Commission Implementing Regulation (EU) 2022/468 of 23 March 2022 imposing a definitive anti-dumping duty and definitively collecting the provisional duty imposed on imports of calcium silicon originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (the ‘basic Regulation’) and in particular Article 9(4) thereof,

Whereas:

(1) On 18 February 2021, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of calcium silicon (‘CaSi’) originating in the People’s Republic of China (‘the PRC’ or ‘the country concerned’ or ‘China’) on the basis of Article 5 of the basic Regulation. It published a Notice of initiation in the Official Journal of the European Union (2) (‘the Notice of initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 4 January 2021 by Euroalliages (‘the complainant’). The complaint was made on behalf of the Union industry of calcium silicon in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) In accordance with Article 19a of the basic Regulation, on 17 September 2021, the Commission provided parties with a summary of the proposed provisional duties and details about the calculation of the dumping margins and the margins adequate to remove the injury to the Union industry. Interested parties were invited to comment on the accuracy of the calculations within three working days. No comments on the accuracy of the calculations were received.

(4) The Commission imposed provisional anti-dumping duties on imports of calcium silicon originating in the People’s Republic of China by Implementing Regulation (EU) 2021/1811 (3) (‘the provisional Regulation’).

(5) Following the disclosure of the essential facts and considerations on the basis of which a provisional anti-dumping duty was imposed (‘provisional disclosure’), the complainant, the Government of the People’s Republic of China (‘GOC’), the Chinese cooperating exporting producers Ningxia Ketong New Material Technology Co., Ltd (‘Ketong’), Ningxia Shun Tai Smelting Co., Ltd and its related trader Overseas Metallurgy Co., Ltd (‘Shun Tai’) and Shaanxi Shenghua Metallurgy-Chemical Co., Ltd (‘Shenghua’) and one user (cored wire manufacturer Filo d.o.o.), made written submissions making their views known on the provisional findings.

(6) The parties who so requested were granted an opportunity to be heard. Hearings took place with Filo d.o.o. and one of the cooperating exporting producers, Ketong.

(7) The Commission continued to seek and verify all the information it deemed necessary for its definitive findings. When reaching its definitive findings, the Commission considered the comments submitted by interested parties and revised its provisional conclusions where appropriate.

(8) The Commission informed all interested parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-dumping duty on imports of calcium silicon originating in the People’s Republic of China (‘final disclosure’). All parties were granted a period within which they could make comments on the final disclosure.

(9) Parties who so requested were also granted an opportunity to be heard. A hearing took place with Ketong.

(10) In the absence of comments on the initiation of the investigation after the imposition of provisional measures, the Commission confirmed its conclusions set out in recital (12) of the provisional Regulation.

(11) In the absence of comments concerning sampling of Union producers, importers and exporting producers in the PRC, the Commission confirmed its conclusions set out in recitals (15), (17) and (19) of the provisional Regulation.

(12) In the absence of comments concerning the investigation period and the period considered, the Commission confirmed its conclusions set out in recital (25) of the provisional Regulation.

(13) In the absence of any comments concerning the product scope, the Commission confirmed the findings in recitals (26) to (29) of the provisional Regulation.

(14) Following provisional disclosure, the complainant, the GOC and the cooperating exporting producers commented on the provisional dumping findings.

(15) Upon provisional disclosure, the GOC, as well as Ketong and Shenghua submitted comments in which they, inter alia, contested the legality of Article 2(6a) of the basic Regulation, as well as the existence of significant distortions described by the Commission. The comments are addressed in detail below.

(16) The GOC submitted, first, with respect to the Report, that there is no evidence that the Report was approved or endorsed by the Commission, for which reason there are doubts whether the Report can represent the official position of the Commission. On the factual side, the Report is, according to the GOC, misrepresentative, one-sided and out of touch with reality. Moreover, the fact that the Commission has issued country reports only for a few selected countries raises concerns about MFN treatment. Furthermore, in the GOC’s view, the Commission should not rely on the evidence in the Report, as this would be not in line with the spirit of fair and just law, as it effectively amounts to judging the case before trial.

(17) Second, the GOC argued that constructing normal value in accordance with Article 2(6a) of the basic Regulation is inconsistent with the WTO Anti-Dumping Agreement (‘ADA’), in particular with Article 2.2 of the ADA which provides an exhaustive list of situations where the normal value can be constructed, with ‘significant distortions’ not being listed. Moreover, using data from an appropriate representative country is, according to the GOC, inconsistent with GATT Article 6.1(b) and Article 2.2.1.1 of the ADA, which require using the cost of production in the country of origin when constructing normal value.

