Commission Implementing Regulation (EU) 2023/1647 of 21 August 2023 imposing a definitive countervailing duty on imports of certain coated fine paper originating in the 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), and in particular Article 18 thereof,

Whereas:

(1) Anti-subsidy measures on imports of certain coated fine paper (‘CFP’) originating in the People’s Republic of China (the ‘PRC’ or ‘China’ or ‘country concerned’) were originally imposed in 2011 by Council Implementing Regulation (EU) No 425/2011 (2) (‘the original measures’). The investigation leading to the original measures is referred to as ‘the original investigation’.

(2) The original measures took the form of an ad valorem duty rate ranging from 4% to 12% for imports from individually named exporters, with a residual country wide rate of 12%.

(3) Following an anti-dumping investigation, by Implementing Regulation (EU) No 451/2011 (3), the Council also imposed a definitive anti-dumping duty on imports of certain coated fine paper originating in the PRC.

(4) On 4 July 2017, following an expiry review (‘the expiry review’) in accordance with Article 18 of Regulation (EU) 2016/1037 (‘the basic Regulation’), the Commission extended the measures as established in the original investigation for five years by Commission Implementing Regulation (EU) 2017/1187 (4) (‘the expiry review Regulation’).

(5) The countervailing duties currently in force range from 4% to 12%.

(6) Following the publication of a notice of impending expiry (5) of the countervailing measures in force on the imports of certain coated fine paper originating in the PRC, the European Commission ('the Commission') received a request for the initiation of an expiry review pursuant to Article 18 of the basic Regulation.

(7) The request was lodged on 31 March 2022 by five Union producers (Arctic Paper Grycksbo AB, Burgo Group SpA, Fedrigoni SpA, Lecta Group and Sappi Europe SA), jointly referred to as ‘the applicants’, representing more than 50% of the total Union production of certain coated fine paper.

(8) The request for review was based on the grounds that the expiry of the measures would be likely to result in continuation or recurrence of subsidisation and recurrence of injury to the Union industry.

(9) Having determined that sufficient evidence existed for the initiation of an expiry review, on 30 June 2022 the Commission initiated an expiry review of the measures in force with regard to imports into the Union of certain coated fine paper originating in the People’s Republic of China on the basis of Article 18 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (6) (‘the Notice of Initiation’). In view of Article 18(2) of the basic Regulation, the Commission prepared a memorandum on sufficiency of evidence containing the Commission’s assessment on all the evidence at its disposal and on the basis of the investigation was initiated. That memorandum can be found in the file for inspection by interested parties.

(10) Prior to the initiation of the expiry review, and in accordance with Article 10(7) of the basic Regulation, the Commission notified the Government of China (‘GOC’) that it had received a properly documented review request and invited the GOC for consultations with the aim of clarifying the situation as regards the content of the review request and arriving at a mutually agreed solution. However, no response was received from the GOC.

(11) By means of a notice published in the Official Journal of the European Union on 30 June 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 of 8 June 2016 (8) of the definitive anti-dumping measures in force with regard to imports into the Union of certain coated fine paper originating in the PRC.

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

(13) In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. In addition, the Commission specifically informed the Union industry, the known exporting producers and the Government of the People’s Republic of China (‘PRC’) about the initiation of the investigation and invited them to participate.

(14) In parallel, upon initiation, the Commission made the questionnaires for the exporting producers, the unrelated importers, the users and the Union producers available online. It also sent the macro data questionnaire to the complainants. Questionnaires were also made available to unrelated importers and users on the same DG Trade’s website (9).

(15) All parties were invited to make their views known, submit information and provide supporting evidence within the time limits set out in the Notice of Initiation. Interested parties had also the 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.

(16) In the Notice of Initiation of the expiry review investigation, the Commission stated that it might sample exporting producers in accordance with Article 27 of the basic Regulation.

(17) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC to provide the information specified in the Notice of Initiation. No exporting producer came forward.

(18) In addition, the Commission asked the Mission of the PRC to the European Union to identify and/or contact other exporting producers, if any, that would be interested in participating in the investigation. However, no response was provided.

(19) Consequently, the Commission informed the authorities of the PRC that absent cooperation, it intended to resort to the use of facts available under Article 28 of the basic Regulation when examining the continuation or recurrence of subsidisation. The authorities of the PRC did not respond.

(20) In the Notice of Initiation of the expiry review investigation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the representativity in terms of volume of production and sales of the like product in the EU between 1 January and 31 December 2021. This sample consisted of 3 Union producers. The sampled Union producers accounted for approximately 41 % of the estimated total volume of production and 37 % of the estimated sales of the like product in the Union. The Commission invited interested parties to comment on the provisional sample. No comments were received on the provisional sample and the provisional sample was therefore confirmed. The sample is representative of the Union industry.

