Commission Implementing Regulation (EU) 2025/58 of 15 January 2025 imposing a definitive anti-dumping duty on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in 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) 2025/58 of 15 January 2025 imposing a definitive anti-dumping duty on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in 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), and in particular Article 11(2) thereof,

Whereas:

(1) On 4 May 2018, the European Commission (‘the Commission’) adopted Regulation (EU) 2018/683 (2) imposing a provisional anti-dumping duty on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 (‘tyres’ or ‘product concerned’) originating in the People’s Republic of China (‘PRC’).

(2) On 18 October 2018 the Commission adopted Implementing Regulation (EU) 2018/1579 (3) imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People’s Republic of China (‘the original anti-dumping Regulation’).

(3) On 9 November 2018, the Commission adopted Implementing Regulation (EU) 2018/1690 (4) imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People’s Republic of China and amending Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People’s Republic of China and repealing Implementing Regulation (EU) 2018/163 (‘the original anti-subsidy Regulation’).

(4) Following a challenge lodged by China Rubber Industry Association (‘CRIA’) and China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (‘CCCMC’), the General Court of the European Union annulled on 4 May 2022, in its judgement in joined cases T-30/19 and T-72/19 (5) (‘the Court judgement’), the original anti-dumping and the original anti-subsidy Regulations as regards several exporting producers.

(5) Following the Court judgment, the Commission reopened the investigations and on 4 April 2023, the Commission re-imposed a definitive anti-dumping duty by Commission Implementing Regulation (EU) 2023/737 (6) (‘the second anti-dumping Regulation’) and a definitive countervailing duty by Commission Implementing Regulation 2023/738 (7) (‘the second anti-subsidy Regulation).

(6) On 6 September 2024, the Commission terminated two partial interim reviews of the anti-dumping and countervailing measures applicable to imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People’s Republic of China (8) (9).

(7) The anti-dumping duties currently in force are in euros per item ranging between 0 to 35,74 euros per item.

(8) Following the publication of a notice of impending expiry (10) the European Commission ('the Commission') received a request for a review pursuant to Article 11(2) of Regulation (EU) 2016/1036 ('the basic Regulation').

(9) The request for review was submitted on 19 July 2023 by the Coalition against unfair tyres imports (‘the applicant’) on behalf of the Union industry of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 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 or recurrence of dumping and continuation or recurrence of injury to the Union industry.

(10) 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 20 October 2023 the Commission initiated an expiry review with regard to imports into the Union of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China (‘the country 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 (11) (‘the Notice of Initiation’).

(11) The investigation of continuation or recurrence of dumping covered the period from 1 July 2022 to 30 June 2023 (‘review investigation period’). 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 review investigation period (‘the period considered’).

(12) 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, the known producers in the People's Republic of China and the authorities of the People's Republic of China, the known importers, as well as associations known to be concerned about the initiation of the expiry review and invited them to participate.

(13) 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.

(14) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

Sampling of Union producers

(16) This sample consisted of 6 Union producers. The sampled Union producers accounted for more than 25 % of the estimated total volume of production and sales of the like product in the Union.

(17) In accordance with Article 17(2) of the basic Regulation, the Commission invited interested parties to comment on the provisional sample. No comments were received. The sample is representative of the Union industry.

Sampling of importers

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

(19) One unrelated importer made itself known to the Commission but did not provide the requested information nor agreement to be included in the sample. No other unrelated importers came forward.

Sampling of exporting producers in the People's Republic of China

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

(21) Three exporting producers or group of exporting producers in the country concerned provided the requested information and agreed to be included in the sample. Two groups of exporting producers covered around 50 % of the reported volume exported to the European Union during the period July 2022-June 2023 while the volume of exports of the third exporting producer was found not significant. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of two groups of exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the country concerned, were consulted on the selection of the sample. No comments were made.

(22) In the original investigation, 49 exporting producers agreed to be included in the sample. In the present review investigation while more than 140 exporting producers were listed in the complaint, only 3 exporting producers or group of exporting producers provided a sampling reply.

(23) The cooperated exporting producers accounted for around 50 % of the total volume of imports of tyres from the PRC into the European Union and accounted for less than 2 % of the total production of tyres in the PRC. As the Union market share of imports from the PRC was around 5,4 % during the review investigation period, the Commission considered that half of these imports would provide sufficient information to assess the export price and the existence of continuation or recurrence of dumping during the review investigation period and can therefore be considered representative of the total imports from the PRC.

(24) 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 People’s Republic of China (‘GOC’).

(25) The Commission sent questionnaires to the two sampled groups of exporters and the six sampled Union producers. The same questionnaire had also been made available online (13) on the day of initiation. In addition, the Commission sent a questionnaire to the applicant.

(26) Questionnaire replies were received from the two sampled groups of exporting producers and from 6 Union producers. The reply received from one Union producer, Recauchutagem São Mamede, Lda (‘RSM’) was deficient and the Commission requested this producer to complement its reply. No further reply was received, and the Commission informed RSM that it intends to apply Article 18 of the basic Regulation and use the facts available. No further comments were received from this Union producer.

(27) Consequently, the data provided by the remaining 5 union producers was used by the Commission. Not obtaining data from RSM had only marginal impact on the representativity of the sample. The remaining 5 Union producers continued to account for more than 25 % of the estimated total volume of production and sales of the like product in the Union. This remaining sample of 5 Union producers was therefore considered representative of the Union industry.

(28) No questionnaire replies were received from the GOC.

(30) On 11 November 2024, the Commission disclosed the essential facts and considerations on the basis of which it intended to maintain the anti-dumping duties in force. All parties were granted a period within which they could make comments on the disclosure.

(31) The comments made by interested parties were considered by the Commission and taken into account, where appropriate. The parties who so requested were granted a hearing. A hearing was hold at the request of Giti.

(32) The product subject to this review is certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 currently falling under CN codes 4011 20 90 and ex 4012 12 00 (TARIC code 4012 12 00 10). The CN and TARIC codes are given for information only without prejudice to a subsequent change in the tariff classification (‘the product under review’).

(33) The product under review covers both new and retreaded pneumatic tyres for buses or lorries which share the same essential physical, chemical and technical characteristics. Both types of the product concerned are made of the same input (even if the technology involved may differ) and have a similar structure. The variance in raw materials and structure impart different performance characteristics.

