Commission Implementing Regulation (EU) 2017/1408 of 1 August 2017 withdrawing the acceptance of the undertaking for two exporting producers under Implementing Decision 2013/707/EU confirming the acceptance of an undertaking offered in connection with the anti-dumping and anti-subsidy proceedings concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China for the period of application of definitive measures

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union (‘the Treaty’),

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (2) (‘the basic anti-subsidy Regulation’), and in particular Article 13 thereof,

Having regard to Council Implementing Regulation (EU) No 1238/2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China (3), and in particular Article 3 thereof,

Having regard to Council Implementing Regulation (EU) No 1239/2013 imposing a definitive countervailing duty on imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China (4), and in particular Article 2 thereof,

Informing the Member States,

Whereas:

(1) By Regulation (EU) No 513/2013 (5), the European Commission (‘the Commission’) imposed a provisional anti-dumping duty on imports into the European Union (‘the Union’) of crystalline silicon photovoltaic modules (‘modules’) and key components (i.e. cells and wafers) originating in or consigned from the People's Republic of China (‘the PRC’).

(2) A group of exporting producers gave a mandate to the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘CCCME’) to submit a price undertaking on their behalf to the Commission, which they did. It is clear from the terms of that price undertaking that it constitutes a bundle of individual price undertakings for each exporting producer, which is, for reasons of practicality of administration, coordinated by the CCCME.

(3) By Decision 2013/423/EU (6), the Commission accepted that price undertaking with regard to the provisional anti-dumping duty. By Regulation (EU) No 748/2013 (7), the Commission amended Regulation (EU) No 513/2013 to introduce the technical changes necessary due to the acceptance of the undertaking with regard to the provisional anti-dumping duty.

(4) By Implementing Regulation (EU) No 1238/2013, the Council imposed a definitive anti-dumping duty on imports into the Union of modules and cells originating in or consigned from the PRC (‘the products concerned’). By Implementing Regulation (EU) No 1239/2013, the Council also imposed a definitive countervailing duty on imports into the Union of the products concerned.

(6) By Implementing Decision 2014/657/EU (9) the Commission accepted a proposal by the exporting producers together with the CCCME for clarifications concerning the implementation of the undertaking for the products concerned covered by the undertaking, that is modules and cells originating in or consigned from the PRC, currently falling within CN codes ex 8541 40 90 (TARIC codes 8541409021, 8541409029, 8541409031 and 8541409039) produced by the exporting producers (‘product covered’). The anti-dumping and countervailing duties referred to in recital (4) above, together with the undertaking, are jointly referred to thereafter as ‘measures’.

(7) By Implementing Regulation (EU) 2015/866 (10) the Commission withdrew the acceptance of the undertaking for three exporting producers.

(8) By Implementing Regulation (EU) 2015/1403 (11) the Commission withdrew the acceptance of the undertaking for another exporting producer.

(9) By Implementing Regulation (EU) 2015/2018 (12) the Commission withdrew the acceptance of the undertaking for two exporting producers.

(10) The Commission initiated an expiry review investigation of the anti-dumping measures by a Notice of Initiation published in the Official Journal of the European Union (13) on 5 December 2015.

(11) The Commission initiated an expiry review investigation of the countervailing measures by a Notice of Initiation published in the Official Journal of the European Union (14) on 5 December 2015.

(12) The Commission also initiated a partial interim review of the anti-dumping and countervailing measures by a Notice of Initiation published in the Official Journal of the European Union (15) on 5 December 2015.

(13) By Implementing Regulation (EU) 2016/115 (16) the Commission withdrew the acceptance of the undertaking for another exporting producer.

(14) By Implementing Regulation (EU) 2016/185 (17), the Commission extended the definitive anti-dumping duty imposed by Implementing Regulation (EU) No 1238/2013 on imports of the products concerned originating in or consigned from the People's Republic of China to imports of the product concerned consigned from Malaysia and Taiwan, whether declared as originating in Malaysia and in Taiwan or not.

(15) By Implementing Regulation (EU) 2016/184 (18), the Commission extended the definitive countervailing duty imposed by Implementing Regulation (EU) No 1239/2013 on imports of the products concerned originating in or consigned from the People's Republic of China to imports of the product concerned consigned from Malaysia and Taiwan, whether declared as originating in Malaysia and in Taiwan or not.

(16) By Implementing Regulation (EU) 2016/1045 (19) the Commission withdrew the acceptance of the undertaking for another exporting producer.

(17) By Implementing Regulation (EU) 2016/1382 (20) the Commission withdrew the acceptance of the undertaking for another five exporting producers.

(18) By Implementing Regulation (EU) 2016/1402 (21) the Commission withdrew the acceptance of the undertaking for another three exporting producers.

(19) By Implementing Regulation (EU) 2016/1998 (22) the Commission withdrew the acceptance of the undertaking for another five exporting producers.

