Commission Implementing Regulation (EU) 2020/508 of 7 April 2020 imposing a provisional anti-dumping duty on imports of certain hot rolled stainless steel sheets and coils originating in Indonesia, the People’s Republic of China and Taiwan

8.4.2020	EN	Official Journal of the European Union	L 110/3

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union ¹ (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 12 August 2019, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports into the Union of certain hot rolled stainless steel sheets and coils (‘SSHR’ or ‘the product under investigation’) originating in Indonesia, the People’s Republic of China (‘PRC’) and Taiwan (‘the countries concerned’), on the basis of Article 5 of Regulation (EU) 2016/1036. It published a Notice of Initiation in the Official Journal of the European Union ² (‘Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 28 June 2019 by the European Steel Association (‘Eurofer’ or ‘the complainant’) on behalf of four Union producers representing the entirety of Union production of the product under investigation. The complaint contained evidence of dumping from the countries concerned and resulting material injury that was sufficient to justify the initiation of the investigation.

• (3) The Commission made imports of the product concerned subject to registration under Article 14(5) of the basic Regulation by Commission Implementing Regulation (EU) 2020/104 ³.

1.2.   Interested parties

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

• (5) Interested parties had the opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. The Commission received comments that are addressed in Sections 2.3 and 5.2.3.

1.3.   Sampling

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

1.3.1.   Sampling of Union producers

• (7) In the Notice of Initiation, the Commission stated that it had decided to limit to a reasonable number the Union producers that would be investigated by applying sampling, and that it had provisionally selected a sample of Union producers. The Commission selected the provisional sample on the basis of production and Union sales volumes reported by the Union producers in the context of the pre-initiation standing assessment analysis, taking also into account their geographical location. The provisional sample thus established consisted of three Union producers accounting for over 78 % of production and 88 % of sales in the Union of the like product, and located in three different Member States. Details of this provisional sample were made available in the file for inspection by interested parties, with the possibility for them to make comments. No comments were made.

• (8) As a result of the above, the provisional sample of Union producers was confirmed. It consisted of Aperam Belgium (‘Aperam’), Acciai Speciali Terni S.p.A. (‘AST’) and OTK Stainless Oy (‘OTK’). The definitive sample is representative of the Union industry.

1.3.2.   Sampling of importers

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

• (10) Two unrelated importers made themselves known as interested parties and provided the requested information. In view of the low number of replies received, sampling was not necessary. Both importers were invited to complete a questionnaire.

1.3.3.   Sampling of exporting producers in the countries concerned

• (11) Taking into account the number of known producers of the product concerned in the countries concerned, the Notice of Initiation provided only for sampling in the PRC and therefore, the Commission asked all Chinese exporting producers to provide the information specified in the Notice of Initiation to decide whether sampling was necessary and, if so, to select a sample.

• (12) In addition, the Commission asked the Embassy of the Republic of Indonesia in Brussels, the Mission of the People’s Republic of China to the European Union and the Taipei Representative Office in the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

1.3.3.1.   Indonesia

• (13) There were only two exporting producers in Indonesia known to the Commission at the initiation of the investigation. Therefore, the Commission did not intend to select a sample. No further exporting producers came forward. Consequently, the Commission carried out the investigation on the two exporting producers in Indonesia.

1.3.3.2.   The People’s Republic of China

• (14) Five exporting producers in the PRC provided the information requested in the Notice of Initiation and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three companies, which could reasonably be investigated within the time available. The basis for the selection of the sample were the largest volumes of exports to the Union.

• (15) In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the PRC, were consulted on the selection of the sample. No comments were made.

• (16) Following the verification visits, given the shortcomings of the information provided by one sampled Chinese exporting producer, the Commission decided to disregard the information given by this producer on the basis of Article 18(1) of the basic Regulation ⁴.

• (17) As a result of the above, the sample of the Chinese exporting producers was reduced to two companies, covering around 92 % of Chinese exports of the product concerned to the Union in the investigation period, which was still considered a high level of cooperation.

1.3.3.3.   Taiwan

• (18) In the Notice of Initiation, sampling was not foreseen for Taiwan as there was only one exporting producer known to the Commission. However, shortly before the initiation, the Commission was informed by the Taipei Representative Office in the European Union that there might be a total of 12 additional exporting producers of the product concerned in Taiwan. Therefore, upon initiation, the Commission asked the 13 parties to reply to sampling questions and, subsequently, to reply to a couple of other questions destined to clarify their role and exact activities. On that basis, the Commission could eventually identify two exporting producers of the product concerned in Taiwan. Therefore, sampling was not necessary.

• (19) The two exporting producers represented around 56 % of the total volume of exports from Taiwan to the Union. The replies of 7 of the Taiwanese parties contacted by the Commission upon initiation revealed that these companies were in fact independent service centres and/or traders and that most if not all of the remaining Taiwanese exports to the Union were eventually made by these parties. These service centres did not have any hot-rolling or cold-rolling facilities and therefore did not qualify as a producer of the product concerned. In addition, their added value was minor in relation to the cost of their inputs. However, in view of the replies received from them on the questions referred to in recital (18) above, the Commission followed up by providing these parties with a concise questionnaire in order to obtain a sound understanding of the functioning of the Taiwanese domestic and export sales of the product under investigation.

