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

• (137) According to Article 2 of the Land Administration Law, all land is government-owned since, according to the Chinese Constitution and relevant legal provisions, land belongs collectively to the People of China. No land can be sold but land-use rights may be assigned according to the law: the State authorities assign it through public bidding, quotation or auction.

3.3.5.3.   Findings of the original, previous expiry review and recent investigation

• (138) In the original investigation ⁸¹, the Commission found that the provision of land-use rights by the GOC should be considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation in the form of provision of goods which confers a benefit upon the recipient companies.

• (139) Neither the GOC nor the exporting producers provided evidence suggesting that the coated fine paper industry stopped benefitting from the provision of land-use rights for less than adequate remuneration or that that the subsidies and subsidy programmes at issue will be terminated in the near future.

• (140) Furthermore, the Commission also recently found in several investigations, including GFF from China ⁸² and Aluminium converter foil from China ⁸³, that Chinese producers are eligible to receive refunds from local authorities to compensate for the prices, which they paid for the LURs. In this regard, in 2019, The Chenming Group reported an increase of its land-use rights amounting to RMB 163 million. In 2020, that amount went up to RMB 219 million, i.e., an increase of RMB 56 million ⁸⁴.

• (141) Consequently, on the basis of the available information, the Commission concluded that the rates paid for land use continued to be subsidised because the system imposed by the GOC does not adhere to market principles. As the paper industry continued to be an ‘Encouraged industry’ under the 13th Five-Year Plan and the 14th Five-Year Plan, the Commission, on the basis of the available information established that the preferential assignment of land continues. The provision of land-use rights by the GOC to the paper industry as one of the encouraged industries shows that the subsidy is specific within the meaning of Article 4(2) of the basic Regulation.

• (142) In the absence of cooperation from the GOC and the Chinese exporting producers, the Commission had no company-specific information on the basis of which it could calculate the amount of subsidy conferred during the RIP. However, in view of the findings reached in the previous investigations referred to in recital (138) the overall tax benefits found by the applicants referred to in recital (136), and absent any information to the contrary, the Commission considered that the CFP producers continued to be subsidised during the review investigation period.

3.3.5.4.   Conclusion

• (143) In light of the above, the Commission concluded that the coated fine paper industry continued to benefit from provision of land for less than adequate remuneration during the RIP. In view of the existence of financial contributions, a benefit to the exporting producers and specificity, this subsidy scheme continues to be considered countervailable.

3.3.6.   Export insurance programmes for the coated fine paper industry

3.3.6.1.   Legal Basis

• (144) The legal bases for this programme are the following:

• — the Notice on the Implementation of the Strategy of Promoting Trade through Science and Technology by Utilising Export Credit Insurance (Shang Ji Fa[2004] No 368), issued jointly by MOFCOM and Sinosure,

• — the Export Directory of Chinese High and New Technology Products of 2006,

• — the so-called ‘840 plan’ included in the Notice by the State Council of 27 May 2009,

• — the so-called ‘421 plan’ included in the Notice on the issues to implement special Arrangements for financing of insurance on the export of large complete sets of equipment, issued jointly by the Ministry of Commerce and the Ministry of Finance on 22 June 2009.

3.3.6.2.   Sinosure is a public body

• (145) In the previous review investigation ⁸⁵ and recital (458) of Commission Implementing Regulation (EU) 2022/72, the Commission concluded that Sinosure is a public body within the meaning of Article 2(b) of the basic Regulation. In particular, as in the context of preferential lending above, the conclusion that Sinosure is vested with authority to exercise governmental functions is based on facts available relating to State ownership, formal indicia of government control as well as evidence showing that the GOC continues exercising meaningful control over the conduct of Sinosure.

• (146) As confirmed in the previous review investigation and in other recent investigations ⁸⁶, the government exercises full ownership and financial control over Sinosure. Sinosure is a State sole proprietorship, owned 100% by the State Council. The Articles of Association (‘AoA’) state that the business competent department of the company is the Ministry of Finance, and also requires Sinosure to submit financial and accounting reports and the fiscal budget report to the Ministry of Finance for examination and approval.

• (147) With regard to government control, as a state sole proprietorship, Sinosure does not have a Board of Directors. As for the Board of Supervisors, all of the supervisors are appointed by the State Council and execute their duties according to the ‘Interim Regulation on the Board of Supervisors of Important State-owned Financial Institution.’ The senior management of Sinosure is also appointed by the government. Sinosure’s website ⁸⁷ shows that the Chairman of Sinosure is the Secretary of the Party Committee, and the majority of the Senior Management are also Members of the Party Committee.

• (148) The legal basis for subsidies provided by Sinosure are the following:

• — the Notice on the Implementation of the Strategy of Promoting Trade through Science and Technology gy Utilising Export Credit Insurance (Shang JiFa [2004] No.368), issued jointly by MOFCOM and Sinosure;

• — the Export Directory of Chinese High and New Technology Products of 2006; the so-called 840 plan included in the Notice by the State Council of 27 May 2009;

• — the so-called 421 plan included in the Notice on the issues to implement special arrangements for financing of insurance on the export of large complete sets of equipment, issued jointly by the Ministry of Commerce and the Ministry of Finance on 22 June 2009; and

• — the Notice on Cultivation and Development of the State Council on Accelerating Emerging Industries of Strategic Decision (GuoFa[2010] No.32 of 18 October 2010), issued by the State Council and its Implementing Guidelines (GuoFa[2011] No.310 of 21 October 2011) ⁸⁸.

