Commission Implementing Regulation (EU) 2024/2211 of 5 September 2024 imposing a definitive anti-dumping duty on imports of oxalic acid originating in India and the People’s Republic of China following an expiry review pursuant to Article 11(2) of Regulation (EU) 2016/1036 of the European Parliament and of the Council

COMMISSION IMPLEMENTING REGULATION (EU) 2024/2211 of 5 September 2024 imposing a definitive anti-dumping duty on imports of oxalic acid originating in India and the People’s Republic of China following an expiry review pursuant to Article 11(2) of Regulation (EU) 2016/1036 of the European Parliament and of the Council

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 11(2) thereof,

Whereas:

(1) By Implementing Regulation (EU) No 325/2012 (2), the Council imposed anti-dumping duties on imports of oxalic acid, originating in India and the People’s Republic of China (‘PRC’) (‘the original measures’). The investigation that led to the imposition of the original measures will hereinafter be referred to as ‘the original investigation’.

(2) Following the judgment of the General Court of 20 May 2015 (3), the measures were annulled in so far as they concerned the Chinese exporting producer Yuanping Changyuan Chemicals Co. Ltd (‘Yuanping’). Following the implementation of that judgment, the European Commission (‘the Commission’) re-imposed anti-dumping measures on imports of the product concerned by Yuanping with effect from 30 November 2016 (4).

(3) By Implementing Regulation (EU) 2018/931 (5), the Commission extended for another five years the definitive anti-dumping measures on imports of oxalic acid originating in India and the People’s Republic of China following an expiry review (the ‘previous expiry review’).

(4) The anti-dumping duties currently in force are between 22,8 % to 43,6 % and 14,6 % and 52,2 % on imports from India and the People’s Republic of China (‘countries concerned’) respectively.

(5) Following the publication of a notice of impending expiry of the anti-dumping measures in force (6), the Commission received a request for a review pursuant to Article 11(2) of the basic Regulation.

(6) The request for review was submitted on 30 March 2023 by Oxaquim SA (‘Oxaquim’ or ‘the applicant’), with the support of WeylChem Lamotte S.A.S., which together constitute the Union industry of oxalic acid in the sense of Article 5(4) of the basic Regulation. The request for review was based on the grounds that the expiry of the measures would be likely to result in continuation of dumping and continuation and/or recurrence of injury to the Union industry.

(7) Having determined, after consulting the Committee established by Article 15(1) of the basic Regulation, that sufficient evidence existed for the initiation of an expiry review, on 30 June 2023, the Commission initiated an expiry review with regard to imports into the Union of oxalic acid originating in the countries concerned on the basis of Article 11(2) of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (7) (‘the Notice of Initiation’).

(8) The investigation of continuation or recurrence of dumping covered the period from 1 April 2022 to 31 March 2023 (‘review investigation period’ or ‘RIP’). The examination of trends relevant for the assessment of the likelihood of a continuation or recurrence of injury covered the period from 1 January 2020 to the end of the RIP (‘the period considered’).

(9) In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. In addition, the Commission specifically informed the applicant, other known Union producers, the known producers in India and the PRC and the authorities of India and the PRC, known unrelated importers and users about the initiation of the expiry review and invited them to participate.

(10) Interested parties had an opportunity to comment on the initiation of the expiry review and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. No interested party requested a hearing.

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

(15) One exporting producer in India provided the requested information and agreed to be included in the sample. In view of that, the Commission decided that sampling was not necessary. One additional exporting producer in India came forward afterwards, therefore, as sampling was deemed not necessary, the Commission invited also the second exporting producer to fill in the questionnaire.

(16) No company from the PRC came forward. The Commission informed the Chinese authorities by means of a Note Verbale on 25 October 2023 that it had not received any cooperation from exporting producers in the PRC. It therefore intended to base its findings for the exporting producers in the PRC on the facts available in accordance with Article 18 of the basic Regulation. No comments were received.

(17) The Commission sent a questionnaire concerning the existence of significant distortions in the PRC within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the PRC (‘GOC’).

(18) The Commission sent questionnaires to the two known Union producers, to all known unrelated importers and to two exporting producers in India. The same questionnaires had also been made available online (8) on the day of initiation.

(19) Questionnaire replies were received from two Union producers, one user and two exporting producers in India. One Union producer, WeylChem Lamotte S.A.S. (‘WeylChem’), submitted an incomplete questionnaire reply. The Commission sent a deficiency letter requesting additional information. WeylChem informed the Commission that it was unable to reply to the deficiency letter and host a verification visit.

(21) On 5 June 2024, the Commission disclosed the essential facts and considerations on the basis of which it intended to propose the extension of anti-dumping measures on imports of oxalic acid originating in India and the People’s Republic of China.

(22) Comments were received from the applicant, Oxaquim, and from the Indian exporting producer, Star Oxochem Pvt Ltd.

(23) Following a claim concerning an adjustment, an additional disclosure was made to Star Oxochem Pvt Ltd on 19 June 2024. The company provided no further comments.

(24) The product under review is the same as in the original investigation and previous expiry review, namely oxalic acid, whether in dihydrate (CUS number 0028635-1 and CAS number 6153-56-6) or anhydrous form (CUS number 0021238-4 and CAS number 144-62-7) and whether or not in aqueous solution, currently falling under CN code ex 2917 11 00 (TARIC code 2917 11 00 91) (‘the product under review’).

(25) Oxalic acid is used in a wide range of applications, for example as a bleaching agent in the textile and wood industries, reducing agent in the production of pharmaceutical products and as a material used in the extraction and purification of rare earth metals and elements.

(26) In the original investigation, it was found that there are two types of oxalic acid: unrefined oxalic acid and refined oxalic acid. Refined oxalic acid, which was produced in the PRC but not in India, is manufactured through a purification process of unrefined oxalic acid, the purpose of which is to remove iron, chlorides, metal traces and other impurities. In the absence of cooperation from the PRC it was assumed for the current review investigation that exporting producers in the PRC manufactured and exported refined oxalic acid as in the original investigation.

(27) The product concerned by this investigation is the product under review originating in India and the PRC.

(29) These products are therefore considered to be like products within the meaning of Article 1(4) of the basic Regulation.

(30) During the review investigation period, imports of oxalic acid from PRC and India continued albeit at lower volumes than in the investigation period of the original investigation (from 1 January to 31 December 2010) and at similar level as in the previous expiry review period (from 1 April 2016 to 31 March 2017). According to Eurostat, imports of oxalic acid from PRC and India accounted for about 17 % of the Union market in the review investigation period compared to 16 % during the previous expiry review. In absolute terms imports decreased from 7 969 tonnes during the original investigation period to 1 658 tonnes in the last expiry review and further to 1 565 tonnes in the current RIP.

(31) There are four known producers of oxalic acid in India, of which two provided a reply to the questionnaire. On the basis of the information at its disposal (9), the Commission estimated total production in India at around 40 000 tonnes. Total exports from India are estimated at around 5 700 metric tonnes, based on data provided in review request, cross checked with data available in Global Trade Atlas (GTA).

