Commission Implementing Regulation (EU) 2024/1923 of 10 July 2024 imposing a provisional anti-dumping duty on imports of titanium dioxide originating in the People’s Republic of China

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	2024/1923	11.7.2024

THE EUROPEAN COMMISSION,

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

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

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 13 November 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of titanium dioxide (‘TiO2’), originating in the People’s Republic of China (‘the country concerned’, ‘China’ or ‘the PRC’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union ² (‘the Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 29 September 2023 by the European Titanium Dioxide Ad Hoc Coalition (‘the complainant’). The complaint was made on behalf of the European Union (‘the Union’) industry of TiO2 in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

1.2.   Registration

• (3) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2024/1617 ³ (‘the registration Regulation’).

1.3.   Interested parties

• (4) In the Notice of Initiation, the Commission invited interested parties to participate in the investigation. In addition, the Commission specifically informed the complainant, Union producers, the known exporting producers and their representative associations, the authorities of the People’s Republic of China, known importers, traders and users about the initiation of the investigation and invited them to participate.

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

1.4.   Comments on initiation

• (6) Several parties submitted comments on initiation. These concerned the product scope, alleged injury suffered by the Union industry, target profit used in injury calculations, causal link, union interest. All of those comments are addressed below in the relevant sections of this Regulation.

1.5.   Sampling

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

Sampling of Union producers

• (8) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of production and sales volumes taking it account the geographical location of the companies. This sample consisted of three Union producers. The sampled Union producers accounted for 50 % of the total production in the Union and 65 % of the sales volume to unrelated customers in the Union. The Commission invited interested parties to comment on the provisional sample. No comments were received on the sample of Union producers The sample is representative of the Union industry.

Sampling of unrelated importers

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

• (10) One unrelated importer provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary.

Sampling of exporting producers in the PRC

• (11) To decide whether sampling is 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. 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 could be interested in participating in the investigation.

• (12) Twenty-nine exporting producers in the PRC provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of seven companies belonging to two separate corporate groups on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available.

• (13) In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the PRC were consulted on the selection of the sample. No comments were received on the sample.

1.6.   Individual examination

• (14) Two exporting producers in the PRC indicated their interest in requesting individual examination under Article 17(3) of the basic Regulation. However, the requesting producers did not fill out the dedicated questionnaire for the exporting producers within the deadline specified in the Notice of initiation. Therefore, no requests for individual examination were ultimately received.

1.7.   Questionnaire replies and verification visits

• (15) The Commission sent questionnaires to the sampled Union producers, the sampled exporting producers in China, the known importers and users. The same questionnaires were made available online ⁴ on the day of initiation.

• (16) The Commission sent also a questionnaire concerning the existence of significant distortions in the PRC within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the People’s Republic of China (‘GOC’).

• (17) Furthermore, the complainant provided in the complaint sufficient prima facie evidence of raw material distortions in the PRC regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covered those raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation with regard to the PRC. For this reason, the Commission sent additional questionnaires in this regard to the GOC.

• (18) The Commission received questionnaire replies from the three sampled Union producers, the two sampled groups of Chinese exporting producers and six users. The Commission did not receive the questionnaire reply from the GOC.

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

Union producers

• — Kronos Titan GmbH, Leverkusen, Germany, and its related companies:

• — Kronos Europe S.A/N.V., Gent, Belgium,

• — Societe Industrielle du Titane, Paris, France,

• — Precheza a.s., Olomouc, Czechia, and its related company:

• — Agrofert Italia SRL, Monza, Italy,

• — Tronox Pigments Holland B.V., Rotterdam, The Netherlands.

Users

• — Akzo Nobel Sourcing B.V., Amsterdam, The Netherlands,

• — Flint Group GmbH, Hilversum, The Netherlands,

• — Munksjö Paper AB, Aalen, Germany,

• — Felix Schoeller GmbH & Co. KG, Osnabruck, Germany,

• — Sherwin-Williams Italy SRL, Bologna, Italy,

• — A. Schulman Plastics, Rotterdam, The Netherlands.

Exporting producers in the PRC:

Anhui Gold Star group

• — Anhui Gold Star Titanium Dioxide (Group) Co., Ltd. (‘Anhui Group’),

• — ANHUI GOLD STAR TITANIUM DIOXIDE TRADING COMPANY LIMITED (‘Anhui Trading’).

LB group

• — LB GROUP CO., LTD. (‘LB’),

• — HENAN BILLIONS ADVANCED MATERIAL CO., LTD. (‘HB’),

• — LB LUFENG TITANIUM INDUSTRY CO., LTD. (‘LL’),

• — LB SICHUAN TITANIUM INDUSTRY CO., LTD.(‘LS’),

• — LB XIANGYANG TITANIUM INDUSTRY CO., LTD. (‘LX’).

1.8.   Investigation period and period considered

• (20) The investigation of dumping and injury covered the period from 1 October 2022 to 30 September 2023 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2020 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (21) The product subject to this investigation is titanium dioxide, having the chemical formula TiO2, in all forms, as titanium oxides or in pigments and preparations based on titanium dioxide, containing a minimum of 80 % by weight of titanium dioxide calculated on the dry matter, having all types of particle sizes, currently falling under CN codes ex 2823 00 00 and 3206 11 00 (TARIC codes 2823000010 and 2823000030) (‘the product under investigation’).

