Commission Implementing Regulation (EU) 2023/100 of 11 January 2023 imposing a provisional anti-dumping duty on imports of stainless steel refillable kegs originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

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

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

After consulting the Member States,

Whereas:

(1) On 13 May 2022, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of stainless steel refillable kegs originating in the People’s Republic of China (‘China’ or ‘the country concerned’) 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 31 March 2022 by the European Kegs Committee (‘the complainant’). The complaint was made on behalf of the Union industry of stainless steel refillable kegs 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) Pursuant to Article 14(5a) of the basic Regulation, the Commission should register imports subject to an anti-dumping investigation during the period of pre-disclosure unless it has sufficient evidence within the meaning of Article 5 that the requirements either under point (c) or (d) of Article 10(4) are not met. Given that the evidence on the file did show that the requirement under point (d) was not met, the Commission did not make imports of the product concerned subject to registration under Article 14(5a) of the basic Regulation.

(4) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the Union producers represented by the complainant; other known Union producers; known importers, traders, and users; known exporting producers; and the authorities of the country concerned about the initiation of the investigation and invited them to participate.

(5) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. No hearing was requested.

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

Sampling of Union producers

(7) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of production and sales volumes, taking into account their geographical location. This sample consisted of three Union producers. The sampled Union producers accounted for 73 % of the estimated total Union production and 74 % of sales in the Union. The Commission invited interested parties to comment on the provisional sample. No comments were received in that regard. The sample is representative of the Union industry.

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

(9) Only one unrelated importer provided the requested information and agreed to be included in the sample. The Commission thus decided that sampling of unrelated importers was not necessary.

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

(11) Six producers in the country concerned that exported kegs to the Union during the IP, provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of two exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned and the authorities of the country concerned were consulted on the selection of the sample. No comments were received.

(12) The Commission sent a questionnaire concerning the existence of significant distortions in China within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the People’s Republic of China (‘GOC’). No reply was received.

(13) The Commission published online (3) the questionnaires for the sampled exporting producers, the unrelated importers and the Union producers and sent the macro data questionnaire to the Complainant on 20 May 2022.

(14) The Commission sought and verified all the information deemed necessary for a provisional determination of dumping, resulting injury and Union interest. Verification visits pursuant to Article 16 of the basic Regulation were carried out at the premises of the following companies:

(16) The investigation of dumping and injury covered the period from 1 January 2021 to 31 December 2021 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2018 to the end of the investigation period (‘the period considered’).

(17) The product under investigation is kegs, vessels, drums, tanks, casks and similar containers, refillable, of stainless steel, commonly known as ‘stainless steel refillable kegs’, with bodies approximately cylindrical in shape, with a wall thickness of 0,5 mm or more, of a kind used for material other than liquefied gas, crude oil, and petroleum products, of a capacity of 4,5 litres or more, regardless of the type of finish, gauge, or stainless steel grade, whether or not with additional components (extractors, necks, chimes or any other component), whether or not painted or coated with other materials (‘kegs’ or ‘the product under investigation’).

(18) The following products do not fall under the scope of this investigation when imported separately from the product under investigation: necks, spears, couplers or taps, collars, valves and other components of the product under investigation (extractors, necks, chimes or any other component).

(19) The product concerned is the product under investigation originating in China, currently falling under CN codes ex 7310 10 00 and ex 7310 29 90 (TARIC codes 7310100010 and 7310299010) (‘the product concerned’).

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

(22) In view of the sufficient evidence available at the initiation of the investigation pointing to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation with regard to China the Commission considered it appropriate to initiate the investigation with regard to the exporting producers from this country having regard to Article 2(6a) of the basic Regulation.

(23) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in China to provide information regarding the inputs used for producing kegs. Six exporting producers submitted the relevant information.

(24) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. In addition, in point 5.3.2 of the Notice of Initiation, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union. No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation was received within the deadline. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China. The Commission invited the GOC to submit its comment on the application of Article 18. No comments were received.

(25) In point 5.3.2 of the Notice of Initiation, the Commission also specified that, in view of the evidence available, possible appropriate representative third countries were Mexico and Türkiye pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks. The Commission further stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

(26) On 20 July 2022, the Commission informed by a note (‘the First Note’) interested parties on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of kegs. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Mexico, Brazil and Russia as appropriate representative countries. The Commission received no comments on the First Note.

