Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt

• (497) Following definitive disclosure, the GOC claimed that in a bidding mechanism, the price eventually obtained does not only reflect the price at which a seller is willing to sell or the initial price at which a bid is made, but also reflects the price that purchasers are willing to pay and the price eventually reached through such mechanism thus reflects both demand and supply. If, after the bidding mechanism has been completed, the end price “corresponded to the starting price of the bidding process”, then this simply means that this is the price that reflects demand and supply at that moment in time. The Commission agreed with the GOC on the basic principles of bidding mechanisms described, but noted that such a mechanism can only work when there are several bidders for a certain piece of land. However, the Commission did not find a single instance in this investigation, or even in previous investigations, where there had been more than one bidder for the land, and where the interplay of demand and supply could thus have been observed. Consequently, this claim was rejected.

• (498) Moreover, the Commission also found that some companies received refunds from local authorities to compensate for the prices, which they paid for the LURs. Furthermore, some of the LURs obtained by companies in the CNBM Group only had to be paid several years after the land had been put into use.

• (499) The above evidence contradicts the claims of the GOC that the prices paid for LUR in the PRC are representative of a market price, which is determined by free market supply and demand.

(c) Conclusion

• (500) The findings of this investigation show that the situation concerning acquisition of LURs in the PRC is non-transparent and the prices were arbitrarily set by the authorities.

• (501) Therefore, the provision of land-use rights by the GOC should be considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation in the form of provision of goods, which confers a benefit upon the recipient companies. As explained in recitals (491) to (499) above, there is no functioning market for land in the PRC and the use of an external benchmark (see recitals (506) to (515) below) demonstrates that the amount paid for land-use rights by the sampled exporting producers is well below the normal market rate.

• (502) In the context of preferential access to industrial land for companies belonging to certain industries, the Commission noted that the price set by local authorities has to take into account the government’s industrial policy, as mentioned above in recital (493). Within this industrial policy, the GFF industry is listed as an encouraged industry ¹¹⁶. In addition, Decision No. 40 of the State Council requires that public authorities ensure that land is provided to encouraged industries. Article 18 of Decision No. 40 makes clear that industries that are ‘restricted’ will not have access to land use rights. It follows that the subsidy is specific under Article 4(2)(a) and 4(2)(c) of the basic Regulation because the preferential provision of land is limited to companies belonging to certain industries, in this case the GFF sector, and government practices in this area are unclear and non-transparent.

• (503) Following definitive disclosure, the GOC reiterated the comments provided on Section 3.1 above also in relation to LUR, stating that none of the documents referred to by the Commission have a direct link to GFF, and none of them restrict the allegedly preferential provision of LURs to certain enterprises. In addition, Decision No. 40 of the State Council does not mention that public authorities should ensure that land is provided to encouraged industries.

• (504) In response, the Commission referred back to the arguments already developed in Section 3.1 above, highlighting that GFF is indeed an encouraged industry. Furthermore, Decision No. 40 of the State Council does mention in Article XII that ‘The Guiding Catalogue for Industry Restructuring’ is an important reference for guiding the investment, government’s management of investment projects and the formulation and implementation of policies of tax, credits, land (emphasis added) and import and export”. Furthermore, the introduction of the Decision No. 40 states that “All departments concerned shall accelerate the steps in formulating and amending the relevant policies in tax, credit, land (emphasis added) and import and export, etc., and strengthen the coordination with industrial policies so as to further perfect the policy system of promoting the industrial restructuring”. A contrario, Article XVIII of Decision No. 40 states that for industries falling into the limited category “The departments governing investment shall not examine, approve or put on record, no financial institution may grant any loan, no other departments governing land management, city planning and construction, environmental protection, quality inspection, firefighting, customs, industry and commerce, etc., may go through relevant procedures” (emphasis added). There is thus a clear link between the industrial policies for encouraged industries and the policy for the provision of land. The GOC’s claims were therefore rejected.

• (505) Consequently, the Commission considered this subsidy countervailable.

(d) Calculation of the subsidy amount

• (506) As in previous investigations ¹¹⁷ and in accordance with Article 6(d)(ii) of the basic Regulation, land prices from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (‘Chinese Taipei’) were used as an external benchmark ¹¹⁸. The benefit conferred on the recipients is calculated by taking into consideration the difference between the amount actually paid by each of the sampled exporting producers (i.e., the actual price paid as stated in the contract and, when applicable, the price stated in the contract reduced by the amount of local government refunds/grants) for land use rights and the amount that should normally have been paid on the basis of the Chinese Taipei benchmark.

• (507) The Commission considers Chinese Taipei as a suitable external benchmark for the following reasons:

• — the comparable level of economic development, GDP and economic structure in Chinese Taipei and a majority of the provinces and cities in the PRC where the sampled exporting producers are based;

• — the physical proximity of the PRC and Chinese Taipei;

• — the high degree of industrial infrastructure in both Chinese Taipei and many provinces of the PRC;

• — the strong economic ties and cross border trade between Chinese Taipei and the PRC;

• — the high density of population in many of the provinces of the PRC and in Chinese Taipei;

• — the similarity between the type of land and transactions used for constructing the relevant benchmark in Chinese Taipei with those in the PRC; and

• — the common demographic, linguistic and cultural characteristics between Chinese Taipei and the PRC.

• (508) Following the methodology applied in previous investigations ¹¹⁹, the Commission used the average land price per square meter established in Chinese Taipei corrected for inflation and GDP evolution as from the dates of the respective land use right contracts. The information concerning industrial land prices as of 2015 was retrieved from the website of the Industrial Bureau of the Ministry of Economic Affairs of Taiwan ¹²⁰. For the previous years, the prices were corrected using the inflation rates and evolution of GDP per capita at current prices in USD for Taiwan as published by the IMF for 2015.

