Commission Implementing Regulation (EU) 2025/78 of 15 January 2025 imposing a provisional anti-dumping duty on imports of multilayered wood flooring originating in the People’s Republic of China

COMMISSION IMPLEMENTING REGULATION (EU) 2025/78 of 15 January 2025 imposing a provisional anti-dumping duty on imports of multilayered wood flooring originating in the People’s Republic of China

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), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

(1) On 16 May 2024, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of multilayered wood flooring (‘MWF’) originating in the People’s Republic of China (‘the country concerned’, ‘the PRC’, or ‘China’) on the basis of Article 5 of Regulation (EU) 2016/1036 of the European Parliament and of the Council (‘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 4 April 2024 by the European Parquet Federation (‘the complainant’). The complaint was made on behalf of the Union industry of MWF 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.

(3) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2024/2733 of 24 October 2024 (‘the registration Regulation’) (3).

(4) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers and the authorities in the country concerned, known importers, users and traders 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.

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

(7) 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 quantities in the context of the pre-initiation standing analysis. This sample consisted of three Union producers. The sampled Union producers accounted for more than 20% of the estimated total Union production and more than 20% of the estimated total Union sales of the like product. The sample was considered representative of the Union industry. The Commission invited interested parties to comment on the provisional sample. No comments were received and therefore, the sample was confirmed.

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

(9) Two unrelated importers (Lamett Europe N.V. and Svartes s.r.o) 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. The Commission invited the two companies indicated above to complete the questionnaire for importers. Ultimately, only Lamett Europe N.V. provided a questionnaire reply as explained in recital (17).

(10) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all exporting producers in PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(11) 78 exporting producers in the country concerned 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 five producers from two groups on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned and the authorities of the country concerned were consulted on the selection of the sample. Following the consultation comments were received on the selection of that sample from one group of exporting producers. The group argued that the proposed sample was not sufficiently representative, within the meanings of Article 17(1) of the basic Regulation as it accounted only for a limited proportion of the volume exported by all cooperating exporting producers. The Commission assessed the claim and decided to extend the number of companies selected for the sample by adding third largest exporting producer’s group with five producers. The revised sample accounted for 40% of the volume and 27% of the estimated total export quantity reported by all cooperating exporting producers exported to the European Union of the product concerned during the investigation period. No further comments on the proposed sample were received.

(12) Furthermore, in the course of investigation, based on the publicly available sources the Commission verified information provided by the cooperating exporters to confirm the status of the companies as a producer of the product concerned. If necessary, the Commission requested additional documents, such as business licence and articles of association. One party failed to demonstrate link with the investigation and therefore was considered as non-cooperating.

(13) 19 exporting producers in PRC requested individual examination under Article 17(3) of the basic Regulation. However, none of them provided the questionnaire reply within the deadline set by the Commission. Accordingly, the Commission provisionally concludes that no individual examination will be granted in the present case.

(14) The Commission sent 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’).

(15) Furthermore, the complainant provided in the complaint sufficient prima facie evidence of raw material distortions in 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 PRC. For this reason, the Commission sent additional questionnaires in this regard to the GOC.

(16) No questionnaire replies were received from the GOC. Consequently, the Commission informed the GOC that it intends to apply Article 18 of the basic Regulation and use the facts available as regards the existence of significant distortions in the PRC within the meaning of Article 2(6a)(b) of the basic Regulation. No further comments were received from the GOC.

(17) The questionnaires for Union producers, unrelated importers, users and exporting producers were made available online (4) on the day of initiation. The Commission received questionnaire replies from the three sampled Union producers, one unrelated importer (Lamett Europe N.V.) and three exporting producers’ groups (Jinfa Group, Forest Group and Fusong Group).

(19) The investigation of dumping and injury covered the period from 1 January 2023 to 31 December 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’).

(21) AUMI and CNFPIA argued that the complaint relied on import quantities in square meters from Eurostat which had been adjusted by the complainant. AUMI and CNFPIA further argued that the complainant had neither explained the need for the adjustment, nor it disclosed the adjustment method. AUMI and CNFPIA noted that using the adjusted import quantities proposed by the complainant resulted in an increase of more than 20% of the import quantities from China during the period concerned. AUMI and CNFPIA added that using the import quantities as reported by Eurostat, that is, without any adjustment, would result in a decrease of 3% of the import quantities from China during the period concerned. Furthermore, AUMI and CNFPIA indicated that the adjusted import quantities skewed other economic indicators such as Chinese import prices, consumption and market shares.

(22) In this regard FEP indicated that while the surface density range of MWF was between 7 and 9,5 kilograms (‘kg’) per square meter (‘m2’), several Eurostat entries were outside this surface density range. FEP explained that economic operators must report the net mass (tonnes or kilograms) to customs’ authorities, but not necessarily the supplementary unit (m2). Therefore, FEP adjusted the entries outside the range by dividing their declared net mass by the average density of the above-mentioned range. FEP also updated the respective part of the non-confidential version of the complaint to illustrate the adjustment method.