(34) Manufacturing process of the new lorry and bus tyres involves: (1) compounding and mixing rubber; (2) tyre components preparation; (3) (green) tyre building; (4) curing (vulcanisation); and (5) final inspection. All lorry and bus tyres are made from the same basic raw materials, namely natural rubber, synthetic rubber, steel, carbon black, other chemicals and oils as well as fabric and have the same components, namely tread belt, sidewall, inner casing, bead wires, steel belts, casing cords, even if a certain variance is found between the various producers of this product.

(35) The manufacturing process of the new lorry and bus tyres was also found to involve varying technologies, which, however, did not impact on the overall findings of interchangeability.

(36) Retreading is essentially a recycling process whereby worn tyres are refurbished through a replacement of the tread on an old casing. Casings are main elements of the retreading process, and, as such a substantial part of the retreader activity is the selection and acquisition of casings suitable for retreading. Casings are thereby the main input of the production process and constitute — depending on their quality — either a real ‘semi-finished’ product or a waste.

(37) Again, this process can involve varying technologies without impact on the Commission's interchangeability findings.

(38) Lorry and bus tyres are produced in a large variety of types and sizes found on a wide range of commercial vehicles, from local delivery lorries and buses in urban or regional settings to the long-haul lorries and buses according to their size and load index specifications. They are neither suitable for use on passenger vehicles or on other light commercial vehicles nor for fully off-the-road vehicles such as agricultural tractors.

(39) Tyres for lorries or buses are sold in two types and four categories. Tube type tyre is a more traditional option; it has an inner tube, which has its own valve, placed inside the tyre. In a tubeless tire, the tire and the rim of the wheel form an airtight seal, with the valve being directly mounted on the rim. An overwhelming majority of tyres for lorries or buses sold in the Union are tubeless tyres. The four categories of tyres for lorries or buses are: steer, drive, trailer and multi-position. Steer tyres are designed to be used on the front axle to aid with steering but can be used in all positions on the lorries or bus depending on the vehicle's use. Drive tyres are designed for the drive train and provide better traction. Trailer tyres are designed to be mounted on trailers, while multiposition tyres are designed to be used in all in all positions on a vehicle depending on its use.

(40) Tyres, new or retreaded, are subject to the same safety requirements in the Union market as set out in Directive 2007/46/EC of the European Parliament and of the Council (14).

(41) Information collected and received by the Commission indicates that the Union market for bus and lorry tyres is segmented in three tiers or segments. While there are no clear dividing lines among tiers, there is a general agreement among interested parties and the findings of the Commission on the following categorisation.

(42) Tier 1 tyres cover premium new tyres with the flagship brand of main manufacturers. Brand recognition is a key factor for tyres in this tier and justifies significantly higher prices for expected high performances as well particularly strong marketing investments. Original equipment for lorries or buses manufacturers (‘OE1’) tyres are primarily included in that tier. The quality of tier 1 tyres ensures a high level of retreadability of the tyres which are designed to be ‘multi-life’ tyres further increasing the significantly higher mileage of the original product (up to three retreading for a normal use). Tier 1 tyres are also associated with a higher level of safety and are often accompanied with a good level of after-sale services.

(43) Tier 2 tyres cover most non-premium tyres, both new and retreaded tyres, with prices ranging between approximately 65 % and 80 % of the price of tier 1 tyres. Original equipment for trailers manufacturers (‘OE2’) tyres may be included in that tier. Brand recognition remains important in this tier and brands are usually well-known from purchasers which are also able to identify the tyre manufacturers. They are generally retreadable at least once and, although more limited than tier 1 tyres, deliver good performances in terms of mileage.

(44) Tier 3 tyres cover both new and retreaded tyres with lower mileage performances and very limited retreadability, if any. They are typically priced at less than 65 % of the price and mileage performance of tier 1 tyres. In that tier, brand recognition is almost non-existent and price becomes the determining factor in the customer's decision to purchase. They are usually not provided with after-sale services.

(46) The Commission applied the same mapping of new and retreaded tyres by brand as in the original investigation. This information was also provided by the complainant and was made available to all the interested parties on initiation day.

(47) The product concerned by this investigation is the product under review originating in the People’s Republic of China (‘the product concerned’).

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

(50) During the review investigation period, imports of product under review from the People’s Republic of China continued albeit at lower levels than in the investigation period of the original investigation (i.e. from 1 July 2016 to 30 June 2017). According to Eurostat imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 from the People’s Republic of China accounted for about 5,4 % of the Union market in the review investigation period compared to 21,3 % market share during the original investigation. These figures are in absolute terms.

(51) As mentioned in recital (22), three group of exporting producers from PRC cooperated in the investigation, accounting for around 50 % of the total volume of imports of tyres from the PRC into the European Union.

(52) 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.

(53) Consequently, to collect the necessary data for the possible application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in China to provide information regarding the inputs used for producing tyres. The two sampled groups of exporting producers submitted the relevant information.

(54) 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.

(55) 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.

(56) In the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may 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.

(57) On 23 January 2024, the Commission informed by a note (‘the First Note’) interested parties on the relevant sources 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 the product under review. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Brazil, Indonesia, Malaysia, Thailand, Türkiye and South Africa as an appropriate representative country.

(58) The Commission received comments on the First Note from the applicant, Giti and Hankook.

(59) On 16 July 2024, and after having analysed the comments received and the additional information provided by Hankook, the Commission informed by a second note (‘the Second Note’) interested parties on the relevant sources it intended to use for the determination of the normal value, with Türkiye as the representative country.

(60) It also informed interested parties that it would establish selling, general and administrative costs ('SG&A') and profits based on available information for the companies Brisa Bridgestone and Goodyear Lastikleri Turk, producers in the representative country.

(61) The Commission received comments on the Second Note from the applicant, Giti and Hankook. All the comments are addressed in detail in Section 3.3.

(62) The Commission therefore concluded that normal value should be constructed using the method set out in Article 2(6a) of the basic Regulation, and that costs and prices in China should be rejected.

(63) 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”.

(64) 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’).

(65) 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, the application of Article 2(6a) of the basic Regulation was appropriate.

(67) 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.

(68) 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.

(69) 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”.

(70) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’) (15), 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 chemical, ….). 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 application also contained some relevant evidence complementing the Report.

(71) The Applicant relied on the evidence contained in the Report to argue that both the Chinese tyre industry itself, as well as other upstream sectors critical to tyre production, such as rubber, energy, steel as well as the downstream automotive industry, are all severely affected by the GOC's omnipresence, resulting in significantly distorted prices and costs. The Applicant underlines the presence and influence of the CCP over the economy relying on the 2018 "Decision by the Communist Party of China (CCP) Central Committee on deepening reform of Party and State institutions”, speech by the Chinese President at the 20th national Congress of the Communist Party, the 2020 publication by the Central Committee of the CCP of an Order expressly declaring the intention of introducing further State presence in private companies and calling for politically and ideologically educating directors of private companies. The Applicant stated that the GOC's interventionism takes several forms, which can essentially be categorised around three different axes: administrative, financial and regulatory.