1.4.   Individual examination

• (20) Originally, four Chinese exporting producers that returned the sampling form requested individual examination under Article 17(3) of the basic Regulation. The Commission made the questionnaire available online on the day of the initiation ⁵. Moreover, when announcing the sample, the Commission informed the exporting producers that were not sampled that they were required to provide a questionnaire reply if they wished to be examined individually. However, none of the companies provided a questionnaire reply. Therefore, no individual examination was granted.

1.5.   Questionnaire replies and verification visits

• (21) 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’).

• (22) Furthermore, the complainant provided in the complaint sufficient prima facie evidence of raw material distortions in Indonesia and the PRC regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covered those raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation with regard to Indonesia and the PRC. For this reason, the Commission sent additional questionnaires in this regard to the Government of Indonesia (‘GOI’) and the GOC.

• (23) The Commission sent questionnaires to the three sampled Union producers, the complainant, the two unrelated importers and two users that had made themselves known, the nine exporting producers in the countries concerned and all other economic operators that made themselves known and requested a questionnaire. The same questionnaires had also been made available online ⁶ on the day of initiation.

• (24) Questionnaire replies were received from the three sampled Union producers, two unrelated importers, two users, the two known exporting producers from Indonesia, the three sampled exporting producers from the PRC, the two exporting producers in Taiwan and an unrelated service centre in Taiwan. A questionnaire reply was also received from the GOI. No reply was received from the GOC for any of the two questionnaires sent.

• (25) The Commission sought and verified all the information deemed necessary for a provisional determination of dumping, resulting injury and Union interest. Verification visits pursuant to Article 16 of the basic Regulation were carried out at the premises of the following parties:

• (a) Union producers and their association

• — Acciai Speciali Terni S.p.A., Terni, Italy (‘AST’)

• — Aperam Stainless Belgium, Châtelet and Genk, Belgium (‘Aperam’)

• — Outokumpu Stainless Oy, Tornio, Finland (‘OTK’)

• — Eurofer, Brussels, Belgium.

• (b) Users in the Union

• — Marcegaglia Specialties S.p.A., Mantova, Italy (‘Marcegaglia’).

• (c) Exporting producers

Exporting producers in Indonesia:

• — PT Indonesia Tsingshan Stainless Steel, Jakarta (‘ITSS’)

• — PT Indonesia Guang Ching Nickel and Stainless Steel Industry, Jakarta (‘GCNS’).

Exporting producers in the PRC:

• — Shanxi Taigang Stainless Steel Co., Ltd., Taiyuan (‘STSS’), its related exporter in the third country – Tisco Stainless Steel (H.K.) Ltd., HongKong (‘Tisco HK’), and five related companies located in the PRC: Beijing Taigang Sales Co., Shanxi Taigang Bonded & Conprehensive, Taiyuan Iron & Steel (Group) Fly Ash Comprehensive Utilization Co. Ltd., Taiyuan Taigang Daming Metal Products Ltd., and Tianjin Tisco and TPCO Stainless Steel

• — Fujian Fuxin Special Steel Co., Ltd., Ximen (‘FSS’)

• — Zhenxhi Group Eastern Special Steel Co., Ltd., Jiaxing (‘Zhenshi’).

Exporting producers in Taiwan:

• — Yieh United Steel Co. (‘Yusco’); its related producer Tang Eng Iron Works Co. Ltd. (‘Tang Eng’); its related service centre Yieh Mau Co. (‘YMC’); and its related trader Yieh Co. Ltd. (‘YCL’), Kaohsiung (together referred to as ‘Yusco Group’)

• — Walsin Lihwa Co., Tainan (‘Walsin’).

Independent service centre in Taiwan:

• — YC INOX Ltd., Changhua County (‘YC INOX’).

• (26) With regard to the procedure of Articles 7(2a) and 7(2b) of the basic Regulation, a consultation with the GOI took place.

1.6.   Investigation period and period considered

• (27) The investigation of dumping and injury covered the period from 1 July 2018 to 30 June 2019 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2016 to the end of the investigation period (‘the period considered’).

1.7.   Procedure for the determination of the normal value under Article 2(6a) of the basic Regulation

• (28) In view of the sufficient evidence available at the initiation of the investigation pointing to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation with regard to the PRC, the Commission considered it appropriate to initiate the investigation with regard to the exporting producers from this country having regard to Article 2(6a) of the basic Regulation.

• (29) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in the PRC to provide the information requested in Annex III to the Notice of the Initiation regarding the inputs used for producing SSHR. Five Chinese exporting producers submitted the relevant information.

• (30) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation, the Commission sent a questionnaire to the GOC as described in recital (21). No reply was received from the GOC. 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.

• (31) In the Notice of Initiation, the Commission also invited all interested parties to make their views known, submit information and provide supporting evidence regarding the appropriateness of the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of this Notice in the Official Journal of the European Union. Two exporting producers made comments on the existence of significant distortions.

• (32) 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.