• (149) On its website, Sinosure states that it promotes Chinese exports of goods, especially the exporting of high-tech products. According to a study undertaken by the Organisation for Economic Cooperation and Development (‘OECD’), the Chinese high-tech industry, of which the ACF industry is part, received 21 % of the total export credit insurance provided by Sinosure ⁸⁹. Furthermore, Sinosure has taken an active role in fulfilling the ‘Made in China 2025’ initiative, guiding enterprises to use national credit resources, carrying out scientific and technological innovation and technological upgrading, and helping “going out” enterprises become more competitive in the global market ⁹⁰.

• (150) The institutional framework and other documents issued by the GOC under which Sinosure operates further show that Sinosure is vested with the authority to carry out governmental policies. The Notice on the Implementation of the Strategy of Promoting Trade through Science and Technology by Utilising Export Credit Insurance (Shang Ji Fa [2004] No 368 of 26 July 2004) was issued jointly by MOFCOM and Sinosure in 2004 and still governs Sinosure's activities. Among the objectives of this Notice is the promotion of the export of high and new technology and of high value-added products through the further use of export credit insurance.

• (151) As set out in recitals (46), (57) and (113), the Commission established that the coated fine paper industry is regarded by the GOC as a key industry, whose development is actively pursued by the State as a public policy objective. It is recalled that the paper industry is one of the 26 industries which are classified as ‘Encouraged’, as stated in recital (46), (57) and above. The Commission noted that the activity of export credit insurance performed by Sinosure is an integral part of the broader financial sector where it is established that government intervention directly interferes in and distorts the normal functioning of the financial market in the PRC, see also recitals (148) and (149).

• (152) The Commission is aware of other documents proving that Sinosure directly carries out governmental policies benefitting, inter alia, the exporting producers. The so-called 840 plan is detailed in the Notice by the State Council of 27 May 2009 ⁹¹. This name refers to the use of USD 84 billion as export insurance and it is one of the six measures launched by the State Council in 2009 to stabilize export demand further to the global crisis and the consequent increased demand for export credit insurance. The six measures include notably an improved coverage of export credit insurance, the provision of short-term export credit insurance on a scale of USD 84 billion in 2009 and a reduction of the premium rate. As the only policy institution underwriting export credit insurance, Sinosure is indicated as the executor of the plan. As for the reduction of the insurance premium, Sinosure was required to ensure that the average rate of short-term export credit insurance would be reduced by 30% on the basis of the overall average rate in 2008.

• (153) The so-called ‘421 plan’ was included in the Notice on the issues to implement special arrangements for financing of insurance on the export of large complete sets of equipment issued jointly by the Ministry of Commerce and the Ministry of Finance on 22 June 2009. This was also an important policy supporting China's ‘going out’ policy in response to the 2009 global financial crisis and provided USD 42,1 billion of financing insurance to support the export of large complete sets of equipment. Sinosure and some other financial institutions would manage and provide the funding. Enterprises covered by this document could enjoy the preferential financial measures, including export-credit insurance. Due to the non-cooperation of the GOC, the Commission was unable to obtain additional details on the application of this notice. In the absence of evidence to the contrary, the Commission considered that the paper industry is also covered by this document.

• (154) By the end of 2019, Sinosure had supported exports, domestic trade and investments with a total value of more than USD 4.6 trillion. It has also facilitated the lending of RMB 3.6 trillion by more than 200 banks ⁹².

• (155) Sinosure also plays a very active role in supporting companies involved in the Belt and Road Initiative, such as APP. This includes introducing special measures to increase the speed of settlement of cases in terms of damage assessment, and helping export enterprises to control risks to the greatest extent and to alleviate financial pressure effectively ⁹³.

• (156) On the basis of the above elements and in the absence of cooperation from the GOC, the Commission concluded that Sinosure is a public body as it is vested with authority to exercise governmental functions. The same conclusions were reached in previous anti-subsidy investigations concerning encouraged industries in the PRC ⁹⁴.

• (157) As Sinosure is a public body vested with government authority and executes governmental laws and plans, the provision of export credit insurance to coated fine paper producers constitutes a financial contribution in the form of potential direct transfer of funds from the government within the meaning of Article 3(1)(a)(i) of the basic Regulation.

3.3.6.3.   Benefit

• (158) In the absence of cooperation from the GOC and the Chinese exporting producers, the Commission had no company-specific information on which the amount of subsidy conferred during the review investigation period could be calculated.

3.3.6.4.   Based on the information provided in the request as well as on the findings in recent investigations, the Commission concluded that a benefit within the meaning of Articles 3(2) and 6(c) of the basic Regulation exists since Sinosure, as a policy mandate, provides export credit insurance on terms more favourable than the recipient could normally obtain on the market, or provides insurance cover that would otherwise not be available at all on the market. Specificity

• (159) The subsidies are contingent upon export performance within the meaning of Article 4(4)(a) of the basic Regulation, and therefore specific.

3.3.6.5.   Conclusion

• (160) In light of the above, the Commission concluded that the coated fine paper industry continued to benefit from the export credit insurance provided by Sinosure in the RIP. In view of the existence of financial contributions, a benefit to the exporting producers and specificity, this subsidy scheme continues to be considered countervailable.

3.3.7.   VAT rebates for products furnished with at least 70% recycled fibre and agricultural residues

3.3.7.1.   Legal Basis

• (161) From 1 July 2015, the VAT refund or exemption scheme for production and labour services which comprehensively utilise resources is consolidated under the ‘Notice of Ministry of Finance and State Administration of Taxation to Print and Issue Catalogue of Products and Labour Services with Comprehensive Utilization of Resources (CaiShui [2015] No 78)’. Domestic sales of coated fine paper are subject to a 17% VAT rate. According to the Notice, companies receive a 50% VAT rebate for products furnished with at least 70% recycled fibre and agricultural residues, such as bagasse, waste paper and crop straw.