(32) The imports from India to the Union in the RIP amounted to around 400 tonnes, based on Eurostat data.

(33) Imports from India are also subject to the 6,5 % CCT duty (10).

(34) The Commission first examined whether the total volume of domestic sales for each of the two cooperating Indian companies was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represented at least 5 % of its total export sales volume of the product under review to the Union during the review investigation period. On this basis, the total sales of the two cooperating exporting producers of the like product on the domestic market were found representative.

(35) The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union.

(36) The Commission then examined whether the domestic sales by each cooperating exporting producer for each product type that is identical or comparable with a product type sold for export to the Union were representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales of a product type are representative if the total volume of domestic sales of that product type to independent customers during the review investigation period represents at least 5 % of the total volume of export sales of the identical or comparable product type to the Union. The Commission established that the sales of the two cooperating exporting producers were representative.

(37) The Commission next defined the proportion of profitable sales to independent customers on the domestic market for each product type during the review investigation period in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(39) In respect of the two cooperating Indian companies in this investigation, it was established that both fulfilled the criteria above. Therefore, the normal value was based on the weighted average of the prices of all domestic sales of that product type during the review investigation period.

(40) The two exporting producers exported the product under review directly to independent customers in the Union. Therefore, the export price was the price actually paid or payable for the product under review when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(41) The Commission compared the normal value and the export price of the two exporting producers on an ex-works basis as established above.

(42) Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport, insurance, handling, loading and ancillary costs, packing, discounts, credit costs, bank charges and commissions paid by the cooperating exporting producer. Each of the two Indian cooperating exporting producers received the detailed calculations of the adjustments made in the specific disclosure.

(43) Following final disclosure, Star Oxochem Pvt Ltd, claimed that one adjustment for a transport allowance should not have been deducted from the export price.

(44) The Commission assessed the claim and revised the dumping calculation, which was disclosed to the exporter in question. No further comments were received.

(45) In the context of Article 2(10)(b) of the basic Regulation, one cooperating producer indicated that they had benefitted from the Indian Merchandise Exports from India Scheme (‘MEIS’) (11). The MEIS is a scheme of the government of India that provides an incentive in the form of a duty credit scrip to exporters to compensate for losses on the payment of duties. The incentive is paid as a percentage of the realized free on board (‘FOB’) value (in free foreign exchange) for specific goods going to specific markets. This export incentive is not a permissible adjustment for price comparison. It does not qualify as a duty drawback scheme for which an adjustment under Article 2(10)(b) of the basic Regulation could be considered, because Article 2(10)(b) only allows for adjustments to the normal value and not to the export price. In addition, the value of the scrip is not calculated in relation to the amount of import duties that would be incorporated in exports of downstream products, but, instead, is determined as a percentage of the FOB value of the exported merchandise. Additionally, irrespective of the calculation of the value of the incentive, the operation of the system does not lead to a situation where import charges borne by materials physically incorporated in the domestic sales of the like product are refunded or not collected upon exportation of the same production to the Union. For all the above reasons, no adjustment to the normal value or export price could be accepted. In any event, regardless of this or any other adjustment being made, there would be dumping above de minimis.

(46) For the two cooperating exporting producers, the Commission compared the weighted average normal value of the like product with the weighted average export price of the corresponding type of the product under review, in accordance with Article 2(11) and (12) of the basic Regulation.

(47) On this basis, since the cooperating exporting producers account for the bulk of the Indian exports during the RIP, the weighted average dumping margin expressed as a percentage of the CIF Union frontier price, duty unpaid, was [5 %-10 %] countrywide. It was therefore concluded that dumping continued during the review investigation period.

(48) As mentioned in recital (17), none of the exporters/producers from PRC cooperated in the investigation. Therefore, the Commission informed the authorities of PRC that the Commission might apply Article 18 of the basic Regulation concerning the findings with regard to the PRC. The Commission did not receive any comments or requests for an intervention of the Hearing Officer in this regard.

(49) Consequently, in accordance with Article 18 of the basic Regulation, the findings in relation to the likelihood of continuation or recurrence of dumping were based on facts available, in particular publicly available information such as official company websites, available statistics, in particular Global Trade Atlas (‘GTA’) databases, information in the request for review, and information obtained from cooperating parties in the course of the review investigation (namely, the applicant and the sampled Union producers).

(50) Given the sufficient evidence available at the initiation of the investigation tending to show, with regard to the PRC, the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation, the Commission initiated the investigation on the basis of Article 2(6a) of the basic Regulation.

(51) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. In addition, in point 5.3.2 of the Notice of Initiation, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union. No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation was received within the deadline. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in the PRC.

(52) In point 5.3.2 of the Notice of Initiation, the Commission also specified that, in view of the evidence available, it might need to select an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks. The Commission further stated that it would examine other possibly appropriate countries in accordance with the criteria set out in first indent of Article 2(6a) of the basic Regulation.

(53) On 1 March 2024, the Commission informed interested parties by a note on the relevant sources (‘the Note’) it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of oxalic acid. In the absence of cooperation from the Chinese exporting producers, the Commission identified the main factors of production based on the information contained in the request and provided by one Union producer. In addition, the Commission informed interested parties that it had selected a representative country, namely Colombia, as an appropriate representative country. It also informed interested parties that it would establish selling, general and administrative costs (‘SG & A’) and profits based on available information for the company Sucroal SA, a producer of the product in the same sector as oxalic acid, namely citric acid in Colombia.

(54) The Commission received comments only from one Union producer. These comments were addressed in recital (214).

(55) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’.

(56) However, according to Article 2(6a)(a) of the basic Regulation, ‘in case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits’ (‘administrative, selling and general costs’ is refereed hereinafter as ‘SG & A’).

(57) As further explained below, the Commission concluded in the present investigation that, based on the evidence available, and in view of the lack of cooperation of the GOC and the exporting producers, the application of Article 2(6a) of the basic Regulation was appropriate.

(59) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list.

(60) However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) of the basic Regulation must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provide the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

(61) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

(62) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’) (12), which contains evidence of the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as selected sectors (such as the chemical sector). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report concerning China was placed in the investigation file at the initiation stage. The request for an expiry review also contained some relevant evidence complementing the Report.

(63) The GOC did not comment or provide evidence supporting or rebutting the existing evidence on the case file, including the Report, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

(64) In order to show the significant distortions with regard to prices and costs in the PRC, the applicant relied on the evidence contained in the Report, as well as on Commission findings in several recent investigations concerning the chemical sector in the PRC.

(65) The applicant first addressed specific interference in the costs of the raw materials and other inputs used to manufacture oxalic acid. Indeed, the production of oxalic acid is carried out starting with five different raw materials, namely: carbohydrates (mainly sugar and starch derived from corn starch); nitric acid; sulfuric acid; oxygen; and hydrogen peroxide.

(66) The applicant submitted that significant distortions are found in each relevant sector as follows.