• (33) On 9 September 2019, the Commission published a first note for the file (‘the Note of 9 September’) seeking the views of the interested parties on the relevant sources that the Commission may use for the determination of the normal value, in accordance with Article 2(6a)(e) second paragraph of the basic Regulation. In that note, the Commission provided a list of all factors of production such as materials, energy and labour used in the production of the product concerned by the exporting producers. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries (namely Brazil, Malaysia, South Africa and Turkey).

• (34) The Commission gave all interested parties the opportunity to comment. The Commission received comments from two Chinese exporting producers and the complainant. The GOC did not provide any comments.

• (35) The Commission addressed the comments received in the second note on the sources for the determination of the normal value of 10 October 2019 (‘the Note of 10 October’). The Commission also established a provisional list of factors of production and concluded that, at that stage, Brazil was the most appropriate representative country under Article 2(6a)(a), first indent of the basic Regulation. The Commission invited interested parties to comment and no comments were received.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product concerned

• (36) The product concerned by this investigation is flat-rolled products of stainless steel, whether or not in coils (including products cut-to-length and narrow strip), not further worked than hot-rolled and excluding products, not in coils, of a width of 600 mm or more and of a thickness exceeding 10 mm, currently falling under HS codes 7219 11, 7219 12, 7219 13, 7219 14, 7219 22, 7219 23, 7219 24, 7220 11 and 7220 12 and originating in the People’s Republic of China, Taiwan and Indonesia. The HS codes are given for information only.

2.2.   Like product

• (37) The investigation showed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses:

• — the product concerned;

• — the product produced and sold on the domestic markets of the countries concerned;

• — the product produced and sold on the domestic market of Brazil, which served as representative country in the meaning of Article 2(6a) of the basic Regulation; and

• — the product produced and sold in the Union by the Union industry.

• (38) The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

2.3.   Claims regarding product scope

• (39) Marcegaglia and the two exporting producers in Indonesia claimed that black coils should be excluded from the scope of the investigation. They claimed the present investigation covers two different types of stainless steel coils, namely white and black coils, and that although both black and white coils are classified under the same HS codes (as defined in the Notice of Initiation), their properties and intended uses differ. With regard to physical and chemical properties, Marcegaglia, inter alia, argued that black coils are, in terms of corrosion resistance, not even stainless steel products. According to Marcegaglia they are semi-finished products, neither annealed nor pickled.

• (40) Moreover, according to Marcegaglia, black SSHR are made by hot rolling of slabs and they are mainly, if not exclusively, supplied to re-rollers. Marcegaglia argued that black SSHR can in fact only be used for further processing (re-rolling) into pickled coils or stainless steel cold-rolled coils and that there are only two re-rollers in the Union, namely Marcegaglia and another much smaller party. It claimed that black SSHR, as product category, is more similar to stainless steel slabs than to white SSHR due to its intrinsic nature of semi-finished product.

• (41) Further according to Marcegaglia, white SSHR are a stainless steel finished product made by annealing and pickling of black SSHR. The latter are therefore the indispensable raw material to manufacture white SSHR to the same extent as slabs are the indispensable raw material to manufacture black SSHR. As such, white SSHR can be used without further processing by end-users for direct industrial application (e.g. automotive, machinery and petrochemical industries). It is supplied to plate cutting companies, tube manufacturers and cold rolling companies for further processing.

• (42) Finally, the parties concerned claimed that the Union industry is not interested in supplying the market with black coils as they rather use themselves the black coils they produce for further conversion into white coils and further downstream products. Therefore, according to them, the security of supply of black coils is at stake if they wouldbe included in the scope of measures, if any.

• (43) Eurofer opposed the claims referred to in recitals (39) to (42). It, inter alia, insisted that black and white coils are both flat stainless steel products with the same physical characteristics and chemical composition for the same grades, manufactured from the same raw materials (essentially chromium, stainless steel scrap and nickel) and that the added value for processing black coils into white coils is limited and represents less than 8 % of the production cost of a white coil. Eurofer also referred to an overall unused capacity of more than 2 million tonnes among Union producers and indicated that the Union industry can and is willing to satisfy the entire demand of SSHR on the Union market, regardless of the product type needed. Moreover, it submitted that several Union producers notified on their websites that they are capable and willing to deliver black coils. Consequently, it argued that the security of supply of black coils is not at risk but pointed at the risk of circumvention if black coils would be excluded.

• (44) The Commission analysed the claims. On the product characteristics, the investigation found that black coils and white coils have the same chemical composition. In particular, black coils are manufactured from the same basic material and thus have the same characteristics as white coils depending on the steel grade. It follows that black coils fall under the same Combined Nomenclature headings as the white coils covered by the proceeding, starting with 7219 or 7220. These headings both fall under the Section ‘stainless steel’ in Chapter 72 (Iron and Steel) of the Combined Nomenclature. Black and white coils also have the same physical properties as they have similar dimensions. Black and white coils are interchangeable for re-rollers with annealing and pickling facilities, which indeed means that there is a risk of circumvention if black coils would be excluded from the scope of the product concerned.