3.3.7.2.   Eligibility

• (162) According to unverified information provided by the GOC in the framework of the previous review investigation ⁹⁵, pursuant to the Notice referred to above, the VAT refund policies are applicable to sales of products, the production of which used the recycled, reused or redundant materials or energy from other productions.

3.3.7.3.   Practical implementation

• (163) According to unverified information provided by the GOC in the framework of the previous review investigation ⁹⁶, the programme is administered by the State Administration of Taxation of the People's Republic of China with the assistance of other competent authorities, and is implemented by the local tax authorities within their respective jurisdictions. Enterprises that apply for the VAT refund have to file their application with other relevant documents to the taxation authority for examination. After the application is approved, the applicants can receive the benefits.

3.3.7.4.   Findings of the previous review investigation

• (164) In the previous review investigation ⁹⁷ the Commission found that the VAT rebates for products furnished with at least 70% recycled fibre and agricultural residues by the GOC should be considered a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of foregone government revenue which confers a benefit upon the recipient companies. On the basis of the information available, the Commission further concluded that the subsidy was specific in accordance with Article 4(2) of the basic Regulation.

• (165) Neither the GOC nor the exporting producers provided evidence suggesting that the coated fine paper industry stopped benefitting from this VAT rebate or that that the subsidies and subsidy programmes at issue will be terminated in the near future. Indeed, the Notice referred to in recital (161), (162) and (163) specifically mentions paper as products utilising resources such as bagasse, waste paper and crop straw, and stating that the producers have to comply with technical regulations specific to the pulp and paper industry.

• (166) Also, there was no evidence at the Commission’s disposal that this scheme has been discontinued vis-à-vis producers of coated fine paper.

• (167) On the basis of the above the Commission concluded that the GOC provides subsidies in the form of VAT rebates for products furnished with at least 70% recycled fibre and agricultural residues to the coated fine paper industry and that producers of coated fine paper in the PRC continued to benefit from these rebates during the RIP.

3.3.7.5.   Conclusion

• (168) In light of the above, the Commission concluded that the coated fine paper industry continued to benefit from subsidies in the form of VAT rebates for products furnished with at least 70% recycled fibre and agricultural residues during the RIP. In view of the existence of financial contributions, a benefit to the exporting producers and specificity, this subsidy scheme continues to be considered countervailable.

3.4.   Overall conclusion regarding the continuation of subsidisation

• (169) On the basis of all the above, the Commission concluded that producers of coated fine paper in the PRC continued benefitting from countervailable subsidies during the RIP.

3.5.   Development of imports should measures be repealed

3.5.1.   Production capacity and spare capacity in the PRC

• (170) To analyse production capacity and spare capacity in the PRC and given the non-cooperation of the GOC and any Chinese exporting producers, the Commission relied on the information provided by the applicants in their request for review, as specified in the recitals below, concerning the CFP as well as of the Coated Wood-Free paper industry (CWF), the wider sector to which CFP belongs.

• (171) As data at CWF was more readily available, the applicants used it to calculate the CFP proportion of the production and capacity numbers.

• (172) Based on the applicants’ request ⁹⁸, in 2021, global CWF demand was approximately 17,3 million tonnes and global capacities were approximately 20,7 million tonnes Global CFP demand was calculated by the applicants to be approximately 12,1 million tonnes and capacities approximately 14,5 million tonnes.

• (173) In 2021, according to the applicant, EU CWF paper demand was approximately 3,2 million tonnes and EU CWF paper capacities were approximately 5 million tonnes. EU CFP demand was calculated by the Commission at approximately 2,64 million tonnes and EU CFP capacities at just over 4 million tonnes.

• (174) The 2021 Chinese CWF capacities were approximately 6,8 million tonnes and Chinese demand was 4.7 million tonnes. Chinese CFP capacities were therefore 4,8 million tonnes and domestic demand for the product concerned was approximately 3,3 million tonnes ⁹⁹.

• (175) Therefore, China had spare CFP capacities ¹⁰⁰ of at least 0,9 million tonnes and overcapacities ¹⁰¹ of approximately 1,5 million tonnes in 2021, a figure which corresponds to approximately 56 % of the total EU CFP demand. Looking at CWF overall, Chinese overcapacities were over 2 million tonnes in 2021 (more than 80 % of EU consumption). No reduction of overcapacities has been observed. Consequently, should the measures be allowed to lapse, it can be assumed that even higher spare capacity could be easily redirected from CWF to CFP production and sold on the Union market.

• (176) Based on the above, the Commission concluded that the Chinese exporting producers have significant spare capacity which they could use to produce even more CFP products and which could be exported to the Union market if measures were repealed. The Commission also found that this export potential could increase as a result of the expected decline in global and domestic demand in the PRC, in line of the developments in the last decade, as described in section 5 of the expiry review request.

3.5.2.   Attractiveness of the Union market

• (177) As indicated in recital (172) to (175) the investigation showed that Union demand for CFP remained significant. Although Union consumption declined over the period considered, the Union market remains the second largest market in the world (second to the Chinese market) accounting for approximately 20% of global consumption. Furthermore, domestic demand in the PRC is forecast to decrease, suggesting a strong incentive for Chinese producers to find alternative markets which could absorb these Chinese overcapacities.

• (178) In addition, several countries have put measures ¹⁰² in place for paper products against China, including South Korea, India and the USA, as referred to in the expiry review request.

• (179) Furthermore, based on facts available and in particular on the request, the Commission identified 27 countries where the Chinese exporters sold the product under review during the review investigation period at prices below the Union industry’s target prices. Chinese exports to these countries represented about 10 % of the Chinese export to third countries in volume.