• (509) After definitive disclosure, several parties claimed that Chinese Taipei was not a suitable external benchmark. One party suggested the use of India instead of Chinese Taipei for the following reasons:

• — The industrial land prices were collected by a wide number of different industrial areas in the states of Bihar, Maharashtra and Tamil Nadu,

• — These three states are highly industrialised and display a high level of economic development and industrial infrastructure similar to China

• — These three states are geographically close to each other and to China,

• — There are well-established economic ties and cross-border trade between India and China,

• — The 22 cities have similar population densities as Chinese industrialised cities,

• — Both China and India have vast vacant lands available for future use, unlike Taiwan that is confined on an isolated island

• — Finally, data relating to industrial land prices are publicly available in India.

• (510) However, the claim of this party ignored one crucial element in its analysis, namely the level of economic development of these provinces. According to public sources, the level of GDP per capita of these Indian provinces is far below that of the cities / provinces where the exporting producers are based. As a matter of fact, the GDP per capita of Maharastra ¹²¹, which is the highest of the three provinces quoted, amounted to only 3 000 USD in 2018-2019 while the GDP level found for the Zhejiang province (used for comparison purposes by the claimant) amounted to 14 907 USD in 2018 ¹²². Considering the above and the factors listed in recital (507), this claim had to be rejected.

• (511) Furthermore, the GOC submitted that in-country prices should be used in this case because private companies are also engaged in sub-letting or transferring LURs in China, and the GOC is thus not the only player on that market. In order to examine this claim, the Commission would need to establish first the nature and the size of the land market for private players compared to the government-led market as well as any possible interference by the central and local authorities in that allegedly privately operated land market. Furthermore, comprehensive and up to date data on the pricing of the transactions would need to be available. However, the GOC failed to provide any statistics or data to allow the Commission to examine the proposal, and the Commission could not find any publicly available data on the subject either. In addition, even if such information were to be received, it would only concern a secondary market of transfers, since there is only one player on the primary market (i.e. the original allocation of LUR is always performed by the GOC). Indeed, the primary market of original allocation for 50 years is different from rent in the secondary market, which normally should be for a much shorter period, or at least with different clauses for revaluation, termination, etc. Therefore, the Commission continued to rely on the information available for the primary market, which is the market under investigation in this case.

• (512) The GOC also argued that in case the Commission would choose to proceed with an external benchmark, an adjustment should be made for the population density factor, which in turn affects the demand and consequently prices. Indeed, between 2015 and 2018, the population density in Chinese Taipei was 4,4 times higher than it was in China. Particularly, while the population density for China between 2015 and 2018 was approximately 147 people per square kilometer of land, the population density for Chinese Taipei was approximately 650 people per km² of land in the same period. The land situation and the prices in these two countries are thus incomparable.

• (513) However, the Commission noted that the GOC compared population density figures at the level of the entire country. Looking closer at population density of the actual locations of the exporting producers, it appears that population density figures are actually quite similar. For example, the population density of Zhejiang was 560 people per m² in 2018, and the population density of Shandong was 640 people per km^2 123. Therefore, the Commission considered that no adjustment was warranted.

• (514) The GOC also requested the Commission to provide additional information on the similarity between the type of land and transactions used for constructing the relevant benchmark, as mentioned in recital (507) above. The Commission highlighted in this respect that in both cases, the transactions concern industrial land of a certain size located in industrial areas.

• (515) In accordance with Article 7(3) of the basic Regulation, the subsidy amount has been allocated to the investigation period using the normal lifetime of the land use right for industrial use land, i.e. 50 years. This amount has then been allocated over the total respective company turnover during the investigation period, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

• (516) Following definitive disclosure, Yuntianhua Group claimed that there was a clerical error on the value used in a specific LUR contract. The Commission accepted the claim and corrected the value accordingly.

• (517) Following definitive disclosure, the CNBM Group argued that one LUR contract should be removed because it had been received after the investigation period. In addition, the benefit for LUR purchased in 2018 should be calculated pro rata for the investigation period. Finally, the CNBM Group stated that for another plot of land, which had been purchased by a related company in 1998 and invested in the exporting producer in 2004, the Commission should have used the data of the 2004 transaction to calculate the benefit. The Commission dismissed the first claim, as the purchase contract for the LUR in question had already been signed in 2018, and ownership had thus passed to the company during the investigation period. The Commission accepted the second claim on the calculation pro rata, and adjusted the benefit calculation accordingly for all companies, which had purchased LUR in 2018. The last claim was rejected, since the transaction dating back to 2004 concerned an intercompany transfer, and thus did not reflect the real value at which the land was originally acquired by the group.

• (518) Following the additional definitive disclosure, the CNBM Group asserted that the Commission should have used the date at which the plots of land were received as the starting point for the benefit calculation. However, as mentioned in the preceding recital, ownership of the land, with the corresponding rights and obligations, had already accrued to the company as of the date of the purchasing contract. In addition, the price of the land, on which the benefit calculation is based, was determined by the purchasing contract as well. The company’s claims were thus rejected.

• (519) The subsidy amount established with regard to this subsidy during the investigation period for the sampled exporting producers amounts to:

Provision of Land use rights at less than adequate remuneration

Company/Group	Subsidy Rate
Yuntianhua Group	4,08  %
CNBM Group	3,63  %

3.7.   Government revenue that is forgone or not collected

3.7.1.   Provision of electricity at reduced rates

• (520) All sampled companies purchased their electricity.

• (521) Regarding same of the sampled companies, the purchase prices of electricity followed the officially established price levels set at provincial level for large industrial clients. As found in previous investigations ¹²⁴, this level did not confer a specific advantage for these large industrial clients. However, the Commission established that investigated companies within the two sampled groups benefitted from reductions or refunds of part of their electricity cost in the form of grants.

(a) Legal basis

• — Circular of the National Development and Reform Commission and the National Energy Administration on Actively Promoting the Market-oriented Power Transactions and Further Improving the Trading Mechanism, Fa Gua Yun Xing [2018] No 1027, issued on 16 July 2018

• — Several Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System (Zhong Fa [2015] No. 9);

• — Notice on Taking Efforts on the Construction of Power Market in 2017 of Shandong Economy and Information Technology Committee, LJXDL [2017] No. 93

• — Notice on Amending the 2017 Direct Electricity Trading Rules of the National Energy Administration Shandong Supervision Office, LJNSC [2017] No. 36

(b) Findings of the investigation

• (522) The Commission found that some key large industrial users of electricity are allowed to purchase electricity directly from power generators instead of buying from the grid, either by signing direct purchasing agreements or being qualified to participate in the ‘Market-oriented electricity trading system’. Some of the sampled companies had such direct electricity purchasing agreements or were qualified to participate in the ‘Market-oriented electricity trading system’ during the investigation period. For most of the investigated companies, the prices received through such contracts/trading system were lower than the fixed prices set at provincial level for large industrial clients.