• (22) TiO2 is classified under the Chemical Abstracts Service Registry Number (CAS RN) 12065-65-5 and 13463-67-7 (‘the product under investigation’)

• (23) Titanium dioxide is a chemical product in the form of fine white powder. It is used in a range of industrial and consumer products such as paints, coatings, paper, plastics, rubber, textiles, pharmaceutical products etc. Titanium dioxide has excellent light-scattering properties therefore applied where white opacity and brightness is required.

2.2.   Product concerned

• (24) The product concerned is the product under investigation originating in the PRC.

2.3.   Like product

• (25) The investigation showed that the following products have the same basic physical chemical and technical characteristics as well as the same basic uses:

• — the product concerned when exported to the Union,

• — the product under investigation produced and sold on the domestic market of the PRC, and

• — the product under investigation produced and sold in the Union by the Union industry.

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

2.4.   Claims regarding product scope

• (27) Several parties submitted claims regarding product scope within the deadline to submit product scope claims.

• (28) First, one user, Schulman Plastics SAS (‘Schulman Plastics’), requested that product scope be extended to cover the product known as ‘Masterbatch White’.

• (29) Second, one user, Akzo Nobel Sourcing B.V. (‘AkzoNobel’), contended that the product control number (‘PCN’) structure should be amended.

• (30) Third, one user, Munksjö Paper AB (‘Munksjö’), claimed that the product definition is unclear and requested the Commission to clarify that so called laminate-grade TiO2, a particular type of TiO2 which is used in laminate paper production (‘laminate-grade TiO2’), does not fall within the product scope. Munksjö subsequently supplanted this request, asking the Commission to exclude laminate-grade TiO2 from the product scope of the investigation, or, alternatively, to exempt it from anti-dumping duties under the end-use procedure, provided for in Article 254 of the Union Customs Code (‘UCC’) ⁵. Munksjö made the latter request together with another user, Felix Schoeller GmbH & Co. KG (‘Felix’).

• (31) Fourth, one user, Treibacher Industrie AG (‘Treibacher’) requested that TiO2 of a purity of 99,9 % or more be excluded from the product scope.

• (32) Finally, two users, Flint Group GmbH (‘Flint’) and Sun Chemical Ltd. (‘Sun Chemical’) separately requested that a special type of TiO2 that is only used as a pigment in the production of inks in the graphic industry (‘graphic TiO2’) be excluded from the product scope. Flint additionally requested to, alternatively, exempt graphic TiO2 from anti-dumping duties under the end-use procedure provided for in Article 254 of the UCC.

• (33) In addition, the Commission did not consider the requests submitted by several parties regarding product exclusion because those requests were made after the deadline to submit product scope claims had passed. Those requests related to uncoated TiO2 for non-white pigments and food grade TiO2. The Confederation of European Paper Industries (‘CEPI’) also requested to exclude laminate-grade TiO2 from the product scope once the deadline to submit claims had passed. In addition, AkzoNobel introduced a product exclusion request for TiO2 produced via chloride process in their questionnaire reply after the deadline to submit product scope claims.

2.4.1.   Masterbatch White

• (34) Schulman Plastics claimed that the product scope should be extended to include ‘Masterbatch White’ (‘MW’) (currently classified under TARIC code 3206190090). MW is a concentrated mixture of basic elements, such as pigments, dyes, carriers, dispersants, and additives. These are encapsulated in a thermosetting resin, then cooled and cut into granules, which are used to colour or enhance the properties of plastic. TiO2 is an important white pigment constituent of MW, it is the substance which allows MW to colour the plastics white. Thus, Schulman Plastics claimed that the increase in costs of importing TiO2 to the Union, resulting from anti-dumping duties, will lead to the diversion of Chinese TiO2 into the production of MW in China. This would, in turn, further increase the volume of cheaper MW from China being imported/dumped into the Union, making the Union MW producers unable to compete effectively.

• (35) According to the evidence collected during the investigation, as well as Schulman Plastics’ own description of MW, the Commission noted that the product under investigation, as defined in the Notice of Initiation and reiterated in recital (21) above, is used as raw material in production of MW, making MW a downstream product of the product under investigation. This is further corroborated by the fact that Schulman Plastic submitted to the Commission the questionnaire for users, which additionally made clear that the product under investigation is one of the main raw materials that they use in their production of MW.

• (36) For that reason, the complaint could also not contain any evidence which would allow the Commission to assess if there is indication of dumping and associated injury caused by imports of MW originating in China, since the construction of normal value for MW would require benchmarks for different raw materials than the ones used for the product under investigation as is currently defined. The scope of this investigation could not thus be extended to MW, and any alleged dumping practices and the resulting injury inflicted on the MW producers in the Union would have to be determined in a separate anti-dumping investigation.

• (37) Therefore, the Commission rejected the request to extend the scope of this investigation to include MW.

