Commission Implementing Regulation (EU) 2023/1123 of 7 June 2023 imposing a definitive countervailing duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in People’s Republic of China following an expiry review pursuant to Article 18 of Regulation (EU) 2016/1037 of the European Parliament and of the Council

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 18 thereof,

Whereas:

(1) By Commission Implementing Regulation (EU) 2017/969 (2), the European Commission (‘the Commission’), imposed a countervailing duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel, originating in People’s Republic of China (PRC or ‘the country concerned’ or ‘China’) (‘the original regulation’). The countervailing duties currently in force range from 4,6 % to 35,9 % (‘the original measures’). The investigation that led to the imposition of the original measures will hereinafter be referred to as ‘the original investigation’.

(2) By Commission Implementing Regulation (EU) 2017/649 (3), the Commission, imposed definitive anti-dumping measures on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel, originating in People’s Republic of China (PRC). The anti-dumping duties currently in force range from 0 % to 31,3 %.

(3) Following the publication of a notice of impending expiry (4), the Commission received a request for the initiation of an expiry review of the countervailing measures pursuant to Article 18 of the basic Regulation.

(4) The request for review (‘the request’) was submitted on 9 March 2022 by EUROFER, the European Steel Association, (‘the applicant’) on behalf of the Union industry of certain hot-rolled flat products of iron, non-alloy or other alloy steel in the sense of Article 10(6) of the basic Regulation.

(5) The applicant claimed that the expiry of the countervailing measures would likely result in continuation or recurrence of subsidisation and recurrence of injury to the Union industry.

(6) Having determined that sufficient evidence existed for the initiation of an expiry review, the Commission initiated, on 8 June 2022, an expiry review with regard to imports to the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the PRC on the basis of Article 18(2) of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (5) (‘the Notice of Initiation’).

(7) Prior to the initiation of the review, the Commission notified the Government of China (‘GOC’) (6) on 12 May 2022 that it had received a properly documented request, and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. The same day GOC also submitted comments in writing arguing that in general the request does not contain sufficient evidence to initiate an expiry review, especially with regard to the specificity of the alleged subsidies to the HRF producers. The Commission took note of the comments raised by the GOC and have paid particular attention to these elements during the expiry review investigation.

(8) By a notice published in the Official Journal of the European Union on 5 April 2022 (7), the Commission also announced the initiation of an expiry review pursuant to Article 11(2) of Regulation (EU) 2016/1036 of the European Parliament and of the Council (8) of the definitive anti-dumping measures in force with regard to imports into the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the PRC.

(9) The investigation of continuation or recurrence of subsidisation covered the period from 1 January 2021 to 31 December 2021 (‘review investigation period’). The examination of the trends relevant for the assessment of the likelihood of continuation or recurrence of injury covered the period from 1 January 2018 to the end of the review investigation period (‘the period considered’).

(10) In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. The Commission specifically informed the applicant, all known Union producers, the known producers in the PRC and the authorities of the People’s Republic of China as well as known importers, users and traders of the initiation of the expiry review and invited them to participate.

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

(12) In its Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

(13) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. In accordance with Article 27 of the basic Regulation, the Commission selected the sample on the basis of the largest volume of production of the like product in the Union during the review investigation period that could reasonably be investigated within the time available. This sample consisted of three Union producers. The sampled Union producers accounted for around 29 % of estimated total production in the Union. The Commission invited interested parties to comment on the provisional sample. No comments were received and the Commission confirmed the provisionally selected sample. The sample is representative of the Union industry.

(14) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked known unrelated importers to provide the information specified in the Notice of Initiation. No unrelated importer came forward and provided the requested information.

(15) To decide whether sampling was necessary with regard to the exporting producers and, if so, to select a sample, the Commission asked all known producers in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the PRC to the European Union to identify and/or contact other producers, if any, that could be interested in participating in the investigation. None of the producers in the PRC provided the requested information.

(16) Consequently, the Commission informed the authorities of the PRC by Note Verbale of 2 September 2022, that it might resort to the use of facts available under Article 28(1) of the basic Regulation when examining the continuation or recurrence of subsidisation. The authorities of the PRC did not react to the Note.

(17) The Commission sent questionnaires to the three sampled Union producers, the applicant and the GOC. Replies to the questionnaires were received from the three sampled Union producers and the applicant.

(19) On 4 April 2023, the Commission disclosed the essential facts and considerations on which basis it intended to impose countervailing duties. All parties were granted a period within which they could make comments on that disclosure.