• (45) On the alleged lack of interest of the Union industry to sell black coils, this claim was not substantiated by any evidence. On the contrary, the investigation showed that the Union industry has a significant spare capacity, which is equally available for black and white coils, and that, in spite of the difficult market circumstances, it sold in the investigation period very significant volumes of black coils on the Union market, including (but not exclusively) to Marcegaglia. That shows it has a genuine interest in serving the market.

• (46) On that basis, it is provisionally concluded that black and white coils share the same basic physical and chemical characteristics and that they form one product group. The claims referred to in recitals (39) to (42) are therefore rejected.

• (47) Several parties claimed that SSHR of a width of 1 600 mm and more, including SSHR of a width of 2 000 mm, should be excluded from the scope of the investigation because introducing anti-dumping measures on this special material would further reduce the purchase possibility of a material which is already very hard to procure. It would also limit their competitiveness against non-Union producers of large diameter welded tubes.

• (48) This claim is rejected. SSHR of a width of 1 600 mm or more have the same basic chemical characteristics as smaller SSHR. They also share the same basic physical characteristics except for the width. SSHR of larger width could easily be transformed into smaller SSHR by simple cutting operations. There is therefore a risk of circumvention if larger coils would be excluded from the scope of the product concerned.

• (49) The Consortium for imports of SST HRF ⁷ claimed that coils with a thickness above 10 mm should be excluded, as there are only two plants in the Union able to produce SSHR with a thickness above 13 mm. The Commission sees no valid reasons to exclude these coils, which beyond any doubt share the same basic physical and chemical characteristics and uses as all other product types under the product scope. Moreover and as indicated by the Consortium itself, the Union industry has the capacity to supply them. The claim is therefore rejected.

3. DUMPING

3.1.   Indonesia

3.1.1.   Exporting producers

• (50) During the investigation period, there were two exporting producers in Indonesia, the companies ITSS and GCNS. The companies were related to each other via their ultimate parent, the Chinese steel producer Tsingshan Steel Group.

• (51) Together with the Indonesian company PT Bintang Delapan, Tsingshan Steel Group established the Indonesia Morowali Industrial Park (‘IMIP’) in Sulawesi, Indonesia ⁸. The following companies related via Tsingshan Steel Group and located in IMIP were involved in the investigation:

• — GCNS is an integrated exporting producer of the product under investigation processing nickel ore into black SSHR;

• — ITSS is an integrated exporting producer processing nickel ore into stainless steel slab;

• — PT Sulawesi Mining Investment (‘SMI’) is a smelter processing the nickel ore into ferronickel and further to stainless steel slabs;

• — PT Indonesia Ruipu Nickel and Chrome Alloy (‘IRNC’) is a producer of ferrochrome and downstream products of the product under investigation being able to further process white SSHR by cold-rolling;

• — PT Tsingshan Steel Indonesia (‘TSI’) is a producer of nickel pig iron (produced from nickel ore with a low nickel content).

3.1.2.   Application of Article 18 of the basic Regulation

• (52) Both exporting producers failed to provide a meaningful worldwide structure of the group in their questionnaire replies and during the verification visits. Furthermore, the related traders involved in export sales did not provide any questionnaire reply.

• (53) Therefore, the Commission was not able to verify the relationship between the exporting producers and their suppliers of nickel ore, which is considered a crucial raw material giving the product under investigation its stainless characteristics. In particular, the Commission was not able to establish whether the allegedly unrelated suppliers were indeed independent from the exporting producers.

• (54) Consequently, the Commission was not able to assess whether the nickel ore supplied by positively identified related parties was purchased at an arm’s length price.

• (55) Moreover, the Commission was not able to verify the relationship with the allegedly unrelated customer of a related domestic trader. Thus, the Commission disregarded the sales between the related trader and the allegedly unrelated customer when determining the normal value.

• (56) Finally, due to the non-cooperation of the related traders involved in export sales, the Commission was not able to determine the export price to the first unrelated customer and the actual costs incurred by those related traders. Thus, the Commission was not able to calculate the export price based on the data provided by the exporting producers producers although all information provided by GCNS and ITSS could be verified against the companies’ records.

• (57) By a letter of 20 December 2019, the Commission informed GCNS and ITSS of its intention to apply Article 18 of the basic Regulation with regard to certain aspects of the dumping margin calculation. In this respect, the exporting producers submitted comments on 7 January 2020.

• (58) In their comments on the application of Article 18 of the basic Regulation, the exporting producers submitted that the basic Regulation does not allow the Commission to conclude that the information provided by the exporting producers concerning the purchases of nickel ore are not reliable solely on the grounds that the relationship between the exporting producers and their suppliers could not be established. GCNS and ITSS referred to World Trade Organisation (‘WTO’) jurisprudence ⁹ and the WTO Customs Valuation Agreement ¹⁰, from which followed that transactions between related parties cannot be considered a priori unacceptable or not at arm’s length. Finally, the exporting producers recalled that the Commission verified the purchases of nickel ore during the verification visit.

• (59) In this respect, the Commission confirmed that indeed the information provided by the companies in the group (GCNS, ITSS, SMI, and TSI) on the identity of the supplier, the volumes and values of the raw material purchases were verified. Nevertheless, and notwithstanding the WTO rules and jurisprudence on transactions between related parties, by not supplying the worldwide structure of the group, the exporting producers prevented the Commission from even examining whether the purchase transactions were carried out at arm’s length price.