• (523) The possibility to enter into such direct contracts or to be qualified to participate in the ‘Market-oriented electricity trading system’ is currently not open to all large industrial consumers. At national level, the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System specifies for example that ‘enterprises that do not conform to the national industrial policy and whose products and processes are eliminated should not participate in direct transactions.’ ¹²⁵

• (524) In practice, direct electricity trading is executed by the provinces. Companies have to apply to provincial authorities for approval to participate in the direct electricity pilot scheme, and they have to fulfil certain criteria.

• (525) For example, in Shandong Province, the Notice on Amending the 2017 Direct Electricity Trading Rules of the National Energy Administration Shandong Supervision Office provides that ‘users participating in direct electricity trading shall be confirmed according to 2017 access conditions approved by Shandong Economy and Information Technology Committee. To take part in direct electricity trading, the electricity selling enterprises shall put forward registration application to Shandong Electric Power Trading Center, and could participate in direct electricity trading after being reviewed and publicized by the Center’. In that respect, a list of eligible enterprises that qualify to participate in the market-oriented electricity trading system is established and announced in a notice of the Shandong Economic and Information Technology Commission ¹²⁶.

• (526) For certain companies, there is no actual market-based negotiation or bidding process, since the quantities purchased under direct contracts are not based on the real supply and demand. Indeed, power generators and power users are not free to sell or purchase all of their electricity directly. They are restricted by quantitative quotas, which are allocated to them by the local government.

• (527) Furthermore, although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are actually issued by the State Grid Company. For instance the Notice on Amending the 2017 Direct Electricity Trading Rules of the National Energy Administration Shandong Supervision Office stipulates that, the ‘State Grid Shandong Electric Power Company will charge the electricity direct trading charge’ and that the ‘State Grid Shandong Electric Power Company shall issue VAT invoice to users, and power generation enterprises’.

• (528) Finally, all signed direct purchase contracts need to be submitted to the local government for the record.

• (529) In 2018, the GOC issued the Circular of the National Development and Reform Commission and the National Energy Administration on Actively Promoting the Market-oriented Power Transactions and Further Improving the Trading Mechanism (Fa Gai Yun Xing [2018] No. 1027). However, the Commission notes that this legislation was issued during the investigation period and has not been implemented yet. Furthermore, although the Circular aims to increase the number of direct transactions on the electricity market it specifically mentions certain industries, including the building materials industry and high-tech industries, as supported and benefitting from liberalization of the electricity market. In particular, the Circular provides that ‘supporting users with annual electricity consumption of more than 5 million kWh to conduct direct electricity transactions with power generation enterprises. In 2018, electricity generation plans for coal, iron and steel, non-ferrous metals, building materials and other four industries will be liberalized’. In addition the Circular points out that ‘supporting emerging industries with high added value, such as high-tech, internet, big data and high-end manufacturing industries, as well as enterprises with distinct advantages and characteristics and high technology content, to participate in transactions, free from voltage levels and power consumption restrictions’.

• (530) Therefore, the legislation provides for a selective application of direct transactions on the electricity market to certain industries such as the building materials and high-tech industries. This selective application has the result of applying cheaper prices for electricity by the State to companies from these industries.

(c) Conclusion

• (531) The Commission considered that the reduced electricity rate at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC (i.e. the operator of the grid) that confers a benefit to the companies concerned. The benefit for the recipients is equal to the electricity price saving, since the electricity was provided at rates below the normal grid price paid by other large industrial users that cannot benefit from the direct supply. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this scheme only to enterprises that conform with certain industrial policy objectives determined by the State and whose products or process have not been eliminated as not eligible.

• (532) Thus, the Commission concluded that the subsidy scheme was in place during the investigation period and that it is specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation.

• (533) Following disclosure, the GOC claimed that the Commission failed to show that the entities providing electricity at allegedly reduced rates, i.e. that power generators and state grid companies, are public bodies or are entrusted or directed by the government.

• (534) In this respect, as explained in recitals (523) to (528), the Commission noted that the direct electricity trading system and the conditions under which companies are allowed to participate are established by the State and executed by the provinces. Indeed, companies have to obtain the approval of provincial authorities to participate in the direct electricity pilot scheme. Furthermore, as pointed out in recital (527), although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are issued by the State Grid Company. Considering that the direct electricity trading system is designed and controlled by the State through its implementation by provincial authorities, and that the State Grid Company issues the invoices, the Commission concluded that the negotiated reduced rates are provided by public bodies. Therefore, the claim of the GOC was rejected.

• (535) Furthermore, the GOC considered that the Commission failed to show how the provision of electricity at allegedly reduced rates is specific within the meaning of Article 2 of the SCM Agreement. The GOC claimed that the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System, to which the Commission referred to, do not limit the access to this alleged subsidy to certain enterprises, since they are not mandatory but only a guideline. Furthermore, the GOC considered that the claim of the Commission about specificity is incoherent because on the one hand, the Commission stated that GFF is an encouraged industry and on the other hand, it stated that only some sampled companies were eligible for the direct electricity trading system.

• (536) In this regard, as stated in recital (523), the possibility to enter into direct contracts or to be qualified to participate in the ‘Market-oriented electricity trading system’ is currently not open to all large industrial consumers. Indeed, companies have to apply to provincial authorities for approval to participate in the direct electricity pilot scheme, and they have to fulfil certain criteria such being “conform to the national industrial policy”. The fact that the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System might not have de jure mandatory character is irrelevant because the investigation showed that only certain companies have received an approval to participate in the direct electricity trading system and thus benefitted from reduced electricity prices. Furthermore, the fact that companies are subject to specific approval in order to benefit from the reduced electricity prices also points to the specific character of this scheme. Therefore, these claims were rejected.