Carbohydrates (sugar, corn and corn starch)

(67) The applicant indicated that China holds large amounts of corn stockpiles allowing the government to artificially lower or raise the prices of this commodity by purchasing or selling large amounts of corn on the market. Even though China started tackling the problem of excessive corn reserves in 2016, it still holds very large stockpiles, which have a distortive effect on prices (13).

(68) Furthermore, the applicant claimed that the government is controlling the various aspects of the entire corn value chain, including subsidies on the production of corn (14) and supervision of the processing (15). There are also investment control measures in place in the PRC (16).

(69) The applicant also indicated that China’s 14th Five-Year Plan for National Economic and Social Development (‘14th FYP’) follows the previous 13th FYP in setting out the goals to be achieved in the Chinese agricultural sector, including the production and regulation of sugar and corn. These plans were adopted at the central government level but are implemented at local level by provincial governments and authorities.

(70) The 14th FYP continues central and localised economic planning in the Chinese agricultural sector covering 2021 to 2025 with the goal of continuing to ‘deepen the structural reform of the agricultural supply side, strengthen quality guidance, and promote the revitalization of rural industries’ (17).

(71) In order to achieve this ‘deep agricultural restructuring’, the 14th FYP sets out several objectives in its agricultural sector, among which the goals to optimize the layout of agricultural production, build a superior agricultural product production industry belt, improve the agricultural support and protection systems, improve the benefit compensation mechanism for major grain-producing areas, build a new agricultural subsidy policy system, and improve the minimum grain purchase price policy. Such objectives are further implemented at central level by, for instance, the Development Plan for Digital Agriculture and Rural Areas (2019-2025); a white paper on food security in China (18); and the 2020-2025 National Plan for Rural Industrial Development (19).

(72) The Chinese central government regularly calls for interventionist measures and practices to regulate the output, supply and demand of corn in the country. In April 2022, Chinese Vice Premier Hu Chunhua, and member of the Political Bureau of the Communist Party of China Central Committee, called for ‘solid efforts’ by agricultural producers to boost corn production to stabilize the output and supply of the crop (20). Specifically, he stated that corn is not only an important staple grain but also a ‘vital raw material for many industrial products’, oxalic acid being one such product.

(73) The central state-owned enterprises (‘SOEs’) and their subsidiaries under the supervision of the State-owned Assets Supervision and Administration Commission (‘SASAC’) operating in the agriculture sector and related sectors are, among others: the China Agriculture Development Group; COFCO Corporation; the China Grain Storage Group; China Salt Industry Group; Sinochem; China National Chemical Group; and the China National Seed Group (21).

(74) China also prohibits foreign entities from being controlling shareholders in enterprises engaged in the cultivation of corn (22). The export of corn is also subject to export quota licences which are managed by the Chinese National Development and Reform Commission (‘NDRC’) and Ministry of Commerce (‘MOFCOM’) and are allocated only to state trading enterprises (23).

(75) The production of corn in China is therefore characterized by interventionist measures taken at national, regional and provincial levels under detailed plans that distort the forces of supply and demand at the basic level of production. There is also a significant presence of Chinese SOEs in the sector. The applicant stressed out that similar interventionist measures and political actions distort the prices of corn to industrial processers at the level of starch and subsequently oxalic acid.

Basic intermediate chemicals

(76) As mentioned above, the production of oxalic acid requires the use of several basic intermediate chemicals including nitric acid, sulfuric acid, oxygen and hydrogen peroxide. The applicant argued that the involvement of Chinese SOEs in its chemical sector is present throughout the production chain, starting with the basic raw materials and ending with oxalic acid production, creating significant distortions in prices and production volumes from basic intermediate chemicals. Both public and privately owned enterprises in the chemical sector are also subject to policy supervision and guidance. As a result, the applicant pointed out that the Chinese government is able to exercise considerable control over basic intermediate chemicals and so the final pricing of oxalic acid made in China resulting in distortions that are carried over into export markets including that of the Union.

(77) The applicant pointed out that this control is achieved through Chinese government agencies such as SASAC, which is the official representative owner of state-owned assets as well as the supervisory organ of non-financial central SOEs which, as of March 2019, comprise 96 enterprises and their subsidiaries (24).

(78) For example, the applicant reported that Chinese SOE giant, Sinopec, through its subsidiary Nanjing Chemical Industrial Corporation is a ‘national production base’ of inorganic chemical, organic chemical, and fine chemical, including sulphuric acid and nitric acid. Through its subsidiary, Hunan Jianchang Petrochemical Co. Ltd., it is also one of the country’s largest suppliers of hydrogen peroxide.

(79) Sinopec has underlined its adherence to the party principles in numerous instances (25). The Sinopec Group, fully controlled by the Chinese central government, admits that its production activities are substantially influenced by the central government’s control over the Chinese economy (26).

(80) The applicant also observed that distortions in the prices and supply of chemical intermediates are caused also by the massive over-capacities in the Chinese chemical sector, which was confirmed by the China Report (27).

(81) Other forms of planning at local level include, for example, Hebei’s 13th FYP on the development of the petrochemical industry, a province that is known for its production of chemical intermediates. The plan, in accordance with the national industrial policy and in accordance with the requirements of Hebei’s list of industry restrictions and eliminations, strictly implements the sector entry conditions, controls any new production capacity project regarding sulphuric acid, among others (28).

Energy – Electricity

(82) The applicant explained that the production of oxalic acid requires a considerable amount of energy, in the form of electrical power, to drive the production process and chemical reactions.

(83) As indicated in the China Report (29), the electricity market in China is also characterised by strong involvement of SOEs in various stages of the supply chain. Around 50 % of the generating capacity is state-owned, whereas the entire transmission grid is owned by two SOEs. The strong state presence extends to the entire energy sector and out of over one hundred centrally owned SOEs currently being overseen by SASAC, 21 are in the energy sector.

(84) The applicant also referred to several aspects of Chinese government policies which also serve to distort electricity prices (30). The first is that SERC, China’s independent electricity regulator, does not set electricity prices. Rather, prices are set by the NDRC, the government authority that also has authority over industrial policies. The second is that while electricity is one of the main inputs in the manufacture of oxalic acid, the prices of electricity are not market-based in the PRC and are also affected by significant distortions (through central price-setting, price differentiation and in direct power purchase practices) (31).

Energy – Gas

(85) The applicant argued that the production, supply, distribution and pricing of natural gas in China are highly regulated and controlled by the Chinese state leading to distortions through several mechanisms. This creates significant distortions in the functioning of the Chinese domestic market for the supply of energy in this form as well downstream substances manufactured with the benefit of these distortions (32).

(86) As part of the general 13th FYP, the Chinese government adopted a specific sectoral plan for Chinese Natural Gas Development (33). As mentioned in the China Report, the prices for domestic natural gas are regulated by the NDRC, which publishes the prices applicable to each province in Notices, and then the local price bureaus publish a corresponding notice at the local level implementing the prices decided by the central NDRC.

