Commission Implementing Regulation (EU) 2023/935 of 11 May 2023 imposing a definitive anti-dumping duty on imports of high tenacity yarns of polyesters originating in the People’s Republic of China and produced by Zhejiang Hailide New Material Co., Ltd

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) Anti-dumping measures on imports of high tenacity yarns of polyesters (‘HTYP’) originating in the People’s Republic of China (‘China’ or ‘country concerned’) ranging from 5,1 % to 9,8 % were originally imposed by Council Implementing Regulation (EU) No 1105/2010 (2) (‘the original measures’).

(2) The original measures applied to all imports of HTYP originating in China, with the exception of imports of HTYP produced by the Chinese exporting producers Zhejiang Hailide New Material Co. Ltd. (‘Hailide’) and Hangzhou Huachun Chemical Fiber Co. Ltd. (‘Huachun’). No duty rate was originally imposed (Regulation (EU) No 1105/2010) on these companies, as no dumping was found.

(3) Following a first expiry review pursuant to Article 11(2) of (the ‘basic Regulation’), the Commission, by Commission Implementing Regulation (EU) 2017/325 (3), as last amended by Commission Implementing Regulation (EU) 2017/1159 (4) maintained the original measures.

(4) A second expiry review of the measures in force pursuant to Article 11(2) of the basic Regulation and a partial interim review (5) pursuant to Article 11(3) of the basic Regulation, limited in scope to the examination of dumping (6) were initiated on 23 February 2022 and 30 June 2022 respectively.

(5) In line with the WTO Appellate Body report in case Mexico – Definitive Anti-dumping Measures on Beef and Rice (7) (‘the WTO Appellate Body report’), Hailide and Huachun were not examined in the subsequent reviews of the original measures as imposed by Regulation (EU) No 1105/2010 and are not subject to the measures in force.

(6) On 30 June 2022, the Commission initiated an anti-dumping investigation under Article 5 of the basic Regulation with regard to imports of HTYP manufactured and exported to the Union by Hailide. A Notice of Initiation was published in the Official Journal of the European Union (8) (‘the Notice of Initiation’).

(7) The Commission initiated the investigation following a complaint lodged on 16 May 2022 by The European Man-made Fibres Association (‘CIRFS’ or ‘the complainant’) on behalf of the Union industry of HTYP 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.

(8) The investigation is limited in scope to the exporting producer concerned (Hailide) and any related company thereto. Another exporting producer, Huachun, which also received no anti-dumping duty rate in the investigation that led to the imposition of the above anti-dumping measures, ceased to exist in 2021. Therefore, Huachun is not considered an exporting producer of the HTYP and a party concerned for the purposes of this investigation.

(9) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, it specifically informed the exporting producer concerned and the authorities in China about the initiation of the investigation and invited them to participate.

(10) 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.

(11) A user association together with five users requested a hearing with the Commission services and were granted an opportunity to be heard.

(12) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample based on production and sales volumes, taking into account their geographical location. This sample consisted of 3 Union producers. The sampled Union producers accounted for more than 50 % of the estimated total EU production and EU sales volume of the like product. In accordance with Article 17(2) of the basic Regulation, the Commission invited interested parties to comment on the provisional sample. No interested party submitted comments on the provisional sample, which was confirmed as the definitive sample. The sample is representative of the Union industry.

(13) In order to enable the Commission to decide whether sampling would be necessary in respect of the unrelated importers in the Union, those parties were requested to make themselves known and to provide the Commission with the information requested in the respective Notice of Initiation. One unrelated importer came forward as an interested party, but did not provide the requested sampling information. Therefore, sampling was not necessary for the unrelated importers.

(14) 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 China (‘GOC’).

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

(16) The Commission received questionnaire replies from Hailide and three sampled Union producers. Questionnaire replies were also received from two users of HTYP. However, these replies could not be taken into consideration in the context of this proceeding, as the users in question did not use the product concerned produced by Hailide.

(17) In view of the outbreak of Covid-19 and the confinement measures put in place by various Member States as well as by various third countries, the Commission could not carry out verification visits pursuant to Article 16 of the basic Regulation at the Hailide’s premises in China.

(18) The Commission instead cross-checked with Hailide remotely all the information deemed necessary for its determinations in line with its Notice on the consequences of the Covid-19 outbreak on anti-dumping and anti-subsidy investigations (9).

(20) On 30 January 2023, in accordance with Article 19a(2) of the basic Regulation, the Commission informed the interested parties of its intention not to impose provisional measures. The Commission did not impose provisional anti-dumping measures in this investigation in order to align the timing of the definitive findings of this proceeding with the expiry review and the partial interim review referred to in recital (4) above.

(21) On 20 February 2023, the Commission disclosed the essential facts and considerations on the basis of which it intended to impose the definitive anti-dumping duties. Furthermore, an additional disclosure was made on 20 March 2023. All parties were granted a period within which they could make comments on the disclosures.

(22) The comments made by interested parties were considered by the Commission and taken into account, where appropriate. The parties who so requested were granted a hearing.

