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

(332) With regards to suitability of Sinopec Chongqing’s data as best facts available, both the Commission and the exporting producer noted that the production process used in Sinopec Chongqing is different from the one used in Sinopec Ningxia. As far as the basic raw materials are concerned, production process in Sinopec Ningxia is closer to the one used in Wan Wei group and Shuangxin. Whilst this perhaps has no impact on prices of PVA, it has a significant impact on construction of normal value, which is based on factors of production (including raw materials), their use rate and benchmarks. Indeed, Sinopec Group itself acknowledged the impact of production process on the level of constructed normal value and consequently on dumping margins. In their submission of 16 June 2020, Sinopec argued that ‘in several US anti-dumping investigations, the fact that its production process and the specific characteristics of its products are significantly different than those of other Chinese producers has led to a zero or very low dumping margin for Sinopec Chongqing’. Since the production process of Sinopec Chongqing is also significantly different from the one used in Sinopec Ningxia, the data of the former cannot be considered as the best facts available to establish the normal value for the latter.

(333) Finally, as far as the use of the highest normal value per product type is concerned, the Commission does not consider this approach as punitive. Since the Commission was unable to verify and therefore use the data supplied by Sinopec Ningxia for the construction of its normal value, there is no evidence suggesting that Sinopec Ningxia’s normal value per product type would be below the highest normal value per product type of the other cooperating producers that use similar raw materials.

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

(335) In order to establish the constructed normal value, the Commission took the following steps.

(336) Firstly, the Commission established the undistorted costs of manufacturing of PVA. It applied the undistorted unit costs to the actual consumption of the individual factors of production of the cooperating exporting producer.

(337) Secondly, the Commission increased the undistorted costs of manufacturing by adding the manufacturing overheads determined as described in recital (305), to arrive at the undistorted costs of production.

(338) Finally, to the costs of production established as described in recital (337), the Commission applied SG&A and profit of Ilkalem Ticaret Ve Sanayi A.S explained in recitals (205) and (218).

(339) The SG&A, expressed as a percentage of the Costs of Goods Sold (‘COGS’) and applied to the undistorted costs of production, amounted to 17,6 %.

(340) The profit, expressed as a percentage of the COGS and applied to the undistorted costs of production, amounted to 4,0 %.

(341) On that basis, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

(342) Following the Note of 20 December 2019, three traders of the product under investigation claimed that the determination of normal value should take into consideration quantity rebates for factors of production, electricity, water and natural gas. These parties claimed that general indexes did not consider such rebates and that these rebates are available to purchases of large quantities. These parties requested that an adjustment should be made to the normal value on the basis of these claimed rebates on factors of production, electricity, water and natural gas. The interested parties also claimed that the vast majority of PVA producers are large companies benefiting from price reduction when acquiring raw materials and energy. The same interested parties reiterated to their claim following the Note of 30 March 2020, without submitting any further evidence to support their claim. At a later stage, the same parties also claimed that the Turkish gas and power market is not liberalised and that the prices are fixed by public authorities.

(343) It is recalled that the sources used for electricity and natural gas referred to in recital (279) contain data for industrial users. Also, it is noted that the quantity rebates claimed by the interested parties or their magnitude were merely general assertions and were not quantified, nor substantiated in any way. Finally, the information brought forward by these parties did not support their claim that the gas and power market is not liberalised and that the prices are fixed by public authorities. On the contrary, the reports submitted by these parties describe the features of the liberalised Turkish energy market and the role of the relevant regulatory bodies which is merely focused on ensuring the proper functioning of the market. Therefore, these claims are rejected as unsubstantiated.

(344) Following the Note of 20 December 2019, the same interested parties claimed that the Chinese exporters subject to this investigation did not have ‘substantial sales costs’ or financial costs for PVA products and that when calculating the normal value, the Commission should not include any sales cost nor financial costs of the exporting producers to the calculation. Similar claims regarding lower sales cost were repeated by the same parties also at a later stage.

(345) The claim made in the context of calculating the normal value was similar to the claim that the same interested parties had made in the context of choosing Ilkalem Ticaret Ve Sanayi A.S. as an appropriate company in the representative country, which was explained and addressed in recitals (216) and (217) above. The Commission also notes that the claim that the Chinese exporting producers did not incur any substantial sales cost or financial costs related to their PVA products was not substantiated in any relevant way and was not confirmed by the investigation. Therefore, this claim was rejected.

(346) Following the Note of 20 December 2019, the same three interested parties also expressed their opinion on suitable methods for accounting for the depreciation of the investment in the context of calculating the normal value. At a later stage, the same parties added to their claim also that the PVA of Chinese origin did not require any Research and Development (‘R&D’) cost.

(347) The general methodology for accounting for the manufacturing overhead costs, SG&A and profits, in which also the depreciation and R&D cost is included, was explained in the recital (305) above. Furthermore, the detailed methodology for each cooperating exporting producer has been disclosed to these companies in their respective specific disclosure documents. In accordance with the established practise, each of these exporting producers is always given the opportunity to comment on their respective calculations and methodology. Therefore, this claim made by traders of the product under investigation was considered factually incorrect and therefore rejected.

(348) In their comments on the final disclosure, the GOC argued that the Commission adopted the Turkey manufacturers’ cost data of PVB, including the prices of its imported raw materials, to construct normal value for Chinese companies, without making proper adjustment. According to the GOC, the constructed normal value seriously deviates from the actual production situation of the sampled exporting producers, rendering the price comparability requirements in the WTO rules meaningless.

(349) The Commission disagreed with this claim. The Commission noted that it did not use the Turkey manufacturers’ cost data of PVB, including the prices of its imported raw materials, to construct normal value. It did use the SG&A and profit percentage of the producer in the representative country. However the cost structure (including the usage rates of raw materials) was based on the data supplied by the exporting producers and verified by the Commission, to which undistorted benchmarks were applied. This claim was therefore rejected.

(350) The sampled exporting producers exported to the Union either directly to independent customers or through related companies acting as an importer.

(351) When the exporting producers export the product concerned directly to independent customers in the Union, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(352) When the exporting producers export the product concerned to the Union through a related company acting as an importer, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, actually incurred by related importer and profit (of 6,89 %), which were obtained from cooperating unrelated importers.

(353) One of the exporting producers sold certain quantities of PVA to unrelated domestic traders, knowing that these sales were destined for the Union market. These sales were also taken into consideration when establishing the export price.

(354) In their comments on final disclosure, one exporting producer argued that, when calculating the credit cost, the Commission should use interest rates on loans in USD rather than in RMB, as the export transactions were invoiced in USD.

(355) The Commission disagreed with this claim. The Commission noted that, whilst the export transactions were invoiced in USD, the payments were converted and deposited in RMB. Furthermore the exporting producer did not demonstrate that they have loans in USD and therefore the correct interest rate applied to credit cost is that for RMB. This claim was therefore rejected.

(356) The Commission compared the normal value and the export price of the cooperating exporting producer on an ex-works basis.

(357) Where justified by the need to ensure a fair comparison, the Commission adjusted the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments, based upon the actual figures of the cooperating company, were made for handling charges, freight, credit costs, bank charges, commissions, and indirect taxes.

(358) For two sampled groups of companies, an adjustment under Article 2(10)(i) was also made for sales through related companies. Both groups sold PVA to the Union through their related trader / trader-producer. It was found that the functions of the related trader / trader-producer were similar to those of an agent. Those related companies were looking for customers and established contact with them. Therefore, they bore the responsibility of the selling process. The adjustment consisted of the SG&A of the respective related companies and for profit (of 6,89 %), which was obtained from cooperating unrelated importers.

(359) Following the Note of 20 December 2019, three traders of the product under investigation claimed that the Commission should consider the elements laid down in the Article 2(10) of the basic Regulation when comparing between the export price and normal value, such as physical characteristics, discounts, rebates and quantities, level of trade, credit, after sale costs, commissions and ‘other factors’ (notably for the costs to certify a higher level product). Similar claims regarding credit cost and after sale technical assistance were repeated by the same parties also at a later stage.

(360) As explained in the recital (357) above, the Commission, when justified by the need to ensure a fair comparison, adjusted the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Therefore, these claims are rejected as redundant.

(361) In their comments on final disclosure, one user argued that the Commission should not compare the normal value based on GTA values and SG&A and profit of the producer in the representative countries with export price based on the raw material prices, SG&A and profit margin as incurred by the Chinese exporting producers in the PRC. According to the user, both the export price and the normal value must be based on the same raw material and SG&A costs.

(362) The Commissions disagreed with this characterisation of the dumping calculation. As explained in section 3.1.4.4 the Commission established the normal value in accordance with Article 2(6a) of the basic Regulation. As explained in section 3.2, contrary to what is claim by the user, the Commission based the export price on actual prices charged by the cooperating exporting producers, not on the costs. This claim was therefore rejected.

