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

(173) No relevant evidence was submitted to the effect that the aluminium sector, including the producers of aluminium flat-rolled products, would not be subject to the Chinese labour law system described. The aluminium sector is thus affected by the distortions of wage costs both directly (when making the product concerned or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in the PRC).

(174) Access to capital for corporate actors in the PRC is subject to various distortions.

(175) Firstly, the Chinese financial system is characterised by the strong position of State-owned banks (97), which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similarly to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of large State-owned financial institutions are ultimately appointed by the CCP) (98) and, again just like non-financial SOEs, the banks regularly implement public policies designed by the government. In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State (99). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (100).

(176) While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

(177) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm’s strategic importance to the GOC and the strength of any implicit guarantee by the government. Estimates strongly suggest that Chinese credit ratings systematically correspond to lower international ratings (101).

(178) This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (102). This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

(179) In this respect, the OECD Study refers to anecdotal evidence that certain aluminium producers in the PRC have obtained financing on preferential terms, with cost of financing being seemingly decoupled from the corresponding level of corporate leverage. According to that study, one state-owned aluminium producer explicitly stated in its 2016 bond prospectus that it attracts considerable financial support from Chinese policy banks bearing interest rate below benchmark. Similarly, the 2017 bond prospectus of another state-owned producer refers to the strong ties which the company maintains with Chinese banks, including policy banks that have provided that company with low-cost financing sources. The OECD Study concludes in this connection that while there can be many reasons why interest rates are low for these firms, the contrast between poor financial indicators and low interest rates may suggest some potential under-pricing of the risk associated with those borrowers (103).

(180) Secondly, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the recent growth in corporate leverage in the state sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

(181) Thirdly, although nominal interest rate liberalisation was achieved in October 2015, price signals are still not the result of free market forces, but are influenced by government induced distortions. Indeed, the share of lending at or below the benchmark rate still represents 45 % of all lending and recourse to targeted credit appears to have been stepped up, since this share has increased markedly since 2015 in spite of worsening economic conditions. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(182) Overall credit growth in the PRC indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly in recent years. Faced with a situation of increasing debt-at-risk, the GOC has opted to avoid defaults. Consequently, bad debt issues have been handled by rolling over debt, thus creating so called ‘zombie’ companies, or by transferring the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

(183) In essence, despite the recent steps that have been taken to liberalize the market, the corporate credit system in the PRC is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets.

(184) No evidence was submitted to the effect that the aluminium sector, including the producers of aluminium flat rolled products, would be exempted from the above-described government intervention in the financial system. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

(185) The Commission noted that the distortions described in the Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above in Sections 3.3.1.1-3.3.1.5 apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above in Sections 3.3.1.6-3.3.1.8 above.

(186) The Commission recalls that in order to produce aluminium flat-rolled products, a broad range of inputs is needed. When the producers of aluminium flat-rolled products purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

(187) As a consequence, not only the domestic sales prices of aluminium flat-rolled products are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts A and B of the Report. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout the PRC. This means, for instance, that an input that in itself was produced in the PRC by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth. The arguments and evidence adduced by the exporting producers in this regard are addressed in the next section.

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

(189) In its comments, one exporting producer, Xiamen Xiashun, firstly pointed out that Article 2(6a) is inconsistent with the WTO Anti-Dumping Agreement (‘ADA’). This is because, first, Article 2.2 ADA recognizes three scenarios which allow for the normal value construction: (i) sales are not made in the ordinary course of trade; (ii) there is a particular market situation; or (iii) because of the low volume of sales on the domestic market, such sales are not representative. Xiamen Xiashun submitted that significant distortions meet none of the three criteria. It further submitted that even if the concept of significant distortions could possibly be considered to fall under the second of the above criteria, the Panel in WTO DS529 Australia – Anti-Dumping Measures on A4 Copy Paper confirmed that the fact that the domestic price of the product concerned and its inputs are affected by governmental distortions was not enough to consider that the proper comparison between domestic market sales and export sales is affected ‘because of the particular market situation’. In addition, Xiamen Xiashun commented that the Commission applied the construction of normal value systematically, while it should be checking on a case by case basis if the conditions of Article 2.2 ADA are met. Xiamen Xiashun further submitted that Article 2.2 ADA requires that the construction of the normal value must reflect ‘a cost in the country of origin’, as confirmed in the cases WTO DS529 Australia – Anti-Dumping Measures on A4 Copy Paper and WTO DS473 EU —Biodiesel. Furthermore, Xiamen Xiashun argued that the normal value should be constructed in accordance with the requirements of Article 2.2.1.1 ADA, and DS473 it added that the findings in case WTO DS427 China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States required the investigating authorities to take into account the recorded costs of the exporting producers unless they are not in accordance with the generally accepted accounting principles or do not reasonably reflect the costs associated with the production and sale of the product under consideration. Even if the recorded costs satisfied those two conditions, Article 2(6a) of the basic Regulation is according to Xiamen Xiashun inconsistent with Article 2.2.1.1 WTO ADA because the costs of the exporting producer are disregarded systematically.

(190) The Commission considered that the provisions of Article 2(6a) of the basic Regulation are fully consistent with the European Union’s WTO obligations. As explicitly clarified by the WTO Appellate Body in DS473 European Union – Anti-Dumping Measures on Biodiesel from Argentina, WTO law permits the use of data from a third country, duly adjusted when such adjustment is necessary and substantiated. The Commission recalled that the cases DS529 Australia – Anti-Dumping Measures on A4 Copy Paper and DS427 China – Broiler Products did not concern the interpretation of Article 2(6a) of the basic Regulation and the conditions for its application. Furthermore, the underlying factual situations in those cases was different from the underlying situation and criteria giving rise to the application of the methodology under this provision of the basic Regulation, which concerns the existence of significant distortions in the exporting country. Under Article 2(6a) it is only when significant distortions are found to be present and to affect costs and prices that normal value is constructed by reference to undistorted costs and prices sourced in a representative country or by reference to an international benchmark. In any event, Article 2(6a) second subparagraph, 3rd dash of the basic Regulation provides for the possibility to use domestic costs to the extent they are established not to be distorted. The Commission therefore rejected these claims.

(191) Second, Xiamen Xiashun submitted that Article 2(6a) of the basic Regulation is inconsistent with Article 2.2.2 ADA. It further submitted that the Appellate Body in DS219 EC – Tube or Pipe Fittings confirmed that the investigating authority is obliged to use the actual SG&A and profit of the exporting producers, as long as such data exists. Xiamen Xiashun therefore submitted that the Article 2(6a) of the basic Regulation was incompatible with Article 2.2.2 ADA.

(192) The Commission noted that once it is determined that due to the existence significant distortions in the exporting country in accordance with Article 2(6a)(b) of the basic Regulation it is not appropriate to use domestic prices and costs in the exporting country, the normal value is constructed by reference to undistorted prices or benchmarks in an appropriate representative country for each exporting producer according to Article 2(6a)(a) of the basic Regulation. As explained above in recital (190), the same provision of the basic Regulation also allows the use of domestic costs if they are positively established not to be distorted. In that context, the exporting producers had the possibility to provide evidence that their individual SG&A costs and/or other input costs were actually undistorted. However, as evidenced in Sections 3.3.1.2 to 3.3.1.9, the Commission has established the existence of distortions in the Chinese aluminium flat-rolled products industry and there was no positive evidence as to the factors of production of individual exporting producers being undistorted. Therefore, these claims were rejected.

(193) Third, Xiamen Xiashun submitted that the Commission was obliged, according to the provisions of Article 2(6a) of the basic Regulation, to conduct a company-specific and cost-specific analysis. Therefore, there should have been a specific analysis of Xiamen Xiashun based on the questionnaire it submitted.

(194) The Commission noted that the existence of significant distortions giving rise to the application of Article 2(6a) of the basic Regulation is established on a country-wide level. If the existence of significant distortions is established, then the provisions of Article 2(6a) apply, a priori, to all exporting producers in the PRC and concerns all costs relating to their factors of production. In any event, the same provision of the basic Regulation provides for the use of domestic costs which are positively established not to be affected by significant distortions. However, no domestic costs have been established to be undistorted on the basis of accurate and appropriate evidence. In particular, the exporting producers did not submit accurate and appropriate evidence on undistorted prices and costs.