(87) As indicated in the China Report, China’s natural gas industry is also heavily dominated by SOEs (34).

Energy prices – Generally

(88) In summary, the applicant indicated that the energy prices in China are not market-based and prices are still largely controlled by the state or adopted by provincial and local governments to provide preferential energy prices to local chemical producers enabling them to benefit from lower production costs. China’s formal price controls for natural gas, refined oil, electricity and transportation services result in some of the most significant distortions in China’s economy. These goods and services constitute factors in the market that influence costs of production and the final prices of industrial goods, particularly in resource-intensive industries where significant amounts of raw materials are required, such as the production of oxalic acid (35).

Production of oxalic acid

(89) After analyzing the above-mentioned sectors, the applicant further addressed the production of oxalic acid in China by recalling the following elements resulting in significant distortions.

(90) First, the chemical sector, including the oxalic acid subsector, is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities.

(91) The GOC and the Chinese Communist Party (‘CCP’) maintain structures that ensure their continued influence over enterprises, and in particular SOEs. The sheer scale of the production capacity of the main Chinese oxalic acid producers suggests some aspects of GOC and CCP control over their operations. Shandong Fengyuan Chemical Co., Ltd, for example, describes itself as ‘one of the leading enterprises in the oxalic acid industry in Asia, [with] a capacity of 105 000 mts of industrial oxalic acid and 15 000 mts of refined oxalic acid and oxalate’ (36). Alone, this Chinese company has almost five times the annual production capacity of the Union industry. Given the size of the capital investment requested to set up this enormous operation, the applicant found it likely for the company to have links to the central or local GOC and CCP.

(92) Shandong Fengyuan Chemical Co., Ltd.’s website also reports that the company is recognized as a national high-tech enterprise and enterprise technology centre of Shandong Province. In September 2011, the Shandong Province Science and Technology Department of the provincial government recognised the company’s R & D centre as being ‘Shandong’s oxalic acid engineering technology research centre’. The company has also been awarded the honorary titles of ‘the 14th new leading enterprise of China’s economy’, ‘Shandong Province Fumin Xinglu meritorious enterprise’, and ‘Shandong Province national unity and progress demonstration enterprise’ again illustrating the links between the company and the provincial government.

(93) Similarly, the applicant reported that Tongliao Jinmei Chemical Company, located in the Inner Mongolian region, has an estimated annual production capacity of 100 000 tonnes for oxalic acid, the scale of the investment and capital required to build such a large plant pointing to the existence of similar possible links, influences and control to the central or local GOC and CCP.

(94) Second, the state presence in oxalic acid companies also allows the authorities to interfere with prices and/or costs. Indeed, rules on setting up CCP organisations in each company apply also to producers of oxalic acid and the suppliers of their inputs (37).

(95) Tongliao Jinmei is located in Inner Mongolia, a region which has in the past been discovered to impose governmental links through the party organisation even on ostensibly private companies. In a recent investigation, the Commission uncovered that an alleged private company in that region was required to establish a party branch inside the company. Later, the local committee formally ‘approved’ the establishment of the Party Committee of the company and related subsidiaries were also required to set up a second-level party committee with related branches (38).

(96) Specifically in the oxalic acid sector, even if the level of state ownership is relatively low, a substantial degree of policy supervision by the GOC persists. For example, Shandong Fengyuan Chemical Co., Ltd’s website reported in March 2023 that: ‘Accompanied by staff of Zaozhuang science and technology bureau, financial office, economic information committee, People’s Bank, etc. the Deputy mayor of Zaozhuang, Huo Gaoyuan inspected the development of industrial economy of Taierzhuang District. Our company was also visited. Accompanied by chairman of the board Zhao Guanghui, the leaders visited the plant and listened to the report on situation, the process of the IPO and the plan of our company’s development. While [Chairman] Huo praised the economic achievements and broad prospects of our company, he also made much higher demands on production safety, personnel training and technological innovation of our company’.

(97) Third, the GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces.

(98) The oxalic acid industry is considered by the Chinese government to be a strategically important one because it is increasingly used in China for the development of substances used in extracting or smelting rare earth elements (39). Demand for rare metal elements is surging across end-use industries such as automotive and electronics.

(99) According to its website, Shandong Fengyuan Chemical Co., Ltd is also recognized as a national high-tech enterprise and enterprise technology centre of Shandong Province (40). It seems that this status qualifies the company for China’s High and New Technology Enterprise (HNTE) programme that offers qualified company locations a 15 % (versus the standard 25 %) corporate tax rate regardless of the company’s investment type. HNTE status is granted by provincial tax authorities for company facilities located within those provinces, in this instance apparently Shandong Province (41).

(100) Recognitions of these kinds often also point towards eligibility to receive substantial amounts of central and provincial financial support in the form of subsidies (42).

(101) Other distortions arise from the benefits conferred under central and local government programmes for industrial or chemical parks and increasingly so-called Hi-Tech Industrial Development Areas. According to the companies’ websites, Shandong Fengyuan is located in the Shandong Taierzhuang Economic Development Zone, in the Shandong province; Qingzhou Peng Bo Chemicals Co., Ltd is located in the Econonic Development Zone Qingzhou City, in the Shandong province; and Shijiazhuang Taihe Chemicals Co. Ltd. is located in the Douyu Industrial District Shijiazhuang, in the Shijiazhuang province.

(102) Chemical producers located in these kinds of industrial parks are also normally eligible for governmental support, as all companies located in this park are subject to the Notice on Standardized Management of Chemical Industry Concentration Areas, in order to Strengthen the Province’s Chemical Industry Parks (43).

(103) Fourth, much like in any other sector in the Chinese economy, the chemical sector is subject to the distortions resulting from the discriminatory application or inadequate enforcement of Chinese bankruptcy, corporate and property rules. Indeed, the Commission’s consideration in the China Report concerning Chinese bankruptcy and property laws appear to be fully applicable also in the oxalic acid sector (44).

(104) Fifth, wage costs are distorted in the chemical sector as well, both directly (when producing the product under review or the main inputs), as well as indirectly (when having access to capital or inputs from companies subject to the same labour system) (45).

(105) Sixth, oxalic acid producers have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the state. The financial system of the PRC is dominated by the State-owned commercial banks.

(106) The GOC has also recently clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. 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. The China Banking and Insurance Regulatory Commission (CBIRC) issued on 28 August 2020, a Three-year action plan for improving corporate governance of the banking and insurance sectors (2020-2022) (46). The Plan 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’.

(107) The applicant submitted that the above-mentioned distortions are systemic. Therefore, the involvement of Chinese SOEs throughout the production chain creates significant distortions in prices and production volumes.

(108) In order to produce oxalic acid, a broad range of inputs is needed including sugar/corn/starch, intermediate chemicals and large amounts of energy and water. Since there are restrictions imposed, for example, on the import of corn, the distortions in the form of price suppression for basic intermediate chemicals and, obviously the need to procure energy and water locally, Chinese oxalic acid manufacturers source all their inputs in China. When the producers of oxalic acid purchase/contract upstream raw materials to produce the inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to systemic distortions.