(363) In their comments on final disclosure, two sampled exporting producers argued that the Commission was wrong in adjusting the export price of sales via related traders under Article 2(10)(i) of the basic Regulation for commissions. They further argued that the Commission provided no evidence underlying the need for such adjustment. Both exporting producers argued that the producing and selling companies in their respective groups form a single economic entity.

(364) The Commission disagreed with these claims. For the reasons disclosed to both groups of exporting producers in the additional final disclosure document, the Commission did not consider that either group forms a single economic entity. The details of the arguments explained in those documents contain business confidential information and cannot be summarised here in detail. In its assessment, the Commission considered in particular: (i) whether there is indeed a role split between the companies in question, namely one only sells and the other one only produces; and (ii) whether the principal function of these sales companies is to sell or to facilitate the sale of the corporate product. The Commission also looked at the location of the companies and considered in detail their selling, general and administrative expenses. Based on this assessment, these claims were rejected.

(365) In their comments on the additional final disclosure, Sinopec Group disagreed with Commission’s conclusion that an adjustment under Article 2(10)(i) of the basic Regulation was warranted. The exporting produce first argued that Sinopec Chongqing’s direct sales to the USA are limited and ‘unusual’. Sinopec Group also noted that Sinopec Ningxia had no direct export sales. Sinopec Group argued that only when such direct export sales are (very) substantial that the adjustment may be warranted. Sinopec Group then argued that the fact that producing companies have significant direct domestic sales is irrelevant for the purpose of determination whether a single economic entity exists. Furthermore Sinopec Group argued that the selling expenses of Sinopec Chongqing and Sinopec Ningxia related only to domestic sales and export sale to the USA, in the case of Sinopec Chongqing, and thus were irrelevant. Sinopec Group then noted that the fact that Sinopec Central China bought PVA from unrelated producers did not mean that it cannot constitute a single economic entity with the producing companies. Furthermore, Sinopec Group considered these purchases to be very limited and argued that only when purchases from unrelated parties are substantial that the adjustment can be made. Finally, Sinopec argued that the distance between the producing companies and the trader is immaterial.

(366) The Commission disagreed with this claim. The Commission noted that, in its comments on the additional final disclosure, Sinopec Group did not contest the facts underlying the Commission’s assessment and did not offer additional facts. In relation to the fact that Sinopec Central China, Sinopec Chongqing and Sinopec Ningxia are all controlled by the Sinopec Group, the Commission recalled that the existence of common control is a necessary prerequisite for the existence of a single economic entity and triggers the analysis of whether the totality of the relevant facts pertaining to the related trader demonstrate the existence of a single economic entity. The purpose is to determine whether the functions carried out by the related trader are similar to those of an internal sales department, or not. This analysis needs to be conducted on the basis of the facts established in each case and, therefore, any comparison with other investigations where it was (or not) decided to perform an adjustment under Article 2(10)(i) of the basic Regulation is not always appropriate.

(367) Based on the uncontested facts of the case and having considered the arguments put forward by Sinopec Group in its reply to the additional final disclosure, the Commission considered that this is not the case here.

(368) First, Sinopec Chongqing had significant direct sales to third countries. Whilst their percentage in total export sales might have been below that found in some other cases, the Commission still found it considerable. The Sinopec Group claimed that Sinopec Chongqing’s export sales to third countries were ‘unusual’ as they were made to the USA to benefit from a zero duty rate under the relevant USA anti-dumping legislation. While the Commission was not in a position to verify the veracity of that allegation, it noted that it would not detract from the fact that Sinopec Chongqing is making genuine export sales to third country markets, which are recognised as such by the authorities of the importing country concerned. In addition, Sinopec itself acknowledged that these sales were responsible for part of Sinopec Chongqing’s sales expenses.

(369) The Commission disagreed that the existence of direct sales by the producer on the domestic market is irrelevant. As established by the Court (90), a single economic entity exists where a producer entrusts tasks normally falling within the responsibilities of an internal sales department to a distribution company. Domestic sales as well as export sales discussed in recital (368) are normally a responsibility of an internal sales department. Here, the Commission took note that Sinopec did not dispute sales expenses with regards to domestic (and part of export) sales and considered that ‘it is only normal that these companies incurred selling expenses’.

(370) The Commission noted that Sinopec did not contest either that Sinopec Central China, does not exclusively sell nor indeed export PVA produced by the group, but also trades PVA produced by other, unrelated, companies. The fact that it did not export this third-party PVA but sells it on the domestic market, does not negate the conclusion that in this it behaved more like a trader than an internal sales department.

(371) Finally, concerning the purchases of Sinopec Central China form unrelated PVA producers, the Commission disagreed with the argument that only when purchases from unrelated parties are substantial that an adjustment can be made. Just because this was the case in Musim Mas (91), it does not mean that the proportion of purchases found in that case is the threshold under which companies form a single economic entity and over which single economic entity cannot exist. Indeed, none of the elements discussed above is, in itself, decisive. They should be considered as a whole within each individual case’s context.

(372) To conclude, the Commission recalled that the purpose of the analysis under Article 2(10)(i) of the basic Regulation is to determine the status of the related trading company in the light of the totality of the relevant facts. It is not required that all facts are found to be present for all companies within the group to allow the conclusion that a given company within that group has to be considered as an agent acting on a commission basis. Therefore, the argument that Sinopec Central China could be considered as such an agent in relation to one company of the group, but as an internal sales department of the other company of the same group is not convincing.

(373) Indeed, when looking at the whole picture of the Sinopec group and the activities of Sinopec Central China therein, the Commission confirmed that the latter could not be considered as an internal sales department, but rather qualified as a trader within the meaning of Article 2(10)(i) of the basic Regulation.

(374) For the reasons outlined above, this claim was rejected.

(375) In their comments on additional final disclosure, Wan Wei group disagreed with the Commission’s conclusion that an adjustment under Article 2(10)(i) of the basic Regulation is warranted for sales of Mengwei via Wan Wei. Wan Wei group complained about being given only 5 days to comment on the additional final disclosure, rather than the statutory minimum of 10 days, thereby hampering its rights of defence. Wan Wei then stated that Commission allegedly noted during the verification visit that Mengwei is merely a factory or production base of Wan Wei. The exporting producer then argued that Wan Wei controls Mengwei and thereby they form a single economic entity. According to the exporting producer, the Commission implicitly acknowledged this by assigning a single dumping margin to Wan Wei Group.

(376) The exporting producer then argued that Mengwei’s export sales to third countries were not substantial when compared to all its sales. The exporting producer argued that, it is only when such direct export sales are (very) substantial, that an adjustment under Article 2(10)(i) of the basic Regulation can be made. The exporting producer further argued that Mengwei’s direct domestic sales are irrelevant when assessing whether Wan Wei acts as Mengwei’s sales department. The exporting producer argued that, in any event, the existence of direct sales by the producing company does not preclude a finding of single economic entity. The exporting producer confirmed that Wan Wei buys PVA from unrelated producers but argued that these purchases constituted a small quantity when compared with the purchases from Mengwei. The exporting producer argued that the fact that the trader also purchases products from other companies does not mean that it cannot form a single economic entity with a producing company. Finally, the exporting producer argued that the distance between Wan Wei and Mengwei is immaterial.

(377) The Commission disagreed with this claim. With regards to the procedural part of the claim, the Commission noted that Article 20(5) of the basic Regulation explicitly foresees a shorter period than 10 days for comments on additional final disclosure. Indeed, considering that the comments received concerned only one aspect of the findings in the investigation, the Commission considered that 5 days deadline is sufficient. Furthermore, if the sampled exporting producer considered this deadline to be insufficient, it could have requested an extension. Such extension was requested by another interested party and was granted by the Commission.

(378) With regards to the substantive part of the claim, the Commission noted that, in its comments on the additional final disclosure, Wan Wei did not contest the facts underlying the Commission’s assessment and did not offer additional facts. With regards to the fact that Mengwei is controlled by the Wan Wei, the Commission recalled that control of the trading company over the producer (or vice versa) is a necessary prerequisite for the existence of a single economic entity and triggers the analysis of whether the totality of the relevant facts pertaining to the related trader demonstrate the existence of a single economic entity. The purpose is to determine whether the functions carried out by the related trader are similar to those of an internal sales department, or not. This analysis needs to be conducted on the basis of the facts established in each case and, therefore, any comparison with other investigations where it was or not decided to perform an adjustment under Article 2(10)(i) of the basic Regulation is meaningless.

(379) Based on the uncontested facts of the case and having considered the arguments put forward by Wan Wei in its reply to the additional final disclosure, the Commission considered that this is not the case here.