(18) Third, the GOC claimed that the Commission investigating practices under Article 2(6a) of the basic Regulation are inconsistent with WTO rules insofar as the Commission, in violation of Article 2.2.1.1 of the ADA, disregarded records of the Chinese producer without determining whether those records are in accordance with the generally accepted accounting principles in China. In this connection, the GOC recalled that the Appellate Body in DS473 and the panel in DS494 asserted that according to Article 2.2.1.1 of the ADA, as long as the records kept by the exporter or producer under investigation correspond – within acceptable limits – in an accurate and reliable manner to all the actual costs incurred by the particular producer or exporter for the product under consideration, they can be deemed to ‘reasonably reflect the costs associated with the production and sale of the product under consideration’, and the investigation authority should use such records to determine the production costs of the investigated producers.

(19) Fourth, the GOC submitted that the Commission should be consistent and fully examine whether there are so-called market distortions in the representative country. According to the GOC, readily accepting the representative country’s data without such evaluation represents ‘double standards’. The GOC pointed in particular to the pricing mechanism in the Brazilian electricity market, previously raised by the Chinese cooperating exporting producers in the course of the investigation. The same applies, in the GOC’s view, to evaluating the price and costs of the EU industry. The GOC referred in this connection to widespread situations within the EU that may raise concerns about market distortions.

(20) With regard to the argument on the status of the Report under the EU legislation, the Commission recalled that Article 2(6a)(c) of the basic Regulation does not prescribe a specific format for the reports on significant distortions, neither does that provision define a channel for publication. The report is a fact-based technical document used only in the context of trade defence investigations. The report was therefore appropriately issued as a Commission staff working document as it is purely descriptive and does not express any political views, preferences or judgements. That does not affect its content, namely the objective sources of information concerning the existence of significant distortions in the Chinese economy relevant for the purpose of the application of Article 2(6a)(c) of the basic Regulation. As to the remarks on the Report being one-sided and misrepresentative, the Commission noted that the Report 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 has been publicly available since December 2017 so that any interested party would have ample opportunity to rebut, supplement or comment on it and the evidence on which it is based. The Commission further noted in this connection that while pointing to the Report’s flaws in purely generic and abstract terms, the GOC has refrained from ever providing any rebuttal on the substance to the evidence contained in the report.

(21) In response to the GOC’s claim concerning a violation of MFN treatment, the Commission recalled that, as provided for by Article 2(6a)(c) of the basic Regulation, a country report shall be produced for any country only where the Commission has well-founded indications of the possible existence of significant distortions in a specific country or sector in that country. Upon the entry into force of the new provisions of Article 2(6a) of the basic Regulation in December 2017, the Commission had such indications of significant distortions for China. The Commission also published a report on distortions in Russia in October 2020 (4), and, where appropriate, other reports may follow. Furthermore, the Commission recalled that the reports are not mandatory for the application of Article 2(6a). Article 2(6a)(c) describes the conditions for the Commission to issue country reports, and according to Article 2(6a)(d) the complainants are not obliged to use the report nor is the existence of a country report a condition to initiate an investigation under Article 2(6a) following Article 2(6a)(e). According to Article 2(6a)(e), sufficient evidence proving significant distortions in any country brought by complainants fulfilling the criteria of Article 2(6a)(b) is sufficient to initiate the investigation on that basis. Therefore, the rules concerning country-specific significant distortions apply to all countries without any distinction, and irrespective of the existence of a country report. As a result, by definition the rules concerning country distortions do not violate the most favoured nation treatment.

(22) Concerning GOC’s second and third arguments on the alleged incompatibility of Article 2(6a) of the basic Regulation with WTO law, in particular the provisions of Article 2.2 and 2.2.1.1 ADA, as well as the findings in DS473 and DS494, the Commission reiterated its view expressed in recitals (72) and (73) of the provisional Regulation that Article 2(6a) of the basic Regulation is fully in line with the EU’s obligations under the WTO law. Moreover, concerning the claim that the concept of significant distortions included in Article 2(6a) of the basic Regulation is not listed among the situations in which it is permissible to construct the normal value pursuant to Article 2.2 ADA, the Commission recalled that domestic law does not need to use the exact same terms as the covered Agreements in order to be compliant with those Agreements, and that it considers Article 2(6a) to be fully compliant with the relevant rules of the ADA (and, in particular, the possibilities to construct normal value provided in Article 2.2 ADA). In addition, with respect to DS494, the Commission recalled that both the EU and the Russian Federation appealed the findings of the Panel, which are not final and therefore, according to standing WTO case-law, have no legal status in the WTO system, since they have not been adopted by the Dispute Settlement Body. In any event, the Panel Report in that dispute specifically considered the provisions in Article 2(6a) of the basic Regulation to be outside the scope of that dispute.

