Commission Implementing Regulation (EU) 2021/582 of 9 April 2021 imposing a provisional anti-dumping duty on imports of aluminium flat-rolled products originating in the People’s Republic of China

COMMISSION IMPLEMENTING REGULATION (EU) 2021/582 of 9 April 2021 imposing a provisional anti-dumping duty on imports of aluminium flat-rolled products originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 7(4) thereof,

After consulting the Member States,

Whereas:

(1) On 14 August 2020, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of aluminium flat-rolled products (‘AFRPs’ or ‘product concerned’) originating in the People’s Republic of China (‘the PRC’ or the ‘country concerned’) on the basis of Article 5 the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (2) (‘the Notice of Initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 30 June 2020 by European Aluminium (‘the complainant’) on behalf of producers of aluminium flat-rolled products. The complainant represents more than 25 % of the total Union production of aluminium flat-rolled products. Furthermore, as specified in the note on standing, the complaint was supported by producers accounting for over 80 % of the total non-captive Union production in the investigation period. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(4) Consequently, the Commission did not make imports of the product concerned subject to registration under Article 14(5a) of the basic Regulation, as the condition of Article 10(4)(d) of the basic Regulation, that is a further substantial rise in imports, was not met.

(5) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, it specifically informed the complainants, known Union producers, the known exporting producers and the authorities in the PRC, known importers and users as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(6) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(7) Several parties requested a hearing with the Commission services. Parties who so requested were granted an opportunity to be heard.

(8) One user, Company A, requested anonymity in order to prevent possible retaliatory actions by some of the complainants, which were also its suppliers.

(9) European Aluminium commented that Company A had no standing in this proceeding as, according to European Aluminium, it had not made itself known or provided that there was an objective link between its activities and the like product as defined in Section 2.2 below. It also claimed that the confidentiality of Company A’s identity was not justified by the risk of retaliatory measures from within the EU on the grounds that Company A was located in the EU where European fundamental values apply and that European producers of the like product would not engage in such practice.

(10) The information on file (3) and the confidential information shared by Company A with the Commission, demonstrated that Company A registered as an interested party in due time and demonstrated an objective link between its activities and the product under investigation. As far as the grounds of the anonymity request are concerned, the Commission considered the company provided sufficient justification for its request. In particular, Company A provided duly documented information regarding fears of commercial retaliation due to the nature of its activities and its business relations with other parties active on the market in question. Consequently, the Commission granted anonymity to the company in question for the purposes of this investigation.

(11) Company A and Shanghai Huafon Aluminium Corporation (‘Huafon’), complained about the lack of reasoning pertaining to the exclusion of the products referred to in recital (57) and in the definition of the product under investigation of the Notice of Initiation.

(12) The basic Regulation provides that the complaint should include a complete description of the allegedly dumped product. It does not foresee any requirement for the complainant to provide reasoning with regard to the products that it does not wish to cover in its complaint. On this ground, this claim was rejected.

(13) Company A also claimed that, since the complaint was lodged by producers representing only 80 % of the Union production, it could be assumed that producers accounting for 20 % of the Union production did not suffer any material injury.

(14) The level of support for the initiation of an investigation is not indicative of the injury suffered by the Union industry. The legal requirements related to the initiation of an investigation are set out in Article 5 of the basic Regulation. The complaint contained sufficient evidence justifying the initiation of an investigation pursuant to Article 5(2). Furthermore, as recalled by Company A, the complaint was lodged and supported by Union producers accounting for 80 % of total non-captive Union production, which clearly represents a major proportion of the Union industry as required under Article 5(4). On these grounds, the Commission rejected the claim.

(15) The same user argued that certain indicators of the injury described in the complaint were based on products excluded from the scope of the investigation. However, as this claim was not sufficiently specific and in any case not supported by evidence, it was rejected.

(16) A user, Valeo Systèmes Thermiques SAS (‘Valeo’), claimed that the complainant had proceeded to a segmented injury analysis and that this analysis did not show injury for aluminium flat-rolled products destined for automotive heat exchangers (‘HEX AFRPs’) in view of the de minimis undercutting and underselling margins reported in the complaint. Valeo also referred to the financial statements of the main producer of this product category and indicated that it reported a good financial performance in 2019 and the first half of 2020 and did not list PRC imports as a risk.

(17) The Commission noted that the complaint did not contain a full injury analysis per segment but rather undercutting and underselling calculations for three representative product types, including automotive HEX AFRPs. As far as this product type is concerned, it did not contain all specific injury indicators. Rather, the complaint contained one set of all indicators relating to the like product as a whole but not an injury analysis per segment.

(18) As far as the main producer of automotive HEX AFRPs is concerned, the Commission observed that its product range is not limited exclusively to automotive HEX AFRPs but also includes Heating Ventilation Air Conditioning and Refrigeration (‘HVACR’) products. Moreover, the financial statements of that producer do not relate exclusively to its sales in the Union but rather to its activities worldwide, which explains why it does not single out the PRC as a risk. Consequently, these claims were rejected.

(19) Valeo and Company A asserted that the complaint did not provide evidence that the Union industry suffered material injury on the grounds that several indicators such as export sales, investments, capacity, stock, price and employment showed a positive trend.

(20) The Commission recalled that Article 5(2)(d) of the basic Regulation requires an examination, among others, of the relevant injury factors at initiation stage. Article 5 of the basic Regulation does not specifically require that all injury factors listed in Article 3(5) thereof show deterioration in order for material injury to be established. Indeed, the wording of Article 5(2) of the basic Regulation states that the complaint shall contain information on changes in the volume of the allegedly dumped imports, the effect of those imports on prices of the like product on the Union market and the consequent impact of the imports on the Union industry, as demonstrated by relevant (but not necessarily all) factors and indices having a bearing on the state of the Union industry, such as those listed in Articles 3(3) and 3(5) of the basic Regulation. In fact, the specific injury analysis of the complaint has shown that there is sufficient evidence pointing to a significant penetration of the EU market by Chinese imports made at prices which substantially undercut and undersell the Union industry’s own prices. The complaint contained evidence that this had a materially injurious impact upon the state of the Union industry over the period 2016 to the 2019, for example on the market share and profitability. Consequently, these claims were rejected.

(21) Another interested party, Nilo Asia PTE Ltd/Lodec Metall-Handel Niederlassung Bremen der O. Wilms GMBH (‘Nilo’), argued that the CN codes used for the undercutting and underselling calculations did not allow for the identification of the plates and common sheets and could lead to inaccuracies. It also contested the calculation method for the underselling calculation.

(22) As far as the method for underselling calculations is concerned, the Commission considered that the complainant had used objective data and methodology to establish the export price on an EU-landed basis. Moreover, the CN codes, as verified by the Commission, were correct at that stage of the proceeding. The Union target price was based on the complainant’s cost of production plus a target profit of 6 % in accordance with Article 7 of the basic Regulation. Consequently, the Commission determined that the complainant correctly established underselling and the claim was rejected.

(23) Nilo and an exporting producer Xiamen Xiashun Aluminium Foil Co., Ltd. (‘Xiamen Xiashun’) claimed that total EU consumption had been overestimated by the complainant. They referred to the European Aluminium Report 2019 (4) which referred to a consumption of 5,447 million tonnes.

(24) The Commission observed that the scope of this investigation is different from the report referred to. Indeed, as stated in the Notice of Initiation, several products were excluded from the product scope. Also, this report refers not only to the EU but also includes other countries members of EFTA such as Norway, Switzerland and Turkey. Because of these differences, this claim was rejected.