(195) Furthermore, the calculations concerning Xiamen Xiashun’s anti-dumping rate reflect the data submitted by the company itself, calculated in accordance with the provisions of the basic Regulation, in particular Article 2(6a). There was no evidence that Xiamen Xiashun’s prices and costs were not distorted by the pervasive distortions established on the basis of the evidence available. Therefore, the provisional margins of dumping reflect the specific situation of the company, including the factors of production and amounts as reported by the company in the questionnaire reply, but duly taking into account the existence and impact of significant distortions in the PRC. These claims were therefore rejected.

(196) With regard to the individual situation of the company, Xiamen Xiashun submitted first that the company was a wholly owned foreign enterprise (a ‘WOFE’) and subject to Chinese laws. Its shareholder was Daching Enterprises Limited, a company incorporated in Hong Kong. It further submitted that its financial statements were audited under the international accounting standards as it is part of an international group. It submitted that is was a privately-owned company and that there was no evidence that it was subject to the same ownership, control or policy supervision and guidance by the Chinese authorities as an SOE and was not subject to policy supervision and guidance through State presence interfering with respect to prices and costs. It thus claimed that it did not ‘operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country’ as referred to in Article 2(6a)(b), first indent, of the basic Regulation.

(197) The Commission reiterated that once the significant distortions are established, the methodology under Article 2(6a) of the basic Regulation applies country-wide unless it is positively established that certain costs are not affected by distortions. Xiamen Xiashun did not provide any such evidence, but only some generic arguments concerning relating to certain criteria listed in Article 2(6a)(b) for the existence of significant distortions in the exporting country as a whole and not linked to their specific items of costs being undistorted. Thus, the evidence about the specific situation of Xiamen Xiashun as allegedly independent from State control is not relevant in this context. In any event, the Commission noted that even if these claims were relevant in this context, quod non, on substance the argument of Xiamen Xiashun that it is free from any government influence, including ownership, control or policy supervision and guidance by Chinese authorities, does not correspond to reality. The substantial body of evidence and the conclusions in Sections 3.3.1.3 to 3.3.1.5 show the extent and pervasiveness of the influence of the government and of the CCP in the Chinese economy, including in the aluminium sector. Xiamen Xiashun did not present sufficient evidence that would question these findings. Moreover, as indicated in Section 3.3.1.8, the government disposes of a vast number of instruments and financial incentives to steer the companies, including the privately owned ones, to follow its guidance. As described in the same section, financial institutions, including the private ones have incentives to facilitate access to finance for projects in line with the governmental plans, which has a substantial impact on the privately owned companies which need to comply with the governmental directives to ensure financial liquidity.

(198) With regard specifically to Xiamen Xiashun, the Commission noted that it is formally recognised as: a National Level Key High-Tech Enterprise by the State Council; Fujian Province’s Backbone Enterprise for Strategic and Emerging Industries by the Fujian Province Economic and IT Commission; a Fujian Province Innovative Enterprise by the Fujian Province Science and Technology Bureau, the Fujian Province Economic and IT Commission, the Fujian Provincial Federation of Trade Unions and by the Fujian Province People’s Government State-owned Asset Supervision and Administration Commission (104). In order to receive these formal recognitions, the company must have fulfilled the relevant eligibility requirements, which include, among others, following the official line of the GOC and complying with the official governmental strategies and policies. This is also necessary to be able to retain such recognitions and further benefit from the direct or indirect governmental support attached to them. As an example, some of the specific policies, objectives and benefits linked to the recognition as Strategic and Emerging Industries backbone enterprises in Fujian province, a title held by Xiamen Xiashun, include: ‘Involve backbone enterprises as leaders and examples, foster the leapfrog scientific development of strategic emerging industries in Fujian, and achieve the goals and tasks set in the “Implementation Plan for Accelerating the Development of Strategic Emerging Industries in the Fujian Province”’; ‘Support Fujian’s various types of venture capital funds for strategic emerging industries to carry out equity investment to develop key projects of backbone enterprises’; ‘Encourage and support the provincial strategic emerging industries backbone enterprises to go public for financing and to issue corporate bonds, short-term financing bills, etc., and provide relevant support and services for corporate financing’; ‘Together with economic and trade departments of districts, cities, of Pingtan Comprehensive Experimental Zone and with provincial group (holding) companies, the Provincial Economic and Trade Committee has established a working and contact system with emerging industry backbone enterprises to help coordinate and solve the difficulties and problems encountered in the development of enterprises, and to ensure monitoring and analysis the development of backbone enterprises’ (105). The Commission thus did not accept the company specific defence that Xiamen Xiashun would be free from control or policy supervision or guidance of the authorities of the PRC.

(199) Furthermore, Xiamen Xiashun submitted that it was formed based on the Foreign Trade Law of the People’s Republic of China, the Foreign Investment Law of the People’s Republic of China, the Company Law of the People’s Republic of China and was subject to the Enterprise Bankruptcy Law of the People’s Republic of China. Pursuant to those laws, it was protected by the bankruptcy law and its capital could be freely remitted inward or outward in accordance with the law. It further argued that its financial statements were audited under the international accounting standards, by Ernst & Young and if its financial health was in jeopardy, it would have to follow international standards and possibly be put in bankruptcy.

(200) The Commission recalled, that, as described in Section 3.3.1.6, the distortions in the PRC in the domain of law do not stem from the fact that the Chinese laws are inadequate for their purpose. On the contrary, the Chinese laws are modelled on similar laws in other countries and hence there is no quality problem with the laws as such. The problem lies in inadequate enforcement of those laws and the role the state holds in the insolvency proceedings. Based on the findings in Section 3.3.1.6 and in absence of evidence that Xiamen Xiashun would not be subject to the country-wide distortions in respect to bankruptcy proceedings, this claim was rejected.

(201) Xiamen Xiashun further commented that it conducted independent price negotiations with its customers in the EU or elsewhere based on the cost of production and the prevailing market conditions. It added that when selling to its customers in the EU, its price was based on a conversion premium plus aluminium price quoted, for sales to the EU, in the London Metal Exchange (LME).

(202) According to the requirements of Article 2(6a)(a) of the basic Regulation, the normal value must be constructed on the basis of undistorted prices or benchmarks if 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. The claims summarised in the previous recital are based on cost of production and prevailing market conditions when selling to EU customers (or elsewhere). Therefore, their context and factual situation concerns the export price to the EU (and elsewhere) and not the normal value, which is the object of this provision. The Commission thus rejected this claim.

(203) With regard to raw materials, Xiamen Xiashun submitted that there are no public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces in the PRC. In its view, it has a free choice of selecting its own suppliers, whether producers or distributors, at freely negotiated prices. It added that the purchase price of the raw materials and other inputs was determined through negotiation and bidding among several suppliers. Xiamen Xiashun further added that it purchased some of its raw materials overseas. In particular, this is the case for Titanium Boron Aluminium Rod, which it buys entirely from the United Kingdom.

(204) In this respect, the Commission recalled that Xiamen Xiashun did not provide evidence positively establishing that its costs regarding domestically sourced inputs were not affected by the substantial government intervention according to the findings made in Sections 3.3.1.2 to 3.3.1.9. The investigation established distortions in the entire chain of the aluminium flat-rolled products sector. Those distortions also concern the suppliers of raw materials, who are subject to all types of distortions found in the PRC, including the cost of electricity, labour, access to finance etc. In contrast, in the case of Xiamen Xiashun’s purchases overseas, on the basis of the evidence submitted and subsequently remotely cross-checked, including the questionnaire reply, the relevant contracts, a price analysis of these purchases (showing prices similar to the ones used from the representative country), and absent any evidence of distortions for this input in the United Kingdom, it was positively established that the purchase price of Titanium Boron Aluminium Rod from the United Kingdom (which represents a small part of the overall costs of raw materials of this company) is non-distorted and does not have to be replaced with data from a representative country.