(380) First, with regards to the claim that Wan Wei and Mengwei form a single entity since they are considered as a group, and thus receive one dumping margin, the Commission noted that this does not mean that they form a single economic entity. These are two different concepts. The Commission also noted that at no point of the investigation it agreed that Mengwei is merely a factory or production base of Wan Wei. Indeed, the intention to apply Article 2(10)(i) of the basic Regulation to sales of Mengwei through Wan Wei confirms that the Commission disagreed with this claim.

(381) Second, the Commission agreed that the proportion of direct sales to third countries in total sales (export and domestic) of Mengwei was relatively low. This is because Mengwei had significant direct sales to the domestic market. Therefore, if Mengwei’s direct export sales were compared to all its export sales (namely, without domestic sales), their proportion would be significantly higher.

(382) Third, the Commission disagreed that the existence of direct sales by the producer on the domestic market is irrelevant. As established by the Court (92), a single economic entity exists where a producer entrusts tasks normally falling within the responsibilities of an internal sales department to a distribution company. Direct domestic sales (as well as export sales discussed above) are normally a responsibility of an internal sales department. On this point the Commission also noted that Wan Wei Group did not dispute the Commission’s argument based on the sales costs of Mengwei. These costs clearly prove that Mengwei has its own sales department and is not a mere factory or production base of Wan Wei, as claimed by the exporting producer. In any event, the Commission recalled that, as explained above, Mengwei had significant direct export sales, which as such is sufficient to show that they have a genuine sales department for export sales.

(383) The Commission noted that Wan Wei Group did not contest either that Wan Wei does not exclusively sell or indeed export PVA produced by the group, but also trades PVA produced by other, unrelated, companies. This also supports that the conclusion that Wan Wei acted more like a trader then internal sales department of Mengwei.

(384) Concerning the purchases of Wan Wei form unrelated PVA producers, the Commission disagreed with the argument that only when purchases from unrelated parties are substantial that an adjustment can be made. Just because this was the case in Musim Mas (93), it does not mean that the proportion of purchases found in that case is the threshold under which companies form a single economic entity and over which single economic entity cannot exist. Indeed, none of the elements discussed above is, in itself, decisive. They should be considered as a whole within each individual case’s context.

(385) Indeed, when looking at the whole picture of the Wan Wei group and the activities of Wan Wei with regards to Mengwei’s PVA, the Commission confirmed that, the former could not be considered as an internal sales department of the latter, but rather qualified as a trader within the meaning of Article 2(10)(i) of the basic Regulation.

(386) For the reasons outlined above, this claim was rejected.

(387) In their comments on final disclosure, three sampled exporting producers and a Union producer / user claimed that no adjustment should be made for non-refundable VAT. Notably these interested parties argued that the Commission has not explained why such an adjustment is necessary, particularly in light of the fact that the normal value is constructed by (partially) using data from a third country. Also these interested parties claimed that the Commission has not explained why, without VAT adjustment, there would be a difference between the export price and the constructed normal value affecting price comparability. In their view, as the normal price is based on construction, there is no refund of input VAT and thus no adjustment should made for differences in VAT refund.

(388) The Commission disagreed with this claim. The Commission made an adjustment under Article 2(10)(b) of the basic Regulation for the difference in indirect taxes between export sales from the PRC to the Union and the normal value where indirect taxes such as VAT have been excluded. The Commission does not need to demonstrate that the constructed normal value actually incur VAT that can be fully refunded upon sales on the domestic market, as this is irrelevant. The normal value that was constructed as stated in recitals (335) to (347) and (295) did not include VAT, as the undistorted values in the representative country are used for the calculation of the normal value in the exporting country net of their VAT. The actual situation concerning the VAT treatment of the sales in the domestic market and upon export occurs entirely in the PRC. The investigation concluded that in the IP in the PRC the exporting producers incur a VAT liability of 13 % or 16 % (13 % is applicable from April to June 2019 and 16 % is applicable for July 2018 to March 2019) at exportation while 5 %, 9 % or 10 % is refunded (5 % is applicable from July to August 2018, 9 % is applicable from September to October 2018 and 10 % is applicable from November 2018 to June 2019). Therefore, in line with Article 2(10)(b) of the basic Regulation, for the difference in the indirect taxation, in this case the VAT that is partially refunded with regard to export sales, the Commission duly adjusted the normal value. This claim was therefore rejected.

(389) In their comments on final disclosure, three importers reiterated their comments that the Commission should adjust export price to account for (i) Chinese exporting producers never appoint commercial agents or intermediaries but rather negotiate directly with Union importers; (ii) exporting producers of low quality PVA did not incur in R&D costs; (iii) Chinese exporting producers never allow payment delays, thus they do not incur in financial costs; (iv) Chinese exporting producer never grant post sales technical assistance.

(390) The Commission disagreed with this claim. The Commission noted that it based the export price on prices actually paid, adjusted for all allowances legitimately claimed by the sampled exporting producers. The elements listed by the traders were not added to the constructed normal value so there was no issue of comparability. This claim was therefore rejected.

(391) For the sampled cooperating exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(393) For the cooperating exporting producers outside the sample, the Commission calculated the weighted average dumping margin, in accordance with Article 9(6) of the basic Regulation. Therefore, that margin was established on the basis of the margins of the sampled exporting producers.

(394) On this basis, the definitive dumping margin of the cooperating exporting producers outside the sample is 80,4 %.

(395) For all other exporting producers in the country concerned, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation. To this end, the Commission determined the level of cooperation of the exporting producers. The level of cooperation is the volume of exports of the cooperating exporting producers to the Union expressed as proportion of the total export volume – as reported in Eurostat import statistics – from the country concerned to the Union.

(396) The level of cooperation in this case is high, because the imports from the cooperating exporting producers constituted practically the totality of the exports to the Union during the investigation period. On this basis, the Commission decided to base the residual dumping margin at the level of the cooperating sampled company with the highest dumping margin.

(398) The like product was manufactured by four producers in the Union during the investigation period: Kuraray Europe GmbH; Sekisui Specialty Chemicals Europe S.L., Solutia Europe SPRL, Wacker Chemie AG. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(399) The total Union production during the investigation period was established at around [114 000 – 120 000] tonnes. The Commission established the figure on the basis of all the available information concerning the Union industry, such as information from the complainant and from all known producers in the Union. As indicated in recital (30), two Union producers were selected in the sample representing more than 80 % of the total Union production of the like product.

(400) To establish whether the Union industry suffered injury and to determine consumption and the various economic indicators related to the situation of the Union industry, the Commission examined whether and to what extent the subsequent use of the Union industry’s production of the like product had to be taken into account in the analysis.

(401) PVA is used as an intermediate material for the production of paper and carton board; the production of PVB resins for the production of PVB-films; as a polymerisation aids for plastics; and for the production of emulsions and adhesives. The Commission found that a substantial part of the Union producers’ production was intended for captive use. The Union industry is mostly vertically integrated and PVA is often simply transferred within the same company or groups of companies for further downstream processing.

(402) The distinction between the captive and the free market is relevant for the injury analysis because the products intended for captive use are not exposed to direct competition from imports. By contrast, the production intended for the free market is in direct competition with imports of the product concerned.

(403) The Commission obtained data for the entire PVA activity and determined whether the production was intended for captive use or for the free market in order to provide a picture of the Union industry as complete as possible.

(404) The Commission examined certain economic indicators relating to the Union industry on the basis of data for the free market. These indicators are: sales volume and sales prices on the Union market; market share; growth; export volume and prices; profitability; return on investment; and cash flow. Where possible and justified, the findings of the examination were compared with the data for the captive market in order to provide a complete picture of the situation of the Union industry.

(405) However, other economic indicators could meaningfully be examined only by referring to the whole activity, including the captive use of the Union industry. These are: production; capacity, capacity utilisation; employment and productivity. They depend on the whole activity, whether the production is captive or sold on the free market.

(406) After disclosure Cordial, Wacker and Wegochem argued that the General Disclosure Document did not include relevant information such as the production, production capacity, capacity utilization, sales volume and market share of the complainant.

(407) In response to the companies’ request, the Commission reassessed the information provided in ranges and/or indexed form for production, production capacity and employment. Since this information aggregates data of four companies, these were disclosed in actual figures to the company and made available to interested parties in the open file.

(408) Concerning the confidential data from the complainant, the Commission must reject the request of the companies. The basic Regulation requires the Commission to assess the injury to the Union industry and not to particular producers. In this case the data requested concern macro-indicators and included all known Union producers. There is no reason to single out the data of one single producer, especially when such data is confidential under Article 19 of the basic Regulation.

(409) After disclosure, Wacker and the China Chamber of Commerce of Metals, Minerals and Chemicals (CCCMC) contested the Commission’s approach to the captive and free market analysis. Wacker argued that the Commission should make a clear assessment of the macro and microeconomic indicators only for the complainant to avoid a distorted injury assessment.