• (60) Therefore, the Commission confirmed its intention to disregard the reported purchase price of nickel ore and replace it with facts available under Article 18 of the basic Regulation.

• (61) As for the calculation of the export price, the exporting producers reiterated their best efforts to secure the cooperation of the related traders involved in export sales. The exporting producers also suggested that the Commission use information available on the file as facts available.

• (62) In this respect, the Commission provisionally decided to use the data available on the file provided by interested parties in the Union, which cooperated with the investigation from its initiation and sent questionnaire replies.

• (63) As a conclusion, the Commission provisionally used facts available in order to establish or replace certain information in accordance with Article 18 of the basic Regulation to the extent described above.

3.1.3.   Normal value

• (64) The Commission first examined whether the total volume of domestic sales for each cooperating exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represented at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period.

• (65) On this basis, the total sales by GCNS of the like product on the domestic market were found not to be representative.

• (66) Therefore, where a product type was not sold on the domestic market, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation.

• (67) Normal value was constructed by adding the following to the average cost of production of the like product of GCNS during the investigation period:

• (a) the weighted average selling, general and administrative (‘SG&A’) expenses incurred by GCNS on domestic sales of the like product, in the ordinary course of trade, during the investigation period; and

• (b) the weighted average profit realised by GCNS on domestic sales of the like product, in the ordinary course of trade, during the investigation period.

• (68) The cost of nickel ore was adjusted as explained in recitals (79) to (82).

• (69) GCNS purchased certain services and inputs in the form of semi-finished products from the related suppliers located in IMIP. The Commission examined whether those purchases were carried out at an arm’s length price. In this respect, where available, the Commission compared the purchase price with the price of the related supplier to an unrelated customer. Where such price was not available, the Commission compared the purchase price with a constructed market price taking into account the costs of production, SG&A, and a reasonable profit of the related supplier. Where appropriate, the Commission adjusted the costs of those services and inputs incurred by GCNS in accordance with Article 2(5) of the basic Regulation.

• (70) On the basis of the representativity test explained in recital (64), the total sales by ITSS of the like product on the domestic market were representative.

• (71) The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union for ITSS with representative domestic sales.

• (72) The Commission then examined whether the domestic sales by ITSS on its domestic market for each product type that is identical or comparable with a product type sold for export to the Union were representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales of a product type are representative if the total volume of domestic sales of that product type to independent customers during the investigation period represents at least 5 % of the total volume of export sales of the identical or comparable product type to the Union. The Commission established that the sales of one product type on the domestic market were representative.

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

• (74) The normal value is based on the actual domestic price per product type, irrespective of whether those sales are profitable or not, if:

• (a) the sales volume of the product type, sold at a net sales price equal to or above the calculated cost of production, represented more than 80 % of the total sales volume of this product type; and

• (b) the weighted average sales price of that product type is equal to or higher than the unit cost of production.

• (75) In this case, the normal value is the weighted average of the prices of all domestic sales of that product type during the investigation period.

• (76) The normal value is the actual domestic price per product type of only the profitable domestic sales of the product types during the investigation period, if:

• (a) the volume of profitable sales of the product type represents 80 % or less of the total sales volume of this type: or

• (b) the weighted average price of this product type is below the unit cost of production.

• (77) The analysis of domestic sales showed that 13,7 % of all domestic sales of the product type were profitable and that the weighted average sales price was higher than the cost of production. Accordingly, the normal value was calculated as a weighted average of the profitable sales only.

• (78) Where a product type was not sold in representative quantities on the domestic market, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation.

• (79) Normal value was constructed by adding the following to the average cost of production of the like product of ITSS during the investigation period:

• (a) the weighted average SG&A expenses incurred by ITSS on domestic sales of the like product, in the ordinary course of trade, during the investigation period; and

• (b) the weighted average profit realised by ITSS on domestic sales of the like product, in the ordinary course of trade, during the investigation period.

• (80) The cost of nickel ore was adjusted as explained in recitals (79) to (82).

• (81) ITSS purchased certain services and inputs from the related suppliers located in IMIP. The Commission examined whether those purchases were carried out at an arm’s length price. In this respect, where available, the Commission compared the purchase price with the price of the related supplier to an unrelated customer. Where such price was not available, the Commission compared the purchase price with a constructed market price taking into account the costs of production, SG&A, and a reasonable profit of the related supplier. Where appropriate, the Commission adjusted the costs of those services and inputs incurred by ITSS in accordance with Article 2(5) of the basic Regulation.

• (82) As explained in recitals (52) to (54) and (57) to (60), the Commission disregarded the costs of nickel ore as reported by the two exporting producers and by their related suppliers of certain inputs mentioned in recitals (69) and (78). The Commission intended to use the market price of nickel ore in Indonesia as facts available and replace the actual costs of nickel ore with that price.

• (83) In this respect, in the framework of the consultations with the GOI on potential raw material distortions under Article 7(2a) of the basic Regulation, the Commission requested statistical information on domestic sales volumes and values, which the GOI normally collected under the applicable legislation ¹¹. The GOI, however, only provided information on domestic sales volumes. Thus, this information was incomplete and could not be used to establish a domestic Indonesian market price of nickel ore.