(205) Furthermore, the investigation revealed that Xiamen Xiashun established jointly with Yunlu Aluminum Co., a SOE, an enterprise incorporated under the name of Yunnan Yongshun Aluminium Co., Ltd. in Jianshui County, Yunnan Province. That company’s main business is the production of large aluminium alloy slabs and it is a supplier of Xiamen Xiashun. The above example shows that first, Xiamen Xiashun is closely cooperating with the Chinese state, by creating a joint-venture with a SOE, and secondly, that the country-wide distortions also concern its suppliers.

(206) Xiamen Xiashun further submitted that the government had no influence over its ability to access credit or the terms of credit that the company was granted and that the terms of credit, such as the interest rate, are determined by the pertinent prevailing market rate. Also, Xiamen Xiashun submitted that its SG&A expenses were undistorted and reasonable and should be taken into account.

(207) The Commission recalled that for the purpose of establishing the existence of significant distortions under Article 2(6a)(b) of the basic Regulation, the potential impact of one or more of the distortive elements listed in that provision is analysed with regard to prices and costs in the exporting country. Even if the exporting producer did not benefit from any significant state financing directly, quod non,, Xiamen Xiashun was eligible for financial support as described in Sections 3.3.1.8 coupled with 3.3.1.5 below. This is because, as explained in Section 3.3.1.5, the exporting producer was subject, as all companies in the aluminium sector, to Chinese State planning and guidance documents and enjoyed access to financing, through the Chinese financial system described in Section 3.3.1.8. In this respect, banks and other financing institutions following the guidance of the GOC, facilitate access to finance for market players, including producers of aluminium products, hence creating a financial safety net for those enterprises, and giving them an additional advantage compared to their counterparts located outside the PRC. Furthermore, as explained in recital (198), Xiamen Xiashun, having the status of a Strategic Emerging Industry (‘SEI’), is subject to the financial support made available to the companies having the SEI status, as described in the mentioned recital.

(208) Regarding labour, Xiamen Xiashun submitted that it followed a sound and normal wage cost system. It negotiated independently with its employees for the individual wages based on the market rates and their personal expertise and achievements. It added that there is no state mandate regarding wage controls in the PRC.

(209) The Commission recalled that distortions on the labour market were established at the country-wide level in Section 3.3.1.7. The issues inherent to the Chinese labour market, including the lack of labour unions independent from the government and the workforce mobility restrictions due to the household registration system as described in recital (172) have a distortive impact on the wage creation in the PRC. In this respect, there is no evidence establishing that the distortive effects of the country-wide lack of independent trade unions and the issue of household registration system are not applicable to Xiamen Xiashun. The claim was therefore rejected.

(210) Finally, Xiamen Xiashun submitted that, for all the reasons mentioned above, its SG&A and profits were undistorted and also reasonable and should be taken into account in the calculations.

(211) As for the claim concerning SG&A and profits, the Commission first noted that it was generic and unsubstantiated, as it simply referred to the other claims by this exporting producer which have all been rejected. Furthermore, Article 2(6a)(a) of the basic Regulation specifically requires that if there is a finding of significant distortions, the constructed normal value must include an undistorted and reasonable amount for SG&A costs and for profits. Since this is the case in this investigation and the exporting producer as well as its suppliers are affected by these distortions, these claims were rejected.

(212) In reaction to Xiamen Xiashun’s comments, Airoldi submitted a set of comments on significant distortions with regard to information submitted by other interested parties under point 8(i) of the Notice of Initiation.

(213) First, Airoldi expressed its support for Xiamen Xiashun’s comments submitted on initiation concerning the incompatibility of Art. 2(6a) of the basic Regulation with various provisions of the WTO Anti-dumping agreement.

(214) The issue of compatibility of Art 2(6a) of the basic anti-dumping Regulation with the WTO law was already discussed in recitals (189) to (195). Therefore these claims were rejected.

(215) Furthermore, Airoldi submitted that in case the Commission concluded that there are significant distortions in the PRC, it should still make a producer-exporter specific analysis of the costs and take into account the producer-exporter’s own domestic costs which are found not to be distorted.

(216) The Commission explained in recital (195) above that all the calculations were based on the company’s specific data, and both the types of factors of production as well as their amounts were used as reported by the company, with only the values replaced by an undistorted benchmark. Therefore, these claims were rejected.

(217) Third, Airoldi commented that the complaint submitted by the European Aluminium Association was in fact an anti-subsidy complaint, as the language of the complaint referred in a number of instances to subsidies made available to the aluminium flat-rolled products producers in the PRC. Airoldi submitted that by bringing the anti-dumping complaint and by relying on the assumption that the representative country methodology was automatically applicable, the complainant attempted to circumvent the very essence of the various objectives of the countervailing and anti-dumping investigations. The former addressed the unfair trade practices, as originating from the benefit conferred by the state. The latter concerned unfair trade practices by the individual exporters. Airoldi observed that acceptance of such claims amounts to a violation of the very objectives of the basic anti-dumping and anti-subsidy Regulations (106).

(218) The Commission recalled that Article 2(6a) of the basic Regulation requires a demonstration of significant distortions in the exporting country in question. The complaint made certain references to subsidies to illustrate the presence of significant distortions in the PRC, in accordance with the requirement of Article 2(6a)(b), third indent in particular (public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces). It is undeniable that subsidies are just one of the means used by governments to interfere with the free market forces, and thus they show substantial government intervention according to this provision of the basic anti-dumping Regulation. Therefore, the complaint was fully in line with the provisions and the objectives of the basic anti-dumping Regulation. Thus, this claim was rejected.

(219) Fourth, Airoldi submitted that the complainant had suggested that the Commission was bound by the principle of stare decisis with regard to its previous investigations, as per paragraphs 85-87 of the complaint. Airoldi explained that such a reasoning was manifestly unacceptable with the basic standards of the burden of proof under the basic anti-dumping and anti-subsidy Regulations. In Airoldi’s view, the entire premise of application of the representative country methodology rested on merely two evidentiary documents: (i) the Commission report from 2017; and (ii) the OECD report. The complainant did not exercise due diligence in establishing the existence of specific schemes, with reference to specific measures as applicable in the PRC, which would solely benefit the aluminium sector in the PRC. The claims were unsubstantiated and lacked evidentiary support. Therefore, Airoldi requested that the complainant’s disregard to the requirement of fulfilment of the burden of proof should result in a dismissal of the complaint.

(220) The Commission recalled that the determination on the actual existence of significant distortions and the consequent use of the methodology prescribed by Article 2(6a)(a) of the basic Regulation only occurs at the time of the provisional and/or definitive disclosure and not at initiation. Based on the evidence presented in the complaint, including the two reports, namely the country Report and the OECD Report, and the array of underlying objective sources referenced therein, the Commission deemed the evidence submitted by the complainant on the significant distortions sufficient to initiate the investigation on this basis and fully in accordance with Article 2(6a)(d) of the basic Regulation, which specifically gives the complainants the possibility to use the country Report as evidence when filing a complaint. With regard to the country Report, the Commission recalled that it is a comprehensive document based on extensive objective evidence, including legislation, regulations and other official policy documents published by the GOC, third party reports from international organisations, academic studies and articles by scholars, and other reliable independent sources. The report was published in December 2017 and all parties had ample opportunity to rebut, supplement, or submit comments on the Report in accordance with Article 2(6a)(c) of the basic Regulation, but the Commission received no such comments or evidence which would invalidate the Report. As for the findings in previous investigations such as those in paras. 85-87 of the complaint, they constitute relevant evidence, especially as they concerned not only the country-wide distortions in the same country, but specifically the distortions and the situations in the aluminium sector which are very likely to affect also exporting producers in this investigation. Therefore, these claims were rejected.

(221) Finally, Airoldi presented its support for Xiamen Xiashun’s claim that the prices for aluminium ingots in China are determined by market forces, either LME or the Shanghai Futures Exchange, plus a conversion premium. A similar comment was also received from Jiangsu Alcha Group, which submitted in the questionnaire reply that all its purchases were made based on arm’s length negotiations with its suppliers, and are not affected by any significant distortions. As an example, Jiangsu Alcha Group presented evidence that its purchase price for aluminium ingots during the investigation period was higher than the LME price.