2.4.2.   Claims on the PCN structure

• (38) AkzoNobel claimed that the PCN structure which the Commission established for this investigation should be extended by an additional field to account for surface treatment of different types of TiO2, since: (i) most types of commercially available TiO2 contain some form of surface treatment, (ii) such surface treatment affects the performance of TiO2 in different applications, and (iii) surface treatment features on producers’ data sheets for types of TiO2 they produce and sell. In addition, AkzoNobel claimed that the PCN field for ‘TiO2 content per weight’ is not sufficiently granular to reflect market realities. Specifically, AkzoNobel suggested that the PCN section covering the range of TiO2 content per weight between 80 % and up to but not including 98,5 % should be broken down into three further sections: 80 % up to but not including 90 %, 90 % up to but not including 95 %, and 95 % and up to but not including 98,5 %.

• (39) The complainant opposed these claims on the grounds that surface treatment is a minimal component of the cost of manufacturing and thus does not need to be reflected in the PCN structure. The complainant further commented that the current ‘TiO2 content by weight’ categorization is granular enough to reflect market realities and ensure ‘like for like’ comparison, while adding two additional sections to this field would only be adding unnecessary complexity to the investigation.

• (40) AkzoNobel replied to the complainant’s above comments. AkzoNobel claimed that the PCN structure is not only about making fair comparisons between costs of production for different types of TiO2, but also about making fair comparisons between the selling prices, implying that different types of surface coating will have an impact on the selling price, since it has an impact on which applications certain type of TiO2 should be used for. In addition, examining the datasheets of TiO2 types from the portfolio of the Union producer Kronos, AkzoNobel showed how adding two more PCNs to the ‘TiO2 content per weight’ field would spread the types of TiO2 which Kronos produces more evenly into different PCNs, claiming that such more granular PCN would be more instructive.

• (41) During the investigation, the Commission found that most types of TiO2 marketed by both the Union producers and the exporting producers do contain surface treatment. Such surface treatment consists of different combinations of one or more chemicals, which are relevant for the product’s performance in different applications, and thus do feature on the producers’ data sheets and/or sales brochures.

• (42) The Commission recalls in this respect that the purpose of the PCN is to ensure a fair price comparison between the normal value and the export price under Article 2(10) of the basic Regulation. No evidence demonstrating corelation between the specific chemicals found in the coating and prices of the exporting producers was provided to the Commission, however.

• (43) Furthermore, none of the exporting producers participating in this investigation raised an objection about the proposed PCN structure on the grounds that it would result in unfair price comparison.

• (44) The Commission thus found no reason to amend the PCN structure to reflect these factors and rejected the request by AkzoNobel.

2.4.3.   Product exclusion requests

• (45) As explained above in recitals (27) to (33), several parties introduced requests concerning product exclusion. To assess the product exclusion requests, the Commission examined (i) the basic physical, chemical and technical characteristics of those product types, (ii) their end-use and interchangeability, (iii) end-customer perception, (iv) impact of duties on the user, (v) alternative sources of supply, and (vi) impact of exemption on duties.

2.4.3.1.   Laminate-grade TiO2

• (46) Felix and Munksjö jointly requested the exclusion from the product scope, (or, alternatively, and end-use exemption under Article 254 of the UCC) of laminate-grade TiO2, alleging that this is a special type of TiO2 used only in laminate paper production. In its submission of 21 January 2024, CEPI also independently requested that laminate-grade TiO2 be excluded from the product scope. CEPI’s request was made after the deadline to submit product scope claims of 23 November 2023 as explained in recital (33). The analysis in this section is thus based only on the information provided by Felix and Munksjö.

• (47) The complainant submitted an additional set of comments on this request on 2 May 2024, to which Felix and Munksjö replied in a submission from 22 May 2024. Since the complainant’s comments were made after the deadline for comments on information submitted by other interested parties of 29 January 2024, neither of these additional comments were taken into account. Felix and Munksjö also submitted new factual information in another submission on 30 May 2024. Due to the late stage that the investigation was already in, that information could not be taken into account for the provisional findings.

• (48) Laminate paper (also known as décor paper) is a speciality paper used as the surface of various types of furniture and a wide range of other decorative applications. The two users claimed that the TiO2 used to colour that paper is a special type of TiO2 which is not suitable for other applications, as it has to be covered with a thick coating containing phosphorus. This special coating allows the TiO2 to be properly absorbed into the paper fibres and gives it superior lightfastness which prevents greying of the TiO2 molecules (and thus the final product), which otherwise occur since the molecules are isolated from the air in the melamine resin.

• (49) The two users pointed to the Commission Decision of 4 July 2018 in the merger case Tronox/Cristal ⁶ where the Commission concluded that there was limited demand-side substitutability between titanium dioxide pigment for use in paper laminate and titanium dioxide pigment for use in other end-applications.

• (50) The complainant commented that the application of the type of surface coating designed for laminate-grade TiO2 does not affect the weight of TiO2 particles nor their surface size compared to other types of TiO2, such as plastics or coating applications, nor is the coating in general a significant component of the manufacturing costs. Furthermore, the complainant claimed that the three types of chemicals used in surface treatment are widely applied by all TiO2 producers in their formulations for an array of TiO2 product types (also for paints, coatings, plastic, and other uses), which demonstrates that none of those chemicals are exclusive to laminate-grade types of products.