(72) The applicant pointed out that plans are issued at different governmental levels – State, provinces, municipalities – and are completed by sectoral plans. These plans are binding in law, must be implemented at all levels and, as a result, bring very direct implications with them in terms of access to financing, taxation regimes or choices adopted in the companies. It notably referred to the 14th five years plan (‘FYP’) applicable for the years 2021-2025 on the basis of which it considered that the active role of the State in the economy is clearly apparent through the setting out, for example, of its role to "promote,”"strengthen" or "build" entire segments of the Chinese economy. The applicant concludes that the FYPs further aim to build a stronger connection between the GOC and State-owned enterprises (‘SOE’) and aim to even further increase the system of supervision over State-owned assets. This can take various forms, including the effective prevention of State-owned asset losses.

(73) The applicant underlines that the Chinese financial system is dominated by the presence of State-owned banks (‘SOB’) which must align with the government's policies, as opposed to operating according to market principles. It also stated that the regulatory intervention of the GOC is made mainly by means of public procurement regulation and investment rules.

(74) The applicant also referred to Commission findings in several recent investigations concerning the steel and petrochemical sectors in China, which confirmed the existence of significant distortions with regard to key inputs in the production of the product concerned, namely the investigations concerning stainless steel cold-rolled flat products (16), electrolytic chromium coated steel products (17), wire rods (18), certain graphite electrode systems (19), silicon (20), and high tenacity polyester yarns (21).

(75) Moreover, the application recalled the following elements resulting in significant distortions.

(76) First, the tyre industry sector is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities.

(80) Therefore, the applicant observed that the GOC directs and controls the companies of the Chinese tyre industry under non-market principles resulting in significant distortions throughout.

(81) Second, the state presence in tyre companies also allows the authorities to interfere with prices and/or costs.

(82) According to the application, control over the Chinese economy is exercised by means of implementing CCP cells in enterprises, both private and public, with a predominant role on the functioning of the company and its personnel. The applicant also underlined that over the last years, several regulations targeting either SOEs or private companies were adopted to ensure a stronger and more effective enforcement. This includes the 2020 Regulations on the Work of Grassroots Organizations of State-owned Enterprises of the Chinese Communist Party and notably its Article 11 which bestows significant executive powers upon the CCP cell within companies. This is reflected in the Articles of Association of companies such as Aeolus. The application also mentioned that similar requirements have been issued for private companies. Since 2016, companies have been under increasing pressure to grant the CCP a bigger role in their decision making. Notably the 2018 Code of corporate governance already called listed firms to grant the CCP a role in their internal rules. The applicant also referred to the Vice Chairman of the All-China Federation of Industry and Commerce, Ye Qing, who explained the notion of a "modern enterprise system with Chinese characteristics" to include three axes of control by the Party through (i) a human resources mechanism" (ii) a work of supervision and audit, and (iii) trade unions. It also noted that the CCP routinely uses the practice of "double-hatting," in accordance with which a single person holds several roles in different structures.

(83) The applicant concluded that by their allegiance to the State and Party and their ensuing obligation to advance the State's and the Party's policy goals, the ability of Chinese companies to freely set their prices (in turn also affecting costs) is directly affected by non-market considerations.

(84) In addition, the application provides that the CCP's influence over company personnel is particularly extensive and notably encompasses the nomination of key executives. It also states that there is a significant crossover between the CCP and Chinese businesses and that both the key executive and human resources positions in SOEs must be held by CCP members. As for private companies, they are also advised to establish a supervision mechanism led by the Party cell with disciplinary powers.

(85) The applicant therefore concluded that through its presence at the various levels of management within companies, both public and private, the CCP and GOC are in a position to exert significant and direct decisions over the business life of the companies, away from free market principles and in accordance with political and industrial goals set out at State or Party levels. Such results in non-market forces significantly influencing costs and prices.

(86) The applicant argued that the NDRC has a direct control over the development of companies in particular as it is in charge of the drafting of strategic development plans. The planning of the economy directly affects companies that are required to implement the binding guidelines set out in the different plans. Consequently, the NDRC is not only in charge of orientating companies, but straightforwardly affect their managerial decisions. The respect of the CCP ideology is enshrined in these different plans and must consequently be followed by Chinese companies. These principles are enforced through the CCP cells present within companies.

(87) The applicant also argued that there was a state presence in the tyre industry through industry associations. In this regard, the China Rubber Industry Association (‘CRIA’) is the national association in charge of the whole Chinese rubber industry, including its downstream products such as tyres. As the CRIA is supervised by the SASAC of the State Council and welcomes the principles of the CCP in its functioning, the tyre industry is directly influenced by the CCP through its industry association which also has interlinked ties with managers of tyre producers. In addition to the CRIA, the application mentions the state influence through the CCCMC and the CAAM all which enable the State and Party control over the entire tyre production chain, dissociating prices and costs from free market principles.

(88) The application also states that the CCP routinely appoints Party members as key executives in companies operating in the tyre industry. It notably refers to the case of SOEs and notably Aeolus, but also apparent non-SOEs as Prinx Changshan, Zhongce Rubber Group Co., Ltd and Sailun Group Co., which also include CCP members at the management board or supervisory board.

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

(90) The applicant notably mentioned that the tyre industry is targeted by favourable policies through the allocations made to petrochemicals, rubber, as well as through policies favouring important costs components, such as steel, energy or textile. In this regard, it refers to the fact that the production and sales of natural rubber are done under guidelines of the CRIA. It also mentioned the Yunnan government three-year action plan for agricultural modernisation which qualifies natural rubber as a "key industry" and mentions it as an area of development. The plan it aims at "expand[ing] the production of special rubber for tyres". The Sanmen County’s Long-Range Goals for 2035, also focuses on the rubber industry and aims at constructing a national rubber inspection and testing centre.

(91) Regarding steel, the applicant notes that the 14th FYP also addresses the promotion and upgrading of the steel industry and refers to the release in early 2022 of Guiding opinions on promoting the high-quality development of the Iron and Steel Industry, to implement the 14th FYP and the 14th Five-Year Plan for the Development of Raw Materials Industry. The control over the steel market is implemented through the China Iron and Steel Association (‘CISA’), which is under supervision of the Party building agency, which is none other than the Party Committee of the SASAC of the State Council.