(222) The Commission noted that aluminium ingots are subject to an export tax in the PRC. The operation of this specific export tax distorts the normal operation of market forces by restricting exports and thereby increasing the domestic supply of aluminium ingots for aluminium producers in China. The Commission hence rejected the claim that the prices of aluminium ingots in China were free of State interference and determined by market forces. In this regard, the actual price paid is not determinative. It was not positively established that aluminium ingots were not affected by the government interventions according to the findings made in Sections 3.3.1.2 to 3.3.1.9. Those distortions also concern the domestic suppliers of aluminium ingots, who are subject to all types of distortions found in the PRC, including the cost of electricity, labour, access to finance, etc.

(223) Since the Commission rejected all the claims above, it reaffirmed its conclusion as per recital (188) that it was not appropriate 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.

(224) Consequently, the Commission proceeded to construct the normal value on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation. At the same time it accepted the prices for Titanium Boron Aluminium Rod from one exporting producer which sourced that particular raw material entirely from the United Kingdom as explained at recital (204).

(226) As mentioned in recitals (111) to (113), the Commission made available on the file two notes for the file on the sources for the determination of the normal value on which interested parties were invited to comment: Note of 5 October (‘First Note’) and Note of 25 November (‘Second Note’), respectively. These notes described the facts and evidence underlying the relevant criteria and addressed the comments received from the parties on those elements and on the relevant sources. The Commission’s assessment of the facts and the evidence and conclusions can be summarised as follows:

(227) In the First Note, the Commission identified 55 countries with a similar level of economic development as China. In the investigation period, the World Bank classified these countries as ‘upper-middle income’ countries on a gross national income basis. However, as stated in the complaint, a sizeable production of the product under investigation was known to take place only in six of these countries, namely in Brazil, Indonesia, Russia, South Africa, Thailand and Turkey.

(228) Indonesia, South Africa and Russia had, in the investigation period, export restrictions on aluminium, one of the main raw materials to produce the product under investigation (108). Therefore, given that these restrictions could also have an influence and distort the import price of this raw material, the Commission concluded that it would not consider these countries as appropriate representative countries and it thus further assessed the availability of relevant public data only for Brazil, Thailand and Turkey.

(229) In the First Note, the Commission provided information on relevant public data, notably the availability of financial information of companies producing the product under investigation in Brazil, Thailand and Turkey, and on the imports to these countries of the raw material to produce the product under investigation identified by the interested parties.

(230) According to the Global Trade Atlas (‘GTA’) database, Brazil, Thailand and Turkey imported most of the relevant raw materials in representative quantities and these imports could be thus used as benchmarks to establish the normal value in accordance with Article 2(6a) of the basic Regulation. The Commission also identified producers in these countries with publicly available information (109).

(231) After having received comments on the First Note, the Commission analysed the information at its disposal and it considered that the most appropriate public data was available for the Brazilian company Novelis do Brasil Ltda (‘Novelis do Brasil’). Contrary to the producers identified in Thailand and Turkey, this company had full audited financial statements available on its website (110), and the financial information overlapped with the IP by nine months.

(232) Consequently, the Commission proposed in the Second Note to select Brazil as the appropriate representative country for establishing undistorted prices and benchmarks and to use the data of the Brazilian company Novelis do Brasil to establish an undistorted and reasonable SGA and profit for the calculation of normal value.

(233) Several interested parties (111) raised objections against Brazil as the appropriate representative country. They mainly argued that Government policies, the existence of different taxes (112) on imported products and inefficiencies linked to the production of the product under investigation in Brazil led to exceptionally high prices of the product under investigation on the Brazilian market and to an unreasonable high profit of the Brazilian company. Therefore, the profit of the Brazilian company Novelis do Brasil did allegedly not constitute an appropriate benchmark in the sense of Article 2(6a)(a), last paragraph, of the basic Regulation (113).

(234) In addition, some interested parties (Airoldi Metalli Spa and Xiamen Xiashun) also pointed out that the Brazilian authorities opened, on 29 July 2020, an anti-dumping investigation on Chinese imports of aluminium products into Brazil (Circular No 46 of 28 July 2020 – ‘Circular 46’ – of the Brazilian Secretariat of Foreign Trade –‘SECEX’) (114).

(235) The product scope of the investigation mentioned in Circular 46 largely overlapped with the scope of the product concerned in the current investigation, defined in Section 2 above. Circular 46 also published, in an index format, operational results of the complainants (three companies including Novelis do Brasil) that showed that throughout the period 2015 – 2019, the complainants registered losses (115).

(236) Based on this new evidence, and despite the fact that Circular 46 contains consolidated indexed figures for the three complaining producers, the Commission considered unlikely that Novelis do Brasil’s reported profit (19,4 % in the latest financial period (116)) had been achieved in relation to the product under investigation. In this respect, given that the company produces a large scope of products (117), the Commission considered that such a profit was most likely, and to a large extent, achieved in relation to other products manufactured by Novelis do Brasil, such as products for the aerospace, automotive industry and beverage cans.

(237) The Commission therefore provisionally considered that data of Novelis do Brasil did not constitute an appropriate benchmark to establish a reasonable SG&A and profit for the product under investigation.

(238) The Commission thus re-assessed the respective merits of Thailand and Turkey as possible appropriate representative countries. However, the only publicly available financial data of companies in Thailand and Turkey only partially overlapped with the IP. Moreover, in the most recent financial period that was available, the operational results of these companies were close to the breakeven point (118). Therefore, the Commission considered that data of these companies did not constitute an appropriate benchmark for establishing an undistorted and reasonable profit and SG&A.

(239) Given this situation, the Commission considered that data of companies in a sector producing a similar product could be appropriate in these circumstances. This conclusion was reached close to the adoption of provisional measures. In light of the constraints imposed by the mandatory time limits set out in the basic Regulation, the Commission thus decided to provisionally base its analysis on the knowledge and information already available in another ongoing anti-dumping investigation in the same (aluminium) sector and covering a similar product and a similar period – aluminium extrusions (119). Aluminium extrusions are products having similar technical and physical characteristics as aluminium flat-rolled products. As for the production process, aluminium can be formed into a variety of products by extruding, rolling or casting. Extruded aluminium are formed into aluminium profiles of different shapes. Aluminium flat-rolled products include flat sheet, coiled sheet, plate, and foil. Furthermore, these products are often produced by the same companies as those producing aluminium flat-rolled products or within the same group.

(240) The Commission will continue its investigation and if it obtains new and appropriate data from the potential representative countries the situation could be reassessed.

(241) Therefore, given the similarities between the AFRPS and aluminium extrusion products, and given that the relevant data were publicly available (120), the Commission decided provisionally to use data of the companies producing aluminium extrusions as these data were in the Commission’s view representative of the situation of companies producing aluminium flat-rolled products.

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

(243) In view of the above analysis, the Commission decided provisionally to consider Turkey as the appropriate representative country for the purpose of Article 2(6a)(a) of the basic Regulation.

(244) On the basis of the information submitted by interested parties and other relevant information available on the file, the Commission established, in the First Note, an initial list of factors of production (FOP) such as materials, energy and labour used for the production of the product under investigation.

(245) In accordance with Article 2(6a)(a) of the basic Regulation, the Commission also identified sources to be used for establishing undistorted prices and benchmarks. The main source that the Commission proposed to use included the Global Trade Atlas (the ‘GTA’). Finally, in the same note, the Commission identified the Harmonised System (HS) codes of factors of production which, on the basis of information provided by the interested parties, were initially considered to be used for the GTA analysis.

(246) The Commission invited the interested parties to comment and propose publicly available information on undistorted values for each of the factors of production mentioned in that Note.

(247) Subsequently, in the Second Note, the Commission updated the list of factors of production based on the comments of the parties and information submitted by the sampled exporting producers in the questionnaire reply.

(249) In order to establish the undistorted price of raw materials the Commission used as a basis the weighted average import price (CIF) to the representative country, as reported in the GTA, from all third countries excluding the PRC and countries that are not members of the WTO and listed in Annex 1 of Regulation (EU) 2015/755 of the European Parliament and the Council (121). The Commission decided to exclude imports from the PRC as it concluded that it is not appropriate to use domestic prices and costs in China due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation (recitals (188) to (224) above). Absent any evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected export. The weighted average import price was adjusted for import duties, where appropriate.