(21) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all known unrelated importers to provide the information specified in the Notice of Initiation. However, no importer co-operated with the Commission and provided the requested information.

(22) The Commission sent a questionnaire to the Government of the People’s Republic of China (‘GOC’). No questionnaire reply was received.

(23) The Commission sent questionnaires to the three sampled Union producers. At the day of initiation, the same questionnaires were made available online on DG Trade’s website (10). In addition, the Commission sent a questionnaire to the applicants concerning macroeconomic data. Questionnaires were also made available to unrelated importers and users on the same DG Trade’s website (11).

(24) Questionnaire replies were received from the three sampled Union producers. In addition, the applicants provided the Commission with macroeconomic data. No reply was received from any of the unrelated importers. None of the users provided replies to the questionnaire or came forward during the investigation.

(26) On 14 June 2023, the Commission disclosed the essential facts and considerations on the basis of which it intended to impose countervailing duties. All parties were granted a period within which they could make comments on that disclosure.

(27) The product under review is the same as in the original investigation and in the previous expiry review, namely certain coated fine paper (‘CFP’) which is paper or paperboard coated on one or both sides (excluding kraft paper or kraft paperboard), in either sheet or rolls, and with a weight of 70 g/m2 or more but not exceeding 400 g/m2 and brightness of more than 84 (measured according to ISO 2470-1).

(29) Product concerned by the expiry review investigation is the product under review originating in China currently falling under CN codes ex 4810 13 00, ex 4810 14 00, ex 4810 19 00, ex 4810 22 00, ex 4810 29 30, ex 4810 29 80, ex 4810 99 10 and ex 4810 99 80 (TARIC codes 4810130020, 4810140020, 4810190020, 4810220020, 4810293020, 4810298020, 4810991020 and 4810998020).

(31) The Commission concluded that these products are like products within the meaning of Article 2(c) of the basic Regulation.

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

(33) On 29 September 2022, the Commission sent a questionnaire to the GOC. The GOC was also asked to forward a questionnaire for banks and other financial institutions known by the GOC to have provided loans to the industry concerned or to producers, distributors and other suppliers providing inputs for the production of the product concerned. The Commission did not receive any reply either from the GOC or from any financial institution to which the GOC was asked to forward a questionnaire.

(34) Furthermore, no Chinese producer of CFP cooperated with the Commission in this investigation.

(35) By Note Verbale of 18 January 2023, the Commission informed the Chinese authorities of the consequences of non-cooperation and gave them the opportunity to comment. No comments were received. The Commission, in accordance with Article 28 of the basic Regulation, considered the use of facts available necessary in order to examine the continuation of subsidy practices of the PRC in the paper industry generally and the coated fine paper in particular.

(36) On the use of facts available, the Commission noted that Article 28 of the basic Regulation is similar to Article 12.7 of the SCM Agreement (12). The Appellate Body has recalled that Article 12.7 of the SCM Agreement permits the use of facts on record solely for the purpose of replacing information that may be missing, in order to arrive at an accurate subsidization or injury determination. Accordingly, the Appellate Body has explained that ‘there has to be a connection between the ‘necessary information’ that is missing and the particular ‘facts available’ on which a determination under Article 12.7 is based.’ Therefore, ‘an investigating authority must use those ‘facts available’ that ‘reasonably replace the information that an interested party failed to provide’, with a view to arriving at an accurate determination.’ The Appellate Body has further explained that ‘the facts available’ refers to those facts that are in the possession of the investigating authority and on its written record. As determinations made under Article 12.7 are to be made on the basis of ‘the facts available’, ‘they cannot be made on the basis of non-factual assumptions or speculation.’ Furthermore, in reasoning and evaluating which facts available can reasonably replace the missing information, ‘all substantiated facts on the record must be taken into account’ by an investigating authority. The Appellate Body has explained that ascertaining the ‘reasonable replacements for the missing ‘necessary information’ involves a process of reasoning and evaluation’ on the part of the investigating authority. Where there are several facts available to an investigating authority that it needs to choose from, ‘it would seem to follow naturally that the process of reasoning and evaluation would involve a degree of comparison’ in order to arrive at an accurate determination. The evaluation of the ‘facts available’ that is required, and the form it may take, depend on the particular circumstances of a given case, including the nature, quality, and amount of evidence on the record and the particular determinations to be made. The nature and extent of the explanation and analysis required will necessarily vary from determination to determination (13).