• (51) Assessing the criteria from recital (45) above the Commission concluded that laminate-grade TiO2 shares the same basic physical, chemical and technical characteristics with other TiO2 types. Both laminate-grade TiO2 and some other types of TiO2 contain phosphorus in the coating, although the presence of phosphorus is more significant in laminate-grade TiO2. The Commission further concluded that the specificity of laminate-grade TiO2 coating makes it suitable for laminate-paper production, as this special coating prevents the laminate paper from becoming grey when exposed to sunlight. However, the Commission found that several exporting producers advertise this type of TiO2 also for use in PVC and durable plastics, which suggests that it can also be used in other applications and other end uses.

• (52) TiO2 represents around [25-35] % of these users’ total costs of production, and they source between [10-40] % of their TiO2 in China. The two users have claimed, and one of the users provided evidence to demonstrate, that the Union TiO2 producers would only be able to offer limited quantities of TiO2 to them, insufficient to cover their total demand.

• (53) After analysing the evidence and the comments presented by the two users and the complainant, the Commission first determined that there are no grounds to exclude laminate-grade TiO2 from the product scope, since it shares the same basic physical, chemical and technical characteristics as other types of TiO2, and could, in principle, be used for other purposes. The Commission furthermore considered that there is no ground to grant the end-use exemption either since, even in case of total absence of TiO2 imports from China, based on all the information available to the Commission at this stage, there are sufficient alternative sources of supply available to the laminate-paper producers, both within the Union and from other third markets, such as Mexico.

2.4.3.2.   TiO2 of purity of 99,9 % or more

• (54) One user, Treibacher, requested to exclude TiO2 of purity of 99,9 % from the product scope because this TiO2 is only available in China and used for special niche applications. However, this user never submitted a questionnaire reply, or provided evidence that would demonstrate that the criteria from recital (45) above are met. Therefore, the Commission could not assess the criteria to grant the product exclusion and thus rejected this request.

2.4.3.3.   Graphic TiO2

• (55) Two users requested for graphic TiO2 to be excluded from the product scope: Sun Chemical and Flint. Sun Chemical made their submission after the deadline for product scope claims and did not provide a questionnaire reply, while Flint made their submission within the deadline and also provided a questionnaire reply which the Commission was able to verify. The below analysis is thus based only on the information provided by Flint.

• (56) Flint claimed that the type of TiO2 they use is a very high-end, niche grade product, used only in inks in graphics industry, the production of which involves a special production process and specific know-how.

• (57) The Commission found that graphic TiO2 shares the same basic physical, chemical and technical characteristics with other TiO2 types, as it is a standard rutile product with coating containing chemicals found in many other TiO2 types. However, while the chemistry of graphic TiO2 might not be distinct, the Commission did find that there is indeed a specific know-how to producing it mastered by only a limited number of producers in the Union and in China. Flint was also purchasing, to a limited extent, other types of TiO2 for purposes other than graphic inks.

• (58) While in principle other types of TiO2 could be used for production of inks, this would result in much poorer performance. While Flint has been testing various TiO2 types from different producers to use in its ink formulas, they have provided evidence demonstrating that they generally do not reach satisfactory quality levels. The Commission thus concluded that graphic ink producers indeed have limited possibilities to switch to other suppliers, which was also confirmed in the merger case Hutsman/Rockwoods ⁷, and the performance of graphic TiO2 in final products would affect customer perception. It was not demonstrated, however, that the Union industry would not be able to supply in sufficient quantity the graphic industry.

• (59) Even though graphic ink TiO2 is not fully substitutable with other types of TiO2, it still shares the same basic physical, chemical, and technical characteristics with them. The Commission thus concluded there is no reason for product exclusion.

• (60) Furthermore, since it was not demonstrated that graphic TiO2 has a particular physical, chemical and technical characteristics compared to other types of TiO2, nor a well-defined end-use due to a large number of recipes that Flint has for their products, the Commission concluded at this stage that it would not be possible for customs authorities to verify that it is indeed graphic TiO2 being used for production of inks, especially since Flint also buys other types of TiO2 for other purposes. Finally, the user could not clearly demonstrate that its profitability would be significantly adversely affected by the duties. Therefore, the Commission rejected the end-use exemption request.

2.4.3.4.   Uncoated TiO2 for non-white pigments

• (61) In its submission of 18 December 2023, Sun Chemical requested the Commission to also exclude from the product scope TiO2 in its uncoated form (i.e., TiO2 without surface treatment), in addition to the graphic TiO2 exclusion mentioned above in recital (55). Sun Chemical claimed this is a very niche market and products made from such uncoated TiO2 compete in markets outside the Union, and any anti-dumping duties would thus make their exports uncompetitive. The Commission services also held a hearing with Sun Chemical where the company elaborated on its request.

• (62) This request was received after the deadline to submit product scope claims of 23 November 2023. The Commission noted that comments on the product scope should have been submitted in the early stages of the investigation, in order to allow sufficient time to assess their merit and to give the opportunity to other interested parties to react to them. Also, Sun Chemical did not provide the Commission with a questionnaire reply. Thus, even if the request would have been made on time, the Commission was not able to properly verify if the criteria in from recital (45) above are met. The Commission therefore did not consider this request.