(23) With regard to the fourth argument requesting the Commission to ascertain that third-country data used in the Commission proceedings are not affected by market distortions, the Commission recalled that, in accordance with Article 2(6a)(a) of the basic Regulation, it proceeds to construct the normal value on the basis of chosen data other than domestic prices and costs in the exporting country only where it establishes that such data is the most appropriate to reflect undistorted prices and costs. In this process, the Commission is bound to use only undistorted data. In that respect, interested parties are invited to comment on the proposed sources for the determination of the normal value in the early stages of the investigation. The Commission’s ultimate decision as to which undistorted data should be used to calculate the normal value takes full account of those comments. As to the situation on the Brazilian electricity market, this issue was already addressed in detail in recitals (132), (133) and (152) of the provisional Regulation, and is also addressed in recital (45) below. Concerning the GOC’s request for the Commission to evaluate possible distortions in the EU’s internal market, the Commission failed to see the relevance of this point in the context of assessing the existence of significant distortions in accordance with Article 2(6a) of the basic Regulation.

(24) Consequently, the Commission rejected the GOC’s arguments.

(25) Ketong submitted that Article 2(6a) of the basic Regulation is incompatible with the WTO agreements – including China’s WTO Accession Protocol and the ADA – as well as with the DSB rulings, in particular DS473. Ketong pointed out that the Commission did not elaborate in the provisional Regulation on the WTO compatibility of Article 2(6a) of the basic Regulation, other than providing very general statements without specifying the relevant WTO legal basis. Moreover, referring to DS473, Ketong submitted that the Commission was not entitled to discard its costs or prices on the basis of the alleged existence of significant distortions, given that the existence of such distortions is in any event not a sufficient basis for concluding that the producer’s records do not reasonably reflect the costs of the raw material associated with the production and sale of the product concerned.

(26) In addition, Ketong objected to the Commission having invoked a number of cross-cutting factors existing in China to demonstrate the existence of significant distortions. In particular, Ketong argued that being recognized as ‘2020 Autonomous Region Enterprise Technology Center’ was merely a recognition of its dedication and investment in R & D activities and it did not amount to state intervention in Ketong’s operations. Similarly, Ketong submitted that, as a privately-owned company, it was entirely subject to modern market-oriented corporate governance rules and its operational activities were exclusively responsible to the company’s private shareholders under the PRC Company Law. Furthermore, Ketong claimed that existence of state intervention would not equal to significant distortions and that the Commission bears the legal obligation to establish the distortive effect of the alleged state interventions over its prices and costs.

(27) Concerning the argument on compatibility of Article 2(6a) of the basic Regulation with the WTO agreements and DSB jurisprudence, in addition to recitals (72) and (73) of the provisional Regulation, reference is made to recital (22) above where the argument is addressed.

(28) As to the alleged lack of significant distortions despite existing government interventions, Ketong’s arguments cannot be accepted. First, Ketong did not provide any information which would put in question the Commission’s observations (see recitals (57) and (58) of the provisional Regulation) on the calcium silicon being considered an encouraged industry and therefore subject to distortions. The same applies to the distortions concerning inputs necessary for the manufacturing of the product under investigation (see in particular recitals (62) and (63) of the provisional Regulation). Second, while Ketong considered the ‘2020 Autonomous Region Enterprise Technology Center’ a mere recognition of its R & D activities, it did not dispute the existence of the financial support by the Chinese authorities, nor the other forms of support provided to the sector as referred to in recitals (57) and (58) of the provisional Regulation. Third, as to Ketong’s claim that it is a privately-owned company with modern corporate governance, the Commission has described in recitals (40) to (63) of the provisional Regulation the substantial government interventions in the PRC resulting in a distortion of the effective allocation of resources in line with market principles. Those distortions affect the commercial operators irrespective of the ownership structure or managerial setup.

(29) Upon definitive disclosure, Ketong argued, first, that the Commission still failed to provide any further elaboration concerning the exact legal basis or to underpin its legal reasoning in relation to the compatibility of Article 2(6a) of the basic Regulation with the WTO agreements and the WTO ruling in DS473. According to Ketong, the Commission’s mere reiteration that Article 2(6a) of the basic Regulation is fully in line with the EU’s obligations under the WTO law did not provide any additional clarity on the issue. Second, Ketong reiterated that data from a third country in normal value construction on the ground of alleged existence of significant distortions is incompatible with the Article 2.2 and Article 2.2.1.1 ADA and the WTO Appellate Body’s ruling in DS473. Third, Ketong argued that pursuant to Article 2(6a)(a) of the basic Regulation the Commission bears the legal obligation to assess the existence of significant distortions for each exporter and producer separately and to individually establish the distortive effect of the alleged state interventions over the producer’s prices and costs. In the company’s opinion, it is not up to Ketong to produce evidence showing that the country-wide distortions are not applicable to it and the Commission has in that respect not fulfilled its legal obligation to establish the distortive effect of the alleged state interventions over its prices and costs.