has been provided with governmental authority. GOC claimed that although Article 34 of the Chinese Bank Law requires that commercial banks act “under the guidance of the industrial policies” of the GOC, this provision should be considered a guiding principle for Chinese banks. Furthermore, the GOC claimed that also Article 15 of the General Rules on loans as well as Decision No 40 are not mandatory but only of a guidance nature. Finally, the GOC disagreed with the assertion that EXIM bank “provided loans at below or close to relevant benchmark rates” and claimed that the Commission has not provided the data to support this statement.

(181) The Commission disagreed with the allegations of the GOC. The Commission did not rely only on “formal links” in order to qualify the cooperating State-owned EXIM bank as a public body but also demonstrated that the GOC exercised meaningful control over the bank for the following reasons.

(182) As explained in recital (168) above, the Commission considered that the Chinese Bank law and Decision No 40 are of a mandatory nature. Furthermore, the findings of this investigation as well as the Commission’s findings in previous investigations concerning the same subsidy programme did not support the claim that banks do not take government policy and plans into account when making lending decisions. For example, the Commission found that the exporting producers benefited from preferential lending at below-market interest rates.

(183) The investigation showed that Article 15 of the General Rules on Loans was actually applied in practice, and that Articles 4, 5 and 41 of the Bank law were applicable subject to Article 34 of the Bank Law, i.e. where the State establishes a public policy the banks implement it and follow State instructions. In fact, while Articles 4 and 5 of the Bank Law are part of Chapter I, which sets the general provisions, Article 34 is part of Chapter IV, which establishes the basic rules governing loans. The wording of Article 34: “commercial banks carry out their loan business upon the needs of national economy and the social development and under the guidance of the State industrial policies”, demonstrates that this provision is not of a guiding nature but has rather a mandatory character and provides a clear instruction to banks to take into account the State industrial policies when carrying out their loan business. The Commission also noted that the Decision No 40 of the State Council instructs all financial institutions to provide credit support only to encouraged projects and promises the implementation of “other preferential policies on the encouraged projects”. While Article 17 of the same Decision requires banks to respect credit principles, the Commission could not establish during the investigation that this was done in practice. To the contrary, loans were provided to the exporting producers irrespective of their financial situation and creditworthiness.

(184) Moreover, as concerns specifically EXIM Bank, it is undisputable that this is a policy bank directly pursuing government policies by its own admission. As explained on its website (40), EXIM is a State-funded and State-owned policy bank directly under the leadership of the State Council and dedicated to supporting, inter alia, China’s foreign trade and implementing the ‘going global’ strategy. The Board of Directors (41), the Board of Supervisors (42), and top executives (43) of EXIM Bank contain members with high ranking in the CCP and/or representing a Ministry.

(185) On that basis, the Commission maintains its position that the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the ACF industry as described in the recital (173) above. This is exemplified in recital (170) above, which clearly indicates that the GOC intervenes in all major decisions taken by the bank’s management. This shows that the normative framework did not leave any margin of manoeuvre to the managers and supervisors of the bank as to whether to follow this framework or not with respect to the sampled exporting producers, thus putting the management of that bank in a position of dependence.

(186) Finally, as mentioned in recital (177), in the course of the investigation, the Commission found that loans were provided to the three sampled groups of exporting producers at interest rates below or close to the People’s Bank of China (‘PBOC’) Loan Benchmark Rate and below or close to the Loan Prime Rate, regardless of the companies’ financial and credit risk situation. Therefore, considering the risk profile of the sampled exporting producers described in Section 3.4.2.3 below and that, according to the risk analysis performed by the Commission, the exporting producers should have received a lower credit rating and should thus have paid interest rates significantly above the risk-free rate, the Commission concluded that the loans at issue were provided below market rates Due to the sensitive nature of the data the detailed information of these loans can be disclosed to only the respective exporting producers.

(187) The Commission therefore concluded that the GOC has exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk concerning the ACF industry.