(38) In view of the lack of cooperation from the GOC and Chinese producers the Commission decided to examine under Article 28 of the basic Regulation whether there was continuation of subsidisation as follows. First, the Commission examined whether the subsidies countervailed in the original and previous expiry investigations continued to confer benefit to the CFP industry in the PRC. Second, the Commission analysed whether that industry benefitted from subsidies which were not countervailed in the original or previous expiry review investigations (‘additional subsidies’ or ‘new subsidies’), as alleged in the request.

(39) The Commission decided that, in view of the findings below confirming the existence of continued subsidisation with respect to most of the subsidies countervailed in the original and previous expiry review investigations, as well as the existence of some new additional subsidies, there was no need to investigate all subsidies alleged to exist by the applicants. Indeed, pursuant to Article 18 of the basic Regulation, the Commission should examine whether there is evidence of continued subsidisation, regardless of its amount.

(40) In the original investigation (23) the Commission established that the ad valorem subsidy amount with regard to this measure was 5,37 % for the APP Group (24) and 1,26 % for the Chenming Group (25).

(41) In the original and previous review investigations the Commission first examined whether preferential lending forms part of the implementation of the GOC's central planning, which aims to encourage the development of the paper making industry.

(42) The coated fine paper industry that was subject to the Commission's investigation constitutes part of a wider category of the paper industry, also referred to as the paper making industry. The applicants alleged that the GOC continues to subsidise its paper industry and referred to a number of policy and planning documents as well as legislation, which form the basis for continuation of State support for this industry.

(43) In the original and previous review investigations the Commission established the existence of specific policy plans with respect to the paper industry. These plans stipulated that the government authorities closely monitor the performance of the paper industry and implement special policies (e.g., implementing decrees) for the fulfilment of the goals of the policy plans. Furthermore, the investigation also established that the specific policy plans provide for preferential lending to the paper making industry.

(44) In the previous review investigation the Commission also established that the financial market in the PRC continued to be distorted by the interventions of the GOC. The findings of the original investigation based on government plans in force at that time are upheld in the current expiry review investigation. Both the 14th Five-Year Plan (26) applicable during the RIP and the previous 11th, 12th and 13th Five-Year Plan continue to indicate the paper industry as an ‘Encouraged industry’.

(45) The 13th Five-Year Plan (2016-2020) confirmed the continuation of subsidisation, as it singled out the paper industry as an ‘Encouraged industry’.

(46) The 14th Five-Year Plan (2021-2025) (27) aims at speeding up the transformation and upgrading of enterprises in key industries such as the chemical industry and papermaking, and improving the green manufacturing system.

(47) Under the ‘Made in China 2025’ Initiative, the Chinese light industry, to which the paper industry belongs, is eligible for support to finance its technological upgrading, the acquisition of modern production equipment, and the acceleration of its green transformation. Chinese CFP producers such as the Chenming Group make express references in their financial statements (28) to the implementation of the goals set out in the ‘Made in China 2025’ Plan.

(48) In the original investigation the Commission established, with reference to ‘Decision No 40 of the State Council’ (29) (‘Decision No 40’), that this act is an order from the State Council, i.e. the highest administrative body in the PRC, and remains legally binding on other public bodies and economic operators. It classified the industrial sectors into ‘Encouraged’, ‘Restricted’ and ‘Eliminated’ Projects. This Act represents a binding industrial policy document that shows how the GOC maintains a policy of supporting groups of enterprises or industries, such as the paper industry, classified as an ‘Encouraged industry’. The Commission based on the applicant’s request confirmed that Decision No 40 was still in force during the review investigation period (30).

(49) With respect to the number of industries listed as ‘Encouraged’, there are 26 in total, representing only a portion of the Chinese economy. Furthermore, only certain activities within these 26 sectors are given ‘Encouraged’ status. Article 17 of Decision No 40 also stipulates that the ‘Encouraged investment projects’ shall benefit from specific privileges and incentives (financial support, import duty exemption, VAT exemption and tax exemption). With reference to the ‘Restricted’ and ‘Eliminated’ Projects, Decision No 40 empowers the State authorities to intervene directly to regulate the market. In fact, Articles 18 and 19 require the relevant authority to stop financial institutions from supplying loans and also order the State price administrative department to raise the electricity price and instruct the electricity supply companies to stop supplying electricity to ‘Restricted’ and ‘Eliminated’ Projects. It is obvious from the above that Decision No 40 provides binding rules and instructions to all economic institutions and entities in the form of directives on the promotion and support of eEcouraged industries, one of which is the papermaking industry (31).