Commission Implementing Regulation (EU) 2020/1336 of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People’s Republic of China

(169) The Commission recalls that in order to produce PVA, the main raw materials are: coal, natural gas and acetic acid. According to evidence on the file, all the sampled exporting producers sourced all their inputs in the PRC. When the producers of PVA purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

(170) As a consequence, not only the domestic sales prices of PVA are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also tainted because their price formation is affected by substantial government intervention, as described in Parts A and B of the Report. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout the PRC. This means, for instance, that an input produced in the PRC by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth. No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

(171) The analysis set out in sections 3.1.1.2 to 3.1.1.9, which includes an examination of all the available evidence relating to the PRC’s intervention in its economy in general as well as in the PVA sector (including the product concerned) showed that prices or costs of the product concerned, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation as shown by the actual or potential impact of one or more of the relevant elements listed therein. On that basis, and in the absence of any cooperation from the GOC, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

(172) Consequently, the Commission proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as discussed in the following section.

(173) In their comments on final disclosure, the GOC argued that exporting producers were not given a market distortion questionnaire. According to GOC, this left the exporting producers in confusion about the scope of market distortion issue, and what they need to submit in terms of key points to be addressed and evidence that is acceptable. This has adversely affected Chinese companies’ legitimate rights, and deprived them of their opportunities to defend their interests.

(174) The Commission disagrees with this claim. The Commission first notes that on 30 July 2019 a market distortion questionnaire was issued to the GOC. The GOC failed to reply to it. Furthermore anti-dumping questionnaires intended for exporters contain Point f.4, which explains how the exporting producers could claim that they are not affected by significant distortions. This claim was therefore rejected.

(176) As explained in recitals (46) to (50) the Commission published three notes for the file (66) on the sources for the determination of the normal value.

(177) In the Note of 2 October 2019, the Commission explained that the product under investigation appears to be produced only in Japan, Singapore, Taiwan and the USA, none of which is a country with a level of economic development similar to the PRC in accordance with the criteria mentioned in recital (175).

(178) As all countries where there is PVA production have a different level of economic development than the PRC, the Commission considered the production of a product in the same general category and/or sector of the product under investigation. The Commission therefore indicated it would use production of PVB, a similar product to PVA, to establish an appropriate representative country for the application of Article 2(6a) of the basic Regulation.

(179) Accordingly, in the Note of 2 October 2019, the Commission identified the following four countries where PVB was being produced: Brazil, Malaysia, Mexico and Thailand. These countries were regarded by the World Bank as countries with a similar level of economic development as the PRC, i.e. they are all classified as ‘upper-middle income’ countries on a gross national income (‘GNI’) basis.

(180) Three sampled exporting producers in the PRC provided comments after the Note of 2 October 2019. They agreed with the assessment that all four countries identified by the Commission appear to have a similar level of economic development. However, in their view, Malaysia appeared to be on the higher end of the scale of economic development and may therefore be less representative than the three other countries. They also pointed out that, according to their information, PVB was not produced in Brazil, as the selected company in that country stopped producing PVB. Furthermore, as regards the adequacy of protection concerning level of social, labour and environment, these exporters expressed their reservations as regards Brazil. In their view, out of the countries considered, Mexico has the highest level of compliance with ILO labour standards. Therefore, they considered that Mexico could constitute the most appropriate representative country for the determination of the normal value out of those that were identified in the note of 2 October 2019.

(181) The basic Regulation does not contain any further requirement to choose the country with the closest level of economic development as the export country. Therefore, the fact that a country may have a closer GNI than another is not a decisive factor in the selection of the appropriate representative country. As mentioned above, the relevant criterion in terms of economic development is the upper-middle income classification by the World Bank for the relevant period. This database allows the Commission to have a sufficient number of potentially suitable countries with a similar level of development to choose the most suitable source of undistorted costs and prices. As all four countries are included in the same category of the World Bank database, they are all considered to meet the criterion laid down in Article 2(6a)(a) first indent of the basic Regulation. Therefore, this claim was rejected.

(182) The Commission took note that there does not seem to be production of PVB in Brazil. A more detailed analysis of the availability and quality of the financial data for the different companies in Brazil is carried out under section 3.1.2.3 below.

(183) With regard to the claim concerning the level of social, labour and environmental protection based on Article 2(6a)(a) first indent of the basic Regulation, it turned out there was no need to consider the different levels of protection in these four countries as explained under recital (221) below. Therefore, this claim was dismissed.

(184) As further explained in recitals (188) and (208), based on the comments to on the Note of 2 October 2019, Turkey was added to the list of potential appropriate representative countries. Turkey is regarded by the World Bank as a country with a similar level of economic development to the PRC.

(185) As explained in the recitals (177) and (178) above, the Commission informed in the note of 2 October 2019 that it intends to take PVB as a similar product to PVA to identify an appropriate representative country for the application of Article 2(6a) of the basic Regulation. Interested parties were invited to comment on the choice of PVB as similar product to PVA.

(187) The complainant argued that Polyvinyl acetate (‘PVAc’) should be considered instead as an appropriate similar product based on the similarities existing in the production process of PVA and PVAc. Notably, the complainant claimed that as PVA, PVAc was also produced through the polymerisation of VAM. The complainant also considered that PVAc as a final product was similar to PVA in terms of wide range of uses and potential end-users and customers.

(188) The complainant also identified a PVAc producer in Turkey, which is a country at the same level of economic development as the PRC. The company identified by the complainant was Organik Kimya San. ve Tic. A.Ș. Therefore, the complainant suggested to use Turkey as a representative country for the purpose of the normal value calculation.

(189) The complainant’s claim that PVB film would not be suitable as an appropriate similar product was not supported by any evidence. On the contrary, the visibility of PVB film producers on the publicly available information platforms suggests that PVB film is not limited in its application or number of potential users.

(190) The Commission conducted its own research, in consultation with the European Chemicals Agency (‘ECHA’). On this basis, the Commission found that, considering the manufacturing process, the raw materials used and cost of production, both PVB and PVAc could be used as appropriate similar products for PVA. The factors of production needed to produce both PVB and PVAc are largely the same as for PVA and, in terms of cost of manufacturing, the PVA falls between the PVB and PVAc.

(191) Thus, the complainant’s claim that PVAc, instead of PVB, should be used as appropriate similar product for PVA was rejected. However, based on the reasons explained above, the Commission accepted the argument that PVAc, together with PVB, could be considered as a potential appropriate similar product.

(192) In its comments to the Note of 2 October 2019, Solutia, who was also considered a user (67) importing the product under investigation, questioned whether the Commission considered PVB resin or PVB film as the similar product to PVA.

(193) As explained in the recital (189) above, no distinction was made between PVB resin and PVB film as regards their suitability as an appropriate similar product. Solutia also informed the Commission that one of its affiliated companies in Mexico, namely Solutia Tlaxcala, S.A. de C.V was producing PVB film and its other affiliated company in Malaysia, Flexsys Chemical (M) SDN BHD, is producing PVB resin. The situation of these two companies was addressed in recitals (199) and (200) below.

(194) In the Note of 2 October 2019 the Commission indicated that for the countries identified as countries where PVB was produced, i.e. Brazil, Malaysia, Mexico and Thailand, the availability of public data needed to be further verified in particular as far as public financial data from a producer of the similar product is concerned.

(195) In addition to the companies identified in the Note of 2 October 2019, based on the conclusion under point (a) above, the Commission undertook further research for companies producing PVAc in the countries considered. It found one additional company in Turkey and one in Mexico, as informed to parties in the Note of 20 December 2019.

(196) As mentioned above under point (a), the Commission also analysed the information submitted by the complainant on an additional Turkish company, and the information submitted by an importer on two additional companies in Mexico and Malaysia.

(197) With regard to Brazil, an importer and user of the product under investigation informed the Commission that one of the companies that were identified in the note of 2 October 2019 as a PVB producer in Brazil, namely Solutia Brasil Ltda. (Eastman Chemical company), had ceased producing PVB film and was therefore not a suitable candidate for the determination of manufacturing overhead, SG&A and profit. This also concurred with the comments put forward by the exporters as discussed in section 3.1.2.2. above.

(198) In the absence of other information on file available to the Commission on the presence of other companies producing PVB and/or PVAc in Brazil with publicly available financial data, the Commission concluded that Brazil could no longer be considered an appropriate representative country.

(199) With regard to Malaysia, the availability of data was verified for the company identified in the note of 2 October 2019 – namely Samchem Nusajaya Sdn Bhd – and also for the company suggested by Solutia – namely Flexsys Chemical (M) Sdn Bhd, also producing PVB. The publicly available financial data for both Samchem Nusajaya Sdn Bhd. and Flexsys Chemical (M) Sdn Bhd dated back from 2017 and, as a consequence, could not be considered suitable for the investigation period, when more recent data was available for other producers. Therefore, the Commission concluded that Malaysia was not suitable to be considered as an appropriate representative country for this investigation. This conclusion was further reinforced by the analysis of imports into Malaysia, discussed in recital (203).