(27) On 19 September 2022, the Commission informed by a second note (‘the Second Note’) interested parties on the relevant sources it intended to use for the determination of the normal value, with Brazil as the representative country. It also informed interested parties that it would establish selling, general and administrative costs ('SG&A') and profits based on producer KHS Industria de Maquinas LTDA in Brazil. The Commission invited interested parties to comment. Comments were received from the two sampled exporting producers.

(28) After having analysed the comments and information received on the Second Note, the Commission concluded that Brazil was an appropriate choice as representative country from which undistorted prices and costs would be sourced for the determination of the normal value at the provisional stage. The underlying reasons for that choice are further described in detail in Section 3.2.1.1 and following.

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

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

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

(32) In recent investigations concerning the steel sector in China (4), which is the main raw material to produce kegs, the Commission found that significant distortions in the sense of Article 2(6a)(b) of the basic Regulation were present.

(33) In those investigations, the Commission found that there is substantial government intervention in China resulting in a distortion of the effective allocation of resources in line with market principles (5). In particular, the Commission concluded that in the steel sector not only does a substantial degree of ownership by the GOC persist in the sense of Article 2(6a)(b), first indent of the basic Regulation (6), but the GOC is also in a position to interfere with prices and costs through State presence in firms in the sense of Article 2(6a)(b), second indent of the basic Regulation (7). The Commission further found that the State’s presence and intervention in the financial markets, as well as in the provision of raw materials and inputs have an additional distorting effect on the market. Indeed, overall, the system of planning in China results in resources being concentrated in sectors designated as strategic or otherwise politically important by the GOC, rather than being allocated in line with market forces (8). Moreover, the Commission concluded that the Chinese bankruptcy and property laws do not work properly in the sense of Article 2(6a)(b), fourth indent of the basic Regulation, thus generating distortions in particular when maintaining insolvent firms afloat and when allocating land use rights in China (9). In the same vein, the Commission found distortions of wage costs in the steel sector in the sense of Article 2(6a)(b), fifth indent of the basic Regulation (10), as well as distortions in the financial markets in the sense of Article 2(6a)(b), sixth indent of the basic Regulation, in particular concerning access to capital for corporate actors in China (11).

(34) Like in previous investigations concerning the steel sector in China, the Commission examined in the present investigation whether it was appropriate or not to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file, including the evidence contained in the request, as well as in the including the Commission Staff Working Document on Significant Distortions in the Economy of the People’s Republic of China for the Purposes of Trade Defence Investigations (12) (‘Report’), which relies on publicly available sources. That analysis covered the examination of the substantial government interventions in China’s economy in general, but also the specific market situation in the relevant sector including the product under investigation. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in China as also found by its previous investigations in this respect.

(35) The request alleged that the Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the Chinese Communist Party (‘CCP’) rather than reflecting the prevailing economic conditions in a free market. The request pointed out in this connection not only to the distortions in the stainless steel market (stainless steel accounting for between 40 % and 60 % of the cost of kegs production) but it claimed that all other factors of production – land, capital, labour - are equally distorted. As a consequence, the request concluded that not only the domestic sales prices of stainless steel 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 or labour, are also affected because their price formation is affected by substantial government intervention.

(36) To support its position, the request referred to a number of publicly available information sources, such as the Report, the conclusions reached by the EUCCC (13), the Commission’s recent investigations of the Chinese steel sector (14) as well as the conclusions of the G20 Global Forum on Steel Excess Capacity (15).

(37) As indicated in recital (24), the GOC did not comment or provide evidence supporting or rebutting the existing evidence on the case file, including the Report and the additional evidence provided by the complainant, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

(38) Specifically in the sector of the product under investigation, i.e. the steel sector, a substantial degree of ownership by the GOC persists. While the nominal split between the number of state-owned enterprises (‘SOEs’) and privately owned companies is estimated to be almost even, from the five Chinese steel producers ranked in the top 10 of the world's largest steel producers, four are SOEs (16). At the same time, while the top ten producers only took up some 36 % of total industry output in 2016, the GOC set the target in the same year to consolidate 60 % to 70 % of steel production to around ten large-scale enterprises by 2025 (17). This intention has been repeated by the GOC in April 2019, announcing a release of guidelines on steel industry consolidation (18). Such consolidation may entail forced mergers of profitable private companies with underperforming SOEs (19). Since there was no cooperation by the GOC, given the presence of a number of SMEs active in the sector, the exact ratio of the private and state-owned steel producers could not be determined. In any event, the investigation revealed that at least one producer of kegs is an SOE, namely Penglai Jinfu Stainless Steel Products Co., Ltd.