2.4.3.5.   Food-grade TiO2

• (63) In its submission of 21 January 2024, CEPI requested the Commission to exclude food-grade TiO2 from the product scope, in addition to laminate-grade TiO2 exclusion request mentioned above in recital (46). CEPI claimed that this type of TiO2 is special as it meets the requirements for E-171 additives and has a defined set of extremely low heavy metals thresholds, which thus makes it very expensive to produce.

• (64) However, as this request was made long after the deadline to submit product scope claims of 23 November 2023, the Commission did not consider this request. As stated in recital (62), comments on the product scope have to be submitted in the early stages of the investigation, within the deadlines set for these comments, in order to allow sufficient time to assess their merit and to give the opportunity to other interested parties to react to them.

2.4.3.6.   Exclusion of TiO2 produced using the Chloride process

• (65) AkzoNobel made a request that TiO2 produced using the chloride process should be excluded from the scope of the investigation, because TiO2 produced by the chloride process and TiO2 produced by the sulphate process are not substitutable in paints and coating business. AkzoNobel further claimed that the majority of TiO2 production in China is done by the sulphate process while the Union market mostly consumes TiO2 produced via chloride process. AkzoNobel requested on the same grounds that, if the Commission does not accept this exclusion request, it should at least conduct a separate injury and causality analysis between the TiO2 produced via the chloride process and the one produced via sulphate process.

• (66) The Commission noted that AkzoNobel’s request for product exclusion was submitted in its questionnaire reply, which was submitted on 20 December 2023, after the 23 November 2023 deadline to make product scope claims. The request was therefore not considered. As stated in recital (62), comments on the product scope have to be submitted in the early stages of the investigation, within the deadlines set for these comments, in order to allow sufficient time to assess their merit and to give the opportunity to other interested parties to react to them.

• (67) As concerns the request to conduct separate injury and causality analysis based on the production process, the Commission noted, first, that the investigation has shown that many users, including paints and coatings manufacturers, buy TiO2 produced through both methods.

• (68) Second, the Commission has found that one third of the total Union sales of the sampled exporting producers are of TiO2 produced using the chloride process.

• (69) Furthermore, just because the Chinese producers currently produce more TiO2 using the sulphate process does not mean that this will remain the case in the future. In fact, the investigation has shown that the Chinese industry is committed to accelerate the transition from the sulphate process to the chloride process to produce TiO2.

• (70) Third, the Commission could not establish that there were such differences in physical, chemical, or technical characteristics between the products derived from the two production processes that would warrant the exclusion of one. Ultimately, both production processes can yield anatase TiO2, differentiated almost unanimously by other interested parties from the rutile TiO2 due to their different crystal structure, making this the main distinction between the types of TiO2.

• (71) Based on the above considerations, the Commission rejected AkzoNobel’s request.

3. DUMPING

3.1.   Procedure for the determination of the normal value under Article 2(6a) of the basic Regulation

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

• (73) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in the PRC to provide information regarding the inputs used for producing TiO2. Twenty-five exporting producers submitted the relevant information.

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

• (75) In the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may need to select an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks.

• (76) On 26 March 2024, the Commission informed by a note (‘the First Note’) interested parties on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of TiO2. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Brazil, Malaysia, Mexico and the Russian Federation. The Commission received comments on the First Note from the exporting producer LB group, the complainant and a user, AkzoNobel.

• (77) On 16 April 2024, the Commission addressed the comments received from interested parties on the First Note by a second note (‘the Second Note’) and informed interested parties on the relevant sources it intended to use for the determination of the normal value, with Brazil as the representative country. It also informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profit based on available information for the company Tronox Pigmentos do Brasil S.A. (‘Tronox Brazil’), a TiO2 producer in the representative country.

• (78) The Commission received comments on the Second Note from AkzoNobel as well as the complainant. These comments have been addressed under respective heading under Section 3.4 below.

• (79) After having analysed the comments and information received, the Commission concluded that Brazil was an appropriate representative country from which undistorted prices and costs would be sourced for the determination of the normal value. The underlying reasons for that choice are further described in detail in Section 3.3 below.

3.2.   Normal value

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

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

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

3.2.1.   Existence of significant distortions

• (83) Article 2(6a)(b) of the basic Regulation states that ‘significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:

• — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;

• — state presence in firms allowing the state to interfere with respect to prices or costs;

• — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;

• — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;

• — wage costs being distorted;

• — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state.’

• (84) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list.

• (85) However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) of the basic Regulation must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provide the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

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

• (87) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’) ⁸, which contains evidence of the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as selected sectors (including the chemical sector). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report was placed in the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report.

• (88) More specifically, the complainant relied on the evidence contained in the Report to stress the presence of systemic significant distortions in the economy of the PRC, a ‘socialist market economy’ where the Chinese Communist Party (‘CCP’) guides both the public and private sector.

• (89) The complainant recalled that the Report observed elements pointing to significant distortions in the titanium sector in China. Since many TiO2 producers are also in the titanium metal business, the complainant argued that the TiO2 sector in China is affected by significant distortions just as much as the titanium sector.