• (84) As a consequence, the Commission used the actual price paid by the one exporting producer that provided information on the nickel content of the nickel ore for all its purchase transactions. The Commission considered that the nickel content, which influences the price of nickel ore, should be taken into account when replacing the costs of nickel ore reported by the companies in the group. The Commission identified the most expensive purchase transactions for each nickel content and considered that those transactions and prices were least likely to be affected by a relationship between the supplier and the buyer. The Commission established the adjusted costs of nickel ore based on the weighted average of the purchase price of the selected transactions taking into account the total volume purchased by the company within each nickel content group.

• (85) The adjusted costs of nickel ore were also used to recalculate the production costs of semi-finished inputs bought from the related suppliers mentioned in recitals (69) and (78), when examining whether the relevant inputs were purchased by the exporting producers at arm’s length price. Where it was evident that the suppliers used nickel ore with a lower nickel content, the adjusted costs reflected the difference.

3.1.4.   Export price

• (86) The exporting producers provided information that they exported to the Union through related traders in third countries and an unrelated trader in a third country.

• (87) As explained in recitals (52) and (56), the related traders involved in export sales did not cooperate with the investigation. Therefore, the export price was established in accordance with Article 18 of the basic Regulation on the basis of the information available on file and verified by the Commission. To determine the export price, the Commission first established the import price into the Union based on the information on the file provided by the cooperating interested parties in the Union. The Commission further adjusted that price for all costs incurred between importation and resale, including transport, insurance, handling and loading, SG&A expenses, and for profits accruing, based on verified information provided by the exporting producers or publicly available information (e.g. publicly available audited financial statements of one of the claimed related traders).

3.1.5.   Comparison

• (88) The Commission compared the normal value and the export price of the exporting producers on an ex-works basis.

• (89) Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments to the normal value were made for transport, insurance, handling and loading. Adjustments to the export price were made for credit costs and the commission of the unrelated trader in a third country.

3.1.6.   Dumping margins

• (90) The Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product under investigation, in accordance with Article 2(11) and (12) of the basic Regulation.

• (91) On this basis, the provisional weighted average dumping margins expressed as a percentage of the CIF Union frontier price, duty unpaid, are 19,3 % for GCNS and 16,2 % for ITSS.

• (92) As explained in recitals (50) and (51), the exporting producers are related. Therefore, the Commission established a single weighted average dumping margin for both companies at the level of 19,2 %.

• (93) As the imports of the cooperating exporting producers constituted 100 % of the total exports to the Union during the investigation period, the Commission considered it representative to set the residual dumping margin at the level of the cooperating exporting producers.

• (94) The provisional dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Company	Provisional dumping margin
PT Indonesia Guang Ching Nickel and Stainless Steel Industry PT Indonesia Tsingshan Stainless Steel	19,2 %
All other companies	19,2 %

3.2.   The PRC

3.2.1.   Preliminary remarks

• (95) As explained in the recital (16) with regard to one of the three sampled Chinese exporting producers the Commission decided to make use of the provisions of Article 18 of the basic Regulation and disregarded the information provided by this exporting producer.

• (96) The Commission took this decision because during the verification visit the company failed to explain in time several figures presented in the questionnaire reply and link them with the audited accounts, cost management accounts and data in the internal IT applications used. Some figures, such as production volumes per product type, energy inputs consumption, by-products allocation and manufacturing overheads, that were considered crucial for the calculation of the individual dumping margin, could not be reconciled with the above mentioned documents or their allocation keys could not be sufficiently explained. Furthermore, due to delays in providing requested data and explanations, the Commission could not verify at all certain parts of the questionnaire replies related to the normal value determination. Therefore, the Commission did not receive the necessary information within the time limits set in the basic Regulation to establish a dumping margin for the company.

• (97) In accordance with Article 18(4) of the basic Regulation, by letter of 18 December 2019, the interested party was informed of the reasons of the Commission’s intention to disregard the information provided and it was granted the opportunity to provide further explanations.

• (98) The company replied to the Commission’s letter on 7 January 2020. In its reply, the company did not contest the fact that the deficiencies listed in the Commission’s letter had existed. However the company claimed that such deficiencies were not serious enough to apply Article 18 of the basic Regulation. The company argued that the deficiencies identified by the Commission in its letter were caused by the fact that the information supplied by one related company was generally compiled and treated manually rather than through an IT system. Hence, it was more prone to contain deficiencies. The company concluded that despite this, the Commission could calculate an individual dumping margin on the basis of the information verified on the spot.

• (99) The Commission disagreed with the company’s statement that, on the basis of the information verified on the spot, it was possible to calculate an individual dumping margin. As set out in recital (93) above, the nature and amount of deficiencies identified onspot – irrespective of what their origin may have been – and the fact that the company was not able to resolve them during the entirety of the verification visit, effectively prevented the Commission from calculating a dumping margin on the basis of verified data. Accordingly, the Commission provisionally disregarded the information provided by the exporting producer and confirmed, at this stage, the use of facts available with regard to this exporting producer.