• (537) Following definitive disclosure, one of the companies from CNBM Group contested the Commission’s conclusion that the fact that certain companies are approved to participate in the “market oriented electricity system” by purchasing electricity directly from electricity providers instead of via the State Grid, constitutes “revenue foregone” by the GOC. This interested party pointed out that Article 3 of the basic Regulation defines a subsidy as “government revenue that is otherwise due is forgone or not collected” and that since the GOC was explicitly not reselling any electricity to the exporting producers via the State grid, no revenue was due to the GOC for use of the State grid.

• (538) The Commission disagreed with this claim. As already mentioned in recital (527), although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are always issued by the State Grid Company. Therefore, in recital (534) the Commission concluded that since the direct electricity trading system is designed and controlled by the State through its implementation by provincial authorities, and that the invoices are issued by the State Grid Company, the negotiated reduced electricity rates are provided by public bodies. Therefore, by selectively applying reduced electricity rates to certain industrial users, while the officially established prices generally applicable to all industrial users are higher, the State, through the intermediary of the State Grid Company, did not collect the revenue from electricity sales at the level of the officially established prices. This practice qualifies as “government revenue that is otherwise due is forgone or not collected” in the sense of Article 3 of the basic Regulation. Consequently, this claim was rejected.

(d) Calculation of the subsidy amount

• (539) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total electricity price payable according to the normal grid rate and the total electricity price payable under the reduced rate.

• (540) The subsidy amount established with regard to this scheme during the investigation period for the sampled exporting producers amounts to:

Provision of electricity at reduced rate

Company/Group	Subsidy Rate
Yuntianhua Group	0,05  %
CNBM Group	0,28  %

3.7.2.   Tax exemption and reduction programmes

3.7.2.1.   EIT privileges for High and New Technology Enterprises

• (541) According to the Law of the People's Republic of China on Enterprise Income Tax (‘EIT Law’) ¹²⁷, high and new technology enterprises to which the State needs to give key support benefit from a reduced enterprise income tax rate of 15 % rather than the standard tax rate of 25 %.

(a) Legal basis

• (542) The legal basis of this programme is Article 28 of the EIT Law and Article 93 of the Implementation Rules for the Enterprise Income Tax Law of the PRC ¹²⁸, as well as:

• — Circular of the Ministry of Science and Technology, Ministry of Finance and the State Administration of Taxation on revising and issuing “Administrative Measures for the Recognition of High-Tech Enterprises”, G.K.F.H. [2016] No. 32;

• — Notification of the Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation concerning Revising, Printing and Issuing the Guidance for the Recognition Management of High and New Tech Enterprises, GKFH [2016] No. 195;

• — Announcement [2017] No.24 of the State Administration of Taxation on the Application of Preferential Income Tax Policies to High-tech Enterprises; and

• — Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries (2011), issued by the NDRC, the Ministry of Science and Technology, the Ministry of Commerce and the National Intellectual Property Office.

(b) Findings of the investigation

• (543) Companies, which can benefit from the tax reduction, are part of certain key high and new technology fields supported by the State, as well as the current priorities on high technology fields supported by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries. These guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

• (544) In addition, in order to be eligible, the companies must satisfy the following criteria:

• — keep a certain proportion of research and development expenses in comparison with their sales revenue;

• — keep a certain proportion of income from high-tech technology/products/services in the enterprise's total revenue; and

• — keep a certain proportion of technical personnel in the enterprise's total employees.

• (545) Companies benefiting from this measure have to file their income tax return and the relevant annexes. The actual amount of the benefit is included in the tax return.

• (546) The Commission considered that the tax offset at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned.

• (547) The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this scheme only to enterprises that are operating in certain high technology priority areas determined by the State, such as some key technologies within the GFF sector.

• (548) Following definitive disclosure, the GOC claimed that EIT privileges for High and New Technology Enterprises is not specific because the legislation, pursuant to which this program operates, clearly sets out objective criteria for eligibility ¹²⁹ and these criteria are applied automatically, i.e. the authorities concerned do not have any discretion in providing this specific tax rate when the conditions for eligibility are met. The GOC refers to footnote 2 of the SCM Agreement according to which, eligibility criteria are considered objective if they are neutral, do not favour certain enterprises over others, are economic in nature and horizontal in application. The GOC considered that this is the case of the eligibility criteria for this preferential tax rate, since the access to this lower rate is open to all enterprises and does not favour certain enterprises over others because companies from all sectors, covering the entire economy are eligible to obtain a High and New Technology certificate. Furthermore, the GOC referred to the General Court’s judgment in Case T-586/14 Xinyi PV products v Commission ¹³⁰, as it explained that: “…those incentives were awarded by the competent authorities, not on a discretionary basis, but where their objective conditions for award were met, namely that the undertaking at issue belonged to the high-tech sector (…) In any event, it is apparent from Article 28 of the Corporate Income Tax Law of the People’s Republic of China and from Article 93 of the implementing regulation for that law that the tax incentives awarded to undertakings in the high-tech sector, such as the applicant, which is not disputed by the Commission, are only awarded if certain objective conditions are met, namely, inter alia, that the undertakings at issue operate in the new advanced technologies sector, that they are the holders of intellectual property rights, that their goods or services are in high-tech sectors which are specifically supported by the State, that research and development costs reach a certain percentage of the whole of their revenue and that the number of technicians represents a certain percentage of all the employees.”