(25) An exporting producer, Xiamen Xiashun, contested the complainant’s statement that import prices from the PRC are consistently lower than the import price from other countries on the grounds that an analysis based on all covered CN codes was not accurate enough. It provided an analysis for CN code 7607 11 90 showing that Turkish prices were the lowest and accordingly that the injury suffered by the Union industry was due to imports from countries other than the PRC.

(26) The Commission pointed out that such an analysis is limited to one CN code and does not disqualify the complainant’s statement. As far as the overall analysis of imports during the period considered is concerned, reference is made to recitals (51) to (59). On this basis, this claim was rejected.

(27) Xiamen Xiashun also claimed that the complaint did not contain positive evidence on the existence of material injury by imports originating in the PRC and referred to flaws in the allegations on macro and micro indicators. This party contested the reliability and accuracy of the indicators in the complaint by referring to multiple isolated elements concerning different Union producers that allegedly affected the indicators. However, it did not demonstrate how these examples could question the Commission’s overall assessment that the complaint contained sufficient evidence justifying the initiation of this proceeding.

(28) Several interested parties claimed that automotive HEX AFRPs and foil stock needed to be excluded from the scope of the investigation or at least required a separate segment-specific analysis.

(29) At initiation stage, there was no indication that such segments needed to be analysed separately. In the course of the investigation, the Commission collected comments from interested parties about the product concerned, exclusion requests and the need for analysis by segments. Exclusion requests are analysed in recitals (61) to (105) while the supposed need for analysis by segments is examined in recitals (38) to (45).

(30) One importer, Nilo, questioned the methodology and CN codes used by the complainant in the dumping calculations relating to plates and common sheets and considered that this constituted a major flaw in the complaint.

(31) The Commission considered that the complainant had used objective data and methodology to establish the export price. Moreover, the CN codes, as verified by the Commission, were correct at that stage of the proceeding. Furthermore, as far as the dumping calculation was concerned, considering the level of the normal value established in the complaint for plates and common aluminium sheets, the conclusion with regard to the finding of dumping would have been identical, namely the resulting dumping margin would largely exceed de minimis threshold. Consequently, the claim was rejected.

(32) One of the sampled exporting producers, Xiamen Xiashun, submitted that the complaint contained insufficient evidence on dumping. According to the company, the aluminium ingot price was inflated and so was the normal value. It considered in particular that the 2019 average price of aluminium ingot used for the dumping calculations was USD 1 792 and not EUR 2 300 to EUR 2 700 per tonne, as indicated in the complaint. The company also considered that the consumption of 1-2 of aluminium ingots needed to produce 1 tonne of common aluminium sheet mentioned in the complaint was too high. Xiamen Xiashun further argued that the freight costs for common sheet of EUR 107,77 per tonne used in the dumping calculation in the complaint was too high, compared to its own transport costs for the same product (5).

(33) The Commission rejected these claims. The aluminium ingot price used by the complainant for the calculations was 1 797 EUR per tonne, and not EUR 2 300 to EUR 2 700 per tonne as argued by Xiamen Xiashun (6). Moreover, the Commission considered that both the consumption of aluminium ingots to produce 1 tonne of common sheet and the freight costs used by the complainant were supported by sufficient evidence. Even if it recalculated the normal value using the freight costs proposed by Xiamen Xiashun, the resulting dumping margin largely exceeded de minimis threshold. On this basis, the Commission considered that the complaint contained sufficient evidence on dumping to initiate the proceedings.

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

(35) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. It selected the sample based on the volume of production and sales of the like product in the Union during the investigation period. The sample consisted of three Union producers. The sampled Union producers accounted for 35 % of the estimated total production and 35 % of the estimated total Union sales volume of the like product. The Commission invited interested parties to comment on the provisional sample. European Aluminium provided comments on behalf of two of its members selected to be in the sample. One provisionally sampled company requested that only one of its mills be included in the sample because this mill makes exactly the typical products imported from the PRC. It also claimed that the inclusion of only one mill would make the sample more representative. The Commission observed that the sampled companies consist of individual legal entities and that no distinction can be made on the basis of the internal organisation within the legal entity if all sub-entities belong to the same legal entity. Therefore, this request was rejected.

(36) Another sampled company claimed that the inclusion in the sample of only one legal entity within its group would render verification difficult since the IT and accounting system are maintained on a group basis. The Commission decided to limit itself to the legal entity in question in view of the limited time available. However, considering the sales channels of the products manufactured by this legal entity and the fact that the related companies may be involved in the sales flow, other entities within the group also had to fill in the relevant parts of the questionnaire.

(37) In light of the above, the sample was considered to be representative of the Union industry.

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

(39) Four unrelated importers provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three on the basis of the largest volume of imports. In accordance with Article 17(2) of the basic Regulation, all known importers concerned were consulted on the selection of the sample. No comments were made.

(40) In order to decide whether sampling was necessary and, if so, to select a sample, the Commission asked all known exporting producers in the PRC to provide information specified in the Notice of Initiation. In addition, the Commission asked the Mission of People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(41) Twenty-four exporting producers in the country concerned provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three companies/groups of companies on the basis of the largest representative volume of exports to the Union that could reasonably be investigated within the time available. These companies/groups of companies represented 18,9 % of the estimated total exports. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned and the authorities of the country concerned, were given the opportunity to comment on the selection of the sample.

(42) By letter of 27 August 2020, the company Yantai Jintai International Trade Co., Ltd (part of ‘Nanshan Group’), submitted its comments and requested to be part of the sample. By email of 2 September 2020, one of the selected companies, the company Tianjin Zhongwang Aluminium Co., informed the Commission that it stopped cooperation. On this basis, the Commission decided to replace the company Tianjin Zhongwang Aluminium Co. by the Nanshan Group. The modified sample also accounts for 18,9 % of the estimated total export volume to the Union from the People’s Republic of China in the investigation period. No comments on the modified sample were received.

(43) Seventeen exporting producers in China, which requested individual examination under Article 17(3) of the basic Regulation, were invited in the Notice of Initiation to submit a questionnaire response. However, no exporting producer submitted a completed questionnaire within the stipulated deadline. Therefore, no individual examination was granted.

(44) The Commission sent a questionnaire concerning the existence of significant distortions in China within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the People’s Republic of China (‘GOC’). It also sent to the GOC a questionnaire concerning raw material distortions within the meaning of Article 7(2a) and 7(2b) of the basic Regulation.

(45) The Commission also sent questionnaires to the sampled Union producers, sampled importers, users and sampled exporting producers. The same questionnaires had also been made available online (7) on the day of initiation.

(46) The Commission received questionnaire replies from the three sampled Union producers, the Union producers’ association, the three sampled unrelated importers, five users, and three companies/groups of exporting producers.

(47) One additional user provided an incomplete questionnaire reply that did not include a meaningful non-confidential version either. Despite several requests and reminders, this user did not provide the requested information. Its questionnaire reply was therefore not taken into account in the analysis.

(48) In view of the outbreak of COVID-19 and the confinement measures put in place by various Member States as well as by various third countries, the Commission could not carry out verification visits pursuant to Article 16 of the basic Regulation at provisional stage. The Commission instead cross-checked remotely all the information deemed necessary for its provisional determinations in line with its Notice on the consequences of the COVID-19 outbreak on anti-dumping and anti-subsidy investigations (8). The Commission carried out remote crosschecks (‘RCC’) of the following companies/parties:

Association of Union producers

— European Aluminium, Brussels, Belgium

Union producers

Users

— Company A

Exporting producers in the PRC

— Jiangsu Alcha Aluminum Group Co., Ltd. (‘Jiangsu Alcha Group’)

— Xiamen Xiashun Aluminium Foil Co., Ltd.

(49) The investigation of dumping and injury covered the period from 1 July 2019 to 30 June 2020 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2017 to the end of the investigation period (‘the period considered’).