(23) The Commission also analysed the issue during the investigation and addressed it under section 4.4.

(24) AUMI argued that the complaint did not include figures for five out of the 15 injury indicators, in particular the return on investment, factors affecting Union prices, actual and potential negative effects on cash flow, wages and growth.

(25) The Commission noted that it was not compulsory to include the above-mentioned indicators at the stage of the complaint. The Commission examined these indicators during the investigation in section 4. Therefore, the claim was rejected.

(26) AUMI and CNFPIA argued that the complaint did not include reliable information to support the claim that the Union industry was suffering material injury. On macro-indicators, AUMI and CNFPIA claimed that the production volumes, capacity utilization, sales, and employment within the Union were stable from 2020 to 2022 and only declined in the investigation period as a result of the decrease in demand in the Union. Furthermore, AUMI and CNFPIA indicated that Union producers increased their market share and prices during the investigation period in the complaint showing that Union producers had a robust economic health. On micro-indicators, AUMI and CNFPIA stated that production, sales, and employment data for the Complainants only worsened during the investigation period. Furthermore, AUMI and CNFPIA submitted that Union producers had increased their investments by 56% over the period covered by the complaint, which was evidence of their financial robustness. AUMI and CNFPIA indicated that during the investigation period, Chinese exporting producers seem to have adapted better to declining Union demand: while Chinese imports had decreased, stocks levels of Union producers increased. On financial performance, AUMI and CNFPIA noted that Union producers appear to have improved both sales and profitability between 2020 and 2022 despite the increase in Chinese imports during that period. Finally, AUMI also argued that Chinese imports increased by 21% during the period covered by the complaint, while at least one Union producer undercut the price of unrelated importers and still made profits.

(27) As a preliminary comment, the Commission recalled that a prima facie finding of material injury requires an examination, inter alia, of the relevant factors as described in Article 5(2) (d) of the basic Regulation. Indeed, the wording of Article 5(2) of the basic Regulation states that the complaint shall contain the information on changes in the volume of the allegedly dumped imports, the effect of those imports on prices of the like product on the Union market and the consequent impact of the imports on the Union industry, as demonstrated by relevant (not necessarily all) factors and indices having a bearing on the state of the Union industry, such as those listed in Articles 3(3) and 3(5) of the basic Regulation. Furthermore, Article 3(5) of the basic Regulation states that the list is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance. Therefore, not all factors must show deterioration in order for a prima facie finding of material injury to be established. Furthermore, the existence of other factors which may have an impact on the situation of the Union industry does not necessarily imply that the effect of dumped imports on this industry is not material.

(28) The specific injury analysis of the complaint performed by the Commission showed that there was sufficient evidence pointing to increased penetration of the Union market (both in absolute and relative terms) by imports from China at prices which undercut and undersell the Union industry’s own prices. This appears to have had a materially injurious impact on the state of the Union industry, shown for example by the decrease in production, sales and market share, by a deterioration of financial results or by the level of prices charged by the Union industry. As regards the claims on specific macro-indicators, micro-indicators and price undercutting, in section 4 the Commission provided the detailed assessment on material injury during the period considered. Therefore, the claim was rejected.

(29) The product under investigation is assembled flooring panels, multilayer, of wood, currently falling under CN code 4418 75 00 (‘the product under investigation). Panels of bamboo or with at least the top layer (wear layer) of bamboo, and panels for mosaic floors are excluded.

(30) MWF is a wood-based manufactured product comprised of several layers of wood veneers which are glued or bonded together. MWF is mainly used for indoor flooring.

(31) The product concerned is the product under investigation originating in the PRC (‘the product concerned’)

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

(34) 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.

(35) 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 MWF. 73 exporting producers submitted the relevant information.

(36) 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. 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 questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation was received within the deadline. 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.

(37) In point 5.3.2 of the Notice of Initiation the Commission also specified that, in view of the evidence available, it had provisionally selected Türkiye as 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. The Commission further stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

(38) On 23 August 2024, the Commission informed interested parties by a note (‘the Note’) 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 MWF. In addition, based on the criteria guiding the choice of an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation and the availability of relevant financial information, the Commission identified three possible representative countries, namely Türkiye, Indonesia and Malaysia. Based on the information that was available to the Commission at the time, it considered that that Türkiye could be an appropriate representative country. The Commission received two submissions with comments on the Note jointly from two groups of exporting producers, namely the JINFA group and the Fusong Jinlong Group. The European Parquet Federation (complainant) also submitted comments. The comments are addressed in detail in section 3.2.

(39) After having analysed the comments and information received, the Commission concluded that Türkiye was an appropriate representative country from which undistorted prices and costs would be sourced for the determination of the normal value.