(188) The Commission established that the cooperating State-owned bank implemented the legal framework set out above in the exercise of governmental functions with respect to the ACF sector. Therefore, it was acting as public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(189) As set out in recital (146) above, none of the other State-owned financial institutions, which provided loans to the sampled companies, replied to the specific questionnaire. The GOC provided some information on the ownership of a number of banks, but not on their governance structure, risk assessment or examples relating to specific loans to the ACF industry.

(190) Therefore, in line with the conclusions reached in Section 3.2.1, the Commission decided to use facts available to determine whether those State-owned financial institutions qualify as public bodies.

(191) In previous investigations (44), the Commission established that the following banks, which had provided loans to the sampled groups of exporting producers in the investigation at hand, were partially or fully owned by the State itself or by State-held legal persons: Agricultural Bank of China, Bank of Beijing, Bank of China, Bank of Communications, Bank of Jiangsu, Bank of Kunlun, Bank of Nanjing, Bank of Ningbo, Bank of Qingdao, Bank of Shanghai, Bank of Tianjin, Bank of Yantai, CCB, China Bohai Bank, China CITIC Bank, China Construction Bank, China Development Bank, China Everbright Bank, China Guangfa Bank, China Industrial Bank, China Industrial International Trust Limited, China Merchants Bank, China Merchants Bank Financial Leasing Co., Ltd., China Minsheng Bank, Chongqing Rural Commercial Bank, Daye Trust Co., Ltd., Dongying Bank, EverGrowing Bank, Fudian Bank, Guangdong Development Bank, Guosen Securities Co., Hang Fung Bank, Ltd., Hangzhou Bank, Hankou Bank, Hengfeng Bank Co., Ltd., Huaxia Bank, Hubei Bank, Industrial and Commercial Bank of China (ICBC), Minsheng Securities Co.,Ltd., Postal Savings Bank, Qilu Bank, Shanghai Pudong Development Bank, Shanghai Rural Commercial Bank, Shenyang Rural Commercial Bank, Sinotruk Finance Co. Ltd. and Zheshang Bank. Since no information has been provided indicating otherwise, the Commission maintained the same conclusion in the present investigation.

(193) The Commission further established, in the absence of specific information from the financial institutions at issue indicating otherwise, the GOC’s ownership and control based on formal indicia for the same reasons as set out above in section 3.4.1.3. In particular, based on facts available, managers and supervisors in the non-cooperating State-owned financial institutions would appear to be appointed by the GOC and be accountable to the GOC in the same manner as in the cooperating State-owned bank.

(194) With regard to the exercise of control in a meaningful manner, the Commission considered that the findings concerning the cooperating State-owned financial institution can be considered representative also for the non-cooperating State-owned financial institutions. The normative framework analysed in section 3.4.1.3 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner as for the cooperating State-owned bank.

(195) Following final disclosure the GOC claimed the insufficiency of the Commission’s arguments concluding that all State-owned financial institutions also constituted public bodies. The GOC argued that the Commission relied on previous anti-subsidy cases and its own conclusions with respect to the State-owned financial institutions and lacked to perform a case-by-case analysis giving particular relevance to the specific circumstances of each case and with respect to each of the financial institutions. The GOC further argued that the Commission did not provide sufficient proof to determine the existence of meaningful control over the State-owned financial institutions, and relied merely on formal links constituting of ownership and control.

(196) In this respect, the Commission recalled that in the absence of cooperation from the other State-owned banks than EXIM, the Commission had to rely on facts available. As already mentioned in its questionnaires, and in the absence of any new information provided by the GOC, the Commission concluded that the information from previous investigations, combined with formal indicia of control and additional findings of the investigation itself regarding EXIM bank and regarding the actual conduct of the banks towards the exporting producers constituted the best facts available in this case. In any event, the normative framework analysed in section 3.4.1.3 above applies to all banks in an identical manner. Furthermore, the GOC failed to put forward any evidence or argument to rebut the Commission’s findings concerning the fact that the other State-owned banks which provided loans to the sampled companies are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation. The Commission thus maintained its position.