• (90) Moreover, the complainant pointed out that China’s 14^th Five-Year Plan for National Economic and Social Development (‘14^th FYP’) maintained and strengthened the above-mentioned significant distortions, by integrating the previous 13^th FYP and setting the following priorities, as explained in the 2024 Shanghai International Titanium Dioxide Exhibition website:

• (1) Break through the chloride process and optimize the product structure to enter the international market: the industry of the product concerned should accelerate its transition from a traditional industry to an advanced manufacturing industry and optimize the product structure of chloride and sulfuric acid production processes. Supply may exceed demand, which would trigger Chinese producers to expand on international markets.

• (2) Coexistence of two production processes and optimization: the 14^th FYP requires to actively promote industrial upgrading, optimize the product structure of chloride and sulfuric acid, increase investment in scientific research and technological transformation, and continue to improve the overall competitiveness of the product market. Although a big push should be made for the chloride process, it is nevertheless expected that the sulfate process will remain the main production process and both processes will thus coexist together even during the 15^th FYP.

• (3) Emphasis on greening the sulfate process and push on the chloride process development: since the sulfate process has downsides, it is necessary to make breakthroughs in the chloride process, promote the structural reform of the supply side of the industry, promote the healthy development of the Chinese titanium industry chain, introduce and use advanced technology and equipment.

• (4) New production capacity: during the 13^th FYP, the Chinese capacity had massively increased. Now that Chinese producers have finally started to implement the chloride process, it is expected that expansion projects of the product concerned will add 1,96 million tonnes/year of new production capacity, of which more than 400 000 tonnes/year will be produced by the chloride method. Such a large new production capacity, difficult to absorb on the Chinese domestic market, will encourage the Chinese producers to export their materials.

• (5) The complainant therefore observed that the massive increase of the Chinese TiO2 imports into the Union during the past years was merely the result of the implementation of the 13^th and 14^th FYPs.

• (91) Moreover, the complaint pointed out the following elements indicative of significant distortions.

• (92) First, the market of the product concerned is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities. In China, as the Report has demonstrated, state-owned enterprises (‘SOEs’) represent the majority of the raw material industries.

• (93) The complainant submitted that a substantial degree of ownership by the GOC persists in the major manufacturers, producers and sellers of the product concerned, among which the following companies and group companies:

• — Pangang Group Company, Ltd., which in 2010 merged with Anshan Iron and Steel Group Corporation to become Ansteel;

• — Shandong Jinhai Titanium Industry Resources Technology Co., Ltd (‘Shandong Jinhai’), part of Shandong Lubei Enterprise Group Corporation;

• — China National BlueStar (Group) Co. (‘BlueStar’), part of Sinochem Holdings Corporation, Ltd. (‘Sinochem’) and, as established by the European Commission ⁹, a subsidiary of China National Chemical Corporation (‘ChemChina’).

• (94) Therefore, the complainant observed that the GOC controls and coordinates the commercial strategy of the companies involved in the TiO2 production.

• (95) Second, the state presence in TiO2 firms also allows the state to interfere with prices and/or costs.

• (96) The complainant observed, for instance, that state presence in firms does not concern only SOEs, but also private companies. In the Report, as well as in numerous previous investigations, the Commission found that the CCP exercises pressure on private companies ‘to put patriotism first and to follow party discipline’ throughout all sectors of Chinese economy. Indeed, Article 19 of the PRC Company Law requires a Party cell within each company.

• (97) The sector of the product concerned is regularly subject to overlaps between managerial positions and CCP membership. For instance, the secretary of the Board of the LB Group is a member of the CCP, while the chairmen of the boards of, respectively, GPRO Group (which is the parent company of Nanjing Titanium White Chemical Co., Ltd, a Chinese TiO2 producer), Bluestar and Lubei Group all hold the position of secretary of their own Party Committees, with the chairman of the latter also being a representative of the Chinese National Congress.

• (98) Not only, the chairman of the GPRO declared that ‘the Communist Party of China is a great, glorious and correct Marxist party. Adhering to the leadership of the party and strengthening party building are the fundamental guarantee for the company’s development to always go into the right direction and reach major achievements’, whereas the chairman of the Lubei Group presided a meeting to ‘convey and study the spirit of the important speech of General Secretary Xi Jinping and the main content of the government work report, emphasizing that thoughts and actions must be quickly unified in line with this speech’.

• (99) Third, the GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces.

• (100) The complainant recalled that evidence from Commission’s previous anti-dumping investigations demonstrates that ‘[o]verall, the system of planning in the PRC results in resources being allocated to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces’.

• (101) Furthermore, the complainant stated that the TiO2 industry is considered a strategic industry by the GOC in both the 13^th and 14^th FYP (see recital (90)).

• (102) Moreover, the complainant emphasized that China applies de facto export restraints on titanium related products. The PRC has in place a Catalogue of Goods Subject to Export Licensing which is updated regularly by announcements from the Ministry of commerce and the General Administration of Customs. For goods listed in this catalogue, exporters must obtain an export license from the Ministry of Commerce or the authorized local department ¹⁰.