• (549) The Commission disagreed with the view of the GOC for the following reasons. Chapter IV of the EIT Law contains provisions regarding ‘Preferential Tax Treatment’. Article 25 of the EIT Law, which stands as a chapeau for Chapter IV, provides that “The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State”. Article 28 of the law, which is also part of this Chapter, provides that “the rate of enterprise income tax on high and new technological enterprises needing special support of the State shall be reduced to 15 %”. Article 93 of the Implementation Rules for the Enterprise Income Tax Law clarifies that:

‘ “The important high and new technology enterprises to be supported by the State” as referred to in Clause 2 of Article 28 of the Enterprise Income Tax Law refer to the enterprises, which own key intellectual property rights and satisfy the following conditions:

• 1. Complying with the scope of the Key State Supported High and New Technology Areas;

• 1. The proportion of the research and development expense in the sales revenue shall be no less than the prescribed proportion;

• 1. The proportion of the income from high-tech technology/product/service in the enterprise's total revenue shall be no less than the prescribed proportion

• 1. The proportion of the technical personnel in the enterprise's total employees shall be no less than the prescribed proportion;

• 1. Other conditions prescribed in the Measures for the Administration of High-Tech Enterprise Identification.’

• (550) The above-mentioned provisions clearly specify that the reduced enterprise income tax rate is reserved to “important high and new technology enterprises to be supported by the State” which own key intellectual property rights and satisfy certain conditions such as “complying with the scope of the Key State Supported High and New Technology Areas”.

• (551) As stated in recital (543), the high technology fields supported by the State are listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries and these guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

• (552) Considering that the reduced enterprise income tax rate is reserved only to important high and new technology enterprises to be supported by the State, which comply with the scope of the Key State Supported High and New Technology, the Commission concluded that this measure does not apply on the basis of objective criteria or conditions which do not favour certain enterprises over others. This conclusion is further confirmed by the fact that the ‘Key Priority Developmental Areas in the High Technology Industries’ are a selection of areas in the high technology industries according to the priorities at a certain point of time and are likely to be changed over time. Therefore, contrary to the COG’s claim, the legislation applicable to the reduced enterprise income tax rate does not establish objective criteria for eligibility.

• (553) Regarding the findings of the Court Case T-586/14, the Commission observed that the judgment was set aside by the ECJ in C-301/16 P ¹³¹. Moreover, the statement made by the General Court was made in the context of Article 2(7) of the basic anti-dumping Regulation, and thus in a different context.

• (554) In light of the above considerations, the Commission confirmed the specificity of the measure and rejected the claims of the COG.

(c) Calculation of the subsidy amount

• (555) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total tax payable according to the normal tax rate and the total tax payable under the reduced tax rate.

• (556) The amount of subsidy established for this specific scheme was 0,88 % for the Yuntianhua Group and 2,98 % for the CNBM Group.

3.7.2.2.   EIT offset for research and development expenses

• (557) The tax offset for research and development entitles companies to preferential tax treatment for their R&D activities in certain high technology priority areas determined by the State and when certain thresholds for R&D spending are met.

• (558) More specifically, R&D expenditures incurred to develop new technologies, new products and new crafts, which do not form intangible assets and are accounted into the current term profit and loss, are subject to an additional 50 % deduction after being deducted in full in light of the actual situation. Where the above-mentioned R&D expenditures form intangible assets, they are subject to amortization based on 150 % of the intangible asset costs.

(a) Legal basis

• (559) The legal basis for the programme is Article 30(1) of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC as well as the following notices:

• — Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Improving the Policy of Pre-tax Deduction of R&D Expenses. (Cai Shui [2015] No. 119);

• — Announcement [2015] No. 97 of the State Administration of Taxation on Relevant Issues concerning Policies of Additional Pre-tax Deduction of Research and Development Expenses of Enterprises;

• — Announcement 2017 No. 40 of the State Administration of Taxation on Issues Concerning the Eligible Scope of Calculation of Additional Pre-tax Deduction of Research and Development Expenses; and

• — Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries (2011), issued by the NDRC, the Ministry of Science of Technology, the Ministry of Commerce and the National Intellectual Property Office.

(b) Findings of the investigation

• (560) During previous investigations ¹³², the Commission established that the “new technologies, new products and new crafts”, which can benefit from the tax deduction, are part of certain high technology fields supported by the State, as well as of the current priorities on high technology fields supported by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries.

• (561) The Commission considered that the tax offset at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned. The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this measure only to enterprises that incur R&D expenses in certain high technology priority areas determined by the State, such as the GFF sector.

• (562) Following definitive disclosure, the GOC submitted that the additional R&D expenses deduction program is not specific. The GOC made reference to Article 2.1(b) of the SCM Agreement, which provides that specificity shall not exist if the granting authority or the legislation, pursuant to which the granting authority operates, establishes objective criteria or conditions governing the eligibility for, and the amount of the subsidy, provided that (i) eligibility is automatic, (ii) that such criteria or conditions are strictly adhered to and (iii) that they are clearly spelled out in law, regulation or other official documents, so as to be capable of verification. In the GOC’s view, the legislation, pursuant to which this program operates, clearly sets out objective criteria for eligibility and these criteria are applied automatically. In other words, the authorities concerned do not have any discretion in providing this specific tax rate when the conditions for eligibility are met.

• (563) The Commission referred to Chapter IV of the EIT Law, which contains provisions regarding ‘Preferential Tax Treatment’. Article 25 of the EIT Law, which stands as a chapeau for Chapter IV, provides that “The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State”. Article 30(1), which is also part of this Chapter, provides that “research and development expenses incurred by Enterprises in the development of new technologies, new products and new crafts” may be additionally deducted at the time of calculating taxable income. Article 95 of the Implementation Rules for the Enterprise Income Tax Law clarifies the meaning of “R&D expenditures incurred for the purpose to develop new technologies, new products and new crafts” laid down in Article 30(1) of the EIT Law.

• (564) The above-mentioned provisions clearly specify that the additional deduction of R&D expenses is reserved to enterprises involved in “the development of new technologies, new products and new crafts” and “engaged in industries or projects the development of which is specially supported and encouraged by the State”

• (565) As stated in recital (560), the high technology fields supported by the State, as well as the current priorities on high technology fields supported by the State are listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries. As specified in recital (543), these guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

• (566) Considering that the additional deduction of R&D expenses is reserved only to enterprises engaged in industries which are specifically supported and encouraged by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries, the Commission concluded that this measure does not apply on the basis of objective criteria or conditions which do not favour certain enterprises over others (even not to all high and new technologies enterprises). This conclusion is further confirmed by the fact that the ‘Key Priority Developmental Areas in the High Technology Industries’ are a selection of areas in the high technology industries according to the priorities at a certain point of time and are likely to change over time. Contrary to the COG’s claim, the legislation applicable to the additional deduction of R&D expenses does not establish objective criteria or conditions governing the eligibility. Therefore, the Commission confirmed the specificity of the measure and rejected the claims of the COG.