(200) With regard to Mexico, the Commission also analysed the availability of the financial data for the company producing PVB suggested by Solutia, namely Solutia Tlaxcala S.A. de C.V., as well as for the company that the Commission found on basis of its own research namely Wyn De Mexico Productos Quimicos S.A. de C.V.

(201) As regards the financial statements for 2018 of Solutia Tlaxcala S.A. de C.V., the interested party submitted full financial statements as certified by the auditors in a ‘sensitive’ version only. This party also stated that this comprehensive set of the financial statements submitted to the Commission were not publicly available. The Commission therefore concluded that it could not use the data of this company in the proceeding.

(202) As regards Wyn De Mexico Productos Quimicos S.A. de C.V., the latest publicly available financial data was only available for the first six months of 2018 and therefore it could not be considered. As a result, the Commission concluded that Mexico could not be considered as an appropriate representative country for this investigation.

(203) With regard to Thailand, the data available for Sekisui S-Lec Co Ltd was from 2018, and because there was a partial overlap with the investigation period it could be considered suitable in principle. This company was profitable in 2018. However, in the note of 20 December 2019, the Commission also analysed the imports of the main factors of production into Turkey, Mexico, Thailand and Malaysia. The analysis of import data showed that the imports into Thailand and Malaysia of the major factors of production were affected by imports from the PRC, and therefore neither Thailand nor Malaysia could be considered as a suitable representative country. The same analysis also showed that Turkey and Mexico could be used as an appropriate representative country as their imports of the main factors of production were not materially affected by imports from the PRC or any of the countries listed in Annex I to Regulation (EU) 2015/755 of the European Parliament and of the Council (68).

(204) Further to the information submitted by the complainant on the Turkish company Organik Kimya San. Ve Tic. A.S., the Commission also analysed the situation with regard to Turkey by verifying the availability of data for this company, which was not covered in the Note of 2 October 2019. This company is a producer of PVAc, which was considered as an appropriate similar product to PVA as explained in the point (a) above. The last financial data available for this company was from 2018. The company was profitable. However, it was found that the publicly available data of this company in the Orbis database did not contain the appropriate data for cost of goods sold and SG&A. Therefore, the Commission concluded that the data of this company could not be used for the investigation unless this data became available.

(205) The Commission also researched other potential producers of PVB and/or PVAc in Turkey. Another Turkish company, Ilkalem Ticaret Ve Sanayi A.S., was found to be producing PVAc adhesives. The last financial data available for this company was from 2018 and the company was profitable at the level of operating profits. However, the financial expenses of 2018 were extraordinary high and therefore made the company loss-making in that year. The Commission compared the financial data for that company with the previous years where there was no such extraordinary situation and concluded that the financial expenses for 2018 should indeed be considered extraordinary and appropriately adjusted. Therefore, the Commission concluded that, after the appropriate adjustment to the extraordinary financial expenses, the data of Ilkalem Ticaret Ve Sanayi A.S. could be considered as suitable for this investigation. This conclusion was communicated to interested parties in the Note of 30 March 2020. The Commission received comments from three traders of the product under investigation. These comments are addressed in the recitals (219) and (220) below.

(206) In light of the above considerations, the Commission informed the interested parties with the Note of 20 December 2019 that it intends to use Turkey as an appropriate representative country and the Turkish company Ilkalem Ticaret Ve Sanayi A.S, in accordance with Article 2(6a)(a), first ident of the basic Regulation in order to source undistorted prices or benchmarks for the calculation of normal value.

(207) Interested parties were invited to comment on the appropriateness of Turkey as a representative country and of Ilkalem Ticaret Ve Sanayi A.S, and – in case its financial data would become available – Organik Kimya San. Ve Tic. A.S, as producers in the representative country.

(208) Following the Note of 20 December 2019, one sampled exporting producer argued that, unlike Mexico, Turkey was not mentioned in the Note of 2 October 2019 on the sources for the determination of the normal value.

(209) The initial selection of potential representative countries and of suitable companies with publicly available data does not prevent the Commission from the possibility to supplement or refine such selection and its research at a later stage, including by putting forward new suggestions in terms of potential representative country and similar product. Indeed it is the very purpose of the Notes on factors of production, to invite interested parties to comment on the Commission services’ preliminary research and, if warranted, to receive alternatives for the Commission services’ further consideration. The Notes even contain a specific annex to guide parties in submitting information on possible additional representative countries and/or companies for the purpose of Article 2(6a)(a) of the basic Regulation. Following the comment by the complainant related to Turkey and another potential similar product – PVAc – the Commission performed additional research in collaboration with ECHA as mentioned in the recitals (204) to (206) above. This research demonstrated that both PVAc and PVB could equally well be considered as similar products to PVA. The additional research also confirmed that PVAc was produced in Turkey. On this basis the Commission added Turkey to the list of potential representative countries and designated PVAc as a similar product. Therefore, the claim that Turkey could not be regarded as a representative country since it was not mentioned in in the Note of 2 October 2019 is rejected.

(210) The same exporting producer claimed that Mexico would constitute a more appropriate representative country due to, inter alia, the availability of data for coal and natural gas. Further, this exporting producer also claimed that for a number of major input factors, there were substantial Chinese exports into Turkey while the Mexican import data shows substantial purchases from the USA. The exporting producer also argued that the volume of imports of other factors of production into Turkey was limited when compared to the volume of imports into Mexico. Based on these considerations, this exporting producer expressed the view that the data from Wyn De Mexico Productos Quimicos S.A. de C.V. should be used even if it was only available for the first six months of 2018.

(211) The situation of Chinese imports of the main factors of production into Turkey, compared with the respective imports into Mexico was further analysed in the Note of 30 March 2020. This analysis, in line with the analysis made in the Note of 20 December 2019, mentioned in the recital (203), confirmed that the level of Chinese imports to Turkey of the main factors of production used by the sampled cooperating exporting producers not affected by PRC imports were representative. Therefore, the imports from PRC to Turkey were not such that it would render Turkey inappropriate as a representative country under Article 2(6a)(a) of the basic Regulation. Therefore, this claim was rejected.

(212) The Commission also clarified in the Note of 30 March 2020 that no updated financial data had become available for any of the Mexican companies mentioned in the note of 20 December 2019. For Wyn De Mexico Productos Quimicos S.A. de C.Vc., the latest publicly available financial data covered only the first six months of 2018. It was recalled that this data has no overlap with the investigation period and also that it relates only to a period of 6 months. Any 6 months period cannot be considered representative of a whole year, inter alia, due to potential seasonal fluctuations in the items of the profit and loss statement. Furthermore, a complete financial year has a beginning and closing date where audits are performed, appropriate accruals are recorded and necessary corrections are made. It is less than certain that all this would be done on the basis of a 6 months period. Furthermore, even if a company showed profit for a period of 6 months it does not mean that it would be profitable for the entire year. Indeed, the company suggested by the exporting producer was not profitable in 2017, the latest full year available. For all these reasons the Commission did not agree with the comment made by this exporting producer claiming that the use of this 6 months data would yield a more accurate normal value than using data from Turkey. As regards the other potential company from Mexico referred to in the note of 20 December 2019, namely Solutia Tlaxcala S.A. de C.V., the financial statements of this company were not publicly available. Therefore, the Commission maintained that the data available from the two Mexican companies could not be considered suitable. Therefore, this claim was rejected.

(213) As regards the Turkish company Ilkalem Ticaret Ve Sanayi A.S., the Commission explained in the note of 20 December 2019 that the data could be considered as suitable for this investigation to establish the undistorted SG&A and profit. As explained in the recital (205) it was also noted that the financial expenses of 2018, which made the company loss-making in that year, should be considered extraordinary.

(214) In line with the Commission’s observation, the same exporting producer also noted that the company Ilkalem Ticaret Ve Sanayi A.S became loss making due to financial items. This party further claimed that the financial information available for this company did not allow breakdown between overhead and SG&A expenses.

(215) As regards the overheads and SG&A expenses, it should be noted that the source for the former is normally not based on the company in the representative country. Furthermore, contrary to what was claimed by the interested party, the SG&A of the Ilkalem Ticaret Ve Sanayi A.S. were in fact disclosed in its publicly available financial information in Orbis database. It should also be noted that the publicly available data for this company is generally on the same level of detail as any publicly available financial data normally used by the Commission in these investigations. Therefore, the level of detail currently available for this company contains all the necessary information and does not make the company unsuitable for this investigation. As regards the financial items, the Commission notes that the abnormal level of these items in the profit and loss statement of 2018 should be considered extraordinary as explained in recital (205) above. Considering the above, Commission maintained that the data of Ilkalem Ticaret Ve Sanayi A.S. can be considered suitable after making appropriate adjustments for the extraordinary financial items as explained in the recital (307). Therefore, these claims were rejected.