• (100) Thus, the description of the dumping margin calculation below refers to the remaining two Chinese exporting producers in the sample.

3.2.2.   Normal value

• (101) 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’.

• (102) However, according to Article 2(6a)(a) of the basic Regulation, ‘(i)n 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’. 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.

3.2.2.1.   Existence of significant distortions

(a) Introduction

• (103) Article 2(6a)(b) of the basic Regulation defines ‘significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:

• — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;

• — state presence in firms allowing the state to interfere with respect to prices or costs;

• — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;

• — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;

• — wage costs being distorted;

• — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state’.

• (104) According to Article 2(6a)(b) of the basic Regulation, the assessment of the existence of significant distortions within the meaning of Article 2(6a)(a) shall take into account, amongst others, the non-exhaustive list of elements in the former provision. Pursuant to Article 2(6a)(b) of the basic Regulation, in assessing the existence of significant distortions, regard shall be had to the potential impact of one or more of these elements on prices and costs in the exporting country of the product concerned. Indeed, as that list is non-cumulative, not all the elements need to be given regard to 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. However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) 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 provides 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.

• (105) 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’.

• (106) Pursuant to this provision, the Commission has issued a country report concerning the PRC (hereinafter ‘the Report’) ¹², showing 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 in specific sectors (such as steel and chemicals). The Report was placed on the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report. Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation.

• (107) In particular, the complaint referred to practices affecting the costs and prices in the stainless steel sector:

• — the Chinese stainless steel market is to a significant extent served by enterprises which operate under the ownership, control and policy supervision of the GOC;

• — the costs of raw materials and energy in the PRC are not the result of free market forces as they are affected by substantial government intervention, including policies favouring domestic suppliers;

• — there is still a lack of adequate enforcement of bankruptcy laws, corporate or property laws in the PRC;

• — wage costs are distorted since they do not result from normal market forces or negotiation between companies and the work force;

• — stainless steel companies have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the State.

• (108) As indicated in recital (30), the GOC did not comment or provide evidence supporting or rebutting the existing evidence on the case file, including the Report and the additional evidence provided by the complainant, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

• (109) Comments in this regard were received from two of the exporting producers, which claimed that the calculation of the normal value pursuant to Article 2(6a) of the basic Regulation is incompatible with the WTO Anti-Dumping Agreement (‘ADA’). In this respect, the exporting producers claimed that the Commission should not deviate from the standard methodology in establishing the normal value, unless the ADA permits otherwise, and should follow the standard methodology in accordance with Article 2 of the ADA. Moreover, the interested parties also claimed that the notion of significant distortions does not even exist in the ADA.

• (110) Furthermore, the exporting producers claimed that no evidence was presented on the file that the alleged governmental interventions listed in the Report and complaint had led to price distortions of inputs for the production of the product concerned.

• (111) For the purpose of this investigation the Commission has concluded in recital (157) that it is appropriate to apply Article 2(6a) of the basic Regulation. The Commission considers that Article 2(6a) is thus applicable. In addition, the Commission considers that this provision is consistent with the European Union’s WTO obligations. It is the Commission’s view that, as clarified in DS473 EU-Biodiesel (Argentina), the provisions of the basic Regulation that apply generally with respect to all WTO Members, in particular Article 2(5), second subparagraph of the basic Regulation, permit the use of data from a third country, duly adjusted when such adjustment is necessary and substantiated. The Commission finally recalled that the dispute DS473 EU-Biodiesel (Argentina) did not concern the application of Article 2(6a) of the basic Regulation, which is the relevant legal basis for the determination of normal value in this investigation. Therefore, the Commission rejected this claim.

• (112) The Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, 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, including the evidence contained in the Report, which relied on publicly available sources. That analysis covered the examination of the substantial government interventions in the PRC’s economy in general, but also the specific market situation in the relevant sector including the product concerned.

• (113) Regarding the second claim, the Commission noted that the existence of the significant distortions giving rise to the application of Article 2(6a) of the basic Regulation is not linked to the existence of a specific sectoral chapter covering the product under investigation. The Report describes different types of distortions present in the PRC which are cross-cutting and applicable throughout the Chinese economy and affect the prices and/or the raw materials and costs of production of the product under investigation. As explained in Sections b) to i) below, the SSHR industry is subject to a number of governmental interventions described in the Report (coverage by the Five-Years Plans and other documents, raw material distortions, financial distortions etc.), which are explicitly listed and referenced in this regulation. In addition, recitals (104), (121) to (122), (124) to (128), (135), (138), (141), (151), (153) to (154) of this Regulation have also detailed a number of distortions applicable to the SSHR sector and/or to its raw materials and inputs beyond the significant distortions already contained in the Report. The market circumstances and the underlying policies and plans giving rise to significant distortions are still applicable to the SSHR sector and that of its costs of production, despite the Report being released in December 2017. No party submitted any evidence to the contrary. Also the additional sources of significant distortions contained in the Regulation are still applicable and no party has submitted any evidence to the contrary.

• (114) Therefore, the Commission provisionally rejected the claims made by the two exporting producers.