(c) Calculation of the subsidy amount

• (567) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total tax payable according to the normal tax rate and the total tax payable after the additional 50 % deduction of the actual expenses on R&D.

• (568) The amount of subsidy established for this specific scheme was 1,06 % for the Yuntianhua Group and 0,17 % for the CNBM Group.

3.7.2.3.   Dividends exemption between qualified resident enterprises

• (569) The EIT Law offers income tax preferences to Enterprises engaged in industries or projects the development of which is specifically supported and encouraged by the State and in particular, exempt from tax the income from equity investment, such as dividends and bonuses, between eligible resident enterprises.

(a) Legal basis

• (570) The legal basis for the programme is Article 26(2) of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC.

(b) Findings of the investigation

• (571) The Commission found that some companies in the sampled groups received an exemption from tax of dividend income between qualified resident enterprises.

• (572) In the reply to the questionnaire, the GOC claimed that this scheme does not constitute a subsidy because it relates to the profit after tax and the exemption is to avoid double taxation, thus it does not confer a benefit. The GOC further claimed that the scheme is not specific as it is generally and uniformly applied based on objective criteria since all resident companies in the PRC are qualified to invest in other resident companies and be exempted from the tax.

• (573) In this regard, reference is made to Article 25 of the EIT, which is part of the same Chapter as Article 26(2); i.e. ‘Chapter IV Preferential Tax Policies’ and stands as a chapeau for this chapter. Such Article provides that “The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State”. Furthermore, Article 26(2) specifies that the tax exemption is applicable to income from equity investments between “eligible resident enterprises”, which appears to limit its scope of application to only certain resident enterprises.

• (574) On this basis, in line with conclusions in previous anti-subsidy investigations ¹³³, it is considered that such preferential tax policy is limited to certain industries and projects, i.e. industries which are specifically supported and encouraged by the State such as the GFF industry, and therefore specific. The evidence on file also showed that the companies that benefited from this scheme had a New and High technology certificate. Based on the above, the claims of the GOC had to be rejected.

• (575) The Commission considers that this scheme is a subsidy under Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned. The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this exemption only to qualified resident enterprises which have the major support of, and the development of which is encouraged by, the State.

(c) Calculation of the subsidy amount

• (576) The Commission has calculated the amount of the subsidy by applying the normal tax rate to the dividend income that has been deducted from taxable income.

• (577) The amount of subsidy established for this specific scheme was 0,02 % for the Yuntianhua Group and 2,10 % for the CNBM Group.

3.7.2.4.   Accelerated depreciation of equipment used by High-Tech enterprises

• (578) According to Article 32 of the EIT law, “where accelerated depreciation of fixed assets of an enterprise is really necessary due to technological advancement or other reasons, the number of years for the depreciation may be lessened or the accelerated depreciation method may be adopted”.

(a) Legal basis

• (579) The legal basis for the programme is Article 32 of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC as well as the following notices:

• — Notice of the Ministry of Finance and the State Administration of Taxation on the Policies of Deduction of Equipment and Appliances for Enterprise Income Tax Purposes (Cai Shui [2018] No. 54);

• — Notice of the Ministry of Finance and the State Administration of Taxation on Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2014] No. 75); and

• — Notice of the Ministry of Finance and the State Administration of Taxation on Further Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2015] No. 106)

(b) Findings of the investigation

• (580) According to the Notice on the Policies of Deduction of Equipment and Appliances for Enterprise Income Tax Purposes (Cai Shui [2018] No. 54), “where the unit value of a piece of equipment or appliance newly purchased by an enterprise during the period from January 1, 2018 to December 31, 2020 does not exceed RMB five million, the enterprise is allowed to include such value in the cost and expenses of the current period on a lump-sum basis for deduction upon calculation of its taxable income, and is no longer required to calculate depreciation on an annual basis”. This legislation is not industry specific.

• (581) As regards assets with unit value above 5 million RMB, the Notice on Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2014] No. 75) and the Notice on Further Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2015] No. 106) continue to apply. According to theses notices, fixed assets purchased by companies in 10 key industries may opt for the accelerated depreciation method.

• (582) The Commission established that, during the investigation period, the sampled companies have not applied accelerated depreciation for assets with unit value that exceeds 5 million RMB. Therefore, since those assets did not fall under Notice Cai Shui [2014] No. 75 and Notice Cai Shui [2015] No. 106, the Commission found that the exporting producers did not benefit from countervailable subsidies.

(c) Conclusion

• (583) The Commission considered that the exporting producers did not benefit from countervailable subsidies under this programme.

3.7.2.5.   Land use tax exemption

• (584) An organization or individual using land in cities, county towns and administrative towns and industrial and mining districts shall normally pay urban land use tax. Land use tax is collected by the local tax authorities where the land is used. However, certain categories of land, such as land reclaimed from the sea, land for the use of government institutions, people's organizations and military units for their own use, land for use by institutions financed by government allocations from the Ministry of Finance, land used by religious temples, public parks and public historical and scenic sites, streets, roads, public squares, lawns and other urban public land are exempted from the land use tax.

(a) Legal basis

• (585) The legal basis for this programme is:

• — Provisional Regulations of the People's Republic of China on Real Estate Tax (Guo Fa [1986] No. 90, as amended in 2011); and

• — Interim Regulations of the People's Republic of China on Urban Land Use Tax (Order of the State Council of the People's Republic of China [2013] No. 645).

(b) Findings of the investigation

• (586) One of the sampled groups of companies benefited from refunds of the payment of land use taxes by the local Land Use Bureau, even though they did not fall under any of the exempted categories as set by the national legislation above.