(92) Concerning Energy and Textile, the applicant referred to a recent Commission and US anti-dumping investigations on Chinese products which illustrates the existence of price setting in the case of electricity, where the provincial NDRC sets the electricity price. The textile industry is designated in the 14th FYP. Consequently, the Department of Industry and Information Technology released a notice on Launching the 2022 Textile and Garment "Optimizing Supply and Promoting Upgrading" Activities. According to this notice, the China National Textile and Apparel Council is responsible to plan and implements tasks, and is under "business guidance, supervision and management of the State-owned Assets Supervision and Administration Commission of the State Council".

(93) Tyres are included in the rubber industry in the Guiding Opinions on promoting the high-quality development of the petrochemical and chemical industry during the 14th Five-Year Plan which requires to "increase the proportion of green products in industries such as tyres" and promote a digital transformation around tyre products. The tyre industry is further guided through the CRIA's guidelines. A second area of development in the 14th FYP benefiting tyre producers is the support to research and development activities notably through the National Engineering Research Center for Advanced Tire Equipment and Key Materials. In addition, the applicant underlined that the Ministry of Industry and Information Technology (‘MIIT’) further also selected Sailun Group in its "first batch of ‘National Intelligent Manufacturing Pilot Demonstration Enterprise’ and ‘National Industrial Internet Pilot Demonstration Enterprise’ in the industry, and the first batch of ‘Characteristic Industrial Internet Platform for Key Industries’.

(97) In addition, the application states that in addition to measures taking the form of widespread financial support, the GOC, through its local entities, interfered in companies’ managements by pushing for mergers and reorganizations.

(98) Finally, the applicant referred to global expansion policies benefiting the tyre industry. Including the creation of outlets through the ‘belt and road initiative’; indirect shipping export support; the fact that the ‘belt and road initiative’ broadly discriminates and is essentially a disguised means of financing Chinese companies abroad at the expense of the participating countries.

(100) Fifth, wage costs are distorted in the tyre industry sector as well.

(101) According to the applicant, there is evidence that senior positions in the trade union are occupied by senior Party figures in SOEs, or by managers in non-State enterprises, thus pushing its ability to efficiently represent workers in the realm of the theoretical. It also mentions that the PRC has also still not ratified several of the most important international conventions on labour and refers to the existence of institutional constraints preventing the free setting of wages. In addition, the applicant considers that the Chinese workforce is impacted by the so-called household registration system and stated that the use of forced labour in the Xinyang Region contributes to the existence of distortion over wages, as it likely benefits tyre manufacturers with facilities in the region, such as the SOE Double Coin (Xinjiang) Kunlun Engineering Tire Co., Ltd, directly and through upstream actors.

(103) The applicant submitted that the above-mentioned distortions are systemic stating that the GOC intervenes at all levels of the supply chain of tyres, creating a situation where the input, the input of that input and so on, are all affected in one way or another by government distortions.

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

(105) 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’) (22), which relies on publicly available sources.

(106) 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.

(107) 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” (23).

(108) The state-owned economy is the “leading force in the national economy” and the state has the mandate to ensure its “consolidation and growth” (24). 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.

(109) 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 (25).

(110) 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.

(111) 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.

(112) 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.” (26) This illustrates the unquestioned and ever-growing control of the CCP over the economic system of China.

(113) 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.

(114) 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 (27). 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.

(115) 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.

(116) 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.

(117) 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.).

(118) 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 (28).

(119) 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 (29).

(120) 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 (30).

(121) 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 (31).

(122) 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 (32).

(123) 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 (33).

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

(125) The sector of the product concerned is mainly served by SOE companies, such as: China National Tyre & Rubber Co. Ltd (CNRC) held by SINOCHEM (SOE under the control of the SASAC) (34), Aeolus Tyres 57,5 % held by SOE CNRC (35), and Shuangqian (Double Coin) Tire Group Co., Ltd which is 58,57 % state owned (36).

(126) In addition, other companies have a significant degree of state ownership including Qingdao Doublestar which is 42,4 % state-owned (37), and Guizhou Tyre Co., Ltd which is 26,47 % state owned (38).

(127) However, CCP interventions into operational decision making have become the norm not only in State owned enterprises (‘SOEs’), but also in private companies (39), 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.

(128) Moreover, the sector of the product concerned is subject to several government policies, such as the MIIT Guiding Opinion on promoting the high-quality development of the Chemical and Petrochemical industries during the 14th FYP which provides in its Section II.3 for the implementation of “actions to improve the quality of chemical products supply. Focus on strategic emerging industries […] and accelerate the development of […] high-performance rubber and plastic materials, […]. Increase the proportion of green products in industries such as […] tires, […]. Encourage enterprises to improve product quality and to create and foster brands”. In addition, Section V of this Guiding Opinion provides for the building of “an internet-based industrial chain monitoring applicable to bulk products such as fertilizers and tyres”. (40)

(129) The tyre industry is also covered by policies at provincial levels such as the Shandong Province 14th FYP on the development of the chemical industry which provides the following specifically for the “tyre industry: Strictly implement industry policies and industry standards, integrate and withdraw enterprises with an annual production capacity of less than 1.2 million all-steel radial tires (except engineering tires, aviation tires, and wide-section tubeless tires) and less than 5 million semi-steel radial tires (except run-flat tires, high-end racing tires, and ultra-low-section tires). […]Following the course of high-end and segmented markets, develop high-end products such as ultra-low section, flattening, low rolling resistance, low noise, and run-flat, expand R&D and production of high-performance radial tires such as smart tires, safety tires, low rolling resistance tires, and super wear-resistant so as to increase the products’ added value and market shares. Strengthen the tire industry clusters in the Shandong peninsula as well as in Northern Shandong, strengthen connections with industry support facilities, develop the rubber additive industry cluster in western Shandong, and expand the rubber processing equipment industry cluster in eastern Shandong . Comprehensively improve digitalization, network development and smart development of the tire industry, promote the construction of smart factories in the tire industry across the province, and create an a tire manufacturing industry internet cloud platform. Actively promote green tire production processes such as chemical rubber refining and radiation pre-vulcanization technology, encourage the secondary use of tires, promote the green pyrolysis and carbon black regeneration technology of waste tires, and promote the green circular development of the industry. […] By 2025, the output value of the tire industry will reach RMB 200 billion; there will be 8 tire companies with sales revenue exceeding RMB 10 billion, of which more than 2 will exceed RMB 20 billion, and 1-2 companies will enter the top 10 in the global tire industry” (41).