(20) By Implementing Regulation (EU) 2016/2146 (23) the Commission withdrew the acceptance of the undertaking for another two exporting producers.

(21) Following the expiry and interim reviews referred to in recitals (10)-(12), the Commission maintained the measures in force by Implementing Regulations (EU) 2017/366 (24) and (EU) 2017/367 (25).

(22) The Commission also initiated a partial interim review on the form of measures by a Notice of Initiation published in the Official Journal of the European Union (26) on 3 March 2017.

(23) By Implementing Regulation (EU) 2017/454 (27) the Commission withdrew the acceptance of the undertaking for four exporting producers.

(24) By Implementing Decision (EU) 2017/615 (28), the Commission accepted a proposal by a group of exporting producers together with the CCCME concerning the implementation of the undertaking.

(25) By Implementing Regulation (EU) 2017/941 (29), the Commission withdrew the acceptance of the undertaking for two exporting producers.

(26) The exporting producers agreed, inter alia, not to sell the product covered to the first independent customer in the Union below a certain minimum import price (‘the MIP’) within the associated annual level of imports to the Union (‘annual level’) laid down in the undertaking. The MIP is set on a cash equivalent basis. If the payment term is different from the cash equivalent basis, a certain deduction is applied to the invoice value when compliance with the MIP is compared.

(27) The undertaking also clarifies, in a non-exhaustive list, what constitutes a breach of the undertaking. That list includes, in particular, making compensatory arrangements with customers, making misleading declarations regarding the origin of the product concerned or the identity of the exporter. Taking part in a trading system leading to a risk of circumvention also constitutes a breach. The list also includes that issuing a commercial invoice, as defined in the undertaking, for which the underlying financial transaction is not in conformity with its face value is a breach.

(28) Moreover, the exporting producers undertook not to sell any product other than the product covered produced or traded by them in excess of a given small percentage limit of the total sales value of the product covered to the same customers to which they sell the product covered (‘the parallel sales limit’).

(29) The undertaking also obliges the exporting producers to provide the Commission on a quarterly basis with detailed information on all their export sales to the Union (‘the quarterly reports’). The reporting also includes reporting of re-sales to the first independent customer in the Union through a related importer listed in the undertaking. These latter reports enable the Commission to monitor whether the re-sale price of the related importer to the first independent customer is in accordance the MIP. Sales of products other than the product covered to the same customers also have to be reported. This data submitted in these quarterly reports must be complete and correct and the reported transactions should fully comply with the terms of the undertaking.

(30) The exporting producer is liable for the breach of any of its related parties, whether or not listed in the undertaking.

(31) The exporting producers also undertook to consult the Commission regarding any difficulties or questions, technical or otherwise, which may arise during the implementation of the undertaking.

(32) The undertaking also stipulates that the Commission may withdraw the acceptance of the undertaking at any time during its period of application if monitoring and enforcement prove to be impracticable.

(33) The undertaking also obliges the exporting producers to notify the Commission in due time in case they intend to establish a party in the Union to which they will be related.

(34) For the purpose of ensuring compliance with the undertaking, the exporting producers also undertook to allow verification visits at their premises in order to verify the accuracy and completeness of data submitted to the Commission in the quarterly reports and to provide all information considered necessary by the Commission.

(35) The undertaking further stipulates that the acceptance of the undertaking by the Commission is based on trust and any action which would harm the relationship of trust established with the Commission should justify the withdrawal of the undertaking.

(36) While monitoring compliance with the undertaking, the Commission verified information submitted by the two exporting producers BLD Solar and Topray Solar that was relevant to the undertaking. In addition, the Commission also carried out verification visits at the premises of these exporting producers. The findings listed in recitals (37) to (48) address the problems identified for BLD Solar and Topray Solar which oblige the Commission to withdraw acceptance of the undertaking for those two exporting producers.

(37) At the time of the verification visit in December 2016, BLD Solar's accounts showed that their four biggest allegedly unrelated customers had substantial amounts still due to be paid for modules purchased from BLD Solar. By way of example, one customer had not paid for more than one year after the last purchase. The balance still due amounted to more than 8 % of all BLD Solar sales to this customer. Such outstanding payments constitute ‘unlimited credits’ which are benefits to the customer. They are not allowed as compliance with the MIP cannot be verified for these transactions as set out in recital (26). BLD Solar had issued a large number of debit notes two days prior to the verification visit, allegedly claiming the outstanding payments. None of these debit notes had been entered into the accounts. In addition, BLD Solar failed to consult the Commission on this issue contrary to the obligations set out in recital (31).

(38) BLD Solar paid a substantial amount to one of the four customers mentioned in recital (37). This benefit constitutes a compensatory arrangement. In addition, the payment was not reported. The Commission analysed the implications of this benefit and concluded that BLD Solar had breached its obligation not to enter into compensatory arrangements, as mentioned in recital (27). Moreover, by not reporting this benefit, BLD breached the reporting obligations referred to in recital (29).