(c) Conclusion

• (587) The Commission considers that the tax exemption at issue is a subsidy within the meaning of either Article 3(1)(a)(i) or Article 3(1)(a)(ii), and Article 3(2) of the basic Regulation because there is a financial contribution in the form of either direct transfer of funds (refund of the tax paid) or revenue foregone by the GOC (the non-paid tax) that confers a benefit to the companies concerned. The benefit for the recipients is equal to the amount refunded/tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the companies received a tax reduction although they did not fit into any of the objective criteria mentioned in recital (584).

• (588) Following definitive disclosure, the GOC submitted that the Commission failed to demonstrate that the exemption from land use tax is specific because the companies received a tax reduction although they did not fit into any of the objective criteria mentioned in recital (584), i.e. “the criteria established by law to benefit from this exemption”.

• (589) In this respect, as explained in recital (584), the Commission observed that the rule established by law is that an organization or individual using land in cities, county towns and administrative towns and industrial and mining districts shall normally pay urban land use tax. The exception to this rule is that certain categories of land ¹³⁴ are exempted from the land use tax. The investigation showed that the land used by the cooperating exporting producer, which benefitted from the land use tax exemption, does not fall under any of the categories of land that are exempted from land use tax by law. Therefore, it cannot be concluded that these exporting producers fitted into any of the objective criteria established by the regulations on land use tax. Consequently, the measure exempting these exporting producers from land use tax is specific within the meaning of Article 4(2)(a) of the basic Regulation. The claim was thus rejected.

(d) Calculation of the subsidy amount

• (590) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was considered to be the refunded amount during the investigation period.

• (591) The amount of subsidy established for this specific scheme was 0,17 % for CNBM Group.

3.7.2.6.   Total for all tax exemption schemes and reduction programmes

• (592) The total subsidy amount established with regard to all tax schemes during the investigation period for the sampled exporting producers was as follows:

Tax exemptions and reductions

Company/Group	Subsidy Amount
Yuntianhua Group	1,91  %
CNBM Group	5,42  %

3.8.   Grant programmes

3.8.1.   Grants related to technological upgrading, renovation or transformation

• (593) The sampled companies benefited from a variety of grants related to R&D, technological upgrading and innovation, such as e.g. promotion of R&D tasks under the Science and Technology Support Plans, promotion of investments for Key Industry Adjustment, Revitalisation and Technology Renovation, etc.

(a) Legal basis

• — The 13th Five-year Plan on Technological Innovation;

• — Guiding Opinions on Promoting Enterprise Technology Renovation, State Council, Guo Fa [2012] 44;

• — Industry Revitalization and Technology Renovation Work Plan, issued by NDRC and MIIT, 2015;

• — NDRC Notice on 2015 industrial technology R&D Fund allocation plan to high-tech industries;

• — Medium to Long-Term Programme on Technological and Scientific Development (2006-2020) promulgated by the State Council in 2006;

• — Administrative Measures for National Science and Technology Support Plan as revised in 2011;

• — Administrative Measures for National High Technology Research and Development Plan (863 Plan) as revised in 2011;

• — Measures for the Administration of Special Funds for the Transformation of Independent Innovation Achievements in Shandong Province;

• — Interim Measures for the Management of Industrial Transformation and Upgrading (Cai Jian [2012] 567);

• — Interim Management Measure on Industrial Upgrading and efficiency Iproving Special Fund (Lu Cai Qi 2014, No 24)

• — Management Measures for Industrial Transformation and Upgrade of Made in China 2025 Funds/Intelligent Manufacturing;

• — Notice of the State Council on Issuing the “Made in China (2025)” (No. 28 [2015])

• — Intelligent Manufacturing Pilot Demonstration Project; and

• — At local/provincial level: notices on allocating special funds for technical renovation, special funds for industrial revitalization, special funds for technical transformation, and special funds for industrial development.

(b) Conclusion

• (594) According to the Guiding Opinions on Promoting Enterprise Technology Renovation (at 3.2), central and local governments are called upon to further increase the amount of financial support and increase investment with a focus on industrial transformation and upgrading in key areas and critical issues of technology renovation. Furthermore, authorities should continuously innovate and improve fund management methods, flexibly carry out multiple types of support and raise the usage efficiency of fiscal funds.

• (595) The Industry Revitalization and Technology Renovation Work Plan implements the above mentioned Guiding Opinions in practice by setting up special funds for promoting technological progress and technological transformation projects. These funds include investment subsidies and loan discounts. The use of the funds must be in line with national macroeconomic policies, industrial policies and regional development policies.

• (596) The grants provided under this program confer subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation i.e. a transfer of funds from the GOC in the form of grants to the producers of the product concerned.

• (597) The Commission also determined that these subsidies are specific within the meaning of Article 4(2)(a) of the basic Regulation because only companies operating in key areas or technologies as listed in the guidelines, administrative measures and catalogues that are published on a regular basis are eligible to receive them and GFF is among the eligible sectors. In any event, the grants found are company specific.

(c) Calculation of the subsidy amount

• (598) The benefit was calculated as the amount received in the investigation period, or allocated to the investigation period, where the amount was depreciated over the useful life of the fixed asset to which the grant was related. The Commission considered whether to apply an additional annual commercial interest rate in accordance with section F.a) of the Commission’s Guidelines for the calculation of the amount of subsidy ¹³⁵. However, such an approach would have involved a variety of complex hypothetical factors for which there was no accurate information available. Therefore, the Commission found it more appropriate to allocate amounts to the investigation period according to the depreciation rates of the related fixed assets, in line with the calculation methodology used in previous cases ¹³⁶.

3.8.2.   Environmental protection grants - Energy saving, conservation and emission grants

• (599) The two sampled groups of companies benefited from a variety of grants related to environmental protection and reduction of emissions, such as e.g. incentives for Environmental Protection and Resource Conservation, Promotion of synergistic resource utilization, Incentive funds for energy conservation projects, Promotion of Energy Management Demonstration Centres, grants related to Air Pollution Improvement Projects, incentives for circular economy projects.