(50) This case was initiated on 14 August 2020, i.e. during the transition period agreed between the United Kingdom (‘UK’) and the EU in which the UK remained subject to the Union law. This period ended on 31 December 2020. Consequently, as of 1 January 2021, companies and associations from the UK no longer qualified as interested parties in this proceeding.

(51) By a note to the case file (9) on 18 January 2021, the Commission invited UK operators that considered that they still qualified as interested parties to contact it. No company came forward.

(52) In order to align the data set collected from interested parties with the fact that the transition period had ended and that the UK was no longer subject to Union law, interested parties concerned were invited to provide a revised questionnaire reply on EU-27 basis.

(53) One user, Valeo, claimed that the complaint was vitiated by major procedural deficiencies as it was based on EU-28 data, including the UK, while this country was no longer a Member State at the time of lodging of the complaint and the initiation of the proceeding.

(54) In this regard, as mentioned in recital (50), the UK and the EU had agreed on a transition period during which the UK remained subject to Union law. That period ended on 31 December 2020 (10). Since the case was initiated during the transition period, the complaint was validly lodged on an EU-28 basis. Consequently, the claim was rejected.

(56) The product concerned (11) is commonly referred to as ‘Aluminium flat-rolled products’ or ‘AFRPs’. It is the result of 4 subsequent production processes: melting, casting, rolling and finishing. Some companies may start the production process at a different stage depending on their level of integration.

(58) Aluminium flat-rolled products are used in a wide range of applications in sectors such as building and construction, foil, technical applications, transport and consumer durables.

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

(61) Several parties submitted product exclusion requests concerning the following products: clad tube, clad plate, clad fin and unclad fin stock for use in the manufacture of automotive brazed aluminium HEX and the manufacturing of electrical vehicles battery coolers (‘automotive HEX AFRPs’); aluminium coils for the production of coated coils and aluminium composite panels (‘ACP’); lithographic sheets; battery sheets; aluminium converter foil of gauge 30 to 60 microns (‘ACF-30-60’) and AFRPs for use in the manufacture of slats for venetian blinds.

(62) Several interested parties, Huafon, Valeo, Mahle GmbH, European association of automotive suppliers (‘Clepa’) and TitanX Holding AB (‘TitanX’) claimed that automotive HEX AFRPs did not share the same basic physical, technical and chemical characteristics. The distinct manufacturing process (specific equipment) and chemistry (through the use of proprietary alloys which differ from standard alloys) results in different brazing ability, formability, strength, corrosion resistance and clad ratio, and makes automotive HEX AFRPs entirely different from other AFRPs covered by the product definition. They also claimed that automotive HEX AFRPs were not interchangeable with in-scope commodity AFRPs used in other applications due to their unique physical, mechanical and chemical features that are jointly developed with the up- and downstream industry. It was also claimed that they were mainly made to order, traded in small volumes representing less than 5 % of the overall EU AFRP market and sold at a high price to Tier 1 automotive suppliers which buy all automotive HEX AFRP categories from the same supplier in a ‘one-stop-shop’ for technical, commercial, and risk minimisation reasons.

(63) The parties further asserted that automotive HEX AFRPs could be identified at customs along the same lines as the products excluded from the product scope by the complainants and destined for the automotive (12) or aircraft industry. Similarly to body panels destined for the car industry, it was claimed that automotive HEX AFRPs should thus also be excluded.

(64) Huafon also argued that its automotive HEX AFRPs differed from the ones manufactured in the Union through a different production process (continuous casting) which gives unique specifications in terms of various aspects such as grain size, strength, corrosion performance, formability, brazing ability, tolerances and erosion to its products. It also argued that most Union producers are not willing to provide customer specific automotive HEX AFRPs.

(66) The Commission first observed that automotive HEX AFRPs belong to the product group of HEX AFRPs which includes not only automotive HEX but also HEX destined for HVACR and other applications such as wind mills. Automotive HEX AFPRs, similarly to those destined for HVACR and other applications include products that can be clad (tube, plate, fin) or unclad (fin). Contrary to what was claimed by the user Valeo, the evidence on file shows that the HVACR HEX market has a meaningful size and accounts for 20 % of the total HEX market in the EU. The evidence on file also shows that HVACR HEX are similar in terms of alloy, tempering and thickness to the automotive HEX.

(67) Second, HEX AFRPs were covered by the complaint lodged by European Aluminium regardless of their application and fall in the product scope as defined in the Notice of Initiation and in recitals (55) to (58). Also, automotive HEX AFRPs can be classified using the product coding foreseen by the investigation in terms of thickness, form, material used, finishing and temper.

(68) Third, the investigation revealed that automotive HEX AFRPs share the same basic chemical characteristics as other AFRPs. Even if they are clad, they are composed of more than 95 % of pure aluminium similarly to other AFPRs. In addition, even if so-called proprietary alloys are used in automotive HEX AFRPs, these are closely resembling other alloys since they are mostly derived from 3XXX series alloys.

(69) As far as physical and technical characteristics are concerned, most AFRPs have their own specifications depending on the application or the requirements of the end-user concerned. The fact that AFRP manufacturers need to fulfil specific brazing ability, formability, strength, grain size or corrosion does not mean that they do not share the same basic technical and physical characteristics as other AFRPs. Even if they were not to share such basic characteristics with certain AFRPs falling in the scope of the investigation, quod non, they would share such basic characteristics with AFRPs belonging to the same product group, that is HEX AFRPs destined for HVACR and other applications.

(70) As far as interchangeability is concerned, AFPRs that belong to different product groups may not be interchangeable due to various reasons such as the specific alloy treatments used or the type of finishing. Still, these products fall within the scope of the investigation as they share the same basic physical, chemical and technical characteristics.

(71) As far as the manufacturing process is concerned, the Commission established that automotive HEX AFRPs are the result of the same manufacturing process as described in recital (56) and use to a large extent the same equipment as other AFRPs. The fact that certain alloys need to be developed or that the products need to be validated does not belong to the manufacturing process, rather it belongs to the research and development phase, which is distinct from the manufacturing process. Even if automotive HEX AFRPs used specific equipment (cladding station, slitting equipment), such equipment could be used in order to produce other HEX AFRPs or simply for other AFRPs of a certain width. Also, the fact that certain automotive HEX AFRPs are produced through continuous casting does not single out this product since other products falling within the scope of the investigation can also be produced through the same type of process.

(72) Third, as far as the commercialisation of automotive HEX AFRPs is concerned, the Commission established that most AFRPs are made to order and that the share of commodity products is small. Also, when considering that such product accounts for around 9 % of the Union market consumption, it cannot be considered that it is traded in small quantities or to represent a niche market.

(73) Fourth, the Commission also established that automotive HEX are not the sole products falling within the scope of the investigation sold to Tier 1 automotive suppliers. Indeed, other products such as chassis and components are eventually destined for the car industry and follow the same sales channel and also require a validation process. In addition, HEX manufacturers may buy the different automotive HEX AFRP categories from different suppliers and thus not on a ‘one-stop-shop’ basis, as erroneously claimed. Finally, the Commission also established that the sampled Union producers sold a significant share of other products falling within the product scope at higher prices than automotive HEX AFRPs. These other products accounted for over 8 % of the total sales volume by the sampled Union producers during the investigation period.

(74) Fifth, the Commission did not agree that the HEX AFRPs should be excluded because of their use in the automotive industry. It recalled that not all products destined for the automotive industry are excluded from the scope of the investigation. Indeed, the product under investigation covers AFRPs for automotive products such as structural parts for automotive applications (chassis, components).