(b) Significant distortions affecting the domestic prices and costs in the PRC

• (115) The Chinese economic system is based on the concept of ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of the PRC. 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’. The State-owned economy is the ‘leading force of the national economy’ and the State has the mandate ‘to ensure its consolidation and growth’ ¹³. 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. 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 ¹⁴.

• (116) In addition, under Chinese law, the socialist market economy is developed under the leadership of the Chinese Communist Party (‘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. 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. 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.’ ¹⁵ This illustrates the unquestioned and ever growing control of the CCP over the economic system of the PRC. 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.

• (117) 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 ¹⁶. 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.

• (118) 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. 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 while this was a regular feature in previous planning cycles. 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.). The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also section e) below) ¹⁷.

• (119) Second, on the level of allocation of financial resources, the financial system of the PRC is dominated by the State-owned commercial 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 (see also section h) below) ¹⁸. 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 other than the banking 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 ¹⁹.

• (120) 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 ²⁰. Similarly, in the area of investment, the GOC maintains significant control and influence over the 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 ²¹.

• (121) 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 ²².

(c) Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

• (122) In the PRC, enterprises operating under the ownership, control and/or policy supervision or guidance by the State represent an essential part of the economy.

• (123) The GOC and the CCP maintain structures that ensure their continued influence over enterprises, and in particular State-owned enterprises (SOEs). The State (and in many aspects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision making in SOEs. This is typically done through rotation of cadres between government authorities and SOEs, through presence of party members on SOEs executive bodies and of party cells in companies (see also section d)), as well as through shaping the corporate structure of the SOE sector ²³. In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant inputs, including finance ²⁴.

• (124) Specifically in the steel sector, a substantial degree of ownership by the GOC persists. While the nominal split between the number of SOEs and privately owned companies is estimated to be almost even, from the five Chinese steel producers ranked in the top 10 of the world’s largest steel producers four are SOEs ²⁵. At the same time, while the top ten producers only took up some 36 % of total industry output in 2016, the GOC set the target in the same year to consolidate 60 % to 70 % of iron and steel production to around ten large-scale enterprises by 2025 ²⁶. This intention has been repeated by the GOC in April 2019, announcing a release of guidelines on steel industry consolidation ²⁷. Such consolidation may entail forced mergers of profitable private companies with underperforming SOEs ²⁸. An example of a recent merger are the steel producers Baosteel Group Corp. and Wuhan Iron & Steel Group Corp. in 2016, creating worlds second largest steel producer ²⁹. The major stainless steel producers are state-owned, for example Tisco, Baosteel, Ansteel Lianzhong, Jiujuan Iron and Steel and Tangshan.

• (125) Furthermore, the PRC is the world’s leading consumer of nickel. Nickel is an important raw material giving, together with chromium, the stainless steel its stainless properties. The nickel content is also the cost driver for nickel ore, which, in turn, is the cost driver for the immediate inputs of the product concerned. It is used in the production of SSHR in various forms, e.g. nickel ore, nickel pig iron, ferronickel, pure nickel, nickel scrap, stainless steel scrap. The complainant estimated that nickel in its various forms accounted for more than 50 % of the production costs of stainless steel in the PRC ³⁰. In 2016, the country used 1,04 million tonnes, accounting for 52 % of the global nickel consumption. In 2017, Chinese consumption was set to increase by 2,9 % to 1,07 million tonnes. The production of stainless steel represents the dominant use for nickel in the PRC (84 %). This proportion is significantly higher than the international average (64 %). The consumption of nickel has increased strongly in 2016 and 2017 ³¹, as Chinese stainless steel production expanded by 15,7 % to 24,9 million tonnes. Because output in the rest of the world grew by only 4,3 %, the PRC’s share of world production reached 54,5 %. The surge in output comes on the back of strong infrastructure spending by the GOC and robust real estate construction. Statistics indicated that much of the PRC’s fixed asset investment has been organized by the GOC and its SOEs, both of which have displayed higher investment growth than the private sector ³².

• (126) With the high level of government intervention in the steel industry and non-ferrous metal industry (‘NFM’), and a high share of SOEs in these sectors, even privately owned steel producers are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the steel sector are also subject to policy supervision and guidance as set out in section e) below.

• (127) On the basis of the above, it is concluded that the SSHR market in the PRC was served to a significant extent by enterprises subject to the ownership, control or policy supervision or guidance by the GOC.

(d) Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: State presence in firms allowing the state to interfere with respect to prices or costs

• (128) Apart from exercising control over the economy by means of ownership of SOEs and other tools, the GOC is in position to interfere with prices and costs through State presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant State authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights ³³, CCP cells in enterprises, state-owned and private alike, represent another important channel through which the State can interfere with business decisions. According to the PRC’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 ³⁴) and the company shall provide the necessary conditions for the activities of the party organisation. In the past, this requirement appears not to have always been followed or strictly enforced. However, since at least 2016 the CCP has reinforced its claims to control business decisions in SOEs as a matter of political principle. The CCP is also reported to exercise pressure on private companies to put ‘patriotism’ first and to follow party discipline ³⁵. 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 ³⁶. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of SSHR and the suppliers of their inputs.