• (180) Consequently, given the significant spare capacities found, the possibility to increase spare capacity by switching to coated fine paper from other types of paper, the limited access of Chinese coated fine paper producers to important third countries’ markets, the price at which Chinese exporting producers could sell on the Union market, as well as the forecasted decrease in the domestic consumption in the PRC, it is likely that the subsidised imports will be re-directed to the Union should the measures be allowed to lapse. Therefore, should the measures be allowed to lapse, the subsidised imports will likely come into the Union in higher volumes and in prices that undersell Union industry prices.

• (181) Given the above considerations, the Commission concluded that, if measures were repealed, it would be likely that the exports from the PRC would be directed to the Union market.

3.6.   Conclusion on the likelihood of continuation of subsidisation

• (182) The Commission, on the basis of the facts available, concluded that there is sufficient evidence that subsidisation of the CFP industry in the PRC continued during the review investigation period and is likely to continue in the future. No evidence showed that the subsidies and subsidy programmes at issue will be terminated in the near future.

• (183) The subsidisation of the coated fine paper industry allowed the Chinese producers to maintain their production capacities at a level far exceeding domestic demand, in spite of shrinking markets in China and worldwide.

• (184) Therefore, the Commission found that the repeal of the countervailing measures is likely to result in a return of significant volumes of subsidised imports of the product concerned into the Union market. Various subsidy programmes continued to be offered by the GOC to the coated fine paper industry, and the Commission has sufficient evidence that the coated fine paper industry benefited from a number of them during the RIP.

4. INJURY

4.1.   Definition of the Union industry and Union production

• (185) During the review investigation period, the like product was manufactured by 17 producers in the Union. They constitute the ‘Union industry’ within the meaning of Article 9(1) of the basic Regulation.

• (186) The total Union production during the review investigation period was established at around 3 700 000 tonnes. The Commission established the figure on the basis of the answer to the macroeconomic data questionnaire provided by the Union industry. As indicated in recital (20), three Union producers were selected in the sample representing about 41 % of the total Union production of the like product during the review investigation period.

4.2.   Union consumption

• (187) The Commission established the Union consumption on the basis of the macroeconomic data questionnaire provided by the Union industry and Eurostat data.

• (188) Union consumption developed as follows:

Table 1

Union consumption (tonnes)

	2018	2019	2020	Review Investigation period
Total Union consumption	3 433 636	3 268 584	2 453 924	2 576 925
Index	100	95	71	75
Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data

• (189) The Union consumption decreased by 5 % in 2019, followed by a further sharp decrease of 24 percentage points in 2020 linked to the COVID-19 outbreak. 2021 was marked by a slight increase of 4 percentage points, although by far not enough to get back to the levels observed before the crisis, resulting in an overall decrease in Union consumption of 25 % over the period considered. Looking at the longer trend, the estimated Union consumption during the review investigation period was 44 % lower than the one found during the investigation period in the original investigation (4 572 057 tonnes). The decline in Union consumption reflects decreasing graphic paper demand in general, which is mainly the result of the development of digital media, which is replacing traditional print media.

4.3.   Imports from the country concerned

4.3.1.   Volume and market share of the imports from the country concerned

• (190) The Commission established the volume of imports on the basis of Eurostat data. The market share of the imports was established on the basis of the macroeconomic data questionnaire provided by the Union industry and Eurostat data. Eurostat data were previously check with the available information.

• (191) Imports into the Union from the country concerned developed as follows for the exporters currently subject to the duties:

Table 2

Import volume (tonnes) and market share

	2018	2019	2020	Review Investigation period
Volume of imports from the country concerned (tonnes)	232	242	127	197
Index	100	104	54	85
Market share	0,007 %	0,007 %	0,005 %	0,008 %
Index	100	109	76	113
Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data

• (192) During the period considered, the volume of imports into the Union from the PRC was negligible. In fact, since the imposition of the measures in 2011, imports into the Union from the PRC have dropped to insignificant levels.

4.3.2.   Prices of the imports from the country concerned

• (193) As indicated in the recital above, due to the negligible volume of imports of CFP from the PRC into the Union during the review investigation period, the prices of these sales were not considered as representative and could not be used to draw any conclusions concerning prices of imports from the PRC into the Union and the pricing behaviour of the exporting producers.

4.4.   Imports from third countries other than China

• (194) The imports of coated fine paper from third countries other than China originated mainly from South Korea and the USA.

• (195) The (aggregated) volume of imports into the Union as well as the market share and price trends for imports of coated fine paper from other third countries developed as follows:

Table 3

Imports from third countries

	2018	2019	2020	Review Investigation period
Volume (tonnes)	7 500	6 065	35 584	24 398
Index	100	81	474	325
Market share	0,22 %	0,19 %	1,45 %	0,95 %
Index	100	85	664	433
Average price (EUR/tonne)	832	931	648	685
Index	100	112	78	82
Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat

• (196) Though the total volume of imports into the Union from countries other than the PRC increased over the period considered, it remained at a very low level, as is reflected in their total market share, which increased from 0,22% to 0,95% over this period. The average prices of these imports were higher than the average prices of the Union industry. These imports from third countries have therefore not contributed to the EU injury situation.

4.5.   Economic situation of the Union industry

4.5.1.   General remarks

• (197) In accordance with Article 3(5) of the basic Regulation, the assessment of the economic situation of the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

• (198) As mentioned in recital (20), sampling was used for the assessment of the economic situation of the Union industry.

• (199) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data related to all Union producers, contained in the macroeconomic data questionnaire provided by the Union industry. The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies from the sampled Union producers. Both sets of data were checked and found to be representative of the economic situation of the Union industry.

• (200) The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the subsidy amounts, and recovery from past subsidisation.

• (201) The microeconomic indicators are: average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital.