(75) As far as Union interest claims are concerned, the Commission established that the Union industry has sufficient capacity to meet the current demand and that there is no risk of structural price increase in view of the conditions of competition and available capacities in the EU, as confirmed by the recent Commission decision regarding the merger of Gränges and Impexmetal (14). Also, according to the information provided by the Union industry and verified by the Commission, the Union industry has recently invested in and has other ongoing projects to increase its production capacity. According to the information at its disposal, the Commission considered that this increase is likely to absorb the projected rise in demand following the expected changes in the car production models, namely decrease in internal combustion engines and increase in plug-in hybrid/electrical vehicles.

(76) As far as increased costs are concerned, the Commission considered that the level of profits achieved before the pandemic would allow the automotive HEX manufacturers to absorb extra costs in the form of anti-dumping duties or validation costs, should they wish to switch back to procure from Union producers. Furthermore, the overall financial situation of these companies and the groups to which they belong and for instance their retained earnings did not point to a dramatic financial situation which would jeopardize the continuation of their activities in the current context.

(77) Furthermore, as far as the impact on the supply chain is concerned, it should be noted that automotive HEX manufacturers normally rely on dual sourcing for specific products and that they usually have several validated suppliers for each product category (tube, plate, fin). Union producers of automotive HEX AFRPs have proven track record of supplying such specific products to the major manufacturers in large quantities, both within and outside the Union, for many years. Hence, they have the relevant equipment and technical know-how to develop and supply such products and are often pre-qualified suppliers. While this does not mean that users could switch from one AFRP supplier to another for all their products instantly if they wished so, the Union industry would be in a position to quickly substitute Chinese imports and offer a secure alternative source of supply. One of the Union producers claimed that a similar process had already taken place on the US market where certain non-US producers were able to substitute Chinese imports after anti-dumping duties were imposed on Chinese AFRPs.

(78) While it is not disputed that the development of new generation electric vehicles would reduce greenhouse gas emissions in the Union, the Commission provisionally considered that producing the aluminium needed in such cars in the EU would be less polluting than importing it from the PRC. Indeed, regardless of the transportation costs from the PRC to the EU, aluminium production in the Union generates on average about three times less CO2 than in the PRC (15). On this basis, the Commission considered that imposing duties on automotive HEX AFRPs from the PRC is not incompatible with the Union’s broader policies. In this regard, one exporting producer, Huafon, claimed that its CO2 yield was much lower than the Chinese average. Such claim was however not supported by evidence and could, in any case, not be extrapolated to the whole Chinese aluminium industry.

(79) Furthermore, two users, Mahle and Titanx, also indicated that producers of automotive HEX outside the European Economic Area (‘EEA’) would gain competitive advantage when buying AFRPs from China without paying anti-dumping duties and referred to a Chinese producer of automotive HEX established in Morocco. The Commission established that the investment by the automotive HEX manufacturers in question had been made with the aim to supply a brand new car manufacturing site located outside the EU where the evidence available point to an investment aimed at supplying the local market (16). Consequently, the claim was rejected.

(80) In view of the above considerations, the Commission provisionally rejected the request for exclusion of automotive HEX AFRPs from the product scope of the product under investigation.

(81) One user, Company A, requested the exclusion of aluminium coils for the production of coated coils and ACP on the grounds that such coils have distinct physical, technical and chemical characteristics with regard to their tension levelling and appearance considering that even a small imperfection makes the product unusable for the purpose for which it was purchased.

(82) Given the high quality constraints, the company claimed that such product is not interchangeable with other AFRPs and not substitutable with other products. As far as the production process is concerned, this party argued that the Chinese producers manufacture the product type in question on state of the art equipment (hot rolling, tension levelling and stand tandem hot finishing lines) which result in higher quality and productivity rates as well as lower costs.

(83) The same party also asserted that it faced significant difficulties not only in purchasing the product type at stake with the required standards from the Union industry but also in switching some of its Chinese sourcing to Union sourcing. It also claimed that the product type at stake represented a considerable proportion of its production cost and that, should duties be imposed, it would need to validate new suppliers leading to an increase in its costs.

(84) The Commission established that aluminium coils for the production of coated coils and ACP fall in the definition of the product scope as defined in recital (55) to (58) above and can be classified using the product coding foreseen by the investigation in terms of thickness, form, material used, finishing and temper. Also, they share the same basic chemical, technical and physical characteristics as other AFRPs as they are composed of more than 95 % of pure aluminium similarly to other AFPRs. Furthermore, they are made of similar alloys and have similar finishing, temper and thickness as other AFRPs falling within the scope of the investigation. Tension levelling is not a process which is applied exclusively to the product type at stake as it is used for other AFRP categories as well, such as HEX AFRPs.

(85) As far as interchangeability is concerned, AFPRs that belong to different product groups may not be interchangeable due to various reasons such as the specific alloy treatments used or the type of finishing. Still, these products fall in the product scope of the investigation as they share the same basic physical, chemical and technical characteristics.

(86) As far as the manufacturing process is concerned, the Commission provisionally considered that aluminium coils for the production of coated coils and ACP are the result of the same manufacturing process as described in recital (56) and use to a large extent the same equipment as other AFRPs. The fact that Chinese producers allegedly use state of the art equipment does not make the product any different. In any case, some Union producers have similar production equipment.

(87) However, the Commission acknowledged the specificity of the products that Company A manufactures and the difficulties that it faces in sourcing aluminium coils for the production of coated coils and ACP in the Union. So far, no evidence to the contrary had been provided by the Union industry. In addition, the Commission provisionally established with respect to the sampled Union producers that none of them was producing such special product types destined for the free market in sufficient quantities. Moreover, the share of ACP in the overall group of AFRPs in the Union can be estimated at below 2 %.

(88) In view of the above considerations and based on the evidence at its disposal, the Commission provisionally concluded that imports of aluminium coils should be excluded from the payment of the duties when used for the production of coated coils and ACP.

(89) One exporting producer, Xiamen Xiashun, sought clarification whether lithographic sheets and battery foils were covered by the product scope. In this regard, it claimed that these products differed from fin stock in terms of application, destination market, physical and chemical characteristics and production processes.

(90) In this regard, it should first be noted that the lithographic sheets and battery foils fall in the definition of the product scope as defined in recitals (55) to (58) and can be classified using the product coding foreseen by the investigation in terms of thickness, form, material used, finishing and temper.

(91) Second, unlike the arguments put forward by this party, the product scope of this investigation is much broader and is not limited to fin stock. Furthermore, the investigation revealed that lithographic sheets and battery foils share the same basic chemical characteristics as other AFRPs, as they are composed of more than 95 % of pure aluminium similarly to other AFPRs. Also, they are made of similar alloys and have similar finishing, temper and thickness as other AFRPs falling within the scope of the investigation. Furthermore, the fact that these products are destined for specific applications in specific sectors is not unique as most AFRPs have their own specifications depending on the application or the requirements of the end-user concerned.

(92) As far as the manufacturing process is concerned, the Commission considered that lithographic sheets and battery foil are the result of the same manufacturing process as described in recital (56) and use to a large extent the same equipment as other AFRPs. The fact that these products require specific equipment (degreasing, tension levelling) is not unique as such equipment can be used in order to produce other AFRPs. On this basis, the Commission provisionally confirmed that lithographic sheets and battery foils are part of the scope of the investigation.

(93) The exporting producer Nanshan group sought clarification whether aluminium converter foil with gauges between 30 and 60 microns were covered by this investigation and requested their exclusion from the product scope. It argued that ACF-30-60 has two different sides (mat and bright), it is produced with certain alloys (1xxx and 8xxx) and needs to comply with EU food contact legislation (Regulation (EC) No 1935/2004 of the European Parliament and of the Council (17), Commission Regulation (EC) No 2023/2006) (18), European Parliament and Council Directive 94/62/EC (19) and Regulation (EC) No 1907/2006 of the European Parliament and of the Council (20) (REACH Regulation)) and European Standard CEN EN 602. It also referred to the fact that the Commission considered aluminium converter foil and aluminium household foil as different products in a previous anti-circumvention investigation (21) based on specifications related to aluminium alloys, wettability and pinholes.