(410) The Commission disagreed with Wacker’s claim. The Union industry is composed of four producers, of which two are active in the free market. Therefore, as explained above in recitals (402) to (405), while for certain economic indicators it was considered appropriate to refer only to the data for the free market other economic indicators could meaningfully be examined only by referring to the whole activity, including the captive use of the Union industry.

(411) This claim was therefore rejected.

(413) The captive consumption of own produced PVA increased by 9 % over the period considered. However the consumption on the free market, as well as the total consumption, remained relatively stable during the same period.

(414) The total consumption went from roughly [214 000 – 219 000] tonnes in 2016 to around [218 000 – 223 000] tonnes in the IP, while the consumption on the free market remained stable around [162 000 – 167 000] tonnes in the same period.

(415) The CCCMC argued that the Commission had not properly analysed the captive market and the captive consumption. More specifically, the CCCMC found that the Commission had not adequately informed parties about the part of the captive consumption and production in proportion to the total consumption and production, and how much production went to the free market. The party reiterated its claim after the second additional disclosure.

(416) The Commission disagreed with this claim and clarified that the captive market consumption disclosed to interested parties corresponded to the captive production. Total production is mentioned in Table 4. Using the captive production figures in Table 1, the evolution of the free market production can be easily calculated. The Commission thus considered that parties were informed of all necessary parameters concerning the captive and the free market. In addition, the captive use of the Union industry was analysed extensively in section 5.2.4 ‘Captive use’ and disclosed to all interested parties. However, for ease of reference, the Commission added an additional line item ‘production volume on the free market’ to the revised Table 4.

(417) The Commission established the volume of imports on the basis of the Eurostat database. The market share of the imports was established by comparing import volumes with the Union free market consumption as reported in Table 1 above.

(419) Imports from the country concerned increased by 53 % during the period considered, from around 35 000 tonnes in 2016 to almost 54 000 tonnes in the IP. The market share of the Chinese imports increased thus from 20 % – 25 % in 2016 to 30 % – 35 % in the IP, on the free market.

(420) The Commission established the trends for the prices of imports on the basis of the Eurostat data.

(422) Import prices from the country concerned remained relatively stable in the period considered, around 1,49 EUR/Kg. During the IP, on the basis of the Union average prices in Table 7, there was a price difference between the subject imports and the Union prices of [10 % – 40 %].

(424) The price comparison was made on a type-by-type basis for transactions at the same level of trade, and after deduction of deferred discounts. When necessary, the import price of the product concerned imported from the PRC was duly adjusted when compared with the comparable product type sold by the Union industry.

(425) As regards the differences in certain characteristics between the product concerned and the like product, as established above in recitals (73) to (77), the product types imported from the PRC compete with the product types produced and sold by the Union industry. However, as the ash content of the PVA produced and sold by the cooperating exporting producers was overall higher than the ash content of the PVA produced and sold by the Union industry, the Commission considered that an adjustment was warranted to ensure a fair comparison between the Chinese and EU product types on the basis of PCNs. The commission established the adjustment on the basis of the difference found for PVA imports with high and low ash content from third countries on the basis of information provided by users. The price difference was established at 10 %.

(426) On this basis, an adjustment of 10 % was added to the CIF price of the PVA with high ash content sold by the cooperating exporting producers.

(427) After disclosure Ahlstrom-Munksjö contested the 10 % adjustment because the Commission did not disclose the source of the data and therefore, interested parties did not have the possibility to assess the reliability of such data.

(428) In this regard, the Commission clarified that, as explained above in recital (425), the adjustment was calculated on the basis of the price difference for PVA imports with high and low ash content from third countries for comparable PCNs collected and verified during the investigation from users (actual transactions).

(429) Furthermore, as the methanol content and the packing have a negligible effect on the prices, as explained above in recital (81), the Commission concluded that for undercutting purposes it was appropriate to disregard these characteristics.

(430) The result of the comparison was expressed as a percentage of the Union producers’ turnover during the investigation period. It showed a weighted average undercutting margin of between 28,8 % and 36,7 % by the imports from the country concerned on the Union market.

(431) After disclosure several interested parties, namely Wacker, Ahlstrom-Munksjö, Sinopec Group, Wan Wei, Mengwei and Shuangxin contested the Commission’s calculations.

(432) Wacker and the Chinese exporting producers claimed that 18 % of the exports from the PRC were not sold by the Union industry since for this quantity no comparable PCNs were found. The parties referred to the judgement in Case T-500/17 Hubei Xinyegang v the Commission in support of their claim that the Commission’s injury analysis was only based on a limited volume of the Union industry’s sales and not the whole like product.

(433) First, the Commission noted that this judgment is under appeal before the Court of Justice and therefore cannot be taken as authoritative. Second, the basic Regulation does not require the Commission to carry out the price analysis for each product type separately. Rather, the legal requirement is a determination at the level of the like product. While PCNs are used as the starting point for such assessment, it does not mean that different PCNs are not in competition. Thus, the fact that certain PCNs of the Union industry were not compared to imports does not mean that they do not suffer price pressure from the dumped imports. Indeed, the establishment of price undercutting and underselling by first calculating margins at the level of the PCN is only an intermediary and preparatory step of that required price comparison. That step is not legally mandated, but constitutes the standard practice of the Commission. Third, in cases where sampling is applied it is not surprising that there is not a perfect matching between the imports of the sampled exporting producers and the sales of sampled Union industry. This does not necessarily mean that there are no imports of certain types, but that these types were not exported to the Union by the sampled exporting producers during the investigation period. Finally, as explained above in recitals (58) to (62), the Commission concluded that all PVA grades competed with each other, at least to a certain extent. Therefore, the 18 % of the exports of the sampled exporting producers not sold by the Union industry does not constitute a separate category of the product concerned but competes in full with the remaining grades for which a matching was found. Moreover, the PCNs not sold by the Union industry were product types suitable for application in the adhesives, polymerisation and paper sectors, and therefore equivalent and in direct competition with other product types produced and sold by the Union industry for use in the same applications, even if not used for the quantification of price undercutting.

(434) Therefore, this claim was rejected.

(435) The same parties requested additional disclosure concerning the detailed undercutting and underselling margins calculations per PCN. In particular, they requested: (i) the PCNs sold by the Union industry; (ii) the average quantities and sales prices sold per PCN; and (iii) the detailed undercutting and underselling margins per PCN. The same parties, with reference to the Jindal Court ruling (Case T-301/16, Jindal Saw Ltd and Jindal Saw Italia SpA v the Commission) claimed that the comparison between export prices and Union industry sales prices had not been made at the same level of trade since the large majority of the imports from the PRC were sold via unrelated traders and unrelated importers while the Union industry sold directly to final customers, and that the Commission should therefore perform a level of trade adjustment.

(436) In line with Article 19 of the basic Regulation, the Commission could not reveal the requested data per product type. A disclosure of such level of detail would make it possible to, either directly or with addition of market intelligence, reconstruct confidential sales or production data of individual Union producers.

(437) With regard to the claims on an adjustment for the level of trade, the Commission analysed the price on the Union market for sales made to end-users in comparison with sales to distributors and found no consistent differences in prices for the different levels of trade. Moreover, no other information on file pointed to the need of applying any level of trade adjustment. Therefore, the Commission concluded that an adjustment for the different level of trade was not warranted in the present case.

(438) Wacker also argued that the Commission assessed the price effects of the subject imports on the Union industry for the entire period considered (beyond the undercutting calculation for the investigation period), based on the average import prices without any adjustment for the customs duty, the post-importation costs and the ash content.

(439) This claim had to be dismissed. According to the usual practice of the Commission, undercutting margins were only calculated for the investigation period. The price effects of the entire period considered were however taken into account in terms of the evolution of the trend in import prices. In order to assess such a trend on a comparable basis over the years, no adjustments were needed. Moreover, even when taking into account the average post-importation costs and custom duties for the whole period considered, Chinese prices were still significantly lower than the Union industry prices, thus confirming the significant undercutting found for the investigation period.

(440) In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(441) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data provided by the complainant, cross-checked with the data provided by the other Union producers, users and importers and available official statistics (Eurostat). The macroeconomic data related to all Union producers.

(442) The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies from the sampled Union producers. As regards the second sampled Union producer, Wacker, it must be noted that the data provided did not cover the microeconomic indicators as the company produced only for its captive use and therefore had no sales of the like product on the free market. Therefore the microeconomic data related to the sampled Union producer selling of the free market only, i.e. Kuraray Europe GmbH. Both sets of data were found to be representative of the economic situation of the Union industry.

(443) The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the dumping margin.

(444) The microeconomic indicators are: average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital.