4.5.2.   Macroeconomic indicators

4.5.2.1.   Production, production capacity and capacity utilisation

• (202) The total Union production, production capacity and capacity utilisation developed over the period considered as follows:

Table 4

Production, production capacity and capacity utilisation

	2018	2019	2020	Review Investigation period
Production volume (tonnes)	4 968 337	4 582 940	3 300 705	3 703 442
Index	100	92	66	75
Production capacity (tonnes)	5 451 528	5 121 138	4 595 798	4 044 648
Index	100	94	84	74
Capacity utilisation	91,1 %	89,5 %	71,8 %	91,6 %
Index	100	98	79	100
Source: The macroeconomic data questionnaire provided by the Union industry	Source: The macroeconomic data questionnaire provided by the Union industry	Source: The macroeconomic data questionnaire provided by the Union industry	Source: The macroeconomic data questionnaire provided by the Union industry	Source: The macroeconomic data questionnaire provided by the Union industry

• (203) The production and production capacity have decreased respectively by 25 % and 26 % over the period considered. This reduction in production and production capacity is a long-term trend linked to the adaptation of the industry to a decreasing demand related to the digitalisation of our society.

• (204) Already before the period considered, Union producers had undertaken major restructuring efforts aimed at addressing the structural overcapacity resulting from the digitalisation and these efforts continued during the period considered. Both as a result of certain mill closures and the conversion of other mills to produce paper products other than CFP, the Union industry decreased its CFP production capacity by approximately 1 400 000 tonnes over the period considered.

• (205) By continuously reducing its production capacity, the Union industry was able to keep its capacity utilisation relatively stable during the period considered. With the exception of the year 2020, for which capacity utilisation was lower as compared to previous and following years, mainly due to the reduction in production following the 2020 COVID-19 outbreak.

• (206) The investigation established that high capacity utilisation is an important factor in the long-term viability of the paper industry because of high investments in fixed assets and the resulting impact on average manufacturing costs.

4.5.2.2.   Sales volume and market share

• (207) The Union industry’s sales volume and market share developed over the period considered as follows:

Table 5

Sales volume and market share (tonnes)

	2018	2019	2020	Review Investigation period
Total Sales volume on the Union market (tonnes)	3 425 903	3 262 278	2 418 213	2 552 330
Index	100	95	71	75
Market share	99,8 %	99,8 %	98,5 %	99,0 %
Index	100	100	99	99
Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data	Source: Macroeconomic data questionnaire provided by the Union industry and Eurostat data

• (208) Over the period considered, the sales volume in the Union market decreased by 25 %. It decreased by 5 % between 2018 and 2019 and in 2020, due to the COVID-19 pandemic, sales dropped sharply by an additional 24 percentage points. In 2021, there was a small rebound of 4 percentage points but not up to the levels of sales observed in 2018. The decreasing sales were related to the decreasing demand for the product concerned, which could be linked to the digitalisation of our society.

• (209) Since there were almost no imports of the product concerned during the period considered, the market share of the Union industry remained stable at around 99.

4.5.2.3.   Growth

• (210) During the period considered, the Union industry did not witness any growth of production and sales. On the contrary, these economic indicators closely followed the downward trend of the Union consumption.

4.5.2.4.   Employment and productivity

• (211) Employment and productivity developed over the period considered as follows:

Table 6

Employment and productivity

	2018	2019	2020	Review Investigation period
Number of employees	6 677	6 405	5 793	5 175
Index	100	96	87	78
Productivity (tonne/employee)	744	716	570	716
Index	100	96	77	96
Source: Macroeconomic data questionnaire provided by the Union industry	Source: Macroeconomic data questionnaire provided by the Union industry	Source: Macroeconomic data questionnaire provided by the Union industry	Source: Macroeconomic data questionnaire provided by the Union industry	Source: Macroeconomic data questionnaire provided by the Union industry

• (212) During the period considered, the number of employees decreased by 22 %. This decrease was steady and regular over the period. It reflects the longer-term restructuring efforts undertaken by the Union industry to address the structural overcapacity, as explained in recital (204).

• (213) The substantial reductions in the workforce were matched by comparable reductions in the production. As a consequence, the productivity, measured as output (tonnes) per person employed per year, only recorded a slight decrease by 4 % during the period considered. In 2020, the productivity fell sharply by 19 percentage points due to the sudden drop in demand caused by the COVID-19 pandemic. As a result, the productivity hit its lowest level in 2020.

4.5.2.5.   Magnitude of the subsidisation and recovery from past subsidy

• (214) As explained in recital (142), it was not possible to establish an affirmative determination of the amount of subsidisation during the review investigation period. The investigation therefore focused on the likelihood of continuation of subsidisation should the countervailing measures be repealed (see recitals (182), (183) and (184)).

• (215) In the previous expiry review, the Union industry showed signs of recovery from the effects of past subsidisation. During the period considered of the current expiry review investigation, there were no such signs of recovery, since the Union industry was facing a difficult situation, with the need to restructure added to the negative effects of the COVID-19 pandemic.

4.5.3.   Microeconomic indicators

4.5.3.1.   Prices and factors affecting prices

• (216) The weighted average unit sales prices of the sampled Union producers to customers in the Union developed over the period considered as follows:

Table 7

Sales prices and cost of production in the Union (EUR/tonne)

	2018	2019	2020	Review Investigation period
Average unit sales price in the Union	654	667	616	650
Index	100	102	94	99
Unit cost of production	674	662	639	712
Index	100	98	95	106
Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers

• (217) The average unit sales price of the Union industry to unrelated customers in the Union remained rather stable over the period considered and decreased only 1 %. After a slight increase of 2 % in 2019, prices decreased by 8 percentage points in 2020, the year of the COVID-19 outbreak, when a lower demand dragged prices downwards. In the review investigation period prices increased again by 5 percentage points due to an increase in demand.