(20) 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. CISA requested and was granted a hearing with the Commission services on 12 April 2023.

(22) Hot-rolled flat steel products are produced through hot-rolling. This is a metal forming process in which hot metal is passed through one or more pairs of hot rolls to reduce the thickness and to make the thickness uniform, whereby the temperature of the metal is above its recrystallization temperature. They can be delivered in various forms; in coils (oiled or not oiled, pickled or not pickled), in cut lengths (sheet) or in narrow strips.

(23) There are two main uses for hot-rolled flat steel products. First, they are the primary material for the production of various value-added downstream steel products, starting with cold-rolled flat and coated steel products. Second, they are used as an industrial input purchased by end users for a variety of applications, including in construction (production of steel tubes), shipbuilding, gas containers, cars, pressure vessels and energy pipelines.

(24) The product concerned by this investigation is the product under review originating in the People’s Republic of China.

(26) These products are therefore considered to be like products within the meaning of Article 2(c) of the basic Regulation.

(27) In accordance with Article 18 of the basic Regulation, and as stated in the Notice of Initiation, the Commission examined first whether the expiry of the existing measures would be likely to lead to a continuation of subsidisation.

(28) On 12 July 2022 the Commission sent a questionnaire to the GOC. The GOC was asked to forward a questionnaire for banks and other financial institutions known by the GOC to have provided loans to the industry concerned as well as to the producers and distributors of the hot-rolled and cold-rolled steel providing inputs for the production of the product under review.

(29) The Commission received no reply.

(30) By Note Verbale of 2 September 2022, the Commission informed the Chinese authorities that following non-cooperation from the GOC and the producers of the product under review the Commission intended to make its findings on the basis of the facts available, in accordance with Article 28(1) of the basic Regulation. They were also informed that a finding based on facts available may be less favourable than if the GOC and producers cooperated.

(31) No comments in this regard were received. The Commission, in accordance with Article 28 of the basic Regulation, considered the use of facts available necessary in order to establish the continuation of subsidy practices of China in the hot-rolled flat steel industry.

(33) Before analysing the alleged subsidisation in the form of specific subsidies or subsidy programmes (sections 3.3 and following below) the Commission assessed government plans, projects and other documents, which were relevant for more than one of the subsidies or subsidy programmes. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC’s central planning for the following reasons.

(34) The Commission in the current investigation established that the main document of relevance during the review investigation period was the 14th Five-Year-Plan on developing the raw materials industry, such as the steel one. Steel industry being an important part of the raw materials industry, it represents a key field that shapes China’s international competitive edges, and the ‘main battlefield’ for the restructuring of the industrial foundation and green industrial development. The Plan carries an emphasis on cultivating a group of leading enterprises in the industrial chain with ecological leadership and core competitiveness.

(35) Hebei Province’s Three year action plan on cluster development in the steel industry chain (2020 – 2022) elaborates the reform of mixed ownership of state-owned enterprises, focuses on promoting the cross-regional merger and reorganization of private steel enterprises.

(36) Shangdong Province’s 14th Five-Year-Plan on the steel industry development emphasizes competitiveness of the steel industry as the goal, as strict control of production capacity is brought forward. Furthermore, it carries objectives of optimizing industrial layout, strengthening innovation drive, promoting green development and building an advanced steel manufacturing industrial base with domestic first-class competitiveness and international influence.

(37) After disclosure, CISA claimed that the Commission relied heavily on the ‘14th Five-Year Plan’ in order to prove the strategic importance of the relevant industry and in doing so it evidences the existence of subsidies in relation to this specific sector. CISA emphasised that ‘five-year plans’ are merely guiding documents expressing policy views for the future and as such do not have binding force because there is no violation or penalty clause in such plans. In addition to that, CISA referred in this regard to equivalent documents and reports on the side of the EU Commission such as the Commission’s own publication titled ‘A New Industrial Strategy’ in which the Commission itself identifies various priorities in terms of public investments in a clear attempt to steer future development of the EU’s key industries.

(38) This argument could not be accepted. First of all, the FYPs published by the GOC are not merely general guidance documents, but are of a legally binding nature. The 14th FYP explicitly reminds all authorities to diligently implement the plans: ‘We will strengthen planning management systems such as catalogues and lists, compilation and archival, and alignment and coordination, develop lists and catalogues such as the “14th Five-Year” National-Level Special Plans, promote plan archival relying on the national planning integrated management information platform, and bring various plans under unified management. We will establish and improve planning alignment and coordination mechanisms, align plans approved by the CCP Central Committee and the State Council and provincial development plans with this plan before submission for approval, ensure that national-level spatial planning, special planning, regional planning, and other levels of planning are coordinated with this plan in terms of main goals, development directions, overall layout, major policies, major projects, and risk prevention and control.’ (16) Furthermore, the 14th FYP on Developing the Raw Materials Industry stipulates that ‘all localities need to better themselves with this Plan, and include the main contents and major projects herein in their primary local tasks’, while ‘steel and other key sectors shall formulate specific implementation opinions based on the objectives and tasks of this Plan.’ Therefore, the claim was rejected.