(250) For a small number of factors of production the actual costs incurred by the cooperating exporting producers represented a negligible share of total raw material costs in the review investigation period. As the value used for those had no appreciable impact on the dumping margin calculations, regardless of the source used, the Commission treated those factors of production as consumables as explained in recital (13).

(251) The Commission expressed the transport cost incurred by the cooperating exporting producers for the supply of raw materials as a percentage of the actual cost of such raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted transport cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported transport costs could be reasonably used as an indication to estimate the undistorted costs of raw materials when delivered to the company’s factory.

(252) The Commission noted that aluminium liquid, which was used as an input by one of the companies within the Nanshan Group could not be transported at long distances and that no international benchmark existed for this input. Therefore, as an alternative, the Commission decided to use as a benchmark the undistorted price of aluminium ingot falling under HS code 7601 10 from which the processing costs, expressed as a percentage, incurred by the company concerned to transform the aluminium liquid into ingot (122), were deducted.

(253) After the publication of the Second Note, the Nanshan Group reiterated its argument submitted after the publication of the First Note, namely that the aluminium scrap it used to produce the product under investigation had the same aluminium purity as finished goods and that, in terms of usage, this product was recycled in the casting stage in the same manner as aluminium ingots. Consequently, according to the Nanshan Group, the HS code reported by the Commission in the First and Second note referred to a different product, namely to aluminium scrap from various sources, less purity and different alloy composition.

(254) The Commission reviewed the claim. It observed based on the evidence brought by the Nanshan Group during the RCC process that the aluminium scrap used (and sold) by the different companies within the Nanshan Group was not priced at the same level as aluminium ingots, but a deduction of between 2 %-9 % depending on its grade was made to reflect the scrap purity. Therefore, it was confirmed that the price of the aluminium ingot was higher than the price of scrap.

(255) The Commission also observed that the relevant commodity code under the Turkish nomenclature recognised so-called manufacturing scrap (under a more refined commodity code 760200190000) that, compared to scrap under commodity code 760200 900000, appeared to better reflect the type of scrap consumed and produced by the Nanshan Group. Finally, the Commission also reiterated that it had not received any evidence on the particular composition of the aluminium scrap imported under the mentioned HS code to support the claim that is a scrap with less purity and different alloy composition. Therefore, the Commission decided to use as the benchmark the import price under commodity code 760200190000 and not an import price for an ingot as suggested by the company.

(256) The Nanshan Group also argued that the GTA price based on HS codes did not differentiate the end uses and alloys of aluminium coil, while by quantity, a very large portion of the imported aluminium coil could be used for products not covered by the product scope namely for automobile or aerospace industry, or, as a can stock. It argued that the prices of the different alloys and end uses varied substantially, and therefore, in its view, the GTA averaged price failed to provide a surrogate value of aluminium coil specific to that consumed by Nanshan Group for production of the product under investigation. The Nanshan Group proposed, instead of taking as benchmark the GTA prices, to rely on prices provided in the CRU reports for the foil stock price of alloy 1050 which was in its view very similar to foil stock alloy 8079 in terms of its chemical composition.

(257) The Commission assessed the claim. First, it observed that under the Turkish nomenclature, the HS code used as the benchmark for the calculation of the provisional margin excluded, contrary to Nanshan’s claim, the largest group of products that fell outside the product scope, namely products to be used by the can industry. Second, in the Turkish nomenclature, the particular commodity codes distinguished between different thicknesses, and therefore, allowed for a more precise split between the different types of products, compared to prices in the CRU report that only referred to one particular thickness. Third, the prices in the CRU reports related to markets in the Union and thus did not reflect prices in a country with a similar level of economic development. Therefore, the Commission considered that the prices in GTA of the imported coils represented a more appropriate benchmark for establishing the normal value compared to prices indicated in the CRU report. The Commission thus rejected the claim and decided to use as the benchmark the import price under commodity code 760612920000 for cold rolled coils, the average of commodity code 760612930000 commodity code 760612990000 for hot rolled coils and commodity code 760612990000 for plates.

(258) The Nanshan Group also argued that for steam coal, the Commission should not rely on import prices of coal in the GTA database, as import quantities into Turkey for 2019 were negligible. Instead, the Commission could consider prices of thermal coke and petroleum coke prices in the IHS report (123).

(259) The Commission observed first that there was no evidence to consider that the price in the GTA database of the imported quantity (of over 500 tonnes) was not representative of a market price or that the price in the GTA database would have been substantially different if the import volume was higher. Second, in the submitted report, the prices related, apart from China, to only five other countries, namely Australia, India, Russia, South Africa and Indonesia. These prices varied between the different regions and countries. The Commission found no compelling evidence that the prices in those countries would be more representative of an international undistorted price than the prices in the representative country. Therefore the Commission rejected the claim and decided to use as the benchmark the import price of the coal into Turkey.

(260) To establish the benchmark for labour costs the Commission used the most recent statistics published by the Turkish Statistical Institute (124). This institute publishes detailed information on wages in different economic sectors in Turkey. The Commission established the benchmark based on hourly labour costs for the economic activity C.24 (manufacture of basic metals) (125). The values were adjusted using as deflator the domestic producer price index published by the Turkish statistical institute (126).

(261) To establish the benchmark price for electricity, the Commission used prices of electricity for companies (industrial users) in Turkey published by the Turkish statistical institute (127). The benchmark was established based on the price for electricity published on 25 March 2020. The price referred to the 2nd semester of 2019. The Commission used the data on the industrial electricity prices in the corresponding consumption band that is respectively 2 000 ≤ T < 20 000 MWh for medium consumers and > 150 000 MWh for very large consumers.

(262) To establish the benchmark for gas, the Commission used the prices of gas for companies (industrial users) in Turkey published by the Turkish statistical institute. The prices differed per consumption volume (128). The Commission used the corresponding prices for medium or large consumers. The Commission used as benchmark the most recent data relating to 2nd semester of 2019.

(263) For both, electricity and gas, the Commission used prices at net level (without VAT).

(264) The price of water in Turkey is published by the Istanbul Water and Sewerage Administration (ISKI), the Eskişehir Water and Sewerage Administration & Antalya Water and Sewerage Administration (129). To establish the benchmark price for water, the Commission used an average industry price in the Istanbul region, the Eskişehir Organized Industrial Zone (OIZ) and prices in the Antalya OIZ for which the relevant information was publically available.

(265) According to Article 2(6a)(a) of the basic Regulation, ‘the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profit s’.

(267) The same level of the weighted average profit of 7,2 % and of the weighted average proportion of SG&A costs of 12,2 % was used in this investigation.

(268) Based on the undistorted prices and benchmarks described above, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

(269) To establish the undistorted costs of manufacturing for each legal entity manufacturing and exporting the product concerned, the Commission replaced, for each exporting producer, factors of production purchased both from related and unrelated parties by the factors of production identified in Table 2.

(270) The Nanshan Group argued that the normal value for the Group should be calculated in a consolidated way, i.e. the Commission should only consider replacing the prices of factors of production that the Group was buying at the beginning of the production process from an unrelated party with the benchmark prices. Therefore, it considered that the Commission should disregard the intra-group sales of intermediary products. The Nanshan Group referred in particular to the Commission’s practice on the concept of a ‘single economic entity’ for the purpose of establishing the export price. The Group argued in particular that all the companies within the Group were controlled by one legal entity, there was no written contract for sales between the companies, the companies were located in the same facility or nearby, production types did not overlap, production of downstream is dependent on the upstream production, and finally, that the companies do not have independent export sales.

(271) The Commission observed that indeed, the production of different product types and/or different steps in production processes within the Group was split between the companies within the Group, and that the individual companies used the production inputs produced by a related company within the group. The intra-group sales included sales of raw material (such as for instance aluminium liquid), energy (such as for instance electricity) and also product concerned that was further used as a production input by a downstream company (such as for instance cold rolled coils used by one of the companies to produce aluminium foil).