(a) Legal basis

• — Law of the People‘s Republic of China on Energy Conservation, version revised and adopted on October 28, 2007, and version amended on July 2, 2016;

• — Cleaner Production Promotion Law of the People’s Republic of China, Order No. 54 of the President of the People’s Republic of China, as amended on 29 February 2012;

• — Measures on Clean Production Inspection, Decree No. 38 of the NDRC and Ministry of Environmental Protection, promulgated on 1 July 2016;

• — Notice on Printing and Distributing the Interim Measures on the Administration of Subsidy for Energy Saving and Emission Reduction, Ministry of Finance [2015] No. 161;

• — Key Points of Energy Conservation and Comprehensive Utilization in Industry in 2015, issued by the MIIT on 3 April 2015;

(b) Conclusion

• (600) The energy saving, conservation and emission program confers subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation i.e. a transfer of funds from the GOC in the form of grants to the producers of the product concerned.

• (601) The Commission also found that this subsidy program is specific within the meaning of Article 4(2)(a) of the basic Regulation since only companies operating in key technologies or in the production of key products as listed in the guidelines and catalogues that are published on a regular basis are eligible to receive them. In particular, the MIIT document of 2015 specifically mentions the building material industry, which includes GFF, as an industry for specific incentives related to energy conservation.

(c) Calculation of the subsidy amount

• (602) The benefit was calculated in accordance with the methodology described in recital (598) above.

3.8.3.   Ad hoc grants provided by municipal/regional authorities

• (603) In its complaint, the complainant provided evidence, which showed that the GFF industry in the PRC may receive various one-off or recurring grants from different levels of government authorities, i.e. local, regional and national.

• (604) The investigation revealed that the two sampled groups of companies received significant one-off or recurring grants from various government levels resulting in the receipt of benefits during the investigation period. The sampled companies had already reported some of these grants in their respective questionnaire replies, while others were found during the verification visits. The GOC has disclosed none of them in its questionnaire reply.

(a) Legal Basis

• (605) These grants were given to the companies by national, provincial, city, county or district government authorities and all appeared to be specific to the sampled companies, or specific in terms of location or type of industry. The level of legal detail for the exact law, under which these benefits were granted, if there was any legal basis for them at all, was not disclosed by all sampled companies. However, the Commission was sometimes given a copy of a document issued by a government authority, which accompanied the grant of funds (referred to as ‘the notice’).

(b) Findings of the investigation

• (606) Given the large amount of grants contained in the complaint and/or found in the books of the sampled companies, only a summary of the key findings is presented in this Regulation. Evidence of the existence of numerous grants and the fact that they had been granted by various levels of the GOC was initially supplied by the two sampled companies. Detailed findings on these grants were provided to the individual companies in their specific disclosure documents.

• (607) Examples of such grants were patent funds, science and technology funds and awards, business development funds, export promotion funds, grants for industry quality increase and efficiency enhancement, municipal commerce support funds, foreign economic and trade development fund, production safety awards, support funds provided at district or provincial level, interest discounts on loans for imported equipment.

(c) Conclusion

• (608) These grants constitute subsidies within the meaning of Article 3(1)(a)(i) and (2) of the basic Regulation as a transfer of funds from the GOC in the form of grants to the producers of the product concerned took place and a benefit was thereby conferred.

• (609) These grants are also specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation given that from the related documents provided by the cooperating exporting producers they are limited to certain companies or specific projects in specific regions and/or the GFF industry. In addition, some of the grants are contingent upon export performance within the meaning of Article 4(4)(a). These grants do not meet the non-specificity requirements of Article 4(2)(b) of the basic Regulation, given that the eligibility conditions and the actual selection criteria for enterprises to be eligible are not transparent, not objective and do not apply automatically.

• (610) In all cases, the companies provided information as to the amount of the grant, and from whom the grant was received. The companies concerned also mostly booked this income under the heading ‘subsidy income’ in their accounts and had had these accounts independently audited. This has been taken as a positive evidence of a subsidy that conferred a benefit.

• (611) Therefore, the Commission decided that the verified findings represented a reasonable indicator of the level of subsidisation in this respect. As those grants share common features, they were awarded by a public authority and were not part of separate subsidy programme, but individual grants to this encouraged industry, the Commission assessed them together.

(d) Calculation of the subsidy amount

• (612) The benefit was calculated in accordance with the methodology described in recital (598) above.

3.8.4.   Other grants

• (613) No financial contribution was received by the sampled exporting producers from the remaining grant programmes mentioned in Section 3.3(v) above during the investigation period.

3.8.5.   Comments on grants

• (614) Following definitive disclosure, the GOC submitted that the Commission failed to demonstrate that the various grants related to technological upgrading, renovation or transformation, environmental protection and ad hoc grants provided by municipal/regional authorities that the sampled companies allegedly received are specific. According to the GOC, the Commission failed to point out any specific provision explicitly mandating the granting of benefits to the GFF industry and thus failed to meet the requirement set out by the Panel in ‘EC – Aircraft’, according to which, finding of specificity requires the establishment of an explicit limitation of the alleged subsidy only to “certain enterprises”, that “…does not make the subsidy sufficiently broadly available throughout the economy” and that a limitation must “…distinctly express all that is meant, leaving nothing merely implied or suggested.”

• (615) The GOC further submitted that with respect to ad hoc grants provided by municipal/regional authorities, the Commission failed to provide any argument or evidence of the specificity of these grants but merely stated that they “…appeared to be specific to the sampled companies, or specific in terms of location or type of industry”. According to the GOC, the mere appearance of specificity cannot constitute sufficient evidence that a measure is, in fact, specific.

• (616) In this regard, the GOC recalled that, as held by the Appellate Body in ‘US – DRAMs’ (CVD), the Commission is required to “…provide a reasoned and adequate explanation for its conclusions” and to ensure that “the underlying rationale behind those conclusions be set out in the investigating authority's determination.” The GOC stressed that the Commission's reference to the fact that the companies concerned mostly booked this income under the heading ‘subsidy income’ does not qualify as a reasoned and adequate explanation.

• (617) The GOC further noted that the mere fact that a subsidy is granted by a regional authority does not make it specific and referred to the Appellate Body held in ‘US – CVD (China)’ that a subsidy available to all enterprises in a region will not be specific if the granting authority in that region is a regional government.