(109) As a consequence, not only are the domestic sales prices of oxalic acid not appropriate for use, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention. This means, for instance, that an input that in itself was produced in the PRC by combining a range of factors of production is exposed to significant distortions. The same applies for inputs to inputs, for example the conversion of corn to starch for subsequent use as feedstock to produce oxalic acid. For instance, suppliers of those inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

(110) In conclusion, the applicant argued that significant distortions pursuant to Article 2(6a) of the basic Regulation are present in the oxalic acid sector.

(111) The Commission examined whether it was appropriate or not to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file. The evidence on the file included the evidence contained in the Report, as well as in its updated version (‘updated Report’) (47), which relies on publicly available sources, and which was released in the investigation file on 14 May 2024.

(112) That analysis covered the examination of the substantial government interventions in China’s economy in general, but also the specific market situation in the relevant sector including the product concerned. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in China.

(113) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’ (48).

(114) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ (49). Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation.

(115) The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the state with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the state ownership (50).

(116) In addition, under Chinese law, the socialist market economy is developed under the leadership of the CCP. The structures of the Chinese state and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the state are indistinguishable.

(117) Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution.

(118) Following the already existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China’ (51). This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

(119) This leadership and control is inherent to the Chinese system and goes well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

(120) The Chinese state engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market (52). The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as the level of the regulatory environment.

(121) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government.

(122) Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets.

(123) Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.).

(124) The economic operators, private and state-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans, but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also recitals (155) to (170) below) (53).

(125) Second, on the level of allocation of financial resources, the financial system of China is dominated by the state-owned commercial and policy banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project (54).

(126) The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also, these parts of the financial sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the state and the CCP (55).

(127) Third, on the level of regulatory environment, the interventions by the state into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market-based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by state policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies (56).

(128) Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both state and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining state control over key sectors or bolstering domestic industry (57).

(129) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in distorting the effective allocation of resources in line with market principles (58).

(130) In China, enterprises operating under the ownership, control and/or policy supervision or guidance by the state represent an essential part of the economy.

(131) The GOC and the CCP maintain structures that ensure their continued influence over enterprises, and in particular SOEs. The State (and in many aspects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision making in SOEs. This is typically done through the rotation of cadres between government authorities and SOEs, through the presence of party members on SOEs executive bodies and of party cells in companies, as well as through the shaping of the corporate structure of the SOE sector. In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant inputs, including finance (59).

(132) However, CCP interventions into operational decision making have become the norm not only in SOEs, but also in private companies (60), with CCP claiming leadership over virtually every aspect of the country’s economy. Indeed, the State’s influence by means of CCP structures within companies effectively results in economic operators being under the government’s control and policy supervision, given how far the State and Party structures have grown together in China.

(133) The sector of the product concerned is served both by SOEs and private companies.

(134) Specifically in the oxalic acid sector, a certain degree of ownership by the GOC is evident. The investigation showed that one of the main exporters of oxalic acid, Shandong Hualu Hengsheng Chemical Co., Ltd., shows a significant degree of public ownership (61).

(135) Similarly, Tongliao Jinmei Chemical Co., Ltd., is part of Danhua Chemical Technology Group, a SOE which is in turn effectively controlled by Danyang Municipal SASAC (62). The company cooperates with local government, as shown in an article on capacity increase and cooperation with Tongliao Municipality. Indeed: ‘Tongliao Economic and Technological Development Zone aims at the development trend and market prospects of degradable industry, gives full play to regional comparative advantages, extends the coal chemical industry and corn processing industry chain, and is making every effort to cultivate and introduce new degradable materials. […] [i]n the process of promoting the construction of the degradable new materials industrial park, Tongliao Economic and Technological Development Zone plans to invest a total of 10 billion yuan and have a planned land area of 4 670 acres. Among them, Tongliao Jinmei Chemical Co., Ltd., invested and constructed by the Chinese Academy of Sciences, Shanghai Jinmei Holdings, and Danhua Technology, covers an area of 1 000 acres, with a total investment of 4,04 billion yuan, and has complete supporting facilities, equipment and industry processes in order to extend the production capacity of ethylene glycol and oxalic acid to polyglycolic acid, and is committed to building the largest production base for coal-based polyglycolic acid degradable materials in China. […] In the future, Tongliao Economic and Technological Development Zone will rely on Jinmei Chemical Group’s product resource advantages and technology first-mover advantages to comprehensively expand and strengthen the degradable new materials industry chain’ (63).

(136) Shandong Fengyuan Chemical Stock Co., Ltd, on the other hand, is mainly private, with less of 1 % of state shareholding (64), but does cultivate close links to the state and the local government. As confirmation, an article published on the company’s website affirms: ‘At the meeting, the Zaozhuang Municipal Party Committee and Municipal Government focused on commending enterprises and outstanding entrepreneurs with outstanding contributions in Zaozhuang City in 2022. Zhao Guanghui, chairman of Fengyuan Co., Ltd., won the title of “Outstanding Entrepreneur of Zaozhuang City in 2022”, recorded second-class merit, and received a medal Certificate. […] Fengyuan, under the correct leadership of the Zaozhuang Municipal Party Committee and Municipal Government, adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and actively implemented a new development concept, focussing on the goal of “promoting the economy first, and concentrate on strengthening industry”, […] overcome difficulties, pioneer and innovate, achieve steady growth of enterprises, and help promote the city’s “industrial power and industrial prosperity. […] Fengyuan will be guided by the spirit of the ‘Mobilization Conference for the City’s efforts to deepen industry development towards strong and vivid industries, setting goals and shouldering responsibilities, accurately mapping out benchmarks, striving for the leading position, seizing strategic opportunities for industrial development, and making efficient overall plans for projects construction, production, while R & D and operation will accelerate the significant increase in output, revenues and tax payments, making substantial contributions to the city’s “strengthening industry, revitalizing industry and transforming to break through”’”’ (65).

(137) The GOC exerts guidance on enterprises also by setting specific objectives. For instance, in 2022 the Ministry of Finance and the Ministry of Agriculture and rural affairs announced the 2022 key policies, and the following goals involve enterprises: ‘[i]ntegrated development of agricultural industry. Coordinate the layout and construction of a number of national modern agricultural industrial parks, advantageous and characteristic industrial clusters, and agricultural industrial strong municipalities. Focusing on ensuring national food security and effective supply of important agricultural products, focusing on rice, wheat, corn, […] sugar, dairy industry, seed industry, facility vegetables, etc. Agricultural products, taking into account other characteristic agricultural products, build a modern rural industrial system based on strong industrial towns, industrial parks as the engine, and industrial clusters as the backbone, provincial, county and township layouts, and coordinated promotion of points, lines, and areas, so as to improve the quality and efficiency of industrial development as a whole’ (66).