(130) Government control and policy supervision can be also observed at the level of the relevant industry associations (42).

(131) For instance, the China Rubber Industry Association (‘CRIA’), of which the CNRC, Aeolus Tyres, Qingdao Doublestar, Shuangqian (double coin) Tire Group Co., Ltd, and Guizhou Tyre Co., Ltd are members (43), states in Art. 3 of its Articles of Association that it “adheres to the overall leadership of the Communist Party of China. In accordance with the provisions of the Constitution of the Communist Party of China, the Association establishes an organization of the Communist Party of China, carries out the activities of the Party, and provides the necessary conditions for the activities of the Party organization. The authority in charge of registration and management of the Association is the Ministry of Civil Affairs, and the authority in charge of Party building is the Party Committee of the State-owned Assets Supervision and Administration Commission of the State Council. The Association accepts the business guidance, supervision and management of the authority in charge of registration and management, and of the authority in charge of Party building as well as of the relevant administration department in charge of industry management.” (44). Art. 36 further states that the persons in charge of the Association must meet conditions such as “Adhere 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 qualities” (45) .

(132) In addition, the CRIA has 15 branches and professional committees, of which the Tire Branch is its largest branch. There are more than 270 member units, mainly tire manufacturers, and the rest are research institutes, rubber machinery manufacturers, raw and auxiliary materials production and distribution companies related to tire production. The CRIA tyre branch follows the provisions of the Articles of Association of the China Rubber Industry Association, takes serving members as its purpose, plays the role of a bridge between the government and enterprises, and carries out various tasks under the leadership of the General Association. (46)

(133) The tire production of member companies accounts for about 80 % of the Chinese domestic tire production. The Association has 62 governing units, the chairman unit is Zhongce Rubber Group Co., Ltd, and the vice chairman units are Sailun Group Co., Ltd, Linglong Tire Co., Ltd, SHUANGQIAN Tire Group Co., Ltd, Triangle Tire Co., Ltd, Michelin (China) Investment Co., Ltd and other well-known domestic and foreign tire companies. (47)

(134) The Association itself underlines the impact of its policies on the market , stating notably that “[In 2023, ]the prices of major raw materials were in a downward trend in the first half of the year, and continued to rise in the third quarter, leading to a wave of price increases in the tire industry. Despite this, in the first 10 months, the profits of carbon black, rubber additives, and steel cord still showed a significant year-on-year decline, among which carbon black fell by 14,99 %, additives fell by 7,45 %, and skeleton materials fell by 2,90 %”. The Association also highlights the impact of policies on the export performance of the tyre industry mentioning that “the overseas export market is particularly favorable, making up for the gap in domestic consumption and becoming an important driving force to support the increase in sales. According to statistics from the China Rubber Association, from January to October, the industry's export rate was 37,5 % (in value). During this period of time, tire exports maintained a high growth trend, and the export rate (value) remained above 50 % for several consecutive months. (…). Statistical data from the General Administration of Customs show that from January to November, my country's new pneumatic rubber tire exports were about 564 million, an increase of 11,4 %; the export volume was about 7,86 million tons, an increase of 16,8 %; the export trade value was RMB 137,51 billion, an increase of 20,3 %.” (48).

(135) Tyre companies also explicitly mention the influence of the CCP over their conduct. For instance, Qingdao Doublestar states in its 2023 annual report that: “[i]n 2023, the company continued to take Party building as the guide, high-quality development as the goal, actively implemented the "new four modernizations" strategy of ecology, high-tech, localization, and digitalization, focussed on the two main lines of business improvement and innovation breakthrough” and underlined “[n]ew achievements in Party building leadership: Adhere to party building leadership, focus on the main responsibilities and main business, develop and deepen education on the theme of Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, strengthen political construction, consolidate grassroots Party building, and give full play to the role of branch committees in work groups and the role of Party members in the front line” (49). Similarly, Shuangqian (double coin) Tire Group Co., Ltd mentions that “[u]nder the strong leadership of the company's Party Committee and the Board of Directors, all cadres and employees have strengthened their confidence, faced challenges head-on, overcome the impact of the industry cycle downturn, and made steady progress in the production and operation of the company, continuously improving its core competitiveness and accelerating the pace of building a world-class enterprise.” (50) Finally, Guizhou Tyre Co., Ltd considers that “[a]s a state-owned holding company, the company always adheres to the "unwavering leadership of the Party over state-owned enterprises". The Articles of Association confirm the legal status of the Party organization in corporate governance and integrate the Party's leadership into all aspects of corporate governance.” (51)

(136) Consequently, 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.

(137) The GOC is in position to interfere with prices and costs through state presence in firms. Indeed, CCP cells in enterprises, state-owned and private alike, represent an important channel through which the state can interfere with business decisions.

(138) 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 (52)) and the company shall provide the necessary conditions for the activities of the Party organisation.

(139) 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 (53), including exercising pressure on private companies to put “patriotism” first and to follow Party discipline (54).

(140) 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 (55). Similar estimates were reported in 2022 (56). 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.

(141) 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’) (57) was released, which further expanded the role of the Party committees in private enterprises.

(142) 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 (58).

(143) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the tyre sector. To provide an example, the several managers and/or board members of China National Tyre & Rubber Co. Ltd, Qingdao Doublestar, Shuangqian (double coin) Tire Group Co., Ltd, and Guizhou Tyre Co., Ltd are CCP members and hold positions in the secretariat of the Party Committee. (59) This is also the case for the Chairman of the Board of Directors, General Manager, and members of the board of Aeolus, noting that one board member also serves as the financial director of China National Chemical Rubber Co., Ltd (60)

(144) 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 (61). Thus, the state presence in firms, in the tyre and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

(145) 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.

(146) 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 (62).

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

(148) The 14th FYP on developing raw materials industry (63) aims to achieve a breakthrough in key categories of raw materials “[f]ocusing on key application areas such as […] bionic synthetic rubber” (64). Further provisions specific to the tyre industry are also included in the MIIT Guiding Opinion on promoting the high quality development of the Chemical and Petrochemical industries during the 14th FYP, Shandong Province 14th FYP on the development of the chemical industry as mentioned in recitals (128) and (129) above.