• (218) The unit cost of production of the Union industry decreased slightly by 2% between 2018 and 2019. The further decrease by 3 percentage points in 2020 was due to the fall in the prices of raw materials and energy. In 2021, the prices of raw materials and energy increased significantly, leading to an increase in the costs of production by 11 percentage points, resulting in an overall increase of 6% over the period considered.

4.5.3.2.   Labour costs

• (219) The average labour costs of the sampled Union producers developed over the period considered as follows:

Table 8

Average labour costs per employee

	2018	2019	2020	Review Investigation period
Average labour costs per employee (EUR)	72 907	72 704	68 780	76 280
Index	100	100	94	105
Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers

• (220) The average labour costs per employee were stable over the period 2018-2019. They decreased by 6 % in 2020 as compared to 2019. They increased immediately afterwards, in the review investigation period to a level 5 % higher than in 2018.

4.5.3.3.   Inventories

• (221) Stock levels of the sampled Union producers developed over the period considered as follows:

Table 9

Inventories

	2018	2019	2020	Review Investigation period
Closing stocks (tonnes)	151 882	139 168	122 377	107 146
Index	100	92	81	71
Closing stocks as a percentage of production	3,06 %	3,04 %	3,71 %	2,89 %
Index	100	99	121	95
Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers

• (222) The closing stocks of the Union industry decreased by 29 % over the period considered. This is in line with the decrease in the production and production capacities.

• (223) In terms of percentage of production, the level of closing stocks hovered around 3 % over the period.

4.5.3.4.   Profitability, cash flow, investments, return on investments and ability to raise capital

• (224) Profitability, cash flow, investments and return on investments of the sampled Union producers developed over the period considered as follows:

Table 10

Profitability, cash flow, investments and return on investments

	2018	2019	2020	Review Investigation period
Profitability of sales in the Union to unrelated customers (% of sales turnover)	-3,6 %	-0,8 %	-5,6 %	-9,5 %
Index	- 100	-24	- 158	- 267
Cash flow (EUR)	53 230 728	116 531 955	68 541 389	30 295 619
Index	100	219	129	57
Investments (EUR)	21 327 970	39 328 573	20 843 097	32 601 304
Index	100	184	98	153
Return on investments	-7,2 %	-1,7 %	-8,7 %	-24,5 %
Index	- 100	-23	- 122	- 341
Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers	Source: Verified questionnaire replies of the sampled Union producers

• (225) The Commission established the profitability of the sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales. The Union industry has been loss making during the whole period considered. As a reference, it is noted that in the original investigation, the target profit for the industry was established at 8 % ¹⁰³. During the period considered, the Union industry’s profitability decreased from -3,6 % to -9,5 %. 2019 was, comparatively, the best year, when the profitability of the Union industry reached -0,8 %, due to a combination of lower cost of production and strong sales prices. In 2020, profitability dropped sharply to a level of -5,6%, to decrease further in the review investigation period to -9,5 %.

• (226) The net cash flow is the ability of the Union producers to self-finance their activities. During the period considered, cash flow was positive and to a large extent its trend reflected the evolution of profitability, with 2019 being the best year.

• (227) In view of the falling demand for CFP both in the Union and abroad during the period considered, the Union industry did not invest in new capacity. The investments that were made focused on maintenance, capital replacement, improving energy efficiency, and on measures aimed at restructuring and complying with environmental protection standards.

• (228) The return on investments is the profit in percentage of the net book value of investments. It developed similarly to the profit over the period considered.

• (229) Given the cost of existing debt, the profitability of the Union industry and continuously falling demand for CFP, the Union industry's ability to raise capital remained limited over the period considered.

4.6.   Conclusion on injury

• (230) During the period considered, injury indicators showed a negative picture. Production capacity and production were declining, sales were declining, and employment was declining. Profit and return on investment were negative during the whole period concerned, with 2020 and 2021 being the worst years of the period.

• (231) The negative trends in production and sales volumes were the result of the continuously falling demand for CFP both in the Union and abroad, that required the Union industry to continue with restructuring, including closing paper mills and converting others for the production of other types of paper.

• (232) Future demand for CFP is expected to decline and the situation of the Union industry will remain difficult, with further decreases in production and production capacity that will have to take place.

• (233) The measures in place ensured protection to the Union industry, allowing it to maintain a high market share during the period considered. The Union industry was however not able to raise CFP prices sufficiently above cost-covering levels to generate profit. This was due in 2018-2019 to rising prices of raw materials (especially pulp) and the difficulty to pass on increasing prices to the Union industry customers. In 2020, the fall in demand and prices linked to the COVID-19 pandemics hit the Union industry, which recorded significant losses. While 2021 was characterised by increasing prices of raw materials and energy, leading to an increase of the costs of production of 11 % and a further deterioration of the bottom lines. In addition, during the whole period considered, the Union industry had to restructure its activities and the production capacity was cut by 26 % over the period considered. This came at an additional cost.

• (234) On the basis of the above, the Commission concluded that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation during the review investigation period. The injury to the Union industry observed during this period could however not have been caused by subsidised imports from the PRC due to their very limited volume. It was mainly caused by the declining demand for CFP and the related high restructuring costs, both of which had a significant bearing on the Union industry’s profitability.

5. LIKELIHOOD OF RECURRENCE OF INJURY

• (235) The Commission concluded in recital (234) that the Union industry suffered material injury during the review investigation period. The Commission also concluded in recital (234) that the injury to the Union industry observed during the review investigation period could not have been caused by subsidised imports from the PRC due to their very limited volume. Therefore, the Commission assessed, in accordance with Article 11(2) of the basic Regulation, whether there would be a likelihood of recurrence of injury originally caused by the subsidised imports from the PRC if the current measures were allowed to lapse.