(272) In response the Commission noted that Nanshan Group’s claim is related to the construction of a normal value for the various exporting producers within the group. When the product concerned is produced and exported by various entities within a group, the Commission’s practice is to establish a normal value for each investigated individual product type that is exported to the Union within a group of companies for each individual exporting producer separately based on the specific data (here, the factors of production) of the exporting producer concerned.. The request to have the normal value established on a consolidated basis artificially assumes that the group constitutes a single integrated producer. As explained above, this is not the case. The various producing companies of the group separately produce the product concerned. The request is therefore rejected.

(273) First, the Commission established the undistorted costs of manufacturing based on the factors of production purchased by each of the companies. It then applied the undistorted unit costs to the actual consumption of the individual factors of production of each of the cooperating exporting producers. The Commission reduced the costs of manufacturing by the undistorted costs of by-products re-used in the production process.

(274) Second, to arrive at a total undistorted costs of manufacturing, the Commission added manufacturing overheads. Manufacturing overheads incurred by the cooperating exporting producers were increased by the costs of raw materials and consumables referred to in recital (250) and subsequently expressed as a share of the costs of manufacturing actually incurred by each of the exporting producers. This percentage was applied to the undistorted costs of manufacturing.

(275) Finally, the Commission added SG&A and profit, determined on the basis of the five Turkish companies (see Section 3.5.6). SG&A expressed as a percentage of the cost of manufacturing and applied to the undistorted total cost of manufacturing, amounted to 15,16 %. The profit expressed as a percentage of the COGS and applied to the total undistorted costs of manufacturing, amounted to 9,07 %.

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

(277) When the sampled exporting producers of the Nanshan Group exported the product concerned to the Union either directly to independent customers or through related companies located in China or in third countries, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(278) Two companies within the Nanshan Group also sold the product concerned to the Union through an additional related company in the Union acting as an importer. For these sales, the export price was constructed on the basis of the price at which the imported product was first resold to independent customers in the Union in accordance with Article 2(9) of the basic Regulation. The adjustments made related to all costs incurred between importation and resale, including SG&A expenses and profits, in order to establish a reliable export price at the Union frontier level.

(279) Another sampled company, Xiamen Xiashun, exported the products concerned directly to independent customers in the Union. For these sales, the export price was thus the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

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

(281) In order to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments to the export price were made for transport, insurance, handling and loading, packaging, discounts, credits costs, bank charges and other import charges.

(282) All export sales of the product concerned by the Nanshan Group were made exported via a wholly owned domestic trading company in China, which sold it either directly to independent customers or via a related trading company in Singapore. The Nanshan Group claimed that this domestic trading company acted as the internal sales department of the production companies. Based on an assessment of the evidence currently available, the Commission provisionally accepted the claim and no adjustment was made under Article 2(10)(i).

(283) The Jiangsu Alcha Group exported all the production of the product concerned via related traders in China and Hong Kong. One of the companies within the Nanshan Group also sold partially the product concerned to the Union via a related trader in Singapor, as mentioned in the previous recital. Therefore for these sales, the Commission adjusted the export prices of these companies in accordance with Article 2(10)(i) of the basic Regulation as these traders were acting as agents working on a commission basis. The adjustment amounted to the SG&A and profit of the trader.

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

(285) For the companies within the Nanshan Group, it calculated individual dumping margins for each of the companies within the Group and then, it calculated a weighted dumping margin for the Group.

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

(287) On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 67,1 %.

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

(289) The level of cooperation in this case is low because the exports of the cooperating exporting producers constituted only around 40 % of the total exports to the Union during the investigation period. Therefore, the Commission considered it appropriate to set the country-wide dumping margin applicable to all other non-cooperating exporting producers at the level of the highest margin established for product types sold in representative quantities on the basis of the data of the cooperating exporting producers. The dumping margin thus established was 183,3 %.

(291) As indicated in recitals (50) to (52), the transition period for the UK withdrawal ended on 31 December 2020 and the UK ceased to be subject to Union law as of 1 January 2021. Consequently, the Commission requested interested parties to provide updated information on EU-27 basis. In view of the advanced stage of the provisional phase when this updated data was requested, with the exception of the undercutting, the Commission’s provisional findings were based on EU-28 data, for the reasons explained in the next recital.

(292) The Commission provisionally concluded that the EU-28 data was appropriate at this stage after analysing the information on file. This is because the impact of UK’s withdrawal from the Union on the injury analysis appears to be limited. The sales of the sampled Union producers to the UK represented less than 5 % of their total sales to unrelated customers in the EU. There is only one producer of AFRPs located in the UK. The Chinese exports to the UK remained stable and evolved in line with the exports to the EU, and the UK exports to the EU remained also stable.

(293) In any case, the findings on injury, causation and Union interest will be re-assessed at definitive stage on the basis of EU-27 data and amended, if need be. Those findings will be disclosed and parties will have the opportunity to comment.

(294) The like product was manufactured by over 20 producers in the Union during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(295) The total Union production during the investigation period was established at around 1 907 127 tonnes. The Commission established the figure on the basis of the Union production data of European Aluminium, which was cross-checked for reliability and completeness with information supplied by Union producers including the data of the sampled Union producers. As indicated in recital (35), three Union producers were selected in the sample representing 35 % of the total Union production of the like product.

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

(297) To provide a picture of the Union industry that was as complete as possible, the Commission obtained data for the entire AFRPs activity and determined whether the production was destined for captive use or for the free market.

(298) The Commission found that a very small part of the total Union producers’ production was destined for the captive market as shown in Table 3 below. The captive market increased over the period considered but remained at very low levels, below 1,5 % of consumption. Where appropriate, the figures for the captive market are provided and assessed separately. For other indicators, such as production, capacity, productivity, employment and wages, the figures considered below relate to the whole activity and therefore no separation was warranted.

(299) As mentioned in Section 2.3.1, the non-sampled exporting producer Huafon requested the exclusion of automotive HEX AFRPs from the product scope of this investigation. In the absence of such exclusion, it requested a segment specific analysis with regard to dumping, injury, causal link and Union interest for automotive HEX AFRPs. In support of its request, it claimed that automotive HEX AFRPs showed similarities with the aluminium wheels cases (131), where different distribution channels were identified (Original Equipment Manufacturer v aftermarket), thus warranting an analysis by segments. It also referred to the Appellate Body reports China – HP-SSST (Japan)/China – HP-SSST (EU) (132) without, however, explaining exactly how this case-law would apply to the facts of this case.

(300) As explained in recitals (62) to (80), automotive HEX AFRPs were found to share the same basic physical, technical and chemical characteristics as other AFRPs and therefore fell within the product scope of the investigation. The Commission also concluded that there were no Union interest grounds to exclude the product from the scope of the investigation.

(301) As far as the reference to the aluminium wheels cases is concerned, there are no clear dividing lines between automotive HEX AFRPs and other AFRPs in terms of distribution channels. Indeed, as explained in recital (74), automotive HEX AFRPs are not the sole products destined for the automotive industry. The product under investigation covers other automotive products, such as structural parts for automotive applications (chassis, components), that are also sold to Tier-1 suppliers.

(302) Also, whereas this exporting producer did not make reference to specific elements of the Appellate Body report in HP-SSST referred to in recital (299), the facts in the present investigation are different. In the case referred to, the price differences between the different grades at issue were very significant (+ 100 or + 200 %). By contrast, in the current case, there is no significant price difference between automotive HEX AFRPs and other AFRPs that would have pointed to a clear dividing line between this product and other AFRPs. Thus, the analysis in HP-SSST applies to a specific factual situation in that case, and cannot be extrapolated to the present case, where the analysis took place on the basis of PCNs. It is recalled that the Chinese investigating authority does not apply a PCN method of comparison. In any event, there is no legal obligation that the Commission conducts a segment analysis in each and every case, regardless of the factual circumstances – neither in the basic Regulation nor in the WTO Anti-dumping Agreement, and there is nothing in the HP-SSST reports that would suggest the Appellate Body took such a position. Therefore, the Commission rejected this request for a segment specific analysis.