(216) Following the Note of 20 December 2019, three traders of the product under investigation claimed that the company Ilkalem Ticaret Ve Sanayi A.S. is not suitable since the company is not specialised in PVAc production but that this product represents only a limited part of its total product portfolio. These parties claimed that manufacturing overhead cost, SG&A and profits of this company are not apportioned only to PVAc production and that the ‘factors of production, electricity as well as manufacturing overhead costs, SG&A and profits for PVAc are heavily affected by the overall production and sale activity’ and that cost of production varies for each category of products. Notably these parties claimed that cost of sales of non-PVAc products and their after sales assistance are much higher than for PVAc products. Furthermore, these parties claimed that in absence of analytic accounting for PVAc cost of production and profit, Ilkalem Ticaret Ve Sanayi A.S. may not be considered as a reliable source of data.

(217) The claim that the cost of sales of non-PVAc products and their after sales assistance are much higher than for PVAc products was not substantiated by any evidence. Furthermore, it is not exceptional that the companies considered suitable in the context of Article 2(6a)(a) of the basic Regulation are producing more than one product. It is likewise also common that the level of detail of publicly available financial data of suitable companies in the representative country usually does not allow a more granular analysis of the SG&A and profit at the level of individual products. It is also recalled that as regards cost of production, factors of production, and electricity, the choice of any individual company has no relevance to the outcome since this data is retrieved from other sources, namely statistical import data or domestic data of the representative country, as well as data from exporting producers. Therefore, these claims were rejected.

(218) Following the Note of 20 December 2019, the complainant argued that the financial data of Ilkalem Ticaret Ve Sanayi A.S was affected for the 2018 by extraordinary events, namely the currency fluctuation due to political developments in Turkey and the expansion of the company’s capacity. The complainant therefore suggested that the financial data for this company for 2018 could be used, ‘but other than profit before tax’. However, complainant did not further substantiate these possible reasons for the abnormal financial expenses in 2018, neither did it contest the approach suggested by the Commission, which is making an appropriate adjustment for the extraordinary amounts of financial expenses in 2018. Therefore, the Commission in the Note of 30 March 2020 informed that it intends to maintain the approach suggested in the note of 20 December 2019, i.e. using the data of Ilkalem Ticaret Ve Sanayi A.S. adjusted for the extraordinary financial expenses.

(219) Following the note of 30 March 2020 the Commission received repeated comments from three traders of the product under investigation. These parties reiterated their claim that Ilkalem Ticaret Ve Sanayi A.S. is a non-suitable company because its cost of sales of non-PVAc products and after sale assistance are much higher than for PVAc products. These parties made reference to Ilkalem Ticaret Ve Sanayi A.S. website claiming that its portfolio of products shows that the core business is formed by non-PVAc product lines and that PVAc is a side business only. Further, these parties claimed that the non-PVAc sectors require more resources for research and development and technical assistance as well as investments and sales organisation and after sale assistance and claimed that profit in these non-PVAc sectors are ‘usually quite high’. These interested parties did not however provide any additional evidence substantiating their claim. Therefore, these claims are rejected as already explained in the recital (217) above.

(220) Following the note of 30 March 2020, the same parties also repeatedly reiterated their claim that accounting data of Ilkalem Ticaret Ve Sanayi A.S. are not suitable since PVAc production represent only a limited part of its total product portfolio and manufacturing, overhead cost, SG&A and profits of this company are not apportioned only to PVAc production. These parties further suggested that Ilkalem Ticaret Ve Sanayi A.S.’s financial data are unsuitable for determining costs, SG&A and profits, unless the company supplies to the Commission financial data limited to the PVAc product line. As already explained in the recital (217), granular analysis of the SG&A and profits at the level of individual products is usually not possible and not necessary for a company to be considered suitable in the context of Article 2(6a)(a) of the basic Regulation. Therefore, this claim was rejected.

(221) Having established that Turkey was the only available appropriate representative country, based on all of the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

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

(223) In their comments on final disclosure, one sampled exporting producer referred to its comments on the Note of 20 December 2019, where it disagreed with the choice of Turkey as the appropriate representative country.

(224) The Commission noted that these comments were addressed in the Note of 30 March 2020 (as well as in section 3.1.2.3 above) and that the exporting producer did not submit any further comments in response to that Note. As those claims had already been replied to and the exporting producer did not present any new argument or evidence, they were rejected.

(225) In their comments on final disclosure, one user and one union producer / user disagreed with the choice of Turkey as representative country, arguing that it did not respect labour conventions and standards nor complied with climate and environmental rules. The user further disagreed with the use of data of Ilkalem Ticaret Ve Sanayi A.S. since, PVAc production represented only a limited part of its business. Consequently, according to the user, the company’s costs, overheads, SG&A and profit for PVAc were affected by its overall production and sales activity. The user argued that, by using the Turkish producer’s SG&A costs and profit, the Commission inflated the normal value. The user asked the Commission to adapt the constructed normal value accordingly.

(226) The Commission disagreed with these claims. At the outset, the Commission noted that neither of these arguments were put forward by the user in response to the Notes of 2 October 2019, 20 December 2019 and 30 March 2020, where the Commission explicitly requested such comments, subject to deadlines. The Commission then pointed out that, according to Article 2(6a)(a) of the basic Regulation, preference must be given, where appropriate, to countries with an adequate level of social and environmental protection, where there is more than one potential representative country to choose from. As mentioned in recital (221), having established that Turkey was the only available appropriate representative country in this case, there was no need to carry out an assessment of the level of social and environmental protection. This claim was therefore rejected.

(227) As far as the choice of Ilkalem Ticaret Ve Sanayi A.S. is concerned, the Commission first noted that, other than SG&A, it did not use the company’s cots and overheads. As far as SG&A and profit go, the user presented no evidence on why these would be inflated by using the Turkish producer’s company-wide figures. Furthermore, the user noted the Commission explanation in recital (220) that granular analysis of the SG&A and profits at the level of individual products is usually not possible and not necessary for a company to be considered suitable in the context of Article 2(6a)(a) of the basic Regulation. The user opposed this argument by claiming that there is no need to bring detailed evidence substantiating that a company whose PVAc production is only a by-product has a significantly different cost structure and profit margin than a company whose primary focus is the production of PVA. On this point, the Commission noted that claims should generally be supported by valid evidence, however detailed. Furthermore, the SG&A and profits, reported by the sampled exporting producers were not inconsistent with what was reported by the producer in the representative country. These claims were therefore rejected.

(228) In their comment on final disclosure, one Union producer / user argued that the data in Turkey was not publicly available as it has to be purchased from, for instance, Global Trade Atlas (‘GTA’). The Commission noted that, According to Article 2(6a) of the basic Regulation, the data does not have to be ‘publicly available’ but ‘readily available’. The Commission noted that ‘publicly available’ means available to the public at large whereas ‘readily available’ means available to everybody, provided that certain conditions, like a payment of a fee, have been fulfilled. Important to mention that all the information used to construct the normal value was made available on the open file. That means that even when the information is only available upon payment, all interested parties had access to it. This claim was therefore rejected.

(229) In their comments on final disclosure, two sampled exporting producers argued that the financial data for Solutia Tlaxcala S.A. de C.V. were readily available within the meaning of Article 2(6a)(a) of the basic Regulation and thus the Commission was wrong to dismiss Mexico as a potential appropriate representative country. As mentioned in recital (201), the financial data for Solutia Tlaxcala S.A. de C.V. were submitted to the Commission by Solutia only in ‘sensitive’ version because, as explained by the user, the data were not publicly available. According to the sampled exporting producers there is a difference between ‘readily available’ within the meaning of Article 2(6a)(a) of the basic Regulation and ‘publicly available’. The sampled exporting producers argued that ‘publicly available’ means available to the public at large whereas ‘readily available’ means available to everybody, provided that certain conditions, like a payment of a fee, have been fulfilled. The sampled exporting producers then argued that, since the data for Solutia Tlaxcala S.A. de C.V. was allegedly available on Dun&Bradstreet database (69) for a fee, this data were readily available within the meaning of Article 2(6a)(a) of the basic Regulation.