• (236) As mentioned in recital (177), the Union market is the second largest CFP market in the world. Indeed, its overall size and the existence of large CFP buyers make it very attractive to Chinese CFP producers, because such large deliveries would allow them to utilize their spare production capacity, which in turn would lower their unit production costs. Accordingly, if measures were repealed, given the economic benefits of utilizing spare production capacity in the PRC, it is likely that the Chinese exporting producers would offer CFP at low prices in the Union market, putting pressure on Union industry prices and profitability.

• (237) The Commission also analysed the pricing behaviour of the Chinese exporting producers on third countries markets in order to determine the price effects on the Union industry should the measures be allowed to lapse.

• (238) In the absence of cooperation from the Chinese exporting producers, the Commission used the facts available in accordance with Article 18 of the basic Regulation to establish the Chinese export prices to third countries. For this purpose, the data contained in the review request, based on Svan Data ¹⁰⁴, was used and, in particular Chinese export data related to commodity code 4810 19. The reason was that the applicant explained in the expiry review request that exports of the product concerned were mainly exported under Chinese commodity code 4810 19.

• (239) For comparison purposes, the Commission determined the following prices:

• — the weighted average sales price of the Union industry charged to unrelated customers in the Union, adjusted to an ex-works level: 661 EUR/tonne ¹⁰⁵,

• — the EU target price: 774 EUR/tonne ¹⁰⁶, and

• — Chinese export prices as reported by the applicant in the request covering the same period as the review investigation period, with adjusted ocean freight costs ¹⁰⁷ to obtain a likely EU landed price ¹⁰⁸.

• (240) First, the Commission compared the weighted average sales price of the Union industry charged to unrelated customers in the Union, adjusted to an ex-works level, with the Chinese export prices to third countries other than the Union, adjusted to a Union landed price during the RIP. The price comparison based on the data established in recital (239) showed that for export prices to 8 third countries were below the Union industry prices. These exports represented about 1 % of Chinese exports in volume. This small percentage is due to the depressed prices of CFP in the Union.

• (241) Second, the Commission also analysed whether the Chinese weighted export prices to third countries other than the Union, adjusted to a Union landed price undersold the Union industry when compared with the Union industry target price during the RIP. In view of the lack of cooperation by Chinese exporters, the Commission based its analysis on data in the expiry review request. The analysis identified 27 third countries where the Chinese exporting producers sold the product concerned during the review investigation period at prices below the average Union industry’s target price. Chinese exports to these countries represented about 10 % of the total Chinese exports to other third countries in volume. Furthermore, as indicated in recital (178), major third countries markets are foreclosed for exports from China due to their duties in place.

• (242) In conclusion, the analysis demonstrated – on the basis of facts available - that the Chinese exporting producers were able to sell at prices below the Union target price. In view of the significant spare capacities available in China, it was also noted that large volumes of CFP could potentially be produced to be sold on the EU market. The Commission thus concluded that, should measures be allowed to lapse, the Chinese exporters would be able to exercise significant price pressure and thus cause injury to the Union industry.

• (243) The investigation also showed that the Union industry was injured and vulnerable. It was also noted that the industry is currently restructuring as is reflected in the decrease in production capacity over the period considered, with some companies reconverted some of their production lines to produce other types of paper.

• (244) The investigation has also confirmed the findings of the original investigation that high-capacity utilisation is an important factor in the long-term viability of paper producers because the production process is capital-intensive. Any recurrence of subsidised imports and resulting price pressure would deprive the Union industry from the cash flow necessary to finance restructuring efforts to adapt to declining world demand for CFP. It would also undermine the positive effects of past restructuring efforts and lead to the further deterioration of all injury indicators.

• (245) On this basis, it is concluded that the absence of measures would likely result in a significant increase of subsidised imports from the PRC at injurious prices and material injury would be likely to recur.

6. UNION INTEREST

• (246) In accordance with Article 31 of the basic Regulation, the Commission examined whether maintaining the existing anti-subsidy measures would be clearly against the interest of the Union as whole. The determination of the Union interest was based on an appreciation of all the various interests involved, including those of the Union industry, unrelated importers, traders and users.

6.1.   Interest of the Union industry

• (247) The investigation found that the Union industry was injured and in a vulnerable situation. The challenges created by the continuously falling demand for CFP will necessitate continued restructuring plans, including the closure of paper mills and the conversion of others for the production of other types of paper.

• (248) Under the price pressure from subsidised imports from the PRC, the Union industry would not be able to get CFP prices above cost-covering levels and generate the necessary income to finance its restructuring efforts and adjust to the challenges created by the continuously falling demand for CFP.

• (249) On this basis, the Commission concluded that the continuation of the anti-subsidy measures in force would be in the interest of the Union industry.

6.2.   Interest of unrelated importers and traders

• (250) There was no cooperation from unrelated importers and traders. Based on the fact that during the period considered there were almost no imports of CFP from the PRC, the Commission concluded that imports of the product concerned do not represent a major proportion of the business activities of unrelated importers and traders and that there were no factors suggesting that they would be disproportionally affected if measures were maintained.

6.3.   Interest of users

• (251) No individual user cooperated and submitted a questionnaire reply.

• (252) The Commission did receive two written submissions, one from Unitedprint.com, a Union user of CFP and one from an association of the printing industry, Intergraf ¹⁰⁹ (supported by The Royal Dutch Association of Printing and Allied Industries).

• (253) The submission of Intergraf explained that the Union's printing industry was suffering from the replacement of paper media with digital media, as well as from massive imports of printed products, in particular from the PRC. According to Intergraf, the anti-dumping and anti-subsidy? measures undermine the Union printers' competitiveness, which is not protected by similar trade measures and has to respect strict environmental standards.