(94) The same party also referred to the end use and applications and in particular the fact that ACF-30-60 is mainly used for food applications while the main end uses of the product concerned are allegedly lidding foil and pharmaceutical foil. In addition, it argued that ACF-30-60 did not compete and was not interchangeable with the product concerned as, unlike buyers of AFRPs, buyers of ACF-30-60 are active in the food or pharmaceutical industries and ACF-30-60 are sold at higher prices. The same party also claimed that the production process was different in view of the finishing rolling pass leading to a mat and a bright side and that the ‘complainants’ did not, for most of them, manufacture ACF-30-60.

(95) In this regard, it should first be noted that the ACF-30-60 falls under the definition of the product scope as defined in recitals (55) to (58) and is classified using the product coding foreseen by the investigation in terms of thickness, form, material used, finishing and temper. Furthermore, the Commission established that ACF-30-60 share the same basic chemical characteristics as other AFRPs, as they are composed of more than 95 % of pure aluminium similarly to other AFPRs. Also, they are made of similar alloys and have similar finishing, temper and thickness as other AFRPs falling within the scope of the investigation.

(96) Second, the fact that these products have two different sides and need to comply with certain food legislation is not unique as most AFRPs have their own specifications depending on the application or the requirements of the end-user concerned and need to comply with certain legal requirements. This applies for instance to other food stock products that are covered by this proceeding.

(97) As far as the previous anti-circumvention investigation is concerned, Article 1(4) of Regulation (EU) 2017/271 merely excluded from the extension of the existing anti-dumping duties aluminium foil imported for other uses than the use of household foil. As a result, aluminium foil used as converter foil was not covered by those measures. However, Regulation (EU) 2017/271 ultimately acknowledged that it is impossible to distinguish, based on the technical characteristics alloys, wettability and pinholes, between aluminium converter foil and foil covered by that investigation actually used for household applications (see recital 72 thereof). In any case, the analysis was made only in relation to identifying elements which would enable a distinction between aluminium household foil and aluminium converter foil in the context of the circumvention practices established regarding slightly modified aluminium household foil. Consequently, the conclusions drawn in that investigation have no bearing on the investigation at hand.

(98) As far as end use is concerned, the Commission considered that such parameters are not relevant to support a product exclusion request when the product type at stake shares the same basic physical, chemical and technical characteristics as other AFRPs. In any case, in the case at hand, the investigation revealed that, contrary to what is claimed by this party, AFRPs are destined not only for lidding foil or pharmaceutical foil but also to food packaging as presented in the complaint and confirmed by the investigation.

(99) As far as interchangeability is concerned, the Commission established that this parameter is not a relevant argument to support a product exclusion request when the product at stake shares the same basic physical, chemical and technical characteristics as other AFRPs. In the case at hand, although sharing the same basic characteristics and being manufactured on the same equipment, AFPRs that belong to different product groups may not be interchangeable due to various reasons such as the specific alloy treatments used or the type of finishing. Still, these products fall within the product scope of the investigation as they share the same basic physical, chemical and technical characteristics.

(100) Regarding the production process, ACF-30-60 are the result of the same manufacturing process as described in recital (56) and use to a large extent the same equipment as other AFRPs. The fact that the product needs to go through a certain finishing process does not make the product different provided that it shares the same basic physical, chemical and technical characteristics as other AFRPs.

(101) Finally, the allegation that most complainants did not manufacture ACF-30-60 was not supported by evidence. To the contrary, the Commission established that the Union industry manufactured such products.

(102) In light of the above considerations, the Commission provisionally rejected the request for exclusion of ACF-30-60 from the scope of the investigation.

(103) One user, OPL System AB, requested the exclusion of AFRPs for use in the manufacture of venetian blinds from the scope of the investigation. It argued that there is no producer of such material on the Union market and referred to Council Regulation (EU) 2019/2220 (22) which provides for a duty-free import quota for aluminium and magnesium alloy strip or foil for use in the manufacture of slats for blinds. It also argued that the product at stake had to comply with specifications developed for its production equipment

(104) The Commission observed that this interested party did not provide any supporting evidence showing that the product at stake does not share the same basic chemical, physical and technical characteristics as other AFRPs included in the scope of the investigation. Furthermore, this interested party did not provide evidence with regard to the alleged inability for the Union industry to manufacture the product at stake. In its turn, the Union industry commented that it was in a position to manufacture the product at stake.

(105) In the absence of further evidence, the Commission provisionally rejected this product exclusion request.

(106) The evidence available at the initiation of the investigation pointed to the existence of significant distortions in the PRC within the meaning of Article 2(6a), point (b) of the basic Regulation. The Commission therefore considered it appropriate to initiate the investigation having regard to Article 2(6a) of the basic Regulation.

(107) In order to collect the necessary data for a possible application of Article 2(6a) of the basic Regulation the Commission invited all exporting producers in the country concerned to provide information regarding the inputs used for producing aluminium flat-rolled products. Fourteen exporting producers submitted the relevant information.

(108) The Commission also requested, as mentioned above in recital (44), the GOC to respond to a questionnaire concerning the alleged existence of distortions in the PRC. No reply was received. Subsequently, the Commission informed the GOC of its intention to apply Article 18 of the basic Regulation and to use facts available for the determination of the existence of significant distortions in the PRC. No reply was received.

(109) In addition, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union. A submission was received from Xiamen Xiashun.

(110) In point 5.3.2 of the Notice of Initiation the Commission informed interested parties that based on the information available at that stage a possible appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation could be Brazil if the conditions of application of this provision would be confirmed. The Commission also stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

(111) On 5 October 2020, the Commission issued a First note on the sources for the determination of the normal value (‘the Note of 5 October’ or ‘First Note’) by which it informed interested parties on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of aluminium flat-rolled product. In addition the Commission identified Brazil, Thailand and Turkey as possible appropriate representative countries. The Commission gave all interested parties opportunity to comment. The Commission received comments from the complainant, the companies Airoldi Metalli Spa (‘Airoldi’), Company A, Jiangsu Alcha Group, Nilo, Nanshan Group and Xiamen Xiashun.

(112) On 25 November 2020, and after having analysed the comments received, the Commission issued the Second note on the sources for the determination of the normal value (‘the Note of 25 November’ or ‘Second Note’). In that note the Commission established a provisional list of factors of production and informed interested parties of its intention to use Brazil as the representative country under Article 2(6a)(a), first indent of the basic Regulation. It also informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profits based on publicly available financial statements of the Brazilian company Novelis do Brasil Ltda. The Commission invited interested parties to comment. Comments were received from the complainant, and the companies Airoldi, Company A, Jiangsu Alcha Group, Lodec Metal, Nanshan Group and Xiamen Xiashun.

(113) After having analysed the comments and information received on the Second Note, the Commission provisionally concluded that Turkey was an appropriate choice as representative country from which undistorted prices and costs would be sourced for the determination of the normal value. The underlying reasons for that choice are further described in detail in Section 3.3, below.

(114) Upon initiation of the investigation on the basis of Article 2(6a)(a) of the basic Regulation, the Commission sent two questionnaires concerning the existence of distortions to the GOC (23). The GOC however did not submit any replies. The Commission informed the GOC by Note Verbale on 28 September 2020 that it intended to make use of the provision of Article 18 of the basic Regulation in regard to information covered by the two questionnaires and invited the GOC to submit its comment on the application of Article 18. No comments were received.