(230) The Commission disagreed with this claim. At the outset, the Commission noted that none of these arguments were put forward by the sampled exporting producers in response to the Notes of 20 December 2019 and of 30 March 2020, despite being explicitly requested subject to deadlines. The Commission then explained that it did not consider the financial data of Solutia Tlaxcala S.A. de C.V. as not readily available because Solutia requested confidentiality and confirmed that this data was not publicly available. The Commission considered the data as not readily available because it was unable to find it in the services it has access to for this purpose. Furthermore, none other interested party, including the sampled exporting producers, submitted this data in a non-confidential form, despite being explicitly requested to do so in the Notes of 2 October 2019, 20 December 2019 and 30 March 2020. Finally, the Commission noted that even in their comments on final disclosure, the exporting producers did not submit allegedly readily available data of Solutia Tlaxcala S.A. de C.V. They merely pointed to a paid database that allegedly holds that data and later called it ‘prima facie evidence that the financial data of Solutia Tlaxcala S.A. de C.V. can readily be obtained from other sources’. The Commission is unable to use data that it has no access to or that has not been submitted by any of the interested parties in a non-confidential form. Furthermore, without being able to cross-check whether the allegedly readily available data contain necessary figures or that these figures correspond to those in the data submitted by Solutia in confidence, the Commission was unable to use the latter for the purpose of Article 2(6a)(a) of the basic Regulation. A mere prima facie evidence of the availability of Solutia’s data, as put by the exporting producers, is insufficient for that purpose. The Commission finally noted that all the information used to construct the normal value, when not widely available, has to be made available to all interested parties in the open file. To this end, the Commission ensures that even when it take recourse to paid data, it is contractually allowed to share the relevant information used in the investigation with interested parties. These claims were therefore rejected.

(231) In their comments on final disclosure, the same sampled exporting producers argued that Mexico was the most appropriate representative country for the normal value determination since: (i) it has a level of economic development similar to the PRC; (ii) it has an established PVB production; (iii) the relevant data are readily available by virtue of the financial statements of Solutia Tlaxcala S.A. de C.V.; and (iv) Mexico has a higher level of social and environmental protection than Turkey.

(232) The Commission disagreed with this assessment. The Commission noted that the first two arguments are equally applicable to Turkey. As explained in recital (230), the third argument is factually incorrect, which renders the fourth argument moot. This claim was therefore rejected.

(233) In their comments on final disclosure, the same sampled exporting producers argued that, if the Commission insists on using the SG&A costs and profit of the producer in the representative country, it should at least consider the use of Mexico for the undistorted benchmarks.

(234) The Commission disagreed with this claim. The Commission noted that, as explained in sections 3.1.2.2 and 3.1.2.3 above, contrary to what is being claimed, the Commission did consider the use of Mexico as the appropriate representative country and dismissed it as it did not find any readily available financial data for PVAc or PVB producing company in that country. The Commission also noted that neither in response to the Notes of 2 October 2019 or 30 March 2020 nor in the comments on final disclosure, did the exporting producers present a valid argument why Turkey should not be used as a source for undistorted benchmarks. This claim was therefore rejected.

(235) In their comments on final disclosure, the same sampled exporting producers contested the use of the data of the Turkish producer, Ilkalem Ticaret Ve Sanayi A.S. as the source for SG&A and profit on the basis that its reported financial expenses were extraordinary high and needed to be adjusted as explained in the recital (205) above. The exporting producers argued that, if the SG&A and profit data had to be adjusted, it cannot be considered as undistorted and thus cannot be used. The exporting producers went on questioning the readily available nature of the Turkish producer’s data, since that data had to be adjusted to be used. The exporting producers also questioned the reliability of readily available financial information of Ilkalem Ticaret Ve Sanayi A.S. found in Orbis database and provided alternative financial data for this company obtained from another source – ‘EMIS’ – showing different profit and loss statement for the year 2018 than the one used in the dumping calculation. The exporting producers argued that, on these basis Turkey should have been disregarded as potential representative country, or both Turkey and Mexico should have been considered, as the producer in the latter country allegedly had readily available data. Finally, the sampled exporting producers recalled that the Commission dismissed their request for further breakdown of SG&A of the producer in the representative country. In this regard the exporting producers mentioned that it would have been useful to ask the producer in the representative country to fill in a detailed profit and loss table that could then be verified by the Commission.

(236) The Commission disagreed with these claims. At the outset Commission noted that the exporting producers did not raise any of these issue following the publication of the Note of 30 March 2020, which outlined and explicitly requested, subject to a deadline, comments on now criticised approach and figures. With regards to Turkish company’s data being distorted, as explained in the Note of 30 March 2020, as well as in recitals (205), the Commission indeed considered the SG&A to contain extraordinary expenses, which should not be taken into account for the construction of the normal value. This is why the Commission adjusted the data by removing these expenses. Contrary to what was claimed by the exporting producers, the adjustment does not affect the readily available nature of the data. It was done solely on the basis of readily available figures and it was explained in detail in the Note of 30 March 2020, as well as in recital (205). These claims were therefore rejected.

(237) With regards to contradictory data of the Turkish company in other sources, the Commission first noted that this data was not provided in response the Note of 30 March 2020 within the given deadline. The exporting producers did not specify on which basis the report provided by them was compiled, that is, whether it is based on generally accepted accounting principles and statutory accounts or for example a specific reporting template and different accounting conventions particular to EMIS. Therefore, the Commission considers that the financial data obtained from an established and widely used database – Orbis – remains an appropriate and reliable source for the purpose of this investigation. Moreover, the combined SG&A and profit obtained from the Orbis database (21,6 %) for the producer in the representative country is only marginally lower than the one reported in EMIS (22,4 %). Therefore, using the data from EMIS would in fact (marginally) increase the dumping margin for all exporting producers.

(238) With regards to the request for further breakdown of the SG&A costs of the producer in the representative country, the Commission recalled its reply that such detailed data was not readily available. As to additional questionnaire on detailed profit and loss to be sent to the producer in the representative country and verified by the Commission, the basic Regulation provides that the Commission must use information which is readily available and does not foresee any requests to producers in the representative country. Even if it was possible to request and verify such information from those producers, the data collected would be business confidential information and therefore not readily available to interested parties. Therefore, this data was considered not be readily available within the meaning of Article 2(6a) of the basic Regulation.

(239) These claims were therefore rejected.

(240) In the Note of 2 October 2019, the Commission listed the factors of production such as materials, energy and labour used in the production of the product under investigation by the exporting producers and invited the interested parties to comment and propose publicly available information on undistorted values for each of the factors of production mentioned in that note.

(241) Subsequently, in the Note of 20 December 2019, the Commission stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use GTA to establish the undistorted cost of most of the factors of production, notably the raw materials. In addition, the Commission stated that it would use the Turkish Statistical Institute for establishing undistorted costs of labour (70) and energy (71). Moreover, the Commission also informed that for the cost of water for industrial use, it would use the prices published by the Presidency of the Republic of Turkey Investment Office (72) based on sources from the Istanbul water and Sewerage administration, the Eskișehir Water and Sewerage Administration and the Antalya Water and Sewerage Administration.

(242) In the note of 20 December 2019, the Commission also informed the interested parties that due to the large number of factors of production of the sampled exporting producers that provided complete information and the negligible weight of some of the raw materials in the total cost of production, these negligible items were grouped under ‘consumables’. Further, the Commission informed that it will calculate the percentage of the consumables on the total cost of raw materials and apply this percentage to the recalculated cost of raw materials when using the established undistorted benchmarks in the appropriate representative country.

(243) Following the Note of 20 December 2019, the Commission received comments on factors of production from one sampled exporting producer, the complainant and three traders of the product under investigation.

(244) The sampled exporting producer claimed that according to GTA there were no imports of coal (73) and natural gas into Turkey. The party expressed reservations whether Turkish prices could be used in these circumstances as the absence of imports of these two inputs ‘may indicate’ that certain barriers exist on the Turkish market and prevent imports and ‘may therefore result in inflated/distorted prices on the Turkish domestic market’.

(245) There are indeed no reported imports of coal under the HS classification 2701 19 and natural gas into Turkey. However, the claims made by the exporting producer concerning trade barriers and price distortions were not substantiated by any evidence. Also, the Commission examined the existence of the export restrictions and according to the information available to the Commission, there are no such barriers or price distortions on the Turkish market. Therefore, this claim was rejected.

(246) After receiving the comments on the Note of 20 December 2019, the Commission however looked further into the types of coal used by the exporting producers in China and also requested inspection reports for these types of coal. The examination of these inspection reports revealed that coal initially proposed to be classified by some of the exporting producers under HS 2701 19, could be classified under HS 2701 12. GTA, lists import data for Turkey for this HS code, namely 37 113 666 tonnes during the investigation period – none of which is imported from the PRC. Therefore, in the note of 30 March 2020, the Commission informed the interested parties that it intends to use the data for HS 2701 12, as published by GTA, as benchmark for all types of coal. After the Note of 30 March 2020, no interested parties sent any further comments as regards the use of data for HS 2701 12, as published by GTA, as benchmark for all type of coals.

(247) In the note of 30 March 2020, the Commission maintained that, in absence of any evidence of the alleged trade barriers or price distortions concerning the natural gas in Turkey, the price of gas for industrial users in Turkey as published by the Turkish Statistical Institute is a suitable benchmark for this investigation. Following the Note of 30 March 2020, no interested party submitted any further comments on this point and the proposed approach.