(39) According to publicly available information, BLD Solar had an office in the Union sharing the same address with one of its customers mentioned in recital (37). BLD Solar claimed this being unrealised business cooperation. Another one out of the four customers mentioned in recital (37) published a website which is nearly identical with BLD Solar's site, including the same linguistic errors.

(40) The Commission also found that BLD accounted the sales to two importers under a joint customer account. In its quarterly reports to the Commission, however, BLD declared these customers as different entities, hence putting into question the correctness of the reports, as referred to in recital (29). In addition, BLD gave contradictory explanations regarding the business relationship with one of these customers which is related to a Chinese exporting producer not subject to the undertaking.

(41) The Commission analysed the findings set out in recitals (39) to (40) and concluded that these harmed the relationship of trust established with the Commission.

(42) In addition the Commission concluded that the findings set out in recitals (37) and (38) BLD Solar breached the terms of the undertaking, as described in recitals (26), (27), (29) and (31).

(43) In addition to modules, Topray Solar sold big quantities of so-called consumer products like solar fountains and briefcase chargers. These products are not covered by the undertaking. No undertaking invoice should be issued for these products. However, Topray Solar unilaterally defined these products as product covered by the undertaking and issued undertaking invoices to the same customers which contained both: products covered and products non-covered by the undertaking. Moreover, the value of the product not covered by the undertaking was in excess of the parallel sales limit to the same customers. In addition, Topray Solar did not consult the Commission contrary to the obligations set out in recital (31).

(44) Apart from the sales referred to in recital (43), Topray Solar sold additional products not covered by the undertaking (e.g. solar charge controllers) to the same customers without reporting these sales to the Commission. These sales further increased the parallel sales limit excess referred to in recital (43) and constitute a breach of the reporting obligations referred to in recital (29).

(45) The Commission analysed the implications of this pattern of trade and concluded that there is a high risk of cross-compensation of the MIP, namely if products covered and products not covered are sold to the same customers in excess of the parallel sales limit. The Commission concluded that the identified pattern of trade renders the monitoring of Topray Solar's undertaking impracticable.

(46) Topray Solar also sold significant quantities of products not covered by the undertaking (e.g. solar charge controllers) to its related importer in the Union. Topray Solar could not demonstrate that these products were ultimately not sold to a customer which purchased modules in parallel. The Commission analysed the implication of this pattern of trade and concluded that a high risk of cross-compensation exists insofar Topray Solar's related importer may sell products not covered by the undertaking to the same customers that purchase modules in parallel from Topray Solar. Such trade pattern renders the monitoring of Topray Solar's undertaking impracticable. Topray Solar also failed to report these transactions to the Commission, thus breaching the obligations as described in recital (29).

(47) The Commission also found that Topray Solar accounted the sales to two importers under a joint customer account. In its quarterly reports to the Commission, however, Topray Solar declared these customers as different entities, hence putting into question the correctness of the reports, as referred to in recital (29).

(48) Topray Solar also failed to notify the Commission about the acquisition of two related companies in the Union, in breach of the requirement set out in recital (33) above. In addition, a minor sales transaction to one of these companies was reported as sales to an unrelated importer, in breach of the obligations mentioned in recital (29).

(49) The undertaking stipulates that a breach by an individual exporting producer does not automatically lead to the withdrawal of the acceptance of the undertaking for all exporting producers. In such a case, the Commission is required to assess the impact of that particular breach on the practicability of the undertaking with the effect for all exporting producers and the CCCME.

(50) The Commission accordingly assessed the impact of the breaches by BLD Solar and Topray Solar on the practicability of the undertaking with the effect for all exporting producers and the CCCME.

(51) The responsibility for the breaches lies alone with the exporting producers in question; the monitoring has not revealed any systematic breaches by a major number of exporting producers or the CCCME.

(52) The Commission therefore concluded that the overall functioning of the undertaking is not affected and that there are no grounds for withdrawal of the acceptance of the undertaking for all exporting producers and the CCCME.

(53) Interested parties were granted the opportunity to be heard and to comment pursuant to Article 8(9) of the basic anti-dumping Regulation and Article 13(9) of the basic anti-subsidy Regulation. The Commission received comments from an association representing the Union producers of solar modules and cells.

(54) The association requested the Commission to withdraw the acceptance of the undertaking for the two exporting producers with retroactive effect as it considers that these breaches had seriously and repeatedly harmed the Union industry and distorted the Union market.

(55) The Commission examined whether there are reasons to invalidate individual undertaking invoices issued by the two exporting producers pursuant to Article 3(2)(b) of Implementing Regulation (EU) No 1238/2013 and Article 2(2)(b) of Implementing Regulation (EU) No 1239/2013.

(56) As regards BLD Solar, the Commission could not establish that there was a direct link between the trade practises described in recitals (36) to (41) and individual undertaking invoices. Therefore, it considers that it is not appropriate to invalidate any undertaking invoices.