(115) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’.

(116) However, according to Article 2(6a)(a) of the basic Regulation, ‘in case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits’ (‘administrative, selling and general costs’ is referred hereinafter as ‘SG&A’).

(117) As further explained below, the Commission concluded in the present investigation that, based on the evidence available and given the lack of cooperation of the GOC, the application of Article 2(6a) of the basic Regulation was appropriate.

(119) As the list in Article 2(6a)(b) is non-cumulative, not all the elements need to be given regard to for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list. However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provides the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

(120) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

(121) Pursuant to this provision, the Commission has issued a country report concerning the PRC (hereinafter ‘the Report’) (24), showing the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as steel and chemicals). The Report was placed on the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report. Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation.

(122) The complaint contained information on additional studies and reports analysing the situation of the aluminium industry in the PRC. A first source was the Report on overcapacities in China issued by the European Union Chamber of Commerce in China (‘EU Chamber of Commerce Report’), which was used to demonstrate the existence of excess production capacity in China. Secondly, the complainant listed the OECD paper titled ‘Measuring distortions in international markets – The aluminium value chain’ (‘OECD Study’) (25), which closely analyses the issue of financial subsidies granted to companies in the aluminium industry, as well as the fact that export taxes on primary aluminium and incomplete VAT rebates on exports of certain aluminium products discouraged exports of primary aluminium and encouraged production and export of semis and fabricated articles of aluminium, including aluminium extrusions. Lastly, the complainant pointed out that in a recent expiry review regarding anti-dumping duties on imports of certain aluminium foil in rolls originating in China (26), the Commission confirmed the existence of significant distortions and this finding was systemic in nature and not limited to the product concerned in that particular investigation, and there was no reason to depart from this methodology.

(123) As indicated in recital (114), the GOC did not comment or provide evidence supporting or rebutting the existing evidence on the case file at the initiation stage, including the Report and the additional evidence provided by the complainant, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand. Comments received in this respect from a number of interested parties are dealt with in Section 3.3.1.11 below.

(124) The Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file, including the evidence contained in the Report, which relies on publicly available sources. That analysis covered the examination of the substantial government interventions in the PRC’s economy in general, but also the specific market situation in the relevant sector including the product concerned. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in the PRC.

(125) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of the People’s Republic China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’. The State-owned economy is the ‘leading force of the national economy’ and the State has the mandate ‘to ensure its consolidation and growth’ (27). Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation. The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the State with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the State ownership (28).

(126) In addition, under Chinese law, the socialist market economy is developed under the leadership of the Chinese Communist Party (‘CCP’). The structures of the Chinese State and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the State are indistinguishable. Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution. Following the already existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China’ (29). This illustrates the unquestioned and ever growing control of the CCP over the economic system of the PRC. This leadership and control is inherent to the Chinese system and goes well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

(127) The Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market (30). The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as the level of the regulatory environment.

(128) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans cover a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government. Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets while this was a regular feature in previous planning cycles. Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.). The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also Section 3.3.1.5 below) (31).

(129) Second, on the level of allocation of financial resources, the financial system of the PRC is dominated by the State-owned commercial banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project (see also Section 3.3.1.8 below) (32). The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also these parts of the financial sector other than the banking sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the State and the CCP (33).

(130) Third, on the level of regulatory environment, the interventions by the State into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by State policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies (34). Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both State and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining State control over key sectors or bolstering domestic industry (35).

(131) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with free play of market forces, resulting in distorting the effective allocation of resources in line with market principles (36).

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

(133) The GOC and the CCP maintain structures that ensure their continued influence over enterprises, and in particular State-owned enterprises (SOEs). The State (and in many aspects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision making in SOEs. This is typically done through rotation of cadres between government authorities and SOEs, through presence of party members on SOEs executive bodies and of party cells in companies (see also Section 3.3.1.4), as well as through shaping the corporate structure of the SOE sector (37). In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant inputs, including finance (38). The elements that point to the existence of government control over enterprises in the aluminium sector are further developed in Section 3.3.1.5 below.

(134) The OECD Study, submitted as evidence by the complainant, refers to SOEs in the aluminium sector which specifically emphasize in their regulatory filings how State ownership influences relevant industrial policies and how State ownership translates into government support. More specifically, one SOE mentions in its 2016 bond prospectus that it is one of the 52 backbone State-owned enterprises, that it plays a key role in the formulation and implementation of policies in the power sector and that it receives comprehensive and sustained support from the GOC. Another SOE refers in its 2017 bond prospectus to the fact that the respective provincial government can exert significant influence on the group (39).

(135) The PRC is the largest aluminium producer in the world, with several large SOEs amongst the top individual producers worldwide. According to estimates, SOEs account for more than 50 % of the total primary aluminium output in the PRC (40). A study on the non-ferrous metal industry in the PRC also points in the direction of SOEs accounting for a dominant share of the domestic market (41). While an increase in capacity in recent years is attributed partly to privately-owned companies, such capacity increase would usually also entail various forms of (local) government involvement, such as tolerating illegal capacity expansion (42). Moreover, the aluminium production capacity amongst the main SOEs has also increased, though to a lesser extent (43).

(136) Apart from controlling the SOEs, the GOC is also influencing the privately owned companies in the PRC. During the investigation it was established that the aluminium flat-rolled products producers received subsidies from the government. For example, one of the sampled companies, Jiangsu Alcha Group, lists a number of governmental subsidies in the company’s annual report. A number of SOEs persist among the aluminium flat-rolled products exporters, including Chalco Ruimin and Southwest Aluminium Group, which are subsidiaries of Chalco, an SOE under SASAC supervision (44).

(137) With the high level of government intervention in the aluminium industry and a high share of SOEs in the sector, even privately owned producers are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the aluminium sector are also subject to policy supervision and guidance as set out in Section 3.3.1.5 below.

(138) Apart from exercising control over the economy by means of ownership of SOEs and other tools, the GOC is in position to interfere with prices and costs through State presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant State authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights (45), CCP cells in enterprises, state owned and private alike, represent another important channel through which the State can interfere with business decisions. According to the Chinese company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution (46)) and the company shall provide the necessary conditions for the activities of the party organisation. In the past, this requirement appears not to have always been followed or strictly enforced. However, since at least 2016 the CCP has reinforced its claims to control business decisions in SOEs as a matter of political principle. The CCP is also reported to exercise pressure on private companies to put ‘patriotism’ first and to follow party discipline (47). In 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies (48). These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of aluminium products and the suppliers of their inputs.

(139) In addition, on 15 September 2020 a document titled ‘General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era’ (49) was released, which further expanded the role of the party committees in private enterprises. According to the guidelines, Section II.4: ‘We must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area’; and Section III.6: ‘We must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers.’ By this document, the party emphasised the role of the private enterprises in the ‘United Front work’ in an effort to increase the role of the CCP in non-party organisations and entities (50).

(140) The following examples illustrate the above trend of an increasing level of intervention by the GOC in the aluminium sector.

(141) As found by the Commission in another investigation on certain aluminium foil in rolls originating in China (51), in 2017, a Chinese state-owned aluminium producer, China Aluminium International Engineering Corporation Limited (‘Chalieco’), amended its Articles of Association giving more prominence to the role of party cells within the company. It included a whole chapter on the Party Committee, and Article 113 thereof states: ‘In deciding major corporate issues, the Board shall consult the Party Committee of the Company in advance.’ (52) Furthermore, in their 2017 Annual Report (53), the Aluminum Corporation of China (‘Chalco’) stated that a number of directors, supervisors, and senior management – including the Chairman and Executive Director, and the Chairman of the Supervisory Committee – are members of the CCP.