(248) In the Note of 20 December 2019, the Commission stated its intention to use the statistics published by the Turkish Statistical Institute as benchmark for labour costs in the manufacturing sector for 2016, for the economic activity C.23 (Manufacture of other non-metallic mineral products) according to NACE Rev.2 classification. In its reaction to this note, the complainant proposed that the economic activity category C.20 (Manufacture of chemicals and chemical products) would be more suitable to reflect the labour costs of PVA (chemical product) compared to processing of non-metallic mineral products.

(249) The Commission examined this claim and looked into which economic category is more suitable for broader economic activities considering the high level of vertical integration of the Chinese producers, and the variety of labour involved. It was found that the economic activity category C.20 (Manufacture of chemicals and chemical products) would be more suitable. Therefore, the Commission used the economic activity category C.20 as benchmark for labour cost.

(250) Following the Note of 20 December 2019, three traders of the product under investigation stated that they fail to understand why the Commission had disclosed ‘such a long list’ of raw materials among factors of production and claimed that some of the listed factors of production are not used in the PVA production.

(251) This claim appears to stem from a misunderstanding about the origins of data of the factors of production disclosed in the notes of 2 October and 20 December 2019. As explained in the note of 2 October 2019, the primary source of the factors of productions was information submitted by the interested parties, notably the cooperating exporting producers. It is also recalled that the sampled cooperating exporting producers have different levels of integration and use different production processes, which explains the relatively long list of inputs for which there is a need to identify the corresponding undistorted costs in the representative country. Therefore, this claim was contradicted by the data submitted by the Chinese exporting producers and verified by the Commission, and thus it is rejected.

(252) The same interested parties also requested the Commission to make available to all interested parties the specific production process it intends to adopt in order to assess the normal value for PVA. First, it is recalled that the calculation of the constructed normal value is not based on any specific production process as such, but rather on the value of factors of production and their actual consumption by each exporting producer based on their own production process. It is further recalled that the Chinese exporting producers have as part of their replies to the anti-dumping questionnaire explained their production process and outlined their factors of production. The non-confidential versions of these replies have already been available for inspection by all interested parties since September 2019. Therefore, this request was moot.

(253) Following the Note of 20 December 2019, the same interested parties (three traders of the product under investigation) also made claims regarding factors of production, calculation of the normal value and comparison. These claims are addressed in recitals (264), (342) to (346) and (359) below. Following the Note of 30 March 2020, these parties repeatedly reiterated their arguments, however without submitting any further information or evidence to support their claims.

(254) As stated in recital (46), in the Note of 2 October 2019, the Commission sought to establish an initial list of factors of production and sources concerning PVA intended to be used for all factors of production such as materials, energy and labour used in the production of the PVA by exporting producers.

(255) Furthermore, as stated in recital (48), in the Note of 20 December 2019, the Commission provided a revised list of factors of production and established the Turkish goods codes corresponding to the relevant factors of production in Turkey, the representative country.

(256) The Commission did not receive any comments concerning the list of factors of production following the Note of 2 October 2019. As explained in recital (243), one sampled exporting producer, the complainant and three traders of the product under investigation submitted comments following the note of 20 December 2019. As explained in the recitals (246) to (249) the Commission in the Note of 30 March 2019, addressed those comments and revised the codes for coal and labour.

(257) The Commission did not receive any further comments concerning the list of factors of production following the Note of 30 March 2020.

(259) During the verification visits, the Commission verified the raw materials used and the by-product/waste generated in the manufacturing of the product concerned.

(260) For all raw materials with the exception of Oxygen and Acetaldehyde, absent any information on the market of the representative country, the Commission relied on import prices. An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding the PRC and countries which are not members of the WTO, listed in Annex 1 of Regulation (EU) 2015/755 of the European Parliament and the Council (74). The Commission decided to exclude imports from the PRC into the representative country as it concluded in recitals (171) to (172) that it is not appropriate to use domestic prices and costs in the PRC due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation. Given that there is no evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected export prices. After excluding the PRC, the imports from other third countries remained representative ranging from 34 % (75) to 100 % of total volumes imported to Turkey for the factors of production listed in the table above.

(261) As mentioned in the recital above, there were no public reference prices available for oxygen (oxygen 99,6 %, 2,5 bar pipeline transportation) and acetaldehyde (industrial acetaldehyde). While, according to GTA, there are imports of oxygen into Turkey under HS code 2804 40, these are imports of oxygen in cylinders. The price of these imports is likely driven by the cost of transport and storage, which are not relevant when oxygen is being captured close to the production site and transported there by a pipeline. In that case, the costs are being driven primarily by the costs of the machinery and the installation. For this reason, it was considered inappropriate to use the GTA benchmark. As the market of oxygen delivered by pipeline is characterised by the proximity between the producer/seller and the customer, it is not traded on the spot market. As a consequence, there are no indicative prices published on the national or international trading places, thus there are no public available reference prices. For these reasons, it was found appropriate to include the costs of oxygen in the costs category of consumables. Contrary to oxygen, there were no imports of acetaldehyde (HS code 2912 12) in Turkey recorded in the GTA database, and in absence of any other publicly available reference prices or indicative prices of acetaldehyde in Turkey, it was also considered appropriate to include the costs of acetaldehyde in the costs of consumables.

(262) A number of factors of production were mainly catalyst materials, for which the actual costs incurred by the cooperating exporting producers represented a negligible share of total raw material costs in the investigation period. As the value used for these had no significant impact on the dumping margin calculations, regardless of the source used, the Commission decided to include those costs into consumables as explained in the recitals (301) and (302).

(263) In order to establish the undistorted price of raw materials delivered at the gate of the exporting producer’s factory, as provided by Article 2(6a)(a), first indent of the basic Regulation, the Commission applied the import duty of the representative country and added domestic transport costs to the import price. The domestic transport costs for all raw materials as well as insurance costs were estimated based on the verified data provided by the cooperating exporting producers and are not included in the benchmarks mentioned in the table above.

(264) Following the Note of 20 December 2019, three traders of the product under investigation claimed that the VAM cost incurred by the Chinese exporting producers is not distorted and is in line with the costs in the international open market. The interested parties brought elements on file to show that the VAM price in China was higher during the investigation period than the VAM price in Europe and Russia. The interested parties requested the Commission to take into account this claim when determining the normal value. The same parties also repeatedly reiterated to this claim following the Note of 30 March 2020 without submitting any further evidence. First, it is recalled that according to Article 2(6a)(a), third indent of the Basic Regulation, domestic costs can only be used to the extent that it is positively established that they are not distorted. The claim of these parties is based on general aggregate figures concerning prices of VAM in the PRC as opposed to the Union or to Russia. However, the investigation has not established that the VAM prices in the PRC were not distorted. Secondly, due to their production process, VAM is not even an important factor of production for any of the cooperating exporting producers. Therefore these claims are rejected.

(265) In their comments on final disclosure, three importers reiterated their claim, which was summarised and addressed in recital (264) that VAM prices in the PRC are not distorted. In reiterating this argument they argued that the Commission ignored the evidence they submitted in support of VAM prices not being distorted, as it did not come from exporting producers. They pointed at the alleged contradiction where the Commission on the one hand did not consider VAM as major factor of production, while in the injury analysis in recital (462) the Commission refers to it as a major raw material.

(266) The Commission disagreed with these claims. The Commission first reiterated its conclusion form recital (264) that the mere fact that Chines VAM prices are similar and sometimes higher than international VAM prices is not evidence of lack of distortions. As seen in recital (264), contrary what the three importers claimed, the Commission did not ignore this claim and the evidence that was supporting it. The Commission just considered that mere price level is not evidence of lack of distortion. This claim was therefore rejected.

(267) With regards to VAM being a major factor of production, the Commission does consider it an important raw material for PVA production in general but a minor factor of production from the point of view of cooperating exporting producers. In their comments on final disclosure, the three importers noted themselves that the exporting producers are vertically integrated and therefore produce their own VAM. They do not purchase it in significant quantities and therefore it is not considered as a major factor of production for these exporting producers. In recital (462), the Commission refers to the Union industry which does not produce the VAM internally, but purchases it. As a consequence, in the latter case, the fluctuations of the prices of VAM in the market affect the cost of production of PVA. This claim was therefore rejected.

(268) In their comments on the final disclosure, three sampled exporting producers, one Union producer / user and three importers argued that, when establishing the benchmarks for factors of production, the Commission should not have added import duties and domestic transport costs. In particular the three importers referred to VAM and coal. Furthermore, the sampled exporting producers and Union producer / user argued that the import price taken from the import statistic should have been brought down from CIF to EXW level, therefore costs in the country of origin (including additional packing expenses for certain factors of production), freight and insurance should be removed. This claim was motivated by the fact that all three sampled exporting producers sourced their raw materials locally.