(446) During the period considered, the Union industry production volume decreased by 12 %. This decrease in production affected almost entirely the two sole Union producers that sell on the free market, as the production volume of the Union producers that produce only for captive consumption remained relatively stable.

(447) The reported capacity stayed the same over the period considered. However, capacity utilisation decreased significantly due to the significant reduction of the production scale operated by the Union producers selling on the free market, in order to reduce production costs and losses. Indeed, each of the two producers had to mothball part of their production lines in the period 2017 – 2018 due to the pressure of the dumped imports.

(448) Therefore the decrease in capacity utilisation rate must be accounted exclusively to the reduction of production operated by the two Union producers selling on the free market.

(449) After the second additional disclosure, Solutia argued that the decrease in capacity utilisation operated by the Union industry did not follow the trend of imports from the PRC, as it increased from 2017 to 2018, when imports increased, and decreased in the IP when also the imports from the PRC decreased.

(450) This argument had to be dismissed. First, from 2017 to 2018, the capacity utilisation rate of the Union industry increased by 2 percentage points while the consumption on the free market increased by 7 percentage points. Moreover, in the same period the imports from the PRC increased by 23 % in volume and gained additional 14 % of market share. Therefore, even with a growing demand the Union industry could not significantly increase its output as its prices were constantly undercut by growing dumped imports. Second, in the IP, while the Union industry decreased its capacity utilisation rate by 7 points and Union consumption on the free market decreased by 3 points, imports from the PRC remained stable (decreasing by 395 tonnes) and gained an additional 3 percentage points of market share.

(452) Despite the relatively stable consumption, the Union industry sales volume on the free market decreased by 27 % over the period considered.

(453) As a consequence, this translated in a decrease of market share of the Union industry on the free market from [35 % – 40 %] in 2016 to [25 % – 30 %] during the IP, i.e. a decrease by 27 %.

(454) The Union consumption (free market) remained stable during the period considered, while the sales volume of the Union industry on the Union free market decreased by 27 %. The Union industry thus lost market share, contrary to the market share of the imports from the country concerned which increased significantly during the same period.

(456) The level of the Union industry employment decreased over the period considered, due to the reduction in production operated by the Union producers selling on the free market. This resulted in a reduction of workforce by 12 %, without taking into consideration any indirect employment.

(457) As the production volume decreased as well, the productivity of the Union industry remained relatively stable over the period considered. This shows that the union industry was willing to adapt to the changing market conditions in order to remain competitive.

(458) All dumping margins were significantly above the de minimis level. The impact of the magnitude of the actual margins of dumping on the Union industry was substantial, given the volume and prices of imports from the country concerned.

(459) This is the second anti-dumping investigation regarding the product concerned. The previous investigation was terminated in 2008 with no imposition of measures and no data was available to assess the effects of possible past dumping.

(461) The table above shows the evolution of the unit sales price of the Union industry on the Union free market as compared to the corresponding unit cost of production. Sales prices have been on average lower than the unit cost of production since the beginning of the period considered.

(462) The unit cost of production of the Union industry increased by 24 % over the period considered. The increase in cost was driven mainly by higher costs for the principal raw material, VAM. Over the same period sales prices increased by 14 %, but this was not sufficient to offset the increase in the raw material prices due to the significant price pressure operated by the Chinese imports.

(464) During the period considered the average labour cost per employee went up by almost 9 %. This increasing trend was found in both sampled Union producers.

(466) Over the period considered the level of closing stocks decreased significantly, by 40 %. The decrease is due to a specific decision of the sampled Union producer selling on the free market. As the company faced losses on sales due to the pressure of dumped imports, it saw no economic justification for building up stocks when demand for its product had decreased.

(468) The Commission established the profitability of the sampled Union producer active in the open market by expressing the pre-tax net profit of the sales of the like product to unrelated customers on the free market in the Union as a percentage of the turnover of those sales.

(469) Profitability developed negatively over the period considered: losses were incurred during all the four years, from [– 0,5 % – 5 %] in 2016 to [– 10,0 % – 15 %] during the IP. This trend was affected mainly the price pressure exerted by the Chinese imports, which did not allow the sampled EU producer to increase prices in response to cost increases.

(470) The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow varied a lot during the period considered, mainly due to non-cash expenses such as depreciation, and deteriorated during the investigation period.

(471) The return on investments is the profit in percentage of the net book value of investments. It remained negative overall over the period considered following a decreasing trend similar to the profitability one. Over the same period, the Union industry reduced the level of its investments by 72 %. The ability of the Union industry to raise capital has been severely affected by the losses incurred over the period considered, as can be seen from the decrease in investments.

(472) All main injury indicators showed a negative trend during the period considered. The production volume of the Union industry decreased by around 12 % and its sales volume on the free market decreased by 27 %. Considering the relatively stable consumption, this translated into a decrease of market share on the free market from [35 % – 40 %] in 2016 to [25 % – 30 %] during the investigation period, i.e. a decrease by 10 percentage points.

(473) While the sales price increased by 14 % over the period considered, this was not enough to offset the increase in the unit cost of production, despite the effort of the Union industry to improve efficiency by increasing the productivity per employee. In response to the pressure of dumped imports, the Union industry decreased production volumes, which in turn increased the cost per unit. This coupled with the increase in raw material prices, which the Union industry was not able to pass on, caused the depression and suppression of Union industry prices, and hence a decrease in profitability.

(474) As a result of the above trends, the profitability of the Union industry went from [– 0,5 % – 5 %] in 2016 to [– 10,0 % – 15 %] in the IP.

(475) As regards the captive market, the Commission analysed and considered its figures when appropriate, as explained above in section 4.2.

(476) However, in this particular case the captive consumption represented around one quarter of total Union consumption and consisted, almost exclusively, of captive transfers within the same company or group of companies. Such internal transfers are not representative of actual market transactions because of the nature of intra-group transactions. Moreover, those transfers do not enter the free market because the product is fully used by the integrated producers for further processing. As a result, the captive market is not exposed to direct competition from imports from the country concerned.

(477) Therefore, the Commission concluded that the performance of the Union industry could meaningfully be examined by referring mainly to the activity in the free market, as detailed above in recitals (404) and (405).

(478) On the basis of the above, the Commission concluded that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation.

(479) After disclosure, Wacker argued that the production capacity reduction of the Union industry had to be accounted to the second Union producer selling on the free market (i.e. Sekisui). According to Wacker, the reduction was a company business decision pre-investigation period, and not caused by the imports from the PRC. Wacker argued that the company deliberately decided to retract from the Union market and therefore the negative indicators like production, sales and employment should not be used as an evidence of injury.

(480) The Commission disagreed with this interpretation. First, the evidence collected during the investigation indicates that the decrease in production and sales was caused by the price pressure of the imports from the PRC. There is no evidence that this conclusion would not be correct. Second, as explained above in recital (447), none of the two Union producers selling on the free market reduced, irreversibly, their production capacity. The producers just reduced their production output by not operating all their production lines. This reduction of the capacity utilisation took place during the period considered, and thus was taken into account as part of the assessment of the trends over the same period. Furthermore, the argument that the Union industry could not sell what it did not produce is erroneous. It is not economically viable to produce something that will not be possible to sell at a fair market price.

(481) Wacker also argued that the decreased production and sales of Sekisui benefited the complainant, which increased its sales by 6 % between 2016 and 2017. However, the Commission noted that in the same period the Union industry decreased its total sales by 5 % while the Chinese exporting producers increased their sales on the Union market by 25 % and gained 7 percentage points of market share. The argument was therefore dismissed.

(482) Furthermore, Wacker claimed that the Commission did not consider the export sales of the Union industry in its assessment as, in its opinion, the export statistics shows that PVA export sales by the Union producers represented a high portion of the EU industry’s free markets sales. The argument was repeated by CCCMC after the second additional disclosure.

(483) This argument had to be dismissed. The information collected during the investigation showed that the export sales of the sampled Union producer selling on the free market remained relatively stable over the period considered and, more importantly, that they overall represented a negligible quantity when compared to the total sales of the Union producer on the Union free market.

(484) Equally, Wacker and another party, Wegochem, claimed that the Commission did not analyse the importation and resales of the Union industry. The parties claimed that, in their opinion, the Union industry itself was responsible for a large share of the import volume from third countries.

(485) First, the Commission noted that there were several producers in third countries other than the complainant and Sekisui. Second, the investigation revealed that the complainant’s resales were limited and represented [0,5 % –2 %] of the total sales of the Union producer on the Union free market during the period considered. Furthermore, these resales decreased by 50 % over the period considered. The claim was therefore rejected.

(486) The same two parties further argued that some of the data reported in the General Disclosure document, namely the cash flow and the stock, were not consistent with the open version of the questionnaire reply of the complainant.