(303) The sampled exporting producer Xiamen Xiashun claimed that foil stock was not meant to be covered by the complaint. The exporting producer requested a segment specific analysis on the grounds that foil stock was different from the other products described as common sheets and that it was sold via a different distribution channel. It also claimed that foil stock was sold by very few companies and mainly produced and consumed in the captive market. In support of its request, it claimed that automotive foil stock showed similarities with the aluminium wheels cases (133), where different distribution channels were identified (Original Equipment Manufacturer v aftermarket), thus warranting an analysis by segments. It also referred the Appellate Body reports China – HP-SSST (Japan)/China – HP-SSST (EU) (134) without being more specific. Finally, it argued that it was not listed as a producer in the complaint and that its products were not clearly mentioned.

(304) The fact that a producer was not listed as an exporting producer by the complainant does not mean that it is not concerned by a proceeding or that its products are not covered by the proceeding. In fact, it is natural that complainants are not aware of all existing producers in a given country and therefore the list thereby provided cannot be expected to be exhaustive.

(305) Foil stock falls within the definition of the product scope, as defined in recital (55) to (61) above, and can be classified using the product coding foreseen by the investigation in terms of thickness, form, material used, finishing and temper. It shares the same basic chemical, technical and physical characteristics as other AFRPs as they are composed of more than 95 % of pure aluminium. Furthermore, they are made of the same or similar alloys and have the same or similar finishing, temper and thickness as other AFRPs.

(306) As far as the distribution channels are concerned, there are no clear dividing lines between foil stock and other AFRPs. In its claim, Xiamen Xiashun referred to the aluminium wheels case (135) where a distinction was made between OEM and aftermarket market segments. However, the situation in the case at stake is different as foil stock is not sold to a different market segment from other AFRPs. While, like other AFRPs, foil stock has its own specifications, such product is sold to industrial users that will process it into a different product. This is true for PP caps for instance which will be made from AFRPs. Also, the investigation revealed that such product was sold by Union producers in significant quantities. Similarly, the sampled Union producers also sold the products exported by the other sampled producers regardless of their alleged segment. Furthermore, in contrast to the Appellate Body report on HP-SSST, in the current case, there is no significant price difference between foil stock and other AFRPs which would have distinguished unequivocally this product from other AFRPs. It is also recalled that the Chinese investigating authority does not apply a PCN method of comparison. In addition, as mentioned in recital (302), there is no legal obligation that the Commission conducts a segment analysis in each and every case, regardless of the factual circumstances – neither in the basic Regulation nor in the WTO Anti-dumping Agreement and there is nothing in HP-SSST that would suggest the Appellate Body took such a position. On this basis, the Commission rejected this request for segment specific analysis.

(307) The importer Airoldi requested a segment specific analysis between soft and hard alloys claiming that that there were numerous producers of soft alloy AFRPs and only a few producers for hard alloys. It also claimed that there was insufficient production capacity for hard alloys.

(308) Airoldi did not provide any evidence that there was a shortage of supply for hard alloys AFRPs. Also, the investigation showed that AFRPs made from hard or soft alloys share the same basic physical, technical and chemical characteristics with other AFRPs covered by the definition. In any case, the three sampled Union producers manufacture both soft and hard alloys in significant quantities. Also, temper is one characteristic foreseen in the definition of the different product types of this investigation. Hence, the alleged differences of such products were in any event captured in the price comparison. Therefore, the Commission also rejected this request for analysis by segments.

(309) The Commission established the Union consumption on the basis of the European Aluminium data for sales in the Union market plus import data from Eurostat as defined in recital (312).

(311) The free market consumption in the Union decreased by 9 % during the period considered. From 2017 to 2018 the Union market increased by 6 % from around 2,6 to 2,7 million tonnes before decreasing in 2019 by 4 percentage points and decreasing further to 2,4 million tonnes in the investigation period. Total Union consumption followed a similar trend with an increase in 2018 followed by a decrease in 2019, which continued in the investigation period as a consequence of the COVID-19 pandemic.

(312) The Commission established the volume of imports based on adjusted Eurostat data for the CN codes following the uncontested methodology suggested by the complainant. The Commission checked and confirmed the estimations of the complainant regarding the proportion of the product concerned in volumes imported under the CN codes indicated in the Notice of Initiation (136).

(313) Also, further to the publication of the amending notice referred to in footnote 11, imports under CN code 7607 19 90 were also taken into account in order to establish the volume of imports from the country concerned. The market share of imports was established on the basis of the import volume from the country concerned as compared to the volume of total Union consumption as shown in Table 3.

(314) In addition to the analysis of overall imports, the Commission also analysed separately imports under inward processing, given the significant share of the latter in the case at hand.

(316) Imports from the country concerned more than doubled between 2017 and 2019 reaching 345 720 tonnes before decreasing by 23 % between 2019 and the investigation period. Overall Chinese imports of AFRPs increased by 65 % during the period considered.

(317) Imports from the country concerned under inward processing increased significantly in 2018 reaching 108 188 tonnes before decreasing slightly in 2019 and in much greater proportions (by 278 percentage points) in the investigation period. Overall, imports from China of AFRPs under inward processing regime increased by 290 % over the period considered.

(318) Imports from the country concerned excluding inward processing increased massively between 2017 and 2018 from 145 281 tonnes to 213 662. In 2019, contrary to imports under inward processing and overall imports from the country concerned, it increased again by 19 percentage points in comparison with 2018. In the investigation period, it decreased by 36 762 tonnes. Overall such imports increased by 41 % during the period considered.

(319) The exporting producer Xiamen Xiashun commented on the evolution of imports under CN code 7606 11 99 into Greece between 2019 and 2020 and questioned whether the products reported under this code, as far as imports into Greece were concerned, actually fell within the product scope.

(320) The Commission investigated the matter but could not draw meaningful conclusions at provisional stage. In any case, it appears that a significant share of the Chinese imports under CN code 7606 11 99 into Greece and more generally, into the EU, were made under inward processing regime in the period 2018-2019 and decreased significantly in the investigation period. The Commission will continue its investigation on this matter at definitive stage.

(321) The market share of imports from the country concerned first increased from 6,1 % in 2017 to 11,6 % in 2018 and thus outpaced the increase in consumption. In 2019, while consumption decreased, imports from the country concerned increased further leading to 13,2 % market share. The market share decreased to 11,2 % in the IP. However, overall, the market share of imports from the country concerned increased by 5 percentage points during the period considered, equivalent to an increase of 81 %.

(322) The market share of imports under inward processing regime from the country concerned increased from 0,6 % in 2017 to 3,9 % in 2018 and 2019 before dropping to 2,5 % in the IP.

(323) The market share of imports excluding inward processing from the country concerned increased from 5,5 % in 2017 to 9,1 % in 2019. In the IP, further to a decrease in such imports and in consumption, to a greater extent, the market share of imports excluding inward processing decreased to 8,5 %. Overall, such market share increased by 54 % during the period considered.

(324) The Commission established the prices of imports on the basis of Eurostat data, using the CN codes and methodology indicated in recitals (312) and (313).

(326) Average import prices from China decreased by 9 % over the period considered from 2 437 to 2 205 EUR/tonne. Those prices remained significantly below the Union’s sales prices during the period considered, as shown in Table 9.

(327) The price of imports under inward processing decreased significantly in 2018 when the import volume of such imports increased significantly. Overall, it decreased by 27 % and remained significantly below the average import price excluding inward processing from 2018 onwards.

(328) The price of imports excluding inward processing decreased continuously starting at 2 391 EUR/tonne in 2017 and reaching 2 237 EUR in the IP (-6 %).

(329) These developments should be seen in the light of the evolution of world aluminium indices such as the LME Aluminium 3-month price quotation (‘LME’) (EUR/tonne) showing the price of aluminium as a raw material and is often used as a point of reference for negotiating the final price of ARFPs. In this regard, it appears that the correlation was the highest between the LME and the Chinese prices of imports under other regimes (0,97). The correlation between the LME and the price of imports under inward processing was the lowest (0,5). During the investigation period, on the basis of the Union average prices in Table 9 below, there was a price difference between the imports from China and the Union prices of around 18 % when compared to the average import price from China and around 17 % when compared to the average import price from China excluding inward processing.