(23) The investigation of dumping and injury covered the period from 1 January 2021 to 31 December 2021 (‘the investigation period’ or ‘IP’). 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’).

(24) The product subject to this investigation is high tenacity yarn of polyesters not put up for retail sale, including monofilament of less than 67 decitex, (excluding sewing thread and ‘Z’-twisted multiple (folded) or cabled yarn, intended for the production of sewing thread, ready for dyeing and for receiving a finishing treatment, loosely wound on a plastic perforated tube), currently falling under CN Code ex 5402 20 00 (TARIC code 5402200010) (‘the product under investigation’). The CN and TARIC codes are given for information only without prejudice to a subsequent change in the tariff classification.

(25) HTYP are used in a number of diverse applications such as tyre reinforcement, broad fabrics, seatbelts, airbags, ropes, nets and a number of industrial applications.

(26) Product concerned by this investigation is the product under investigation originating in China and produced by Hailide.

(28) These products are therefore considered to be like products within the meaning of Article 1(4) of the basic Regulation.

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

(30) In order to collect the necessary data for a possible application of Article 2(6a) of the basic Regulation the Commission invited Hailide to provide information regarding the inputs used for producing HTYP. Hailide submitted the relevant information.

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

(32) In point 6.3.2 of the Notice of Initiation the Commission informed interested parties that based on the information available at that stage possible appropriate representative countries pursuant to Article 2(6a)(a) of the basic Regulation was Türkiye.

(33) The Commission also stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

(34) On 19 July 2022, the Commission issued a First note on the sources for the determination of the normal value (the ‘First Note’) by which it informed interested parties on the relevant sources it intended to use for the determination of the normal value.

(35) In that note, the Commission provided a preliminary list of all known factors of production (‘FOP’) such as raw materials, labour and energy, used in the production of HTYP. In addition, the Commission identified Türkiye, Brazil and Thailand as possible appropriate representative countries. The Commission gave all interested parties opportunity to comment. The Commission received comments from Hailide as well as from the complainant.

(36) On 30 November 2022, and after having analysed the comments received, the Commission issued the Second note on the sources for the determination of the normal value (the ‘Second Note’) (the First Note and Second Note are collectively referred to as the ‘Notes’).

(37) In the Second Note, the Commission updated the list of factors of production and informed interested parties of its intention to use Türkiye as the representative country under Article 2(6a)(a), first indent of the basic Regulation. It also informed interested parties that it would establish selling, general and administrative costs and profits based on publicly available financial statements of an HTYP producer in Türkiye. An additional note with revised exchange rates for a number of benchmarks as well as including a more detailed disclosure of benchmark for labour cost calculation was issued and placed on the open file on 16 December 2022.

(38) The Commission invited interested parties to comment. Comments were received from Hailide as well as from the complainant and a group of users (IVGT, Delcotex, Gleistein, Guth&Wolf, Heytex and Jakob Eschbach).

(39) After having analysed the comments and information received, the Commission concluded that Türkiye was an appropriate representative country from which undistorted prices and costs would be sourced for the determination of the normal value. The underlying reasons for that choice are further described in detail in Section 3.3.2 below.

(40) 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. No questionnaire reply was received from the GOC. 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.

(41) 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”.

(42) 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’).

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

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

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

(47) Pursuant to this provision, the Commission has issued a country report concerning China (hereinafter ‘the Report’) (10), showing the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as steel and chemicals). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report was placed in the investigation file at the initiation stage. The complaint also referred to other documents issued by Chinese authorities at the national (11) or provincial (12) level, complementing the Report.

(48) More specifically, the complaint alleged that the factors of production, including the main raw materials and energy to produce HTYP are heavily distorted. The complaint referred to the Report and the distortions identified therein with respect to the chemical sector, including the monoethylene glycol (‘MEG’) and purified terephthalic acid (‘PTA’) industry. Further, the complaint referred to the 14th Five-Year Development Plan (‘FYP’) for Petroleum and Chemical Industry of the Zhejiang Province and its call for the development of petrochemical upstream and midstream industries. Moreover, the complaint pointed – with reference to the Report – to existing distortions with respect to energy costs. The complaint also observed that Chinese authorities support implementing preferential fiscal and financial policies for the chemical industry, not least in line with the mandate of the 14th national and provincial FYPs for the “optimization and structural adjustment of the raw materials industries such as petrochemicals” and for accelerated “transformation and upgrading of enterprises in key industries such as chemicals”. The complaint further noted the State interference with respect to the labour market, the land-use rights, as well as the fact that HTYP producers benefitted from export loans. Against this background, the complaint provided some specific examples, how Hailide may have benefitted from the distortions in terms of sourcing raw materials or receiving financial support by government authorities.

(49) As indicated in recital (40), the GOC did not comment or provide evidence supporting or contradicting 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.

(50) Comments were received from Hailide as well as from a group of users. The claims are addressed in section 3.3.1.11 below.

(51) The Commission examined 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 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.