(487) In this respect, the Commission clarified that certain data were amended and corrected by the Commission after the verification according to its usual practice. This explains the differences pointed out by those parties.

(488) In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from the country concerned caused material injury to the Union industry. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry. The Commission ensured that any possible injury caused by factors other than the dumped imports from the country concerned was not attributed to the dumped imports. These factors are: imports from other third countries, the development of raw material costs, self-inflicted injury and the incorrect representation of data operated by one Union producer.

(489) Volume of imports from the country concerned and their market share both increased by 53 % over the period considered. This increase exceeded substantially the evolution of consumption in the free market over the same period, which decreased by [0,5 % – 2 %]. At the same time, the Union industry lost 27 % of sales volume and market share. Furthermore, the prices of imports from the country concerned, even if relatively stable over the period considered, undercut the Union industry prices by between 28,8 % and 36,7 % and by 30,0 % on average Consequently, the profitability of the Union industry was constantly declining and reached [– 10,0 % – 15 %] losses during the investigation period.

(490) The analysis of the injury indicators in recitals (398) to (478) shows that the economic situation of the Union industry worsened during the period considered and this coincided with a significant increase of dumped imports from the country concerned, which were found to undercut the Union industry prices during the investigation period and causing significant price suppression, as the Union industry was not able to increase its prices in line with the increase of cost of production.

(491) Moreover the information collected during the investigation showed that the different product type sold by the Chinese exporting producers compete in full with the product types sold by the Union industry, as explained above in section 2.3.

(492) After disclosure, Ahlstrom-Munksjö, Cordial and Wacker argued that there was no coincidence in time between the increase in imports from the PRC and the worsening situation of the Union industry. In their opinion, the fact that the complainant’s profitability decreased significantly between 2016 and 2017 while its sales volume slightly increased could not be attributed to the dumped imports. They also pointed out that in the investigation period the Union industry lost 11 % of its sales volume while the Chinese prices increased.

(493) Firstly, as explained above in recital (13), the Union industry initially tried to follow the Chinese dumped prices in order not lose market share, which explains the trends pointed out by the company in 2016 and 2017. During this period prices of the Union industry did not increase although cost of production continued to increase. Secondly, at the same time, the union industry lost 5 percentage points of sales volume while imports from the PRC increased 25 percentage points and their sales price decreased by 6 %. Furthermore, even if it is true that during the investigation period the import price from the PRC increased, they remained on average 29 % lower than the Union industry prices, while volumes remained constant. Finally, the Union industry cost of production increased by 5 points while its prices increased only by 3 percentage point. Thus, contrary to that claim, the negative trends observed for the Union industry do coincide with the increase in volumes and market share of imports from the PRC during the period considered.

(494) The argument was therefore rejected.

(495) Wacker also argued that the profitability of the complainant had a different trend than the one reported in its annual report for 2017.

(496) The annual report refers to the global activity of the complainant out of which PVA is only a part. Therefore, no conclusion can be drawn as regards a single business segment from the aggregated figures. The Commission has collected, verified and drawn its conclusions on the basis of specific data. Thus, this argument was dismissed.

(498) Imports from other third countries originated mainly from Taiwan, USA and Japan. Some of the Japanese and American exporters are related to the Union industry, while the Taiwanese exporter is related to one of the Chinese exporting producers.

(499) Contrary to arguments raised by some interested parties, and reiterated after disclosure by Wacker and Solutia, imports from other third countries, even if significant in terms of market share, decreased by 4 % over the period considered and the loss of market share of the Union industry benefitted exclusively the Chinese exporting producers. Import prices from these third countries, although being on average 11 % cheaper than the prices of the Union industry, increased by 9 % over the same period. In particular, import prices from the largest exporter other than the PRC i.e. Taiwan, increased by 9 %, import prices from USA increased by 8 % while import prices from Japan grew by 21 %.

(500) Therefore, imports from other third countries were not the source of injury described in recitals (440) to (478) above.

(501) After disclosure Wacker, the second sampled Union producer, argued that the commission did not correctly estimate the imports from Japan and Taiwan. According to the company, the Commission did not take into account the quantities imported under the inward processing regime from both countries and that, in its view, parts of the imports from Japan were in fact copolymer PVA, hence outside of the scope of the product concerned.

(502) The argument of the inward processing had to be dismissed. The inward processing regime refers to goods that are imported in order to be used in the customs territory of the Union in one or more processing operations and are not therefore released for sales on the Union free market.

(503) As regards the imports of copolymer PVA from Japan, the Commission confirmed that in fact the TARIC code 3905300010 covers exclusively imports of certain copolymer for use as protective coating of wafers during the manufacturing of semiconductors (94).

(504) After further checks, the quantities imported under the TARIC code 3905300010 into the EU were removed from the imports not only from Japan but from all sources, including the PRC. The imports volumes, consumption and market shares were revised accordingly.

(505) Wacker also argued that the Commission only focused on the average import prices from USA. In Wacker views certain imports are concentrated in a few Member States at a much lower prices than the average import prices considered by the Commission and this could therefore have had an impact of the complainant’s sales.

(506) The argument had to be rejected as Wacker claim and data do not contradict the assessment carried out by the Commission. A similar variety of price pattern could be observed for the union industry sales as well as the sales prices also reflect the product types requested by the user industry active in each Member state. Contrary to Wacker argument, the fact that the different PVA grades are largely interchangeable does not imply that all the PVA grade should have the same price. Moreover, even if true that in the investigation period the import price from USA to Belgium was 4 % cheaper than the average import price, imports to Germany in the same period were 13 % more expensive than the average price.

(507) Ahlstrom-Munksjö also argued, after disclosure, that the complainant sold from its USA plants PVA at lower prices than the grades produced in the EU.

(508) However the information provided referred to different grades of PVA, therefore no comparison is possible. Moreover, the grade imported from the USA is a copolymer, hence outside the scope of the product concerned. In addition it must be noted that from the information provided it is evident that the major price increase operated by the complainant in the EU occurred exactly in the month when it mothballed one of its production lines. Hence confirming that the company had to increase prices overall to compensate for the lost production and the increased fixed costs.

(509) Therefore, the argument was dismissed.

(510) One user argued that the increase of the principal raw material (VAM) cost caused the injury. It argued that the complainant, not being integrated upstream, has to purchase VAM on the market and is therefore less cost efficient than the Chinese exporting producers or the other Union producers that produce VAM for their own consumption.

(511) Contrary to this argument, the information collected during the investigation confirmed that the complainant purchases VAM at a cost in line with prevailing prices as observed from other sources. In this regard the increase in VAM prices also had influence on other producers worldwide as demonstrated by the price evolution of the Chinese and third country exporting producers.

(512) In addition, as explained above in recital (462), due to the significant price pressure operated by the Chinese imports, the Union industry was not able to increase its prices in line with the increase of raw materials costs. This, coupled with the significant loss in sales volume caused the depression of the Union industry prices, and hence profitability.

(513) This claim was therefore rejected.

(514) After disclosure Wacker argued that the VAM prices decreased in the first quarter of 2019, and therefore the complainant should have decreased its production cost in the investigation period accordingly. In addition CCCMC argued also that the commission failed to analyse the VAM price evolution of the four year period of the IIP.

(515) These arguments had to be rejected. Wacker argues that the VAM price decreased in the first quarter of 2019 but did not mention that the same price increased again in the second quarter by 3 % and it was 12 % higher in the fourth quarter of 2019. Therefore a quarter by quarter variation is not meaningful as companies take into account the projected price development when accounting for the cost of production (and the sales price) for the year to come. As regards CCCMC claim, the information collected during the investigation showed that the average market price of VAM in the Union increased by 20 % over the period considered.

(516) Two other users argued that the injury suffered by the Union industry was self-inflicted as one of the sampled Union producers disproportionately increased the selling, general and administrative (SG&A) expenses over the period considered.

(517) The investigation revealed that the increase of SG&A in the PVA business was mainly driven by the decrease in sales. Since the vast majority of SG&A are fixed costs, the decrease in sales, and the consequent drop in production quantity increased the share of these costs over the unit cost of production. As mentioned in recital (473), the decrease in sales was a consequence of the pressure of the dumped imports in the Union market. Therefore, the increase of SG&A was closely linked to the dumped imports and cannot be considered self-inflicted injury.

(518) After disclosure Ahlstrom-Munksjö, Wacker and Wegochem reiterated their claim that the complainant did not significantly reduced production during the period considered and therefore the fixed cost should not have increased.

(519) As explained in recital (447), both the Union producers selling on the free market had to mothball one production line during the period considered as a direct consequence of the dumped imports. Therefore, the reduced capacity utilization rate affected the fixed costs of both producers.