• (254) Intergraf claimed that more than EUR 700 million of printed paper is exported from China to the EU yearly. This includes a large variety of print products that are not printed on CFP. Based on the information available, the Commission could not assess what part of the products imported from the PRC was printed on CFP and what was printed on other types of paper.

• (255) The original investigation found that most products that are printed on CFP are ‘time sensitive’ products, such as magazines, brochures, direct mail and inserts that are less susceptible to being imported from the PRC because of the time needed for transportation. Information submitted by the applicants in this review confirmed that the findings of the original investigation were still valid.

• (256) Accordingly, the Commission concluded that while it is likely that some print materials are printed on CFP outside the Union because of anti-dumping and countervailing duties, their impact on the economic situation of the Union's printing industry is limited.

• (257) Intergraf also pointed to shortages of supplies of CFP and large increase of prices, especially since mid-2021. This was also noted in the submission from Unitedprint.com. With the information provided, the Commission could not assess the respective volumes of supply and demand and therefore the alleged market imbalance. The Commission could also not evaluate whether the mentioned price increase could be passed to their customers or not. The Commission also notes that in 2021, in a post-COVID-19 context, there were shortages on a number of raw material markets.

6.4.   Conclusion on Union interest

• (258) On the basis of the above, the Commission concluded that there were no compelling reasons of the Union interest against the maintenance of the existing measures on imports of CFP originating in China.

7. ANTI-SUBSIDY MEASURES

• (259) On the basis of the conclusions reached by the Commission on continuation of subsidy, recurrence of injury and Union interest, the anti-subsidy measures on CFP from China should be maintained.

• (260) To minimise the risks of circumvention due to the difference in duty rates, special measures are needed to ensure the application of the individual countervailing duties. The companies with individual countervailing duties must present a valid commercial invoice to the customs authorities of the Member States. The invoice must conform to the requirements set out in Article 1(3) of this regulation. Imports not accompanied by that invoice should be subject to the countervailing duty applicable to ‘all other companies’.

• (261) While presentation of this invoice is necessary for the customs authorities of the Member States to apply the individual rates of countervailing duty to imports, it is not the only element to be taken into account by the customs authorities. Indeed, even if presented with an invoice meeting all the requirements set out in Article 1(3) of this regulation, the customs authorities of Member States must carry out their usual checks and may, like in all other cases, require additional documents (shipping documents, etc.) for the purpose of verifying the accuracy of the particulars contained in the declaration and ensure that the subsequent application of the lower rate of duty is justified, in compliance with customs law.

• (262) Should the exports by one of the companies benefitting from lower individual duty rates increase significantly in volume after the imposition of the measures concerned, such an increase in volume could be considered as constituting in itself a change in the pattern of trade due to the imposition of measures within the meaning of Article 23(1) of the basic Regulation. In such circumstances and provided the conditions are met an anti-circumvention investigation may be initiated. This investigation may, inter alia, examine the need for the removal of individual duty rate(s) and the consequent imposition of a country-wide duty.

• (263) The individual company countervailing duty rates specified in this Regulation are exclusively applicable to imports of the product under review originating in China and produced by the named legal entities. Imports of the product under review produced by any other company not specifically mentioned in the operative part of this Regulation, including entities related to those specifically mentioned, should be subject to the duty rate applicable to ‘all other companies’. They should not be subject to any of the individual countervailing duty rates.

• (264) A company may request the application of these individual countervailing duty rates if it changes subsequently the name of its entity. The request must be addressed to the Commission ¹¹⁰. The request must contain all the relevant information enabling to demonstrate that the change does not affect the right of the company to benefit from the duty rate which applies to it. If the change of name of the company does not affect its right to benefit from the duty rate which applies to it, a regulation about the change of name will be published in the Official Journal of the European Union.

• (265) All interested parties were informed of the essential facts and considerations on the basis of which it was intended to recommend that the existing measures be maintained. They were also granted a period to make representations subsequent to this disclosure.

• (266) The Commission received a submission from the EU industry that further substantiated the Commission’s findings that the Chinese exporting producers were able to sell at prices below the Union target price. It was therefore not deemed necessary to amend the text of the present Regulation.

• (267) In view of Article 109 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ¹¹¹ when an amount is to be reimbursed following a judgment of the Court of Justice of the European Union, the interest to be paid should be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union on the first calendar day of each month.

• (268) The measures provided for in this Regulation are in accordance with the opinion of the Committee established by Article 15(1) of Regulation (EU) 2016/1036,

HAS ADOPTED THIS REGULATION:

Article 1

The definitive countervailing duty is not imposed on rolls suitable for use in web-fed presses. Rolls suitable for use in web-fed presses are defined as those rolls which, if tested according to the ISO test standard ISO 3783:2006 concerning the determination of resistance to picking — accelerated speed method using the IGT tester (electric model), give a result of less than 30 N/m when measuring in the cross-direction of the paper (CD) and a result of less than 50 N/m when measuring in the machine direction (MD). The definitive countervailing duty is not imposed on multi-ply paper and multi-ply paperboard.

Company	Countervailing duty (%)	TARIC additional code
Gold East Paper (Jiangsu) Co., Ltd, Zhenjiang City, Jiangsu Province, PRC; Gold Huasheng Paper (Suzhou Industrial Park) Co., Ltd, Suzhou City, Jiangsu Province, PRC	12 %	B001
Shangdong Chenming Paper Holdings Limited, Shouguang City, Shandong Province, PRC; Shouguang Chenming Art Paper Co., Ltd, Shouguang City, Shandong Province, PRC	4 %	B013
All other companies	12 %	B999

Article 2

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 21 August 2023.

For the Commission

The President

Ursula VON DER LEYEN