• (103) In this respect, the Ministry of Commerce may restrict or forbid the export of goods if it is necessary for the purpose of maintaining state security, social public good or public morality, if the goods in question are in short supply or subject to effective protection, if the destination country or region has limited market capacity, or in any other circumstances under any international treaty China has concluded.

• (104) Therefore, the complainant observed that this export license system may generate export restraints to ensure that the domestic Chinese industry can benefit from a preferential and cheap access to titanium-related products. Accordingly, the GOC keeps implementing the policies that operators must follow, thereby impeding market forces from operating freely.

• (105) Fourth, the sector of the product concerned is subject to the distortions resulting from the discriminatory application or inadequate enforcement of Chinese bankruptcy, corporate and property rules.

• (106) Such distortions apply to all sectors according to the complainant: the GOC plays an important role in the insolvency proceedings and often has direct influence on the outcome through various means. For instance, the GOC has to give prior approval for the courts to decide on whether to accept or reject the applications of listed companies in practice.

• (107) Many insolvent firms end up with restructuring plans and are rarely delisted. This translates into SOEs benefiting from de facto governmental guarantees. Due to the absence of normal market mechanisms such as effective and transparent bankruptcy procedures, the Chinese financial system remains highly distorted.

• (108) Indeed, in a previous investigation on steel road wheels ¹¹, the Commission found that ‘the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interest of creditors and debtors’.

• (109) The above-mentioned investigation found distortions with regards to Chinese property laws as well, since the rules on land provision and acquisition in the PRC are often unclear and non-transparent, and the prices are often set by the authorities based on non-market considerations.

• (110) Since bankruptcy, corporate or property laws in China apply to all sectors, there is no available evidence showing that those laws would not apply in the Chinese TiO2 sector.

• (111) In conclusion, the complainant argued that significant distortions pursuant to Article 2(6a) of the basic Regulation are present in the TiO2 sector. It is thus not appropriate to use domestic prices and costs in China are not reliable and the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks.

• (112) The Commission examined whether it was appropriate or not to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file. The evidence on the file included the evidence contained in the Report, as well as in its updated version (‘updated Report’) ¹², which relies on publicly available sources.

• (113) That analysis covered the examination of the substantial government interventions in China’s economy in general, but also the specific market situation in the relevant sector including the product concerned. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in China.

3.2.2.   Significant distortions affecting the domestic prices and costs in China

• (114) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’ ¹³.

• (115) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ ¹⁴. Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation.

• (116) The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the state with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the state ownership ¹⁵.

• (117) In addition, under Chinese law, the socialist market economy is developed under the leadership of the CCP. The structures of the Chinese state and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the state are indistinguishable.

• (118) Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution.

• (119) Following the already existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China.’ ¹⁶ This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

• (120) This leadership and control is inherent to the Chinese system and goes well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

• (121) The Chinese state engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market ¹⁷. The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as the level of the regulatory environment.

• (122) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government.

• (123) Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets.

• (124) Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.).

• (125) The economic operators, private and state-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans, but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans ¹⁸.

• (126) Second, on the level of allocation of financial resources, the financial system of China is dominated by the state-owned commercial and policy banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project ¹⁹.

• (127) The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also, these parts of the financial sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the state and the CCP ²⁰.

• (128) Third, on the level of regulatory environment, the interventions by the state into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market-based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by state policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies ²¹.

• (129) Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both state and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining state control over key sectors or bolstering domestic industry ²².

• (130) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in distorting the effective allocation of resources in line with market principles ²³.

3.2.3.   Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

• (131) In China, enterprises operating under the ownership, control and/or policy supervision or guidance by the state represent an essential part of the economy.

• (132) The sector of the product concerned is served both by SOEs and private companies.

• (133) For instance, Pangang Group Vanadium and Titanium Resources, Ltd. ²⁴ (‘Pangang’) part of Pangang Group, a subsidiary of the SOE group Anshan Iron and Steel Group (‘Ansteel’) ²⁵, has a significant degree of state ownership (more than 54 %) ²⁶. On the other hand, LB Group, formerly called Lomon Billions Group Co., Ltd. (‘LB Group’) ²⁷ is a private company ²⁸, while CNNC Huan Yuan Titanium Dioxide Co., Ltd ²⁹ (‘CHTI CNNC’) is a private company, but it still has little more than 7 % of state-related shareholding ³⁰.

• (134) Moreover, the authorities encourage the creation of clusters in the petrochemical and chemical sector, not least to take advantage of the interdependencies of various chemical manufacturing processes. Indeed, the 14^th FYP on Developing Raw Materials Industry requires that ‘[m]easures shall be taken to make leading enterprises bigger and stronger. Led by the market and supported by the government, we shall […] help such enterprises accelerate trans-regional and cross-ownership mergers and reorganization, so as to make the industry more concentrated and facilitate international operations. In sectors including petrochemicals and chemicals […] we shall foster a number of pioneering enterprises that could lead the ecosystem of the industrial chain with core competitiveness […]’ ³¹.

• (135) The state guidance is reflected by the action of the companies, as transpires from Pangang’s website: ‘Facing the future, Pangang Vanadium and Titanium Co., Ltd. will continue to focus on national strategies and market demands, continuously strengthen its independent innovation capabilities, and accelerate the construction of a world-class specialized new enterprise with “outstanding professionalism, innovation-driven, lean management, and distinctive features” to serve as the basis for China’s vanadium and titanium industry and make greater contributions to high-quality development’ ³².