(149) On the province level, similarly, according to the Anhui Province 14th FYP on developing new materials industry (65) the government authorities are set to shape the sector’s industrial layout as follows: “[f]ocusing on the automobile, electronics, high-speed railways, aerospace, and nuclear power sectors, andrelying on the industrial bases of Anqing, Huainan and other places, increase the intensity of research and development and of innovation, and vigorously develop rubber material products with special properties and processes such as high and low temperature resistance, aging resistance, ablation resistance, chemical medium resistance, weather resistance, ozone resistance, arc resistance, etc.”. It also mentions in the list of key products “hydrogenated nitrile rubber, brominated nitrile rubber, solution-polymerized styrene-butadiene rubber, isoprene rubber and its monomers, acrylate rubber, special fluorine-containing rubber, fluorosilicone rubber, electricity insulating silicone rubber” and in the list of breakthrough technologies “Nitrile rubber hydrogenation technology, carboxyl nitrile rubber preparation technology, functionalized SSBR production technology, synthetic rubber drying process energy-saving technology, emulsion polymerization concentration technology, environmentally friendly additive replacement technology, etc.” (66).

(150) Similarly, the Gansu province 14th FYP on developing raw materials industry (67) includes a section on “fine chemical industry” which provides that “[b]y 2025, the total industrial output value of the industry will strive to reach 50 billion yuan” and that in the Synthetic rubber field, the objective is “[r]elying on backbone enterprises, [to] vigorously develop environmentally friendly rubber additives, rubber accelerator series CBS/MBS, carbon disulfide, insoluble sulfur, high-quality carbon black and other products” and for advanced petrochemical new materials “[r]elying on backbone enterprises,[to] improve the level and capacity of Gansu Province's in special engineering plastics, special synthetic rubber , [etc.]” and to “[v]igorously develop key strategic new materials”. In the field of petrochemicals, "develop engineering plastics, special synthetic rubber , special fibers, biodegradable high-performance materials and high-performance composite materials”.

(151) The Gansu province 14th FYP also mentions in its list of key projects the PetroChina Lanzhou Petrochemical Company and the building of a new 35 000 tonnes/year special nitrile rubber unit, mainly including chemical preparation unit, polymerization unit, monomer recovery unit, slurry storage, mixing unit and coagulation drying and packaging unit, etc, for a total investment of more than 84 million CNY (68).

(152) In the Jiangxi’s province 14th FYP on the high-quality development of petrochemical industry (69) states that “[We will…] expand the application scope of […] organosilicon products such as silicone oil, silicone rubber , (…) and white carbon black . We will strengthen the research and development and production of new chemical materials, and vigorously develop cutting-edge new materials such as special rubber (…)”. Concerning special rubber, it also provides that the government will “focus on the development of solution styrene butadiene rubber (SSBR), hydrogenated nitrile rubber, halogenated butyl rubber, hydrogenated styrene thermoplastic elastomers (HSBCs), isoprene rubber (IR), thermoplastic vulcanizate, ethylene propylene rubber (EPR), etc.”.

(153) Finally, the Jilin province 14th FYP on petrochemical industry development (70) provides that the government will “fully promote the development of the new chemical materials industry such as engineering plastics, special synthetic rubber , and high-performance fibers, expand the application scope of new chemical materials in the fields of automobiles , rail transportation, aerospace, etc., and realize the high-quality development of the petrochemical industry system in our province” and “[s]trengthen the ten pillar products, iepolyethylene, ABS, acrylonitrile, methyl methacrylate, phenol/acetone, benzene, butyl octanol, ethylene oxide, ethylene propylene rubber , and fuel ethanol, refine special carbon fiber, highly active polyisobutylene, special rubber and plastic materials and other specialty products, (…) and form three major competitive sectors of " synthetic resin, synthetic rubber and basic organic chemical raw materials ", enhance the competitiveness and endogenous development momentum of the petrochemical industry, and help cultivate competitive product clusters and specific product chains”.

(154) The annual report of the main tyre companies also mentions the existence of governmental subsidies or support. For instance, the annual report of Aeolus tyres states that the company benefited CNY 9,4 million in governmental subsidies in 2023, and 11 million in 2022 (71). Qingdao benefited from governmental subsidies of CNY 105,6 million in 2023, and 625 million in 2022 (72). Shuangqian (Double Coin) Tire Group Co., Ltd reported CNY 163 million in 2023 and CNY 760,8 million in 2022 (73). Finally, Guizhou Tyre Co., Ltd’s annual report shows that the company received Government subsidies related to business operations of CNY 25,2 million in 2023 and 19,8 million in 2022 (74).

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

(156) 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.

(157) 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.

(158) 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 (75).

(159) 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. (76) 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 (77). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (78).

(160) 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 tyre industry sector. The present investigation revealed nothing that would call those findings into question.

(161) 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.

(162) 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, in particular those on freedom of association and on collective bargaining (79).

(163) 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 (80). 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.

(164) 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 (81). Those findings lead to the distortion of wage costs in China.

(165) No evidence was submitted to the effect that the tyre 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).

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

(167) First, the Chinese financial system is characterised by the strong position of state-owned banks (82), 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) (83) and they regularly implement public policies designed by the GOC.

(168) 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 (84). 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.

(169) 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 (85). 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”. (86)

(170) 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 (87). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (88). 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.

(171) 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.

(172) 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 (89). Official media in China have recently reported that the CCP called for “guiding the loan market interest rate downwards” (90). Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(173) 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.

(174) 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.

(175) 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.

(176) In fact, the annual report and publicly available sources show that the main companies active in the tyre industry sector received support from policy banks. For instance, public sources mentioned that “Henan Branch of the Export-Import Bank of China has actively implemented the new development concept, adhered to the responsibility and mission of financial services for the real economy, and provided a credit of 1 billion yuan and a loan of RMB 300 million to Aeolus Tire Co., Ltd (hereinafter referred to as "Aeolus Tire") to help the company develop its export-oriented business and further improve its international market competitiveness”. (91) Similarly, media reported that “[o]n August 12, Doublestar Group and Industrial and Commercial Bank of China Qingdao Branch held a strategic cooperation signing ceremony at the Doublestar Global Model and Market Innovation Center, taking the bank-enterprise cooperation model of "co-development and co-growth" to a new level. Chai Yongsen, Secretary of the Party Committee and Chairman of Doublestar Group, Zhang Junhua, Deputy Secretary of the Party Committee and President, Cai Qian, Secretary of the Party Committee and President of Industrial and Commercial Bank of China Qingdao Branch, Li Xia, Member of the Party Committee and Deputy President, and other leaders attended the ceremony” and that “ICBC Qingdao Branch will continue to provide good financial services, increase credit and loan scale for Doublestar Group, and fully support the rapid development of Doublestar Group”, or that “[t]he development of Doublestar is inseparable from the strong support of ICBC” (92). Strong links with the Bank of Communications and the Bank of China have also been reported with articles stating that “Bank of Communications Qingdao Branch will take Doublestar Group as a key core customer, and around the future development of Doublestar Group, provide strong support in investment and financing credit lines, overseas Kumho Tire advanced manufacturing capacity upgrade projects and other aspects, to help Doublestar's "third entrepreneurship" and support Doublestar to become a world-class enterprise with high-tech, digitalization and social responsibility as soon as possible” and that “Yu Qun, secretary of the Party Committee and president of Bank of China Qingdao Branch, said that he would fully support the development of the real economy in Qingdao and increase the credit and credit scale of Doublestar Group to support its rapid development. After the signing, both parties will continue to expand their business cooperation, starting from the overall needs of Doublestar's future development, to achieve common development and growth, jointly foster new breakthroughs in their respective business scope, and achieve a "win-win" situation of mutual promotion between banks and enterprises”. (93)

(177) 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.