(520) Ahlstrom-Munksjö and Wacker also claimed that the planned six-week maintenance shutdown of the complainant’s plant contributed to inflate its cost of production. In addition Wacker argued that the complainant’s cost of production was disproportionately high.

(521) As regards the plant shutdown, the investigation revealed that it did not significantly affected the complainant cost of production as it was a routine operation planned well in advance. Moreover, the cost of production of the complainant increased by 4 percentage points in 2017 (the year of the shutdown) but increased by 15 percentage points in 2018, when dumped imports further increased reaching a market share of [30 % –35 %].

(522) As regards that the cost, because Wacker produces PVA for its captive consumption only, it has no selling and administrative expenses (and therefore lower cost overall). Moreover, the information collected during the investigation showed that the complainant cost of production was in line with the average cost of production of the PVA industry.

(523) These arguments are therefore rejected.

(524) After disclosure Wegochem argued that, in its view, the complainant’s low profitability was due to excessive depreciation costs.

(525) The Commission confirms that the depreciation costs by the complainant were verified and revised to only include the cost pertaining exclusively to the product concerned. Therefore, this claim was rejected.

(526) Another user argued, and reiterated the argument after disclosure, that the loss in market share suffered by the Union industry was due to their own business decisions, as the sharp increase of prices operated between 2017 and the IP forced certain users of the product concerned to shift to the cheaper Chinese suppliers in order to remain competitive.

(527) Even if there was a coincidence in time between the price increase and the sales decline, this is a direct consequence of the dumped imports from the country concerned. PVA has several applications and is produced in different grades. As explained above in recital (60), some of these grades have a broad range of application and, generally, a lower price, while other more specialised grades designed for applications with narrow specifications (such as pharmaceutical products or the PVB-film production) are on average more expensive.

(528) The Union industry has the ability to supply all the different segments of the downstream industry. However, the imports of PVA from China, at prices undercutting the Union prices by 29,9 % on average forced the Union industry to reduce its production level and concentrate its sales on grades with somewhat higher selling prices on average,. The investigation showed, however, that an increasing price pressure also to these grades, which has been deteriorating the situation of the Union industry even further.

(529) This argument is therefore rejected.

(530) One of the sampled unrelated importers claimed that the complainant itself was dumping on the Union market, and the injury would be therefore self-inflicted, providing evidence of a sale of PVA at a very low price to the Union market, produced by the related company of the complainant based in Singapore. The argument was repeated after disclosure.

(531) The investigation revealed that the allegedly dumped sale from Singapore was actually the sale of a batch of off-spec PVA. This particular type of PVA is usually the result of errors in the production process hence it was sold at a very low price on the market as it did not fit in the general product specifications.

(532) The argument is therefore rejected.

(533) Another user claimed that the declining sales volumes of the Union industry were not caused by the dumped PVA imports from the country concerned but it was provoked by the complainant’s refusal to supply its products to certain users and therefore the material injury was self-inflicted by these anti-competitive practices.

(534) As explained also above in section 2.2, the Union industry is capable and willing to supply all the different grades of PVA. No specific evidence of refusal to supply was provided by the user. On the contrary, as explained above in recital (13) the information collected during the investigation clearly showed that the industry was capable and willing to supply any user of the product concerned.

(535) The user reiterated the argument after disclosure but did not provide any conclusive evidence of the alleged refusal to supply as the documents provided referred only to a disagreement about prices between two parties.

(536) The argument was therefore dismissed.

(537) One user argued that the macroeconomic data provided by the Union producer that was removed from the sample could be misleading, as the decrease in sales of PVA reported could have been a deliberate business decision in order to increase the captive consumption of PVA and therefore the sales in the downstream segments.

(538) As explained in recital (441), the Commission evaluated the microeconomic and macroeconomic indicators on the basis of data contained in the verified questionnaire replies and in the complaint, cross-checked with the data provided by the Union producers, users and importers and available official statistics (Eurostat).

(539) Given the high level of cooperation, the Commission was able to obtain a thorough picture of the PVA captive and free markets, together with a very detailed picture of the different downstream segments and their consumption of PVA.

(540) In any event, as regards the decrease in sales of PVA of the above mentioned Union producer, the information collected during the investigation showed a parallel decrease in the production of PVA of the same magnitude, over the period considered. Therefore the Commission found that the decrease in sales was not caused by any increase of captive consumption.

(541) This argument is therefore rejected.

(542) Two users argued that the complainant’s decision to concentrate on captive consumption for PVB-film production was the cause of the injury suffered by the Union industry.

(543) However, the investigation revealed that the captive consumption of the complainant increased during the period considered at a significantly smaller pace than the decrease in sales quantity. Moreover, the complainant’s captive consumption of PVA has remained stable over the last two years and therefore would not explain the deteriorating situation in recent years and in particular during the investigation period. At the same time, the industry has still at least 30 000 tonnes of spare production capacity that cannot be absorbed by the PVB-film production lines.

(544) The claim is therefore rejected.

(545) Ahlstrom-Munksjö, Solutia, Wacker and Wegochem repeated after disclosure that the complainant’s captive consumption increased significantly over the period considered (i.e. by 25 %). Therefore, the Commission statement that its captive consumption increased during the period considered at a significantly smaller pace than the decrease in sales quantity was wrong.

(546) The Commission confirms its statement was correct and clarifies that, even if in percentage terms the captive consumption of the complainant increased during the period considered, the sales decrease in absolute quantities exceeded significantly the increase of tonnes of PVA used for the captive consumption by the complainant.

(547) The argument was therefore dismissed.

(548) There was a clear coincidence in time between the substantial increase of imports from the country concerned and the deterioration of the situation of the Union industry.

(549) The Commission has also investigated other factors of injury and has not found any other factor which contributed to the material injury suffered by the Union industry.

(550) On the basis of the above, the Commission concluded that the material injury to the Union industry was caused by the dumped imports from the country concerned and that no other factors, considered individually or collectively, contributed to the material injury suffered by the Union industry.

(551) In accordance with Article 21 of the basic Regulation, the Commission examined whether it could clearly conclude that it was not in the Union interest to adopt measures in this case, despite the determination of injurious dumping. The determination of the Union interest was based on an appreciation of all the various interests involved, including those of the Union industry, importers and users.

(552) The investigation has shown that the Union industry is suffering material injury because of the effects of dumped imports from the country concerned that undercut Union industry’s prices causing significant loss of market share and leading to losses during the period considered, as elaborated in recitals (440) to (550) above.

(553) The Union industry will benefit from measures, which would likely prevent a further surge of imports from the PRC at very low prices. Without measures, Chinese producers will continue to dump PVA on the Union market preventing the Union industry from selling PVA at an adequate profit and thus causing further material injury to the Union industry.

(554) Six unrelated importers were willing to cooperate. Three were sampled and provided questionnaire replies. All the three importers opposed the imposition of measures, claiming it will be detrimental to their business and against the interest of users of PVA in the Union.

(555) For the sampled unrelated importers, the weight represented by the product concerned compared to the total turnover of these importers varies, ranging from 10 % to 40 %. The jobs allocated to the product concerned were estimated at around 20 employees.

(556) All the three importers were profitable and the profit margin appeared to be adequate to absorb at least part of the duties. Furthermore, the Commission noted that imports from other third countries still hold the largest market share in the Union. Therefore, the imposition of measures would not have a considerable negative price effect on importers, but some of them would need to switch sources, which would entail additional costs for these importers.

(557) One importer claimed that the imposition of measures would harm the importers as the final Union users will cease to purchase PVA originating in the PRC and will start sourcing alternative non-PVA based products, or blends of PVA and other products produced outside the Union.

(558) In this regard, first of all, it must be noted that the impact of PVA on the users costs varies from segment to segment, as explained below in section 6.3.

(559) Moreover the investigation revealed that the possibility of replacing PVA with alternative products, even if possible in theory, would be very complicated and the increase of PVA cost would not likely be the decisive factor. Some of the alternative products are already significantly more expensive than PVA and not environmentally friendly, as they are not biodegradable like PVA.

(560) As far as the blends of products are concerned, the investigation revealed that transport costs play a more important role than the raw material costs. These blends are usually made of PVA and other additives dissolved in water. The water percentage (and weight) makes therefore the transport more expensive. The sourcing of these PVA-based blends from producers located outside the Union is therefore not likely to increase significantly because of anti-dumping duties on the product concerned.

(561) Therefore this claim was rejected.

(562) Two importers claimed that the Union production of PVA was insufficient to meet the demand and therefore the EU market for PVA was highly import reliant, as demonstrated also by the tariff-free quota for imports of PVA of 15 000 tonnes/year established as of 2014 by the Council of the European Union (95).