(269) The Commission disagreed with this claim. The Commission noted that, according to Article 2(6a)(a) of the basic Regulation, the normal value should reflect the undistorted price of the raw materials in the representative country, in this case Turkey. It should therefore reflect the price that a producer of PVA would pay in Turkey for a raw material delivered at the factory gate. As mentioned in recital (263), the methodology applied by the Commission reflects this approach. If the adjustments suggested by the interested parties were made, the resulting price would not reflect the undistorted price on the Turkish market but the average EXW price (when sold for export) in the countries that sell to Turkey. This would be contrary to Article 2(6a)(a) of the basic Regulation and thus these claims were rejected.

(270) In their comments on final disclosure, two sampled exporting producers, after questioning the compatibility of the Article 2(6a) of the basic Regulation with the WTO rules, suggested that the Commission should simplify its approach by simply taking the benchmark for PVA, the product concerned, and compare it with the export price of each exporting producers.

(271) The Commission disagreed with this approach. The Commission first noted that the compatibility of the method enshrined in Article 2(6a) of the basic Regulation with the WTO rules was discussed in recital (98). The Commission then noted that, the methodology proposed by the sampled exporting producers would violate Article 2(6a) of the basic Regulation, which prescribes the construction of the normal value exclusively on the basis of costs of production and sale reflecting undistorted benchmarks for each exporter and producer separately. In essence this provision requires the Commission to take into account the particular production method and consumption of inputs by each exporting producer individually instead of applying a wholesale benchmark value for all exporting producers without regard to their particular production process. These claims were therefore rejected.

(272) In their comments on final disclosure, the same sampled exporting producers argued that the benchmark for coal is unreasonably higher than the price level on the market when compared to prices quoted by U.S. Energy Information Administration. Considering that China is rich in coal, the sampled exporting producers argued that the Commission should consider using the US prices.

(273) The Commission disagreed with this claim. The Commission first pointed out that, as stated in recital (246), the benchmark for coal was extensively discussed in the Note of 30 March 2020. As also mention in that recital, no comments on this point were received within the given deadline. The sampled exporting producer sole argument was that the prices actually used are significantly higher than the prices quoted in the USA. The Commission noted that it is not unusual for energy and energy source prices in the USA to be relatively low. In the absence of any other argument concerning the reliability of the benchmark used, this claim was rejected.

(274) The exporting producers produced internally certain factors of production such as self-produced steam, electricity, refrigerating capacity, purified water and like. Notwithstanding the requirement in Anti-dumping questionnaire, some exporting producers had failed to allocate the consumption volumes of inputs for these self-produced factors of production to the product under investigation. Instead, these exporting producers had only allocated the consumption values and volumes of the self-produced factors of production to the product under investigation. The Commission sought to establish the undistorted price for the self-produced factors of production. Using the undistorted prices of raw materials and labour, which were determined as explained in recitals (259) to (263) and (276), the Commission recalculated the undistorted prices of the self-produced factors of production. These undistorted prices were subsequently applied in the calculation of the normal value as explained in the section 3.1.4.4.

(275) Those raw materials and self-produced factors of production that only had a negligible weight in the total cost of production of the exporting producer as well as on a PCN level, were grouped under consumables. The Commission calculated the percentage of the consumables on the total cost of raw materials and applied this percentage to the recalculated cost of raw materials when using the established undistorted prices.

(276) The Turkish Statistical Institute publishes detailed information on wages in different economic sectors in Turkey. The Commission used the wages reported in the Turkish manufacturing sector for 2016, for the economic activity C.20 (Manufacture of chemicals and chemical products) (76) according to NACE Rev.2 classification (77). The 2016 average monthly value was duly adjusted for inflation using the domestic producer price index (78) as published by the Turkish Statistical Institute.

(277) In their comments on final disclosure, three sampled exporting producers argued that Commission should have used wages for the economic activity C.22 (manufacture of rubber and plastic products) in NACE Rev.2 classification, instead of C.20. The exporting producers argued that this is because PVA is a type of polymer or plastic, a vinyl polymer joined by only carbon-carbon linkages. The linkage is the same as those of typical plastics such as polyethylene, polypropylene, and polystyrene, and of water-soluble polymers such as polyacrylamide and polyacrylic acid.

(278) The Commission disagreed with this claim. The Commission noted that, according to Eurostat’s guidelines on NACE Rev. 2 classification (79), economic activity C.20, which was used by the Commission, covers, amongst other, manufacture of resins, plastics materials and non-vulcanisable thermoplastic elastomers, the mixing and blending of resins on a custom basis, as well as the manufacture of non-customised synthetic resins (C.20.16). This class includes manufacture of plastics in primary forms: polymers, including those of ethylene, propylene, styrene, vinyl chloride, vinyl acetate and acrylics; polyamides; phenolic and epoxide resins and polyurethanes; alkyd and polyester resins and polyethers; silicones; ion-exchangers based on polymers. The same guidelines describe economic activity C.22 (manufacture of rubber and plastic products), suggested by the sampled exporting producers, as ‘processing new or spent (i.e., recycled) plastics resins into intermediate or final products, using such processes as compression moulding; extrusion moulding; injection moulding; blow moulding; and casting’. Economic activity C.22 is subdivided into: manufacture of plastic plates, sheets, tubes and profiles; manufacture of plastic packing goods; manufacture of builders’ ware of plastic; and manufacture of other plastic products (like tableware, fitting school supplies etc.). It is therefore clear that wages for economic activity C.20 are more appropriate as labour benchmark for PVA production than wages for economic activity C.22. This claim was therefore rejected.

(279) To establish a benchmark for electricity and natural gas, the Commission used the electricity and gas price statistics published by the Turkish Statistical Institute (80) in its regular press releases. From these statistics, the Commission used the data of the industrial electricity and gas prices in the corresponding consumption band in Kuruș/kWh covering the investigation period.

(280) In their comments on final disclosure, one sampled exporting producer and one Union producer / user argued that Turkish natural gas prices are inappropriate as a benchmark and that the US Gulf coast prices should be used instead. The exporting producer argued that Turkish natural gas prices are double the natural gas prices in the Union and more than double the US Gulf coast prices. The exporting producer argued that the gas prices in Turkey increased in the IP and were 75 % higher than at the end of 2017 even though, global gas prices during the same period essentially remained stable. The exporting producer attributed this increase to a mix of circumstances, namely: (i) a dependency on imports; (ii) geopolitical tensions with Russia affecting gas supplies to Turkey; (iii) sanctions on oil producing countries such as Iran and Venezuela; (iv) political tensions with the US; and (v) the devaluation of Turkish Lira. Considering these alleged artificially high natural gas prices, the exporting producer argued that either the US Gulf coast prices or average natural gas prices in Turkey during the 2015 to 2017 period should be used as a benchmark.

(281) The Union producer / user further argued that Turkey has a comparably small and not liberalized natural gas market. Moreover, the Turkish gas prices pertain to gas usage for heating and electricity generation but not large scale usage for the production of chemicals. The user argued that US Gulf coast prices should be used as a benchmark.

(282) The Commission disagreed with these claims. The Commission first pointed out that the statement that natural gas prices in Turkey are double those in the Union during the IP is factually incorrect. According to Gas prices for non-household consumers – bi-annual data (from 2007 onwards) (81) published by Eurostat, in the IP, at 0,028 EUR/kWh (or 0,3 EUR/m3) the average natural gas price for non-household consumers in the Union was 43 % higher than the average gas price in Turkey (0,020 EUR/kWh or 0,21 EUR/m3). The Turkish gas prices for non-household consumers were therefore significantly lower than those in the Union during the IP.

(283) The Commission then noted that the picture of natural gas prices development in Turkey, painted by the sampled exporting producer, is greatly affected by not taking into consideration the significant devaluation of Turkish Lira during that period. The exporting producer noted the devaluation as an affecting factor but did not counter it by applying a conversion rate of USD or EUR in order to compare the price development to that of US Gulf coast prices or Union prices based on a currency that was relatively stable throughout the period. CNY would also be of use, especially since this is the currency into which values of factors of production are converted for construction of the normal value.

(284) When considered in EUR, based on the data provided by Eurostat (82) the natural gas prices in Turkey in the IP were 12 % (not 75 %) higher than in 2017 (83). According to Eurostat, in the same period, prices for non-household consumers in the Union increased by around 11 % (84). Moreover, the period of 2017 to the first semester of 2019 (therefore, the period that includes the complete IP) saw the lowest natural gas prices in Turkey between 2015 and 2019, when expressed in a stable currency. Indeed, if the Commission was to follow the request of the exporting producer and use the average natural gas prices in Turkey between 2015 and 2017 as the benchmark, this would have been to the detriment of the sampled exporting producer. Such average price would amount to around 1,70 CNY/m3 and thus would be some 4 % higher than the price actually used by the Commission in its calculation.

(285) Considering the foregoing, whilst prices of natural gas, when expressed in Turkish Lira, are being affected by the significant devaluation of that currency, that effect is eliminated by the methodology of recalculation these prices into RMB before using them in the construction of the normal value. When considered in the USD, EUR or CNY, there is nothing unusual about these prices and their evolution between 2015 and 2019. There is therefore no reason to use out-of-the-country benchmark or an average prices during the 2015 to 2017 period.