(178) 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, in particular in recitals (66) and (106). The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, tyre 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.

(179) 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.

(180) 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.

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

(183) As explained in recitals (57) and (59), the Commission issued two notes for the file on the sources for the determination of the normal value: the First Note of 14 January 2024 and the Second Note of 16 July 2024.

(184) These notes described the facts and evidence underlying the relevant criteria, and addressed the comments received by the parties on these elements and on the relevant sources.

(185) In the Second Note, the Commission informed interested parties of its intention to consider Türkiye as an appropriate representative country in the present case if the existence of significant distortions pursuant to Article 2(6a) of the basic Regulation would be confirmed.

(186) Based on the initial submissions received from the sampled exporting producers, the Commission decided to group the raw materials based on their weight in terms of production costs. Three categories were defined: the main raw materials representing in total more than 35 % of the total costs, the secondary raw materials representing in total more than 10 % and the last category with the other raw materials in terms of costs of production. These categories were then examined based on Global Trade Atlas (95) import database to make sure that those are representative.

(187) Moreover, the Commission examined if the raw materials were subject to restrictions (based on the OECD Inventory) on export restrictions on Industrial Raw Materials (96), Global Trade Alert (97) database and the Market Access Map (98). No restrictions were identified for Türkiye.

(188) In the First Note, the Commission identified Brazil, Indonesia, Malaysia, Thailand, Türkiye and South Africa as countries with a similar level of economic development as the PRC according to the World Bank (i.e. “upper-middle income” countries on a gross national income basis) where production of the product under investigation was known to take place.

(189) Based on the initial submissions from the sampled exporting producers, the Commission considered that Brazil and Türkiye had sufficient imports for most of the raw materials, and the overall imports were not significantly impacted by imports originating from China.

(190) For the second criterion, the Commission identified readily available detailed financial statements in Brazil and in Türkiye: Vipal Borrachas S.A. (99) in Brazil, and Brisa Bridgestone Sabancı Lastik Sanayi and Ticaret AŞ (100) in Türkiye. Vipal Borrachas is a producer of tread materials while Bridgestone produces new tyres.

(191) The Commission considered that the choice of Brazil more suitable as there was also production of new truck tyres.

(192) The Commission invited comments on the reasoning used to find a representative country in the First Note.

(193) The Commission received comments from the Giti group, the Hankook group and from the Coalition against unfair tyres imports.

(194) Giti claimed that the Commission did not present any proof for the assumption that the level of Chinese imports may affect the average import prices from non-China sources.

(195) The Commission assessed the claim and considered that the level of Chinese imports in Malaysia is such that the volume of imports could not be considered as representative as it is likely to be affected by distortions, if the significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation are confirmed in the final disclosure. Given this risk and the fact that the Chinese imports into Türkiye were significantly lower, the Commission rejected the claim and confirmed the selection of Türkiye.

Brazil

(196) Giti claimed as the Brazilian producer proposed to source the financial data (SG&A and profit) did not produce new tyres, it cannot be used for the purpose of the normal value calculation. Moreover, the Brazilian producer proposed, once removed the equity equivalence result from the Profit & Loss statement, reported an operational loss for the year 2022.

(197) The Commission assessed the claim and confirmed that the proposed producer reported losses for the year 2022. Therefore, in addition to the analysis above, showing the absence of imports in Brazil for four products in the second category, when considering the fact there was no alternative financial data available, the Commission concluded that Brazil was not an appropriate representative country.

Indonesia

(198) Giti claimed that Indonesia should not be disregarded because of insufficient or no imports for HS codes 4001 21 , 4001 22 and 4002 80 as an international benchmark could be used for replacing the values (i.e. the Singapore Commodities exchange). Giti did not explain why Indonesia could be an appropriate potential representative country and why Singapore Commodities exchange is a reliable source of data. Therefore, the Commission considered that this claim was not substantiated.

(199) The Commission considered that in a situation where there was no reliable import value for a certain raw material (i.e. HS code 4001 22 ), it may refer to values obtained from other sources. However, in that particular case imports for the above raw materials were found for other potential representative countries.

(200) Giti also claimed that considering a certain HS code was irrelevant in its case as it did not consume such raw material.

(201) The Commission reminds that it established the list of factors of production based on the submissions made by all the sampled groups of exporting producers as the analysis had to be valid for all of them.

(202) Therefore, in absence of imports data for Indonesia for the relevant codes and the availability of such data in other potential representative countries, the Commission cannot consider Indonesia as an appropriate representative country.

Malaysia

(203) Giti claimed that Malaysia was used as the primary surrogate country by the US DoC (101) for the same type of products. Moreover, Malaysia is the only country for which there are significant imports at representative prices for all raw materials of the main category. In addition, the import prices of raw materials for the second category are also representative as they are in line with import prices in other countries for which the Commission has not raised any issues regarding representativeness or reliability. Furthermore, Malaysia does not suffer from high inflation, devaluation rates and high interest rates as compared with Türkiye. The party proposed the use of the financial data of Toyo Tyre Malaysia which was also used by the USDOC.

(204) Regarding the producer proposed by the party, the Commission noted that, based on the corporate web site, Toyo Tyre Malaysia is not producing truck tyres (102) but light truck tyres (i.e. for SUVs and 4x4 vehicles) as the US proceeding mentioned did not concern truck tyres.

(205) The Commission considered that given the significant volume of imports from China of the main inputs in Malaysia, the imports could not be considered representative since they are likely to be affected by distortions, if the significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation are confirmed in the final disclosure.

(206) Given this risk, the Commission rejected the claim.