• (136) However, CCP interventions into operational decision making have become the norm not only in SOEs, but also in private companies ³³, with CCP claiming leadership over virtually every aspect of the country’s economy. Indeed, the State’s influence by means of CCP structures within companies effectively results in economic operators being under the government’s control and policy supervision, given how far the State and Party structures have grown together in China.

• (137) An accurate representation of government control and supervision on enterprises can be found at provincial level. In Yunnan, the Chuxiong 14^th FYP on new materials and advanced manufacturing development (‘Chuxiong 14^th FYP’) addresses and influences the sector of the product concerned, by setting the following objectives: ‘[g]ive full play to the advantages of Chuxiong’s titanium resources and titanium industry, especially the advantages of hydropower resources, and continue to expand the scale of the titanium industry with the extension of the industrial chain and the improvement of product added value as the main line. Relying on the resources, technology and market advantages of large enterprises such as Longbai and Kunming Iron and Steel, we will accelerate the construction of Longbai Group’s new titanium industry and Yunnan Titanium Industry-related projects, strengthen investment promotion, introduce downstream enterprises in the titanium industry chain to develop, and focus on building titanium industry […]’ ³⁴.

• (138) The Chuxiong 14^th FYP goes even more into detail, as follows: ‘Taking advantage of the opportunity of the state to encourage the development of chloride-based titanium dioxide, we will focus on supporting Longbai Lufeng Titanium Industry to rebuild and expand the chloride-based titanium dioxide production line, eventually forming a chloride-based titanium dioxide production base of 300 000-400 000 tons/year. At the same time, Longbai Group will give full play to its sulfur-chlorine coupling technology advantages, accelerate the structural adjustment and integration of the sulfate-based titanium dioxide industry, strengthen cooperation between sulfate-based titanium dioxide production enterprises and Longbai Group, improve resource utilization, export ferrous sulfate to Southeast Asia, occupy in the Southeast Asian market, we also encourage and support the development of domestic and foreign strong titanium dioxide downstream coatings and plastics companies in Yunnan. It has become the most important chloride titanium dioxide production base in the country and leads the development of China’s titanium dioxide industry. Accelerate the development of titanium sponge, focus on promoting the construction of high-end rotor-grade titanium sponge projects of Longbai Group, accelerate the development of full-process titanium sponge production technology, and transform and expand the existing titanium sponge production line based on it, eventually forming an annual production capacity of 100 000-300 000 tons, becoming the world’s largest titanium sponge production base. Actively promote the development of high-end fine titanium materials’ ³⁵.

• (139) Government control and policy supervision can be also observed at the level of the relevant industry associations ³⁶.

• (140) For instance, Titanium Dioxide Industry Branch of China Coating Industry Association (‘TiO2 Branch’) states in Article 3 of its Articles of Association that the organisation ‘[e]stablishes an organization of the Communist Party of China, carries out Party activities, and provides the necessary conditions for the activities of the Party organization. […] accepts the professional guidance, supervision and management by the entities in charge of registration and management, by entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ ³⁷. Article 36 further states that the persons in charge of the Association have to meet conditions such as ‘[a]dhere to the leadership of the Communist Party of China, support socialism with Chinese characteristics, resolutely implement the party’s line, principles and policies, and have good political quality.’ ³⁸

• (141) TiO2 Branch counts among its members both LB Group and CHTI CNNC, respectively the first and second biggest producers in China ³⁹.

• (142) Consequently, even privately owned producers in the sector of the product concerned are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the sector are subject to policy supervision and guidance.

3.2.4.   Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: state presence in firms allowing the state to interfere with respect to prices or costs

• (143) Apart from exercising control over the economy by means of ownership of SOEs and other tools, the GOC is in position to interfere with prices and costs through state presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant state authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights ⁴⁰, CCP cells in enterprises, state-owned and private alike, represent an important channel through which the state can interfere with business decisions.

• (144) According to China’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution ⁴¹) and the company shall provide the necessary conditions for the activities of the Party organisation.

• (145) In the past, this requirement appeared not to have always been followed or strictly enforced. However, since at least 2016 the CCP has been reinforcing its claims to control business decisions in companies as a matter of political principle ⁴², including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline ⁴³.

• (146) Already in 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies ⁴⁴. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of the product concerned and the suppliers of their inputs.

• (147) In addition, on 15 September 2020 a document titled General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era (‘the Guidelines’) ⁴⁵ was released, which further expanded the role of the Party committees in private enterprises.

• (148) Section II.4 of the Guidelines states: ‘[w]e must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area’; and section III.6 states: ‘[w]e must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers’. The Guidelines thus emphasise and seek to increase the role of the CCP in companies and other private sector entities ⁴⁶.

• (149) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the TiO2 sector. Several members of the board of directors and supervisory board of LB Group, the largest producer of the product concerned, are CCP members and hold positions in the secretariat of the Party Committee ⁴⁷. The same applies to CHTI CNNC ⁴⁸ and Pangang ⁴⁹.