(138) Moreover, in the petrochemical and chemical sector, the authorities encourage the creation of clusters, not least to take advantage of the interdependencies of various chemical manufacturing processes. Indeed, the 14th FYP on Developing Raw Materials Industry requires that ‘[m]easures shall be taken to make leading enterprises bigger and stronger. Led by the market and supported by the government, we shall [...] help such enterprises accelerate trans-regional and cross-ownership mergers and reorganization, so as to make the industry more concentrated and facilitate international operations. In sectors including petrochemicals and chemicals [...] we shall foster a number of pioneering enterprises that could lead the ecosystem of the industrial chain with core competitiveness [...]’ (67).

(139) Government control and policy supervision can be also observed at the level of the relevant industry associations (68).

(140) For instance, China Biotech Fermentation Industry Association (69) (‘CBFIA’) has a subsidiary association focusing on organic acids, which comprehends the product concerned. CBFIA states in Article 3 of its Articles of Association that the organisation ‘[e]stablishes an organization of the Communist Party of China, carries out Party activities, and provides the necessary conditions for the activities of the Party organization. […] accepts the business guidance, supervision and management by the entities in charge of registration and management, by entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ (70). Article 36 further states that the person in charge of the Association have to meet conditions such as ‘[a]dhere to the leadership of the Communist Party of China, support socialism with Chinese characteristics, resolutely implement the party’s line, principles and policies, and have good political quality’ (71).

(141) Similarly, China Chemical Environmental Protection Association (‘CCEPA’) (72), according to Article 2 of its Articles of Association, pursues the goal to ‘publicize and implement national industrial policies, serve the industry wholeheartedly, and promote industrial production’. In addition, Article 3 states that CCEPA ‘establishes an organization of the Communist Party of China, carries out Party activities, and provides the necessary conditions for the activities of the Party organization’ and – just like in the case of CBFIA – ‘accepts the business guidance, supervision and management by the entities in charge of registration and management, by entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ (73). CCEPA counts among its members Shandong Hualu Hengsheng Chemical Co., Ltd. (74).

(142) Consequently, even privately owned producers in the sector of the product concerned are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the sector are subject to policy supervision and guidance.

(143) Apart from exercising control over the economy by means of ownership of SOEs and other tools, the GOC is in position to interfere with prices and costs through state presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant state authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights (75), CCP cells in enterprises, state-owned and private alike, represent an important channel through which the state can interfere with business decisions.

(144) According to China’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution (76)) and the company shall provide the necessary conditions for the activities of the Party organisation.

(145) In the past, this requirement appeared not to have always been followed or strictly enforced. However, since at least 2016 the CCP has been reinforcing its claims to control business decisions in companies as a matter of political principle (77), including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline (78).

(146) Already in 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies (79). These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of the product concerned and the suppliers of their inputs.

(147) In addition, on 15 September 2020 a document titled General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era (‘the Guidelines’) (80) was released, which further expanded the role of the Party committees in private enterprises.

(148) Section II.4 of the Guidelines states: ‘[w]e must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area’; and section III.6 states: ‘[w]e must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers’. The Guidelines thus emphasise and seek to increase the role of the CCP in companies and other private sector entities (81).

(149) The investigation confirmed that overlaps between managerial positions and CCP membership/Party functions exist also in the sector of the product concerned.

(150) For instance, the Articles of Association of Shandong Fengyuan Chemical Stock Co., Ltd require, at Article 1.13, that ‘In accordance with the provisions of the Constitution of the Communist Party of China, the company establishes Communist Party organizations and carries out party activities. The company provides necessary conditions for the activities of party organizations’ (82). Notably, the company is also influenced by local governmental authorities, as shown in recital (136).

(151) Similarly, Article 12 of the Articles of Association of Danhua Chemical Technology Group states that: ‘The company shall establish Communist Party organizations and carry out Party activities in accordance with the provisions of the Constitution of the Communist Party of China. The company’s party organization formulates specific work implementation rules based on the requirements of the superior party organization, sets the direction, manages the overall situation, and promotes implementation. When the company decides on major matters, it should listen to the opinions of the party organization in advance. The company provides necessary conditions for the activities of party organization’ (83).

(152) Moreover, the Director of the Danhua Chemical Technology Group is at the same time Deputy Secretary of the Party Committee of Tongliao Jinmei Chemical Co., Ltd and a member of the Party Committee and Deputy Secretary of the Discipline Inspection Commission of Jiangsu Danhua Group Co., Ltd.

(153) The Chairman of Hualu Hengsheng Chemical Co., Ltd. is also Secretary of the Party Committee and CCP interference into the business decisions is apparent in the company’s website, which describes the role of the Party within the Group as follows: ‘The Party branch of the production department is one of the most important grassroots branches of Hualu Hengsheng. It provides strong support for the company's long-term safe and stable production, lays a solid foundation for lean and efficient operations, and makes outstanding contributions to record economic benefits’ (84).

(154) The state’s presence and intervention in the financial markets as well as in the provision of raw materials and inputs further have an additional distorting effect on the market (85). Thus, the state presence in firms, in the oxalic acid and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

(155) 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, provincial and local governments must focus on. Relevant plans exist at all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of a binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government.

(156) Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (86).

(157) The Chinese authorities have enacted a number of policies guiding the functioning of the sector of the product concerned.

(158) The 2022 key policies of the Ministry of Finance and the Ministry of Agriculture and rural affairs mentioned above (see recital (137)) contain also the following provisions influencing the functioning of the sector: ‘[t]he state will continue to implement policies such as subsidies for corn and soybean producers, subsidies for rice, and incentives for large grain-producing counties, so as to consolidate the effectiveness of supply-side structural reform in agriculture and ensure national food security’ or ‘[r]ewards for major seed production counties. Expand the scope of support for major seed production counties of rice, wheat, corn […], and promote the transformation and upgrading of the seed industry’ (87).

(159) The 14th FYP on promoting the modernization of agriculture and rural areas (88) aims to ‘[i]mprove grain production support policies. Stabilize grain farmers’ subsidies, improve the minimum purchase price policy for rice and wheat, and the subsidy policy for corn and soybean producers. Improve the compensation mechanism for the interests of major grain-producing areas and improve the support policy system for major grain-producing counties’ (89). It further enhances ‘Agricultural science and technology innovation capacity building. Focusing on areas such as biological breeding, biological safety, resources and environment, intelligent agricultural machinery, deep processing of agricultural products, and creation of green inputs, a new batch of major agricultural science and technology facilities and equipment, key laboratories and agricultural scientific observation and experimental stations will be built’ (90).