(142) With regard to the enterprises active in manufacturing of aluminium flat-rolled products, including Southwest Aluminium, Jiangsu Alcha Group and Chalco Ruimin, the investigation showed that the management of those three companies includes CCP members. A number of aluminium flat rolled product manufacturers also organise party building activities for their employees, for example Southwest Aluminium: ‘in order to implement the requirements of General Secretary Xi Jinping, following the political building efforts, the Southwest Aluminum (Group) Co., Ltd’s Party Committee shall vigorously promote the building of study party branches, ensure effective full coverage of Party organizations and Party work, foster the “double promotion” of Party members, and better involve Party members as pioneers and models’ (54). Xiamen Xiashun explains the party building exercises in the following way: ‘Xiashun actively promotes party building and labour union work, and remains committed to the system of joint meetings between Party, government and workers over the years, providing an important platform for employees to participate in decision-making, protect their rights and interests, and build a harmonious atmosphere.’ (55) Other companies involved in the party building activities include Tianjin Zhongwang Aluminium Industry, Jiangsu Alcha Group and Chalco Ruimin.

(143) The State’s presence and intervention in the financial markets (see also Section 3.3.1.8 above) as well as in the provision of raw materials and inputs further have an additional distorting effect on the market (56). Thus, the State presence in firms, including SOEs, in the aluminium and other sectors (such as the financial and input sectors) allow the GOC to interfere with respect to prices and costs.

(144) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist on all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in the PRC results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (57).

(145) For instance, the government plays a key role in the development of the Chinese aluminium sector. This is confirmed in the numerous plans, directives and other documents pertaining directly or indirectly to the sector, which are issued at national, regional and municipal level. Through these and other instruments, the government directs and controls virtually every aspect of the development and functioning of the aluminium sector. Such policies have an important direct or indirect impact on the production costs of aluminium products.

(146) In line with the Commission’s findings in the case on certain aluminium foil in rolls originating in China (58) and in the case of aluminium extrusions (provisional measures) (59), the following facts are equally applicable to the present product concerned, which is, similarly, an aluminium downstream product.

(147) Although the 13th Five Year Plan on Economic and Social Development (60) does not contain specific provisions on aluminium, for the non-ferrous metal industry in general it envisages a strategy of promoting cooperation on international production capacity and equipment manufacturing. To achieve these goals, the plan confirms that it will enhance supporting systems related to taxation, finance, insurance, investment and financing platforms, as well as risk assessment platforms (61).

(148) The corresponding sectoral plan, the Non-Ferrous Metal Industry Development Plan (2016-2020) (‘the Plan’) sets out specific policies and targets that the government aims to achieve for a number of non-ferrous metals industries (62), including aluminium.

(149) The Plan aims at upgrading the range of product types produced by the Chinese aluminium industry, inter alia, through supporting innovation. It calls for swift development of the mixed ownership system and a boost to SOE’s vitality. It further provides for the possibility of stock-piling non-ferrous metals, improving the security of resources, including aluminium and sets specific quantitative targets for reducing power consumption, increasing the ratio of recycled aluminium in production and increasing capacity utilisation (63).

(150) The Plan further provides for structural adjustments with stricter control on new smelting facilities and elimination of outdated capacity. It provides for geographical distribution of processing plants, focuses on projects to increase bauxite and alumina resource exploitation and covers electricity supply and pricing policy (64).

(151) With this wide range of measures and policies, the Plan represents a continuation of the 2009 Non-Ferrous Metals Industry Adjustment and Revitalization Plan which was adopted to alleviate the negative effects on the non-ferrous metal industry of the financial crisis. The key objectives, set out in the plan include, inter alia, production volume control, restructuration, raw material sourcing, export tax policy, security of resources, stockpiling, technological innovation, financial policy and planning and implementation (65).

(152) Another policy document targeting the aluminium sector is the Standard Conditions applicable to the Aluminium Industry issued by MIIT on 18 July 2013, in order to speed up structural adjustment and curb disorderly expansion of the aluminium smelting capacities. The Standard Conditions introduce minimum production quantities for new plants, quality standards and security of supply for imported and domestically sourced bauxite and alumina. The Standard Conditions indicate that MIIT is the authority in charge of the standardisation and management of the aluminium industry, as well as of the publication of the list of companies authorised to operate in the aluminium industry (66).

(153) In the Guiding Opinion on creating an excellent market environment, fostering the non-ferrous metal industry’s structural adjustment and transformation and increasing benefits issued by the General Office of the State Council in 2016 (2016/42) (67), the Chinese authorities state as main objectives to ‘optimize the non-ferrous metal industry structure; Basically balance supply and demand of key product categories; Maintain the utilization rate of electrolytic aluminium production capacity above 80 %; Significantly increase the mineral resources supply security capacity for minerals such as copper and aluminium’ (68). The document also prescribes to ‘strictly control new production capacity.’ To achieve this, the State requires to: ‘Ensure the implementation of indispensable electrolytic aluminium new (reformed, expanded) construction projects; […] Use social supervision and other tools; Step up supervision and inspection efforts; Strictly investigate and deal with new electrolytic aluminium projects breaching regulations’ (69). These provisions demonstrate the substantial degree of the GOC’s intervention into the non-ferrous metals sector, including the aluminium sector.

(154) The above State interference in the functioning of the aluminium sector by means of planning documents is reflected also at the provincial level. For example, the Shandong Province Government’s Notice on the implementation plan for accelerating the high-quality development of the seven energy-intensive industries (2018/248) of 6 November 2018 requires to ‘foster the extension of the electrolytic aluminium industry chain’ through the following actions: ‘Further increase the proportion of fine and deep processing of electrolytic aluminium liquid and aluminium processing materials; Speed up and foster the extension of the aluminium industry chain to finished products and high-end products; Expand the use of high-end aluminium materials; Increase the development possibilities of the aluminium processing industry (70).’

(155) The State has been intervening into the functioning of the aluminium sector for many years before the issuance of the above policy documents, which is, for example, illustrated by the Guidelines for Accelerating the Restructuring of the Aluminium Industry (‘Restructuring Guidelines’) (71), issued by the NDRC in April 2006. The latter regarded aluminium as a fundamental product in the development of the national economy. The said Restructuring Guidelines stated that, in implementing the Industrial Development Policy approved by the State Council, specific objectives shall be achieved in certain areas. These areas were: Enhance the concentration in the industry; Access to financial capital (see also Section 3.3.1.8 below); Organisation of the industry; Strict control of exports of electrolytic aluminium; and Elimination of outdated capacity.

(156) Moreover, the Chinese State has been interfering with the free play of market forces in the sector of upstream aluminium products, hence in the production of inputs and of inputs to inputs, which are used by the producers of the product concerned. In that regard, for example, the Notice on fostering the orderly development of the Alumina Industry (2018/1655) issued on 28 December 2018 by the General Office of the MIIT (72) stipulates – concerning alumina (a key input in the production of primary aluminium) – that ‘guided by Xi Jinping’s socialist ideology with Chinese characteristics in a new era, [all relevant parties shall] comprehensively and thoroughly implement the spirit of the 19th National Congress of the Party; stick to the general orientation of stability in progress work; stick to the new development concept; focus on supply-side structural reforms; make full use of the market’s decisive role in allocating resources, better involve the government, […] meet domestic development needs, and promote the orderly and healthy development of the alumina industry.’ (73) The same document states that ‘the provincial Development and Reform Commissions and MIIT administrations shall: keep abreast of the current developments in the alumina industry in their region; combine their region’s economic and social development, industry base, market demand and energy consumption and environmental capacity; strengthen the scientific planning for the development of the alumina industry; coordinate their region’s industry development scale and layout; ensure project demonstrations; strictly implement the construction requirements; orderly support project constructions; strengthen the supervision of the entire process; ensure the industry development scale matches the domestic market demand and local bearing capacity; prevent projects construction rush.’ (74) In order to achieve the latter, the document prescribes to strengthen supervision and inspection: ‘In accordance with the present notice’s requirements the National Development and Reform Commission, the Ministry of Industry and Information Technology, together with the China Nonferrous Metals Industry Association and other relevant parties shall proceed to inspections of alumina construction projects in the form of letters of enquiries, research and random investigations. Should problems arise, they shall be strictly dealt with in accordance with the relevant regulations.’ (75) The provisions described above show the degree of State intervention and control in the Chinese market of alumina – a key input to in the production of primary aluminium, which is the raw material used by aluminium flat-rolled products producers.