(207) Following the final disclosure, Giti reiterated that Malaysia had stable economic conditions with a low inflation rate of 3,3 % in 2022 and a modest 10 % devaluation of its currency, making Malaysia a more suitable representative country.

(208) As explained in recital (222), the Commission considered that the economic situation of a potential representative country should not be considered as a decisive negative factor. This is because the establishment of benchmarks is not directly affected by the economic situation of the country. The Commission's approach to setting benchmarks is based on import prices for raw materials, as well as the use of percentages for selling, general and administrative (SG&A) expenses and profit, which help to offset internal fluctuations. Additionally, energy costs are converted into Chinese yuan (CNY) using an exchange rate that reflects the evolution of the local currency against CNY. In light of this, the Commission considered Türkiye to be a suitable representative country. The claim was disregarded.

(209) Following the final disclosure, Giti claimed that both Brisa Bridgestone and Goodyear Lastikleri primarily produced tyres for cars and light trucks, similar to the product under investigation. Therefore, the SG&A and profit benchmarks proposed were largely based on car and light truck tyres, making Toyo Tyre Malaysia a suitable reference.

(210) The Commission's search for a representative country revealed that no country had a company that exclusively produced truck tyres. As mentioned in recital (204), Toyo Tyre Malaysia did not produce truck tyres, while Brisa Bridgestone and Goodyear Lastikleri manufactured truck tyres in their Turkish facilities. In light of this, the Commission decided to prioritize companies that produce truck tyres when establishing benchmarks for SG&A and profit. This approach ensures that the benchmarks are more relevant and representative of the industry.

Thailand

(211) Giti claimed that Thailand should be the most suitable choice among those considered by the Commission. Giti and Hankook claimed that Thailand should not be disregarded because of insufficient or no imports for HS codes 4001 21 , 4001 22 and 4002 80 as an international benchmark could be used for replacing the values (i.e. the Singapore Commodities exchange or Statista) and that there were no provisions in the Basic Regulation requiring the use of import data. Moreover, Giti claimed that considering 4001 21 was useless in its case as it did not consume such raw material. The same party provided a list of three producers of truck tyres.

(212) The Commission noted that Giti did not substantiate its claim and did not explain why Thailand is the most suitable choice for representative country, neither explain why Singapore Commodities exchange or Statista (103) are reliable sources of information. The Commission recalls that it established the list of factors of production based on the submission made by all the sampled groups of exporting producers as the analysis had to be valid for all of them. Moreover, the Commission considered that in a situation of quasi-absence of imports for one of the main inputs from the main category mentioned above, Thailand cannot be considered as an appropriate representative country.

Türkiye

(213) The Coalition against unfair imports claimed that the Commission did not consider that Türkiye imported significant amounts of inputs from Russia. The trade flows from Russia have been severely affected by the sanctions following Ukraine’s invasion in February 2022 and large volumes of products have been redirected to non-EU markets in commercial conditions that cannot ensure that free market conditions were maintained. Therefore, according to the Coalition against unfair imports Türkiye cannot be considered as appropriate representative country.

(214) The Commission assessed the claim and found that there have been significant volumes of Russian imports in Türkiye of two HS codes of the main category (as defined in the First Note: 2803 00 and 4002 19 ). However, the party did not provide evidence that imports from Russia may render the imports into Türkiye unreliable. The Commission did not observe evidence of any abnormal price fluctuation for the import from Russia into Türkiye of the two HS codes that were not sold in significant discounts in comparison with average import price of that input in Türkiye. Therefore, the claim was disregarded.

(215) Giti claimed that Türkiye imposed anti-dumping measures to protect its steel industry, and thus these measures distorted import prices of steel wire (an input for the production of tyres) and that in addition local producers of tyres enjoyed significant protection, i.e. anti-dumping measures on tyres, leading to artificially elevated profits. The Commission considered that the imposition of anti-dumping measures was not aimed at shielding local producers from competition but, on the opposite, it reestablished a normal competitive situation. Therefore, the claim was rejected.

(216) Following the final disclosure, Giti claimed that the Commission did not address a claim made after the disclosure of the Second Note on FOP that the steel wire used in the product under investigation is a basic steel product typically sourced domestically while imports should reflect specialty products rather than general market trends. This distortion was evidenced by comparing Türkiye export price with import price which was roughly half the import price.

(217) Giti claimed that a specific type of steel wire was used in the production of truck tyres, but failed to provide any evidence to support this claim. In the absence of such evidence, the Commission considered the claim to be speculative and therefore did not take it into account.

(218) Regarding Türkiye, Hankook claimed that Brisa Bridgestone’s consolidated financial statements included Arvento subsidiaries which were involved in the development and manufacturing of mobile technologies. Therefore, Brisa Bridgestone was considered manifestly not representative for the purpose of the normal value construction. The party proposed the use of Goodyear Lastikleri Turk (104) which would be more appropriate than Brisa Bridgestone as there was not consolidation of other type of activities.

(219) Regarding Brisa Bridgestone and Arvento, the Commission noted that the party did not substantiate its claim, in particular regarding the impact of Arvento turn-over on the consolidated financial statements. Therefore, the Commission concluded that Brisa Bridgestone financial data remained an appropriate source for the establishment of the SG&A and profit percentages. Moreover, the Commission considered the claim concerning Goodyear Lastikleri Turk and concluded that the financial data of this producer of truck tyres could also be a source for the establishment of the SG&A and profit percentages to construct normal value in Türkiye, in addition to the data of Brisa Bridgestone. Indeed, the financial data of Goodyear Lastikleri Turk is readily available and its accounts are audited. Based on both producers, the weighted average rates for SG&A and profit, expressed as a percentage of the cost of goods sold, are 22,0 % and 10,8 % respectively may be considered as reasonable for such industry.

(220) Therefore, the claim was rejected.

(221) Giti and Hankook claimed that the economic conditions (such as high inflation, devaluation of the Turkish lira, increase of lending rates or energy price) affect the Turkish economy, and that the labour costs were impacted by political decision. In their view this could affect the reliability of indirect expenses and undermine the reliability of the normal value.

(222) The Commission considered that the import prices were not impacted by the devaluation of the Turkish lira, the Commission considered that any increase will be reflected by an increase of the total costs of goods sold and/or SG&A expenses and thus in the decrease of the profit margin of the representative producer. As SG&A and profit margins were expressed in percentage, this had no impact on the calculation of the normal value. Regarding the inflation of certain specific costs, as labour or electricity, the Commission considered that the inflation reported in Türkiye is largely attenuated by the evolution of the exchange rate between Turkish lira and the Renminbi. Therefore, the claim was rejected.