(286) Considering the argument that Turkey has a comparably small and not liberalized natural gas market and that gas prices in Turkey pertain to gas usage for heating and electricity generation but not large scale usage for the production of chemicals, the Commission notes that no evidence to support these claims were provided. Moreover the existence of a separate gas tariff for non-household consumers suggests otherwise.

(287) For the reasons outlined above, these claims were rejected.

(288) In their comments on final disclosure, the same sampled exporting producer expresses similar concerns with regards to electricity prices as these expressed about natural gas and summarised in recital (280). According to the exporting producer electricity prices in Turkey also increased dramatically (in line with the price increase observed for natural gas) during the investigation period. The exporting producer proposed to use the average of electricity prices during the 2015 to 2017 period instead of data for the IP.

(289) The Commission disagreed with this claim. The Commission first noted that the exporting producer did not provide any figures to support it. The Commission could only assume that the claim is based on the electricity price evolution in Turkish Lira, which, as in the case on natural gas described in recital (285). As in the case of natural gas, the methodology used by the Commission where the benchmarks are recalculated in CNY counters the effect of the fluctuation of Turkish Lira.

(290) The Commission looked at the electricity prices for non-household consumers reported in Eurostat (85) in EUR. Whilst prices in Turkey in the IP were higher by around 12,7 % then in 2017 the average price in the Union has also increased by 10,7 % during the same period. Furthermore, the average price for electricity in Turkey in the IP, when expressed in EUR, was around 1 % lower than the average price during the 2015 to 2017 period, which the exporting producer is proposing to use. It follows that, when the effect of Lira devaluation is removed, it is clear that, contrary to what sampled exporting producer claimed, there was no dramatic increase of electricity prices in Turkey in the IP.

(291) For the reasons outlined above, these claims were rejected.

(292) In their comments on final disclosure, three importers argued that gas and power costs in Turkey are inflated by political decision. To underlie this argument they referred to the evidence submitted in their submission of 16 June 2020. In that submission, based on an email form a Chief Compliance Officer of a Turkish chemical company, they argued that Turkish gas and power market is not liberalised and prices are fixed by public authority. This conclusion was allegedly supported by Turkish gas and power market analysis but the importers did not refer to any specific part of it. Their argued that based on this argument, the Commission should reconsider Turkey as the appropriate representative country or reduce the allegedly higher gas and power costs by not less than 300 %.

(293) The Commission disagreed with this claim. Even if the Commission was to consider an email from a Chief Compliance Officer of a Turkish chemical company as valid evidence of energy price inflation in Turkey, the Commission noted that the email starts by stating that ‘Turkey has a very liberal energy market in many aspects’. This already contradicts the characterisation of the email in the submission. As to the Turkish gas prices being higher than world markets, as mention in recitals (282), Turkish gas prices for non-household consumers are significantly lower than those in the Union. Finally, the 300 % downward adjustment for gas and power prices appears to be based on a claim in the email form the Chief Compliance Officer of a Turkish chemical company that ‘oil and diesel prices are taxed at the rate of 300 %’. Whether or not correct, this is irrelevant for gas and electricity prices. These claims were therefore rejected.

(294) In their comments on final disclosure, one exporting producer and one Union producer / user noted that the benchmarks for electricity and natural gas contain VAT. They argued that it is standard practice to use domestic sales prices and costs without VAT when calculating the normal value.

(295) The Commission took note of this comment and adjusted the benchmark for electricity and natural gas by removing the VAT (18 %). The normal value and dumping margins were recalculated accordingly for all exporting producers. The new findings were re-disclosed as part of the additional final disclosure.

(296) In their comments on the final disclosure, three exporting producers argued that, when applying the benchmark for electricity, the Commission should use the relevant price band applicable to the level of consumption of electricity by the exporting producer in question, instead of the average of all bands.

(297) The Commission took note of this comment and adjusted the benchmark for electricity by applying price bands for large and medium-large consumers of electricity, where appropriate. This assessment was based on the purchases of electricity by the exporting producers rather than their consumption, as some of them produce part of the electricity they consume. The normal value and dumping margins were recalculated accordingly for all exporting producers. The new findings were re-disclosed as part of the additional final disclosure.

(298) In their comments on additional final disclosure, the complainant argued that the magnitude of the reduction of the dumping margin following the adjustment discussed in recitals (295) and (297) above was inconsistent with what they knew about proportion of natural gas and electricity in the production costs of Sinopec. The complainant argued that whilst indeed one producing company of Sinopec could be using significant amount of natural gas, this was not the case for the other company.

(299) In their comments on additional final disclosure a user also questioned the calculations following the adjustment discussed in recitals (295) and (297). They considered, that given high proportion of energy in production costs of PVA, they expected the impact of the adjustment to be higher. They asked the Commission to verify its calculations.

(300) The Commission disagreed with these claims. The Commission noted that, whilst these claims were based on assumptions, the Commission’s calculation of Sinopec’s normal value, following the adjustment, was based on precise consumption rates provided by the exporting producer and verified by the Commission. With regards to Sinopec Ningxia, the company that allegedly did not use substantial amounts of natural gas in PVA production, as explained in recital (329), due to the use of facts available under Article 18 of the basic Regulation, for each PCN reported by Sinopec Ningxia, the Commission used the highest constructed normal value of the other cooperating exporting producers. Whilst these indeed were not significantly affected by the removal of VAT from natural gas and electricity prices, the overall impact of individual companies on the group’s dumping margin varies depending on the proportion of sales of these companies in all export sales of the group to the Union. Finally, the Commission noted that the adjustment, whilst related to natural gas and electricity did have a knock-off effect on, for instance, overheads, which were calculated as a percentage of undistorted costs of manufacturing. If these costs diminish, due to removal of VAT from natural gas and electricity prices, so do the overheads. This claim was therefore rejected.

(301) Due to the large number of factors of production of the sampled cooperating exporting producers, some of the raw materials that only had a negligible weight in the total cost of production of the exporting producer as well as on a product type level were grouped under consumables.

(302) The Commission calculated the percentage of the consumables on the total cost of raw materials and applied this percentage to the recalculated cost of raw materials when using the established undistorted prices.

(303) In their comments on final disclosure, one sampled exporting producer noted that a significant number of factors of production, which were considered by the Commission as negligible, was treated as consumables and therefore individual benchmarks were not established for these factors of production. Whilst the exporting producer did not contest this approach in principle, it did question its execution. First, the exporting producer argued that the producers had to report a disproportionate detailed information that was in the end not used to compute the normal value. Second, the exporting producer noted that the Commission established values for consumables by applying the proportion of these consumables in its total direct raw material costs to the undistorted values for these costs based on benchmarks. The exporting producer argued that this way the Commission effectively treated consumables as distorted even though no distortion has been established. The exporting producer further argued that Commission could not assume that the consumables were distorted by the same percentage as the direct raw materials. The exporting producer expressed similar reservation with the way the Commission treated overheads. In view of these issues, the exporting producer requested that the Commission caps the consumables and overheads at the values reported for both consumables and overheads by the exporting producer.

(304) The Commission disagreed with this claim. The Commission noted that, in order to establish and verify whether a factor of production value is negligible, a detail breakdown of product types per all factors of production is necessary. The level of information requested was therefore appropriate to establish and verify all the information, including the proportion of consumables in the direct raw material costs that was used in the construction of normal value. With regards to the argument that the consumables were not distorted and that their values should be capped at the levels reported by the exporting producer, the Commission noted that significant distortions were established in section 3.1.1 above. In that case, according to Article 2(6a) of the basic Regulation, domestic costs may be used but only to the extent that they are positively established not to be distorted, on the basis of accurate and appropriate evidence. No such evidence with regards to consumables, as well as overheads, was put forward by the exporting producers, nor found by the Commission. As to the assumption that consumables were distorted by the same percentage as the direct raw materials, the Commission first recalled that the sampled exporting producer did not contest the principle of treating minor factors of production as consumables. Whilst the Commission applied to these the average distortion factor of the other direct raw materials, the exporting producer provided no evidence that such assumption was incorrect. These claims were therefore rejected.

(305) The manufacturing overheads incurred by the cooperating exporting producers were expressed as a share of the costs of manufacturing actually incurred by the exporting producers. This percentage was applied to the undistorted costs of manufacturing.

(306) For SG&A and profit, the Commission used the financial data of the Chemical operation segment of the Turkish company Ilkalem Ticaret Ve Sanayi A.S. for 2018 as announced in the Note of 30 March 2020 and stated in recital (218).

(307) As explained in the recital (205), the Commission concluded that the financial expenses of Ilkalem Ticaret Ve Sanayi A.S in 2018 were extraordinary high and that they should be appropriately adjusted. Therefore, in the calculation of SG&A, the Commission disregarded the financial expenses of 2018 and replaced it with the average financial expenses of the company in 2017, 2016 and 2015. The adjustment resulted in a higher percentage of SG&A, but a lower percentage of profit. Thus, the effect of the extraordinary financial expenses of 2018 was merely a shift between SG&A and profit without any impact on SG&A and profit taken as whole. Therefore, in total, it had no influence on the level of SG&A and profit taken together.