(160) Not only, in December 2018 the Ministry of Agriculture, unitedly with 15 administrations, published a Notice of several policy measures to support the high quality development of Agricultural products’ deep processing: ‘Optimizing the industrial structure Coordinate and promote the coordinated development of intensive processing, primary processing, and comprehensive utilization processing of agricultural products, organically connect with upstream and downstream industries such as special raw material production, warehousing logistics (including cold chain logistics), and market consumption, and integrate with nutrition and health, leisure tourism, education and culture, and health preservation. It is organically combined and deeply integrated with rural industries such as e-commerce. Regularly monitor and analyze the production capacity layout of intensive processing and comprehensive utilization of bulk agricultural products, guide the transformation of excess production capacity, and accelerate the construction of short production capacity, and optimize the layout of the industrial chain. Increase the added value of corn processing, especially corn processing products in Northeast China, and accelerate the development of comprehensive processing and utilization of straw and corn cob’ (91).

(161) Relevant policies are not found solely in the agricultural sector, but in the chemical sector as well.

(162) The Guiding Opinion on Promoting the High-quality Development of the Petrochemical and Chemical Industry During the 14th Five Years Plan Period (‘the Guiding Opinion’), emphasizes the need to ‘[...] accelerate the transformation and upgrading of traditional industries, and vigorously develop new chemical materials and fine chemicals. Accelerate the digital transformation of the industry [...] and promote China's progress from a large petrochemical and chemical country to a strong petrochemical and chemical country’ (92).

(163) The above-mentioned objectives are further specified in the subsequent sections of the Guiding Opinion. For instance, the issuing authorities intend to ‘[s]upport enterprises to take the lead in forming collaborative innovation organizations such as industrial technology innovation alliances and upstream and downstream cooperation mechanisms and support the rational layout of local governments to build regional innovation centers and pilot bases’, to ‘[c]onquer core technologies and enhance the momentum of innovation and development, […] accelerate breakthroughs in key technologies [...]’ (93). Moreover, the chemical sector needs to ‘[focus] on strategic emerging industries such as new generation information technology, biotechnology, new energy, and high-end equipment, we shall increase the specifications of material varieties […] and accelerate the development of high-end polyolefins, electronic chemicals, industrial special gases, high-performance rubber and plastic materials, high-performance fibres, bio-based materials, special lubricants and greases and other products’ (94).

(164) It incites economic actors to ‘Actively develop biochemical industry, encourage the development of enzymes needed for biomass utilization and biorefining based on biological resources’ (95).

(165) On the provincial level, policy objectives and corresponding support tools become more specific and targeted.

(166) According to the Hebei 14th FYP on strategic and emerging industries (96) the government authorities are set to shape the sector’s industrial layout as follows: ‘Accelerate the pace of innovation and development of the bio-industry […] Vigorously develop the industries of bio-fermentation, bio-based products, and characteristic biological products, and promote the integrated application of biotechnology in the fields of medicine, chemical industry, materials, food deep processing, and new energy. Consolidate and improve the advantages of amino acids, starch sugars, enzyme preparations, vitamins and other products, and develop new biological materials such as bio-based fibers, bio-based chemicals, bio-based plastics, and bio-based rubber’ (97).

(167) In Heilongjiang, and especially Qinggang County, ‘since 2021, the Qinggang County Party Committee and County Government has regarded the corn processing industry as “Project No. 1” and has made every effort to build a pillar industry chain of corn in the county, focusing on corn starch as raw material, and the industrial deep processing chain will be directed to sugars, acids and alcohols. The direction of biomedicine is extended and expanded’ (98).

(168) Furthermore, in 2024 Shandong issued a major policy to promote, upgrade and develop the corn industry (99), providing important tax support for research and development.

(169) Therefore, through these and other means, the GOC directs and controls virtually every aspect in the development and functioning of the sector, as well as the upstream inputs.

(170) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives concerning the sector. Such measures impede market forces from operating freely.

(171) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement.

(172) The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the state in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings (100).

(173) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China (101). All land is owned by the state (collectively owned rural land and State-owned urban land) and its allocation remains solely dependent on the state. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates (102). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (103).

(174) Much like other sectors in the Chinese economy, the producers of the product concerned are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the sector of the product concerned. The present investigation revealed nothing that would call those findings into question.

(175) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the sector of the product concerned.

(176) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining (104).

(177) Under national law, only one trade union organisation is active. However, this organisation lacks independence from the state authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary (105). Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area.

(178) This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration (106). Those findings lead to the distortion of wage costs in China.

(179) No evidence was submitted to the effect that the oxalic acid sector would not be subject to the Chinese labour law system described. The sector is thus affected by the distortions of wage costs both directly (when making the product concerned or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in China).

(180) Access to capital for corporate actors in China is subject to various distortions.

(181) First, the Chinese financial system is characterised by the strong position of state-owned banks (107), which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similar to non-financial SOEs, the banks remain connected to the state not only through ownership but also via personal relations (the top executives of large state-owned financial institutions are ultimately appointed by the CCP) (108) and they regularly implement public policies designed by the GOC.

(182) The Guiding Opinion also reveals the range of support tools and policies used to pursue the industrial policy objectives: ‘[i]mprove supporting policies. Strengthen the coordination between fiscal, financial, regional, investment, import and export, energy, ecological environment, price and other policies and industrial policies. Involve national industry-finance cooperation platforms and promote bank-enterprise connections and industry-finance cooperation. [...]’ (109).

(183) In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the state (110).

(184) While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

(185) For example, the GOC has clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. 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 (111). Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ (112).

(186) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm’s strategic importance to the GOC and the strength of any implicit guarantee by the government (113). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (114). This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

(187) Second, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the state sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

(188) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 (115) and, in 2020, official media in China have reported that the CCP called for ‘guiding the loan market interest rate downwards’ (116). Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(189) Overall credit growth in the China indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly, with the GOC a number of times opting to either avoid defaults, thus creating so called ‘zombie’ companies, or to transfer the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

(190) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in China is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

(191) No evidence was submitted in the present investigation demonstrating that the sector of the product concerned is not affected by the government intervention in the financial system in the sense of Article 2(6a)(b), sixth indent of the basic Regulation. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

(192) The Commission noted that the distortions described in the updated Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above as well as in Part I of the updated Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above and in Part II of the updated Report.

(193) The Commission recalls that in order to produce the product concerned, certain inputs are needed. When the producers of the product concerned purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors. These distortions were described in detail above. The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, oxalic acid producers being subject to those rules as any other economic operator in China. The distortions have therefore a direct bearing on the cost structure of the product concerned.

(194) As a consequence, not only the domestic sales prices of the product concerned are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts I and II of the updated Report.

(195) Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout China. This means, for instance, that an input that in itself was produced in China by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth.

(196) No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

(197) The analysis set out in this section, which includes an examination of all the available evidence relating to China’s intervention in its economy in general as well as in the sector of the product concerned showed that prices and costs of the product concerned, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation as shown by the actual or potential impact of one or more of the relevant elements listed therein.

(198) On that basis, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case. Therefore, the Commission calculated these values using appropriate undistorted prices and benchmarks derived from other sources.

(200) In the Note, the Commission explained that there was no production of product under review in any upper-middle income country other than the PRC. The Commission therefore indicated it would use citric acid, a similar product to oxalic acid, to establish an appropriate representative country for the application of Article 2(6a) of the basic Regulation.