(563) In this respect, the biggest suppliers of the EU market were still PVA producers located in third countries (namely Taiwan, USA and Japan), which already accounted for [37 % – 42 %] of the Union consumption on the free market. Moreover, the investigation has shown that several users sourced PVA from different suppliers located in the PRC, from the Union industry and from producers located in third countries at the same time. Finally it must be noted that the Union industry has still about 30 000 tonnes of spare capacity that can supply the Union market.

(564) Hence, since the PVA demand is strong, the imposition of measures would not contribute to the risk of a shortage of supply, given the level of the proposed duties and the alternative sources available. This claim was therefore rejected.

(565) One importer claimed that the imposition of measures would harm the small and medium-sized enterprises (SME) in the Union, especially in the context of the actual COVID-19 crisis. It argued that the anti-dumping duties on PVA originating in the country concerned would create additional disruption in a sector already severely affected by the above-mentioned crisis.

(566) In this respect, the Commission noted that the impact of the proposed anti-dumping measures on the users’ costs varied from segment to segment, and had been thoroughly assessed as explained below in section 6.3.

(567) Furthermore, given the high level of cooperation, the Commission was able to obtain a thorough picture of the PVA captive and free markets, together with a very detailed picture of the different downstream segments.

(568) Finally, the Commission analysed the economic situation of both the Union industry and users also in light of the importance of the supply stability as, without the Union industry, the Union would lose about [50 % – 60 %] of its supply capacity (96) of a critical material, such as PVA.

(569) The claim was therefore rejected.

(570) As explained above in recital (55), PVA is used as an additive, precursor or agent by mainly four Union user industries in: (i) production of PVB resins for the production of PVB-films; (ii) the production of polymerisation application and emulsions; (iii) production of paper and carton board; and (iv) production of adhesives.

(571) PVB producers were the biggest users of PVA, accounting for around 40 % of the PVA consumption in the Union. Polymerisation accounted for around 20 % while paper chemicals and adhesive production accounted, respectively, for 16 % and 14 % of the total consumption of PVA.

(572) Upon initiation, 49 known users in the Union were contacted and invited to cooperate. One PVB producer: Solutia; three paper and carton board producers: Ahlstrom-Munksjö, Papierfabrik August Koehler and Paul & Co; three producers in the polymerisation and emulsions segment: Wacker, FAR Polymers and Celanese; and one adhesive producer: Cordial, came forward. All of them opposed potential measures on the imports of PVA originating in the country concerned, except for Celanese, who took a neutral stance.

(573) As regards the main application of PVA, (PVB film), it has to be noted that the complainant itself is in direct competition with the users of the product concerned in the PVB sector, as part of its PVA production is used captively for the production of PVB film.

(574) PVB resin is produced by acetalisation of PVA (reaction of PVA with Butyraldehyde) and it is then mixed with plasticizer and extruded to produce PVB film. PVA represents up to 27 % of the cost of manufacturing of PVB. PVB film is mainly used as a layer between two glass sheets in the automotive sector (windshields) or in the building sector (security glass).

(575) Solutia was the biggest PVB-film producer in the Union. Together with the complainant and the other Union producer selling on the free market, they represented almost the totality of PVB-film production in the Union. The user also produced PVA for its own internal consumption. The company accounted for almost 1/5 of the total Union consumption of PVA (captive and free market).

(576) The user claimed that anti-dumping measures on PVA would have widespread negative consequences in the PVB-film sector. Since the complainant was, at the same time, an important PVB-film producer as well as a PVA producer and supplier, any anti-dumping measure would affect not only the cost of production of the downstream product, but would also affect competition with PVB producers such as the user. This claim was repeated after disclosure by Solutia and Wegochem. Moreover, the user claimed that the new plant for production of water-soluble PVB film that the complainant is planning to open in Poland will increase even further the complainant’s captive consumption of PVA and will sharpen the lack of Union capacity in terms of PVA supply. These arguments were reiterated by Solutia after the second additional disclosure.

(577) Firstly, whilst the majority of Union producers of PVA and PVB-film were vertically integrated, it must be noted that each of them decided to concentrate its production capacity on the upstream or downstream segment for its own business strategy. In this respect, the user itself was a PVA producer and a PVB-film producer exactly like the other two Union producers. Moreover the production of water-soluble films is mainly based on PVA copolymers, which are outside the scope of the product concerned and are sourced from production plants in third countries, and cannot therefore affect the complainant’s supply capacity of standard (homopolymer) PVA.

(578) Secondly, the investigation has shown that the user had a multi-sourcing strategy producing PVA for its own consumption and extensively using alternative sources of supply of PVA from the Union industry, the exporting producers in the PRC and the producers in third countries. Moreover, as explained recital (563), the Union industry has still 30 000 tonnes of spare capacity to supply the Union market and the level of anti-dumping duties will not prevent Solutia to continue sourcing PVA from the PRC, as explained in recital (588).

(579) Finally, the investigation revealed that the impact of the proposed anti-dumping duties on the user’s cost of production and profitability, given the share of imports from the country concerned in its total PVA consumption and the share of PVA in its cost of production, would be limited even with the measures in force.

(580) As regards the alleged risk of anti-competitive behaviour by the Union industry the Commission notes that no evidences were provided supporting this statement and moreover the union industry has constantly supplied large quantities of PVA to the PVB industry. In addition the investigation revealed also that the PVB industry source PVA via supply contracts that shield it from price fluctuation and supply shortage. Finally, it must be noted that the trade defence instruments allows the Commission to review the proposed measures in the interest of the users in case of conclusive evidence of anti-competitive practices.

(581) Given the above, these claims were rejected.

(582) Solutia also requested an exemption from the proposed anti-dumping duties under the end-use regime for the production of PVB film. The company claimed that the proposed measures would have a very heavy financial impact for the profitability of PVB film production, that few suppliers could meet the specifications and that the product is not interchangeable.

(583) The Commission assessed the company’s request on the basis of all the information collected during the investigation and the comments received after disclosure.

(584) Contrary to the argument of Solutia, the investigation established, as explained above, that the impact of the proposed anti-dumping duties on the user’s cost of production and profitability would be limited.

(585) Moreover, Solutia had a multi-sourcing strategy, producing PVA for its own consumption, as well as extensively using multiple sources of supply of PVA from the Union industry, the exporting producers in the PRC and the producers in third countries. Even if it is true that the qualification of a new PVA source is a difficult and lengthy process, there are three other producers worldwide capable of supplying ‘Low-Ash NMWD PVA’. Moreover, the Commission notes that the level of the anti-dumping duties would not prevent any supplier from the PRC to continue to export PVA at a fair price. Finally, PVB film is the main downstream application for PVA, and Solutia is one of the market leaders in this segment. As a result, granting such an exemption under end use control would risk to seriously undermine the effect of the measures. The request was therefore rejected.

(586) After the second additional disclosure, Solutia claimed that the Commission did not explain the data and the reasoning used to qualify the impact on its profitability as ‘negligible’. Moreover the company argued that it needed to have access to all PVA suppliers at reasonable prices to maintain security of supplies and a reasonable profitability and therefore, the Commission failed to justify how the level of the anti-dumping duties would not prevent Solutia’s supplier from the PRC to continue to export.

(587) The Commission clarified that the impact on the profitability of Solutia was calculated as follows: first, the Commission established the share of the cost of PVA sourced from the PRC in the total cost of production of the company, as verified on spot. The Commission then increased the company’s PVA cost by the proposed duty, applied on the quantity of PVA it sourced from the PRC. The Commission found that the impact of the duties on Solutia were indeed meaningful in absolute figures, but limited when put in proportion to the total cost structure of the company. Furthermore, the Commission did not take into account certain assumptions made by the company concerning the future evolution of PVA prices as the facts suggested that these assumptions were not appropriate and Solutia provided no underlying evidence to the contrary. For confidentiality reasons, further details and the figures used in the Commission’s calculation were provided in a separate document to the company only.

(588) Therefore, in the Commission’s view, given the limited impact on Solutia’s profitability, the anti-dumping duties would not prevent the company to continue sourcing PVA from the PRC, hence the company will maintain access to all its PVA suppliers. In addition, contrary to the claims of the company that the measures would affect also their competitive position vis-à-vis other PVB producers, the limited impact on Solutia’s cost structure and profitability also indicates that there would be a limited impact on their competitiveness.

(589) The argument was therefore rejected.

(590) Solutia also claimed that the fact that PVB film is the main downstream application for PVA, and Solutia is one of the market leaders in this segment are mere assumptions not supported by facts.

(591) Contrary to this argument, the information collected during the investigation showed that PVB film production accounts for at least [30 % – 40 %] of the total PVA consumption in the Union and therefore it is, by far, the largest within the different downstream applications of PVA. Moreover, the Commission noted that, based on the data provided by the company itself in its questionnaire reply, out of four PVB film producers active in the Union market, Solutia had a significant market share and therefore it can be reasonably considered as one of the market leaders.