(308) As further explained in recital (303) in their comments on final disclosure one sampled exporting producer argued that overheads, together with consumables, should not be treated as distorted and their values should be capped at the values reported by the exporting producer. This claim was addressed and dismissed in recital (304).

(309) In their comments on final disclosure, one sampled exporting producer argued that its indirect labour, for the purpose of normal value construction, was included in the overheads instead of being accounted for as a factor or production, especially since the Commission has identified a precise benchmark for labour. The sampled exporting producer commented that using the labour benchmark for the indirect labour would result in a more accurate undistorted cost than including it in the overheads.

(310) The Commission disagreed with this claim. The Commission noted that the exporting producer had himself included the indirect labour in the overheads in the costs of production and at the same time had provided the indirect labour as an individual factor of production. In order to avoid double counting, the Commission removed direct labour as a factor of production and kept it as part of overheads. Considering the nature of indirect labour as overhead, the significant difference in salaries and qualifications of the staff involved in the product manufacturing and in order to avoid any double counting and ensure consistency, the Commission found no reason to change the original approach of the exporting producer, and the Commission retained the indirect labour as overhead cost. This claim was therefore rejected.

(311) In their comments on final disclosure, two sampled exporting producers argued that Commission should have used SG&A and profit data from more than one producer. The exporting producers based this arguments on findings of the Appellate Body in EU – Bed Linen (DS141).

(312) The Commission disagreed with this claim. The Commission noted that Article 2(6a) of the basic Regulation does not prohibit using SG&A data from one producer. The compatibility of this provision with WTO rules was covered in recital (98). Furthermore, as explained in section 3.1.2.3, the Commission found only one company in the representative country with readily available data. This claim was therefore rejected.

(313) In their comments on final disclosure, three sampled exporting producers challenged the fact that the Commission removed certain freight expenses from the export price, whilst these expenses (together with handling expenses, etc. and finance expenses such as bank charges) were not removed from the SG&A costs of the producer in the representative country.

(314) The Commission disagreed with this claim. The Commission noted that there is nothing indicating that such expenses were included in SG&A costs reported for the producer in the representative country. Furthermore, the sampled exporting producers provided no evidence to the contrary. This claim was therefore rejected.

(315) In their comments on final disclosure, one sampled exporting producer agreed that the financial expenses of the producer in the representative country were extraordinarily high and thus SG&A for that company had to be adjusted accordingly. However, the sampled exporting producer disagreed with the adjustment of that company profit on the account of the same extraordinary expenses. The exporting producer argued that the adjustment of profits negates the one done to SG&A as the combined SG&A and profit remained the same.

(316) The Commission disagreed with this assessment, arguing that both SG&A and profit were affected by the extraordinary financial expenses. It would make no sense correcting one but not correcting the other. In the Commission’s view, the adjustment made to profit does not negate but complement the adjustment made to SG&A costs. This claim was therefore rejected.

(317) When examining the replies to the Anti-dumping questionnaires of Wan Wei, Mengwei and Shuangxin, the Commission noted that in the parts of the replies related to the cost of production and thus the calculation of normal value, the factors of production for the internally produced inputs (self-produced steam, electricity and similar) were not appropriately allocated to the product under investigation. This went against the instructions given by the Commission in the Anti-dumping questionnaire. In the following correspondence, including deficiency letters and pre-verification letters, the Commission reiterated its request for Wan Wei, Mengwei and Shuangxin to complete their replies following the instructions given in the Anti-dumping questionnaire.

(318) In their subsequent replies, the abovementioned three companies argued that, in their views, it was not possible to complete the questionnaire as requested by the Commission. Notably, these companies argued that there was no objective or accurate basis to separate consumption of each and every self-produced materials/energy and that it was not feasible to report of consumption and materials purchases for each self-produced material/energy separately. The subsequent revised versions of the replies remained deficient in this respect.

(319) The Commission disagreed with this view. It explained that since these companies had already reported the inputs for producing the self-produced factors of production, these inputs could equally be allocated to the product under investigation.

(320) The Commission informed Wan Wei (86), Mengwei (87) and Shuangxin (88) that due to these shortcomings of the information provided by these exporting producers as described, the Commission decided to base its findings on facts available in accordance with Article 18(1) of the basic Regulation as far as the internally produced inputs used in the production of the product under investigation are concerned.

(321) In their replies to these Article 18 letters, the exporting producers reiterated their explanations why they considered they were unable to provide the requested data.

(322) The Commission established the undistorted prices for the internally produced inputs and applied these prices in the calculation of the normal value as explained in the recitals (274) and (275).

(323) During the verification visit carried out at the premises of Mengwei in November 2019, the company made several revisions to its reply to the questionnaire, including the part related to the cost of production.

(324) At the very end of the last day of verification visit, the company submitted yet another version of the reply, thus nullifying part of the work made earlier during the verification and the related preparatory work. The affected part related to the cost of production with repercussions to the calculation of normal value. In this new version, inter alia, the number of labour hours was reduced considerably from the earlier versions. The Commission therefore informed the company that it was impossible to verify this modified information submitted at the last moment of the verification visit.

(325) After the verification visits the Commission informed Mengwei (89) that the last submission of data, which was received at the very end of the verification visit, could not be verified and that the Commission will base its findings on facts available in accordance with Article 18(1) of the basic Regulation as far as this last submission is concerned. Mengwei did not come forward with any comments following this Article 18 letter.

(326) The Commission decided to disregard a part of the information submitted at the last moment of the verification visit which could not be verified, and in this situation it resorted to and based its findings on the information submitted prior to this last version, which the Commission could verify.

(327) During the verification visit at the premises of Sinopec Ningxia, which took place from 9 to 12 December 2019 in Yinchuan (Ningxia), the Commission identified some substantial and serious deficiencies in the reporting of the cost of production. These deficiencies significantly impeded the normal process of the investigation for that section of the questionnaire reply. In particular, Sinopec Ningxia made a wrong allocation of the value and consumption of the factors of production for the upstream phases of the PVA production (i.e. VAM, acetylene, steam, etc.), thus resulting in significant over/underestimation of the majority of factors of production used indirectly to produce PVA. As a result, the cost of production per PCN was not reliable.

(328) The Commission considered that these substantial and serious deficiencies in the cost of production per product type in the questionnaire significantly impeded the normal process of the investigation, for this section of the questionnaire. Therefore, the Commission informed Sinopec Ningxia about its intention to apply facts available in accordance with Article 18(1) of the basic Regulation as far as the calculation of the normal value was concerned under Article 2(6a) of the basic Regulation.

(329) In this regard, the normal value for Sinopec Ningxia was constructed using the information provided by the other cooperating exporting producers (namely the cost of production and consumption of factors of production, per product type). In particular, for each PCN reported by Sinopec Ningxia, the Commission used the highest constructed normal value of the other cooperating exporting producers.

(330) In their comments on final disclosure, one sampled exporting producer and one union producer / user argued that by using the highest constructed normal value of the other cooperating exporting producers as the normal value for Sinopec Ningxia, the Commission used Article 18 of the basic Regulation in a punitive way. Furthermore, the exporting producer argued that, by using data from other exporting producers, which were also subject to the application of Article 18 of the basic Regulation, the Commission did not use the best fact available but – in a way – applied Article 18 twice to Sinopec Ningxia. The exporting producer further argued that the Commission should have used Sinopec Chongqing’s data instead, since that company was not subject to Article 18 of the basic Regulation. According to the exporting producer, the fact that the production process of Sinopec Chongqing is different from the production process of Sinopec Ningxia does not disqualify Sinopec Chongqing’s data, as production process has no impact on prices of PVA.

(331) The Commission disagreed with these claims. The Commission first noted that, as explained in recitals (317) to (322), the application of Article 18 of the basic Regulation to the Wan Wei group and Shuangxin was limited to self-producer factors of production. As further explained in recital (274) and calculation sheets disclosed to the sampled exporting producers, in order to establish values for self-produced factors of productions that were significant in terms of costs of proportion, the Commission used the consumption rates provided by the exporting producers in question and verified by the Commission. Those rates were applied to undistorted values like for any other factor of production. As explained in recital (275), self-produced factors of production that only had a negligible weight in the total costs of production of the exporting producer, were grouped under consumables, like other insignificant factors of production. Therefore, in a very limited application of Article 18 of the basic Regulation to the Wan Wei group and Shuangxin, the Commission used exclusively verified data provided by these companies, together with the benchmarks, as for any other factor of production. The Commission therefore considered that the normal values established for the Wan Wei group and Shuangxin could be used as best facts available without penalising Sinopec Ningxia.