(201) Oxalic acid and citric acid share similar chemical characteristics. Indeed, they are composed of the same organic elements and, while oxalic acid contains two carboxyl groups, citric acid has three. Moreover, for a large range of end-uses, the two products are somewhat interchangeable. Both are used as cleaning and anti-bacterial agents, in the production of pharmaceutical and antibiotics, for metal purification in metal production and as ingredients in agricultural fertilisers. The Commission established that there was production of citric acid in Colombia, which is classified as an upper-middle income country.

(202) As provided in the Note, the Commission found readily available financial information for Sucroal SA, covering the financial year 2022. Moreover, benchmarks for the main factors of production, energy, gas, water, and labour could be established on the basis of information found for Colombia.

(203) Interested parties were invited to comment on the appropriateness of Colombia as a representative country.

(204) No interested party made any comments regarding the selection of Colombia as a representative country.

(205) Finally, given the absence of cooperation and having established that Colombia was an appropriate representative country, based on all the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

(206) In view of the above analysis, Colombia met the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country.

(207) In the Note, the Commission listed the factors of production such as materials, energy and labour used in the production of the product under review by the exporting producers. The Commission also stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use GTA and the international benchmark as provided by the applicant in the request to establish the undistorted cost of most of the two factors of production, notably oxygen and nitric acid. In addition, the Commission stated that it would use the information from ILO (119) for establishing undistorted costs of labour, and from publicly available tariffs for electricity (120), water (121) and gas (122) suppliers in Colombia.

(208) The Commission also informed the interested parties that two factors of production, due to their low impact on the cost of production, were considered as consumables, which accounted for less than 2 % of the cost of production of oxalic acid.

Factors of production

Raw materials

(210) In order to establish the undistorted price of raw materials as delivered at the gate of a representative country producer, the Commission used as a basis the weighted average import price to the representative country as reported in the GTA to which import duties were added. An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding the PRC and countries which are not members of the WTO, listed in Annex 1 of Regulation (EU) 2015/755 of the European Parliament and the Council (125). The Commission decided to exclude imports from the PRC into the representative country as it concluded that it is not appropriate to use domestic prices and costs in the PRC due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation. Given that there is no evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected export prices. After excluding imports from the PRC into the representative country, the volume of imports from other third countries remained representative.

(211) For one factor of production (namely potassium hydroxide), the Commission established that the in the imports of this raw material into Colombia originating in PRC constituted a significant share. Therefore, the benchmark price based on these imports could not be considered an appropriate and the Commission resorted to the import prices in Türkiye. The Commission notes that despite the fact that Türkiye – the representative country proposed by the applicant – could not be considered an appropriate representative country in this case due to the issues concerning the availability of recent financial information and the main raw material mentioned above, it was still considered reliable as a source for potassium hydroxide benchmark as it has a similar level of economic development to the PRC and it has production of citric acid for which production process is similar to the product concerned.

(212) Due to low volumes of import of oxygen into Colombia, the price was considered as not representative. Also in Türkiye, import volumes of oxygen were low and were considered also unrepresentative. Thus, the Commission resorted to the world average price of imports of oxygen in 2022 as reported in the statistics report available in the request (126).

(213) Furthermore, import volumes of nitric acid in Colombia were low. Türkiye could not be considered an appropriate source for this benchmark since a high share of imports of nitric acid into Türkiye originated in the PRC. Thus, the Commission resorted to the international price for nitric acid in 2022 available in the request (127). In the Note, the Commission informed interested parties that, in the production process of the Union industry, nitric acid is both a factor of production and a by-product of the production process of oxalic acid, therefore the same international benchmark was applied to nitric acid as a by-product.

(214) In the comments to the Note, one Union producer expressed reservations regarding the price of the by-product. It claimed that nitric acid used as raw material and is the one obtained as a by-product should not have the same price. The by-product is obtained in the diluted form and therefore its price is lower than the raw material. Therefore, the Commission adjusted the price of nitric acid applicable to the by-product by the ratio of price of diluted nitric acid sold as a by-product to the price of the nitric acid used as a raw material, according to the data provided by the Union producer. The price of the diluted nitric acid constitutes 46 % of the price of nitric acid used as a raw material. Thus, the benchmark for by-product has been adjusted to the level of 1,30 CNY/kg.

(215) Having regard no cooperation of the exporting producers, based on the information provided by the Union producers, for two factors of production, namely sulphuric acid and hydrogen peroxide, the actual costs incurred by these producers represented a negligible share of total raw material costs in the review investigation period. As the value used for these had no appreciable impact on the dumping margin calculations, regardless of the source used, the Commission decided to include those costs into consumables as explained in recital (208).

(216) Normally, domestic transport prices should also be added to these import prices. However, considering the finding in recital (231) as well as the nature of this expiry review investigation, which is focused on finding whether dumping continued during the review investigation period or could reoccur, rather than finding its exact magnitude, the Commission decided that adjustments for domestic transport were unnecessary. Such adjustments would only result in increasing the normal value and hence of the dumping margin.

Labour

(217) The Commission used ILO statistics to determine the wages in Colombia (128). These provide information on monthly wages of employees in the manufacturing sector and average weekly hours worked in Colombia for the investigation period.

(218) In the calculation of the labour cost in Colombia, the Commission added 12 % contribution to the pension fund and professional risk tax of 2,436 % for the third group risk based on the company activity to which Sucroal SA belongs to (129).

Electricity

(219) For electricity, the Commission used the readily available price from Enel (130), the major electricity supplier in Colombia. This source provides a single average price of electricity per month during the review investigation period.

Water

(220) The Commission used applicable prices in Colombia as charged by the company that is responsible for water supply, sewage collection and treatment in Bogota, namely ACUEDUCTO (131) to determine the prices of water. The applicable unit cost is estimated to amount to 6,59 CNY/m3.

Natural gas

(221) For natural gas, the Commission used the readily available price as published by Gases de Occidente (132), the supplier of gas in the region where Sucroal SA is located. The applicable unit cost is estimated to amount to 3,95 CNY/m3 (i.e. the average of the unit cost in the review investigation period).

Manufacturing overhead costs, SG & A, profits and depreciation

(222) According to Article 2(6a)(a) of the basic Regulation, ‘the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits’. In addition, a value for manufacturing overhead costs needs to be established to cover costs not included in the factors of production referred to above.

(223) In order to establish an undistorted value of the manufacturing overheads and given the absence of cooperation from the exporting producers, the Commission used facts available in accordance with Article 18 of the basic Regulation. Therefore, based on the data provided by the Union producer, the Commission established the ratio of manufacturing overheads to the total manufacturing and labour costs. This percentage was then applied to the undistorted value of the cost of manufacturing to obtain the undistorted value of manufacturing overheads, depending on the model produced.

(224) For establishing an undistorted and reasonable amount for SG & A and profit the Commission relied on the financial data of Sucroal SA in 2022, as extracted from the Orbis (133) database.

(225) On the basis of the above, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.