(331) The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the sampled Union producers’ turnover during the investigation period. It showed a weighted average undercutting margin of between 4,6 % and 11,2 % by the imports from the country concerned on the Union market. The weighted average undercutting found was 7,5 %.

(332) The exporting producer Xiamen Xiashun claimed that, on the basis of the characteristics of the PCN, foil stock would be similar to fin stock, PP cap and lithographic sheets. It also claimed that in view of its use as a raw material for foil rolling mills, this product commanded a different price from the product types mentioned above. Xiamen Xiashun requested the Commission to obtain from the Union producers their contracts and prices for the sale of foil stock specifically and to compare these prices to the prices charged by Xiamen Xiashun for the foil stock it sold to the EU.

(333) However, Xiamen Xiashun did not provide evidence with regard to the alleged price difference between the different applications (fin stock, PP cap and lithographic sheet) and the models that it exported to the EU. Furthermore, it did not quantify such differences. In any case, Xiamen Xiashun’s products were not compared to fin stock or lithographic sheets because such products were not sold by the sampled Union producers under the same product coding as foil stock. Therefore, this the Commission rejected this claim.

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

(335) As indicated in recitals (35) to (37), sampling was used for the determination of possible injury suffered by the Union industry.

(336) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data contained in the response of European Aluminium Association which included data related to all Union producers. The Commission assessed the microeconomic indicators on the basis of data contained in the questionnaire replies from the sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

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

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

(340) Production volume first increased in 2018 as a consequence of an increase in export sales and captive market. It decreased in 2019 and further in the investigation period. Production volume decreased by 11 % over the period considered.

(341) Production capacity slightly increased over the period considered. As production volume decreased overall and capacity increased slightly, capacity utilization shows a downward trend (-12 %) over the period considered.

(343) Total sales in the EU followed a downward trend over the period considered (-13 %) and had already decreased by 5 % in 2019.

(344) As mentioned in recital (298), a very small part of the total Union producers’ production was destined for the captive market. Such part accounted for less than 1,5 % of the Union consumption.

(345) Total sales on the free market by the Union industry decreased by almost 240 000 tonnes over the period considered. While consumption had increased to its highest level in 2018 (+ 5 %), those sales already showed a downward trend (-2 %) which continued in 2019 and in the investigation period. Overall sales on the EU free market decreased by 14 %.

(346) The market share of free market sales of the Union industry decreased from 66,2 % in 2017 to 62,7 % in the investigation period. After dropping by 7 % in 2018-2019, it increased by 1.2 percentage points.

(347) In a context of decreasing consumption, the Union industry not only lost sales volumes in the EU but also market share on the free market.

(349) Employment decreased by 9 % over the period considered as the Union industry tried to ensure its sustainability and align it with the demand in the domestic market.

(350) Consequently, its productivity first improved in 2018 from 236 to 254 tonnes/FTE before decreasing following the reduction of the production volume. Overall productivity deteriorated by 2 %.

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

(352) This is the first anti-dumping investigation regarding the product concerned. Therefore, no data were available to assess the effects of possible past dumping.

(354) Sales prices on the Union market to unrelated parties (the free market) first increased from 2 792 to 2 888 EUR/tonne in 2018. It then decreased by 4 percentage points in 2019 before dropping to 2 680 EUR/tonne in the investigation period.

(355) This trend should be seen in light of developments in the industry. First, over the period considered, the sampled Union producers tried to keep the same production volume to dilute their cost while adapting their product mix to increase their sales of high value-added products. Their prices then followed a downward trend in line with the evolution of the LME price of aluminium as a raw material as reported in Table 9.

(356) The unit cost of production of the sampled producers was also heavily impacted by the LME price development and contained the additional costs incurred by the sampled producers in moving to higher value added products. Also, the decrease in production volume observed from 2019 onwards impacted negatively the unit cost of production. Overall, the cost of production increased by 1 % while the average unit sales price on the free market decreased by 4 % over the period considered. In parallel, the LME price of aluminium decreased by 12 %.

(357) One importer, Nilo, claimed that German producers benefited from cost reductions as far as their electricity costs were concerned. The Commission established that Union producers needed to absorb higher direct and indirect electricity costs stemming from the EU Emission Trading System (‘ETS’) (139), whereby EU companies will receive fewer free CO2 allowances and hence need to purchase additional EU CO2 allowances to produce the same volume of AFPRs. In the case at stake, the net result between the electricity cost increase for the German producers and the compensation received was a net loss and therefore the importer’s claim is factually incorrect. On this basis, this claim was rejected.

(359) The average labour costs per employee increased by 5 % over the period considered. One sampled company incurred restructuring costs which are reflected in the labour cost.

(361) Closing stocks remained at a reasonable level throughout the period considered. Since the AFRPs industry generally operates on a production to order basis, this indicator is of a lesser importance in the overall injury analysis.

(362) The percentage of closing stocks expressed on production shows an overall increase which is mainly due to the decrease in production volume.

(364) The Commission established the profitability of the sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales.

(365) The sales of the Union industry to unrelated customers turned from profit making in 2017 to loss making in 2019 and the IP. Hence, profitability followed a steady downward trend over the period considered from 2,8 % in 2017 to -2,2 % in the investigation period.

(366) Importantly, as explained in recital (356), the costs of the Union producers increased more than their prices, which led to the decrease in profitability of the Union industry. The Union industry was unable to raise prices at the same extent as costs were increasing because of the downward pressure caused by imports from China (both in terms of volumes and low prices). Indeed, throughout the period considered, Chinese prices were consistently low and significantly below Union industry prices (see Tables 5 and 9), limiting price increases which would have been expected in the context of a growing demand (up to 2019) and change in product mix (more high value products). This resulted in price suppression and decreasing profitability. In the investigation period, price suppression continued. Indeed, while Chinese prices increased slightly, they remained far below the price level achieved by the Union industry. This is also evidenced by the significant undercutting margins stated in recital (331).

(367) The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow developed negatively over the period considered in line with the evolution of the profitability. Over the period considered, the cash flow decreased by 55 %.

(368) Investments increased by 119 % over the period considered. They were driven by the unrolling of the investment plans by two sampled Union producers. The investments were made in order to make efficiency gains and to move the businesses towards high value added products and customer focus. This was seen as essential for the sampled producers to maintain competitiveness in the market and be able to follow the latest product developments and offer quality products.

(369) The return on investments is the profit in percentage of the net book value of investments. It developed negatively over the period considered from 12 % in 2017 to -2,8 % in the IP. Such development follows the decreasing profitability of the Union industry.

(370) The three sampled producers are part of larger groups of companies and they have continued to raise capital for investments during the period considered. However, with returns on investments falling so quickly, the sampled producing entities ability to raise capital in the future is clearly in jeopardy.

(371) During the period considered, imports of AFRPs from China increased significantly both in absolute (+ 65 %) and relative terms (+ 5 percentage points in market share) while consumption in the EU decreased by 8 %. The increase in imports concerned both imports under inward processing and total imports excluding inward processing. Chinese import prices were consistently low and significantly below Union industry prices throughout the period considered. During the investigation period, the import prices of the sampled exporting producers undercut Union prices by 7,5 % on average. Regardless of the specific undercutting found as regards the sampled exporting producers, the Commission also observed that Chinese prices were consistently low and significantly below Union industry prices during the entire period considered (see Tables 5 and 9). The Union industry was unable to raise prices to the same extent as costs were increasing because of the downward pressure caused by imports from China (both in terms of volumes and low prices).

(372) Most macroeconomic indicators showed a negative trend over the period considered such as production, capacity utilization, sales volume in the EU market, market share, employment and productivity. Only capacity showed a slightly positive trend. Similarly, most microeconomic indicators showed a negative trend over the period considered such as sales prices in the EU free market, cost of production, labour costs, profitability, closing stocks, cash flow and return on investments. Only investments showed a positive trend after the sampled producers made investments in order to maintain competitiveness and follow the latest product developments. The same injury indicators also developed negatively when looking at the period 2017-2019, that is, before the start of the COVID-19 pandemic.