(39) No evidence or argument to the contrary has been adduced by the GOC in the present investigation.

(41) Decision No 40 is a State Council Order that classifies, for investment purposes, the industrial sectors into different categories, namely ‘encouraged, restrictive and eliminated projects’. This Decision states that the ‘Guidance Catalogue for the Industrial Structure Adjustment’, which is an implementing measure of Decision No 40, is an important basis for guiding investment directions. It also guides the GOC to administer investment projects, and to formulate and enforce policies on public finance, taxation, credit, land, import and export (17). The steel industry is indicated as an encouraged industry in Chapter VIII of this Guidance Catalogue. As to its legal nature, the Commission noted that Decision No 40 is an Order from the State Council, which is the highest administrative body in the PRC. In that regard, the decision is legally binding for other public bodies and the economic operators (18).

(43) According to its chapter VIII, the Guiding Catalogue of industrial structure adjustment (2019), the steel sector is an encouraged sector.

(44) Taking into account the above-listed documents and their provisions, on which there is no evidence that they are no longer in place, the Commission reiterated its conclusion from the original investigation that the Chinese steel industry continued to be a key/strategic industry during the review investigation period, the development of which continues to be actively pursued and directed by the GOC as a policy strategic objective.

(45) In view of the lack of cooperation by the GOC and the Chinese producers specified in recitals (27) and (30), the Commission decided to examine whether there was continuation of subsidisation as follows. First, the Commission examined whether the subsidies countervailed in the original investigation continued to confer benefit to the hot rolled flat steel industry. Subsequently, the Commission analysed whether that industry benefitted from subsidies which were not countervailed in the original investigation (‘additional subsidies’ or ‘new subsidies’) as alleged in the request.

(46) The Commission has decided that, in view of the findings confirming the existence of continued subsidisation with respect to most of the subsidies countervailed in the original investigation, as well as some of the additional subsidies, there is no need to investigate all the other subsidies alleged to exist by the applicant.

(47) After disclosure, CISA claimed that findings reached in past anti-subsidy investigations cannot merely be transposed on to the Commission’s current investigation as such reversals of the burden of proof deviates from the accepted rights of defence by any defendant in such investigations. According to CISA, the Commission used past findings in other separate and unrelated investigations to paint economic practices in China as examples of subsidisation. However, this approach does not prove the existence of subsidisation in relation to the product under review.

(48) The Commission considered that the applicant provided sufficient evidence of the existence, amount, nature, benefit and specificity as was reasonably available to it. Furthermore, the Commission also considered that in the absence of cooperation, the recent EU anti-subsidy investigations related to the same subsidy programmes alleged in the request had also examined benefit, specificity and the amounts of subsidisation of the same programmes. These previous findings of subsidisation, coupled with the wealth of information contained in the request and confirmed by the Commission in the course of this investigation, constituted facts available with regards to continuation of subsidisation in accordance with Article 28 of the basic Regulation. Consequently, the claim was rejected.

(49) In the original investigation (19), the Commission established that State-owned banks (‘SOBs’) were public bodies as they performed governmental functions and, in doing so, they exercised government authority.

(50) With respect to the banks that provided loans to the producers who cooperated in the original investigation, the great majority was State-owned. The available information in the original investigation showed that at least 35 out of the 45 reported banks were State-owned banks, including the major commercial banks in China, like the Bank of China, the China Construction Bank and the Industrial and Commercial Bank of China. Furthermore, it was also found that these State-owned commercial banks held a predominant place in the market and in their capacity as public bodies were engaged in offering lending at below-market interest rates. Accordingly, it was concluded that the GOC had a policy to provide preferential lending to the HRF sector.

(51) The Commission also established, on the basis of, inter alia, Articles 34 and 38 of the Commercial Banking Law and Articles 17 and 18 of Order No 40, that privately owned commercial banks in China were entrusted and directed by the GOC to provide preferential loans to the producers in line with Article 3(1)(a)(iv) of the basic Regulation.