(197) In light of the above considerations, the Commission established that all State-owned Chinese financial institutions that provided financing to the three sampled groups of cooperating exporting producers are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(198) In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established that they would be considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in Section 3.5.1.2 below. Thus, their conduct would be attributed to the GOC in any event.

(199) Overseas-Chinese Banking Corporation, Limited was considered to be privately owned, based on the findings established in previous anti-subsidy investigations (45) and complemented by publicly available information. The Commission analysed whether this financial institution had been entrusted or directed by the GOC to grant subsidies to the ACF sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(200) According to the WTO Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body (46). In both cases, the government uses a private body as a proxy to make the financial contribution, and “in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement” (47). At the same time, Article 3(1)(a)(iv) does not allow Members to impose countervailing measures to products “whenever the government is merely exercising its general regulatory powers” (48) or where government intervention “may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market” (49). Rather, entrustment or direction implies “a more active role of the government than mere acts of encouragement” (50).

(201) The Commission noted that the normative framework concerning the industry mentioned above in recitals (161) to (168) applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the Bank Law and the various orders of the CBIRC cover all Chinese-funded and foreign-invested banks under the management of the CBIRC.

(202) Furthermore, the majority of loan contracts with private financial institutions had similar conditions as the contracts with State-owned banks, and the lending rates provided by the private financial institutions were similar to the rates provided by the State-owned financial institutions.

(203) In the absence of any divergent information received from the private financial institutions, the Commission concluded that, in so far as the ACF industry is concerned, all financial institutions (including private financial institutions) operating in China under the supervision of the CBIRC have been entrusted or directed by the State in the sense of Article 3(1)(a)(iv), first indent of the basic Regulation to pursue governmental policies and provide loans at preferential rates to the ACF industry.

(204) Following final disclosure, the GOC claimed that the Commission failed to demonstrate entrustment or direction by the GOC, in particular a link between the government and the specific conduct of all financial institutions. The GOC argues that exercising its general regulatory powers by giving a mere guidance or encouragement are not sufficient to show entrustment and direction. In addition, the GOC claimed that the Commission failed to its duty to conduct such an analysis for each entity.

(205) The Commission disagreed with this view. Since the normative framework explained in recitals (161) to (173), which applies to all banks in China i.e. whether publicly-owned or private, is legally binding as further confirmed in recitals (182) and (183), it does not amount to a mere encouragement or guidance by the government. The Commission already established in recital (169) above that Decision No 40 instructs all financial institutions to provide credit support only to encouraged projects even though Article 17 of the same Decision also asks the bank to respect credit principles. Furthermore, the Commission established in recital (185) that the GOC relied on this normative framework in order to exercise control in a meaningful way over the financial institutions not leaving them any margin of manoeuvre as to whether to implement it or not. Therefore, there is a clear link between the GOC and the specific conduct of the private banks, which demonstrates entrustment and direction by the GOC.

(206) In addition, the Commission recalled that in the absence of cooperation from the private banks, it had to rely on facts available. Since there was partial cooperation from only one State-owned bank, the Commission used the information available for this bank, which was proven to be a public body, and compared it with the lending conditions offered by the non-cooperating private banks. Moreover, the RCCs with the sampled companies did not reveal any significant differences between loan conditions or rates provided by the private financial institutions and those provided by State-owned financial institutions. The fact that there was an overlap in rates shows that the private banks also provided loans below market terms in compliance with the normative framework referred to above. Therefore, the GOC’s claim that the Commission failed to its duty to conduct such an analysis for each entity is unfounded.

(207) After final disclosure, the Nanshan Group also argued that since financial institutions varied their rates, conditions and types of products depending on the company to which they extended financing, this indicated that they are not being entrusted and directed by the State to offer specific or preferential lending conditions, but rather provide financing following market terms and the financial position of their customer.