(157) Another input in the production of the product concerned is electricity, which constitutes up to 4 % of the production cost of aluminium flat-rolled products of the cooperating exporting producers. In this regard, the Commission found evidence of State-induced distortions affecting the price of electricity provided to Chinese aluminium producers. Notably, it was established that the State intervened in favour of Chinese producers through differentiated, more advantageous energy pricing. In the Guiding Opinion on creating an excellent market environment, fostering the non-ferrous metal industry’s structural adjustment and transformation and increasing benefits mentioned above, the Chinese authorities acknowledged as a policy goal to ‘continue to implement the differentiated electricity price policy; Encourage eligible electricity users to conclude direct deals with power generation companies; Determine prices through negotiation.’ (76). The Commission also established that similar policies were implemented at the provincial level. For example, in the Yunnan Province, according to information reported by the China Industry Journal in November 2019: ‘In order to implement the plan, Yunnan has successively issued specific policies such as the “Implementing Opinion on Promoting the Integrated Development of Hydropower and Aluminium Materials” and the “Plan implementing preferential prices to promote the use of Hydropower”. It appears clearly that any enterprise bringing its capacity quota to Yunnan shall benefit from the “preferential price, full transmission” policy, which means that for the first 5 years, electrolytic aluminium shall benefit from special preferential electricity price of RMB 0,25 per kWh. As to deep processing of materials, a special preferential electricity price of RMB 0,20 per kWh shall be granted. According to reports, the integrated projects of Henan Shenhuo and Sichuan Qiya’s bringing quotas to be built in Yunnan have already benefitted from the policy for integration projects and have signed relevant agreements with local governments, power grid companies, and power generation companies’ (77).

(158) As another example of State interference, at the provincial level, in the already mentioned Shandong Province Government’s Notice on the implementation plan for accelerating the high-quality development of the seven energy-intensive industries, the authorities have issued transformation and upgrading targets for the electrolytic aluminium industry with regard to energy use: ‘By 2022, the electricity consumption of electrolytic aluminium per ton of aluminium shall drop to approximately 12 800 kWh, the electrolytic deep processing rate of electrolytic aluminium in the province shall reach approximately 50 %, and the added value of aluminium per ton shall increase by more than 30 % on average’ (78).

(159) With respect to the enforcement of the provisions contained in the planning documents above, Chinese industry associations play an important role. These entities are to guarantee that industry implements the policies of the GOC. This responsibility is confirmed by the fact that in their activity, they liaise closely with State authorities, which is reflected in their statutes. In the case of the aluminium sector, the Articles of association of the China Non-Ferrous Metals Industry Association assert notably that ‘[t]he Association adheres to the party’s basic line and various principles and policies, abides by the Constitution, laws, regulations and national policies, and abides by social and moral values. It shall stick to the purpose of serving the government, the industry, the enterprises and business managers; it shall set up and improve the industry self-discipline mechanism; it shall fully involve government’s staff to get assistance; it shall play a bridging role between the government and enterprises.’ (Article 3). Along the same lines, Article 25 states that the Association’s chairman, vice-chairman and secretary general must fulfil as a first condition to: ‘Adhere to the party’s line, principles and policies, and have good political qualities’ (79).

(160) Similarly, the Articles of association of the China Non-Ferrous Fabrication Industry Association stipulate that ‘the Association accepts business guidance as well as supervision and management from the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Civil Affairs and the China Nonferrous Metals Industry Association’ (Article 4). One of the established elements of the Association’s business scope is also to ‘Actively put forward suggestions and opinions on industry development, industry policies, laws and regulations, in accordance with the Party’s and the State’s general principles and tasks concerning the building of a socialist market economy system and taking into account the industry’s actual situation.’ (Article 6). Finally, Article 22 also prescribes that the Association’s chairman, deputy chairman and secretary general must, among others, meet as condition to: ‘Adhere to the party’s line, principles and policies, and have good political qualities’ (80).

(161) Thus, the numerous plans, directives and other documents pertaining to aluminium, issued at the national, regional and municipal level, clearly show the high degree of intervention of the Chinese government in the aluminium sector (81). Through these and other instruments, the government directs and controls virtually every aspect of the development and functioning of the sector.

(162) Beyond the plans, the government’s intervention in the sector has taken the form, inter alia, of export-related measures, including export duties, export quotas, export performance requirements and minimum export price requirements on different raw materials for aluminium.

(163) The GOC further discourages exports of primary aluminium and its inputs, aiming at promoting higher added-value aluminium products. This objective is pursued by granting full or partial VAT rebates on downstream aluminium products in combination with incomplete VAT rebates and export taxes on primary aluminium (82).

(164) The prices of key inputs such as energy and electricity are influenced by different types of government intervention (83). Other types of government intervention leading to market distortions include the stockpiling policy through the State Reserve Bureau and the role of the Shanghai Futures Exchange (SHFE) (84). In addition, several trade defence investigations have established that the Chinese government has consistently granted different types of State support measures to aluminium producers (85). The extensive intervention of the GOC in the aluminium sector has led to overcapacity (86), which is arguably the clearest illustration of the implications of the GOC’s policies and the resulting distortions.

(165) The OECD Study also identified additional government support influencing market forces in the aluminium sector. Such support would typically take the form of inputs, in particular electricity and primary alumina, sold at below-market prices (87). The OECD Study further describes how the GOC objectives for the aluminium sector are translated into industrial policies and specific actions on the provincial and local level, including for example capital injections, priority possession rights to mineral resources, governmental grants and subsidies or tax incentives (88).

(166) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives of supporting key industries, including the aluminium sector, which encompasses the production of aluminium flat-rolled products, as well as of primary aluminium – the main raw material used in the manufacturing of the product concerned (more than 50 % of its costs of production). Such measures impede market forces from operating freely.

(167) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement. The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the State in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings (89).

(168) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in the PRC (90). All land is owned by the Chinese State (collectively owned rural land and State-owned urban land). Its allocation remains solely dependent on the State. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates (91). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (92).

(169) Much like other sectors in the Chinese economy, producers of aluminium flat-rolled products are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. The present investigation revealed nothing that would call those findings into question. As such, the Commission concluded that the Chinese bankruptcy and property laws do not work properly, thus generating distortions when maintaining insolvent firms afloat and when allocating land use rights in the PRC. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the aluminium flat-rolled products sector.

(170) This finding is supported by the provisional affirmative determination of the US Department of Commerce, in the Countervailing Duty Investigation of certain Aluminium Foil from China, which found, using facts available, that the Government of China’s provision of land for Less Than Adequate Remuneration constitutes a financial contribution within the meaning of Section 771 (5)(D) of the Tariff Act of 1930, as amended (93).

(171) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the aluminium sector, including with respect to the product concerned.

(172) A system of market-based wages cannot fully develop in the PRC as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining (94). Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary (95). Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area. This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration (96). Those findings lead to the distortion of wage costs in the PRC.