(40) 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’.

(41) 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’).

(42) 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.

(44) 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.

(45) 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.

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

(47) Pursuant to this provision, the Commission issued a country report concerning China (‘Report’) (6), 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 (such as the wood-based products 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 on the investigation file at initiation.

(48) The complainant argued that prices or costs of the product under investigation, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation and that, as a result, it is not appropriate to use domestic prices and costs to establish normal value.

(49) To support this position, the complainant referred to the evidence contained in the Report, as well to findings in past Commission and the US authorities’ investigations.

(50) In particular, the complainant pointed out the Commission’s previous findings on the Chinese economic system being based on the socialist market economy doctrine, on the leading role of the Communist Party’s of China (‘CCP’ or ‘Party’) and on the interventionist economic policy of the state.

(51) Moreover, pointing out that the MWF industry is part of the Chinese forestry and wood products sectors, the complainant recalled the following elements pointing to the existence of significant distortions.

(58) In conclusion, the complainant argued that significant distortions pursuant to Article 2(6a) of the basic Regulation are present in the MWF sector.

(59) 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.

(60) 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.

(61) 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’ (27).

(62) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ (28). 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.

(63) 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 (29).

(64) 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.

(65) 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.

(66) 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’ (30). This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

(67) 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.

(68) 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 (31). 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.

(69) 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.

(70) 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.

(71) 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.).

(72) 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 (32).

(73) 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 (33).

(74) 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 (34).

(75) 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 (35).

(76) 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 (36).

(77) 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 (37).

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

(79) The sector of the product concerned is mainly served by private companies, such as Nature Home (38), Power Dekor (39) or Der (40) but also, to some extent, by SOEs like the Jilin Group (41).

(80) However, CCP interventions into operational decision making have become the norm not only in SOEs but also in private companies (42), with the 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.

(81) Moreover, the MWF sector is subject to several government policies, as the wood processing sector has been listed as an encouraged industry both in the 2019 Guiding Catalogue for Industry Structural Adjustment (43), as well as in its 2024 updated version (44). Similarly, the 14th Forest FYP sets the following objectives: ‘Encourage the development, application and promotion of new environmentally friendly adhesives, and gradually increase the proportion of low-formaldehyde and formaldehyde-free wood processing products. Consolidate and enhance traditional advantageous industries such as wood flooring […]. By 2025, […] the output of flooring will stabilize at around 800 million square meters (45)’.

(82) Government control and policy supervision can be also observed at the level of the relevant industry associations (46). For instance, CNFPIA states in Article 3 of its Articles of Association that the organisation ‘accepts the business guidance, supervision and management by the entities in charge of registration and management, by the entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ (47).

(83) Nature Home, Der as well as Jilin Forest Industry Jinqiao Flooring Group, a subsidiary of the state-owned Jilin Group, are members of the CNFPIA (48).

(84) Similarly, the China Timber and Wood Products Distribution Association (‘CTWPDA’) also states in Article 3 of its Articles of Association that the organisation ‘accepts the business guidance, supervision and management by the entities in charge of registration and management, by the entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ (49) and presents itself as an ‘association subject to the administration of the Ministry of Civil Affairs and the supervision and guidance of the State-Owned Asset Supervision and Administration Commission of the State Council […]’ (50) .

(85) Power Dekor is a member of CTWPDA and the chairman of its board of directors also serves as a vice-president in the association’s board of directors (51).

(86) 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.

(87) The GOC is in position to interfere with prices and costs through state presence in firms. Indeed, CCP cells in enterprises, state-owned and private alike, represent an important channel through which the state can interfere with business decisions.

(88) 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 (52)) and the company shall provide the necessary conditions for the activities of the Party organisation.

(89) 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 (53), including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline (54).

(90) Already in 2018, it was reported that Party cells existed in 73% of some 2,57 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies (55). 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.

(91) 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’) (56) was released, which further expanded the role of the Party committees in private enterprises.

(92) 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 (57).

(93) The present investigation confirmed that overlaps between managerial positions and CCP membership / functions exist also in the MWF sector. To provide an example, a member of the board of directors of Der also serves as the Party secretary of the company’s controlling shareholder (58). Moreover, the chairman of the board of directors of the Jilin Forestry Jinqiao Flooring Group also serves as the secretary of the group’s Party committee (59).

(94) Additionally, Power Dekor ‘adheres to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and thoroughly studies, publicizes and implements the spirit of the 20th CPC National Congress, providing strong political, ideological and organizational guarantees for the Group to complete its business objectives and tasks and achieve high-quality development’ (60).

(95) The state’s presence and intervention in the financial markets as well as in the provision of raw materials and inputs further have an additional distorting effect on the market (61). Thus, the state presence in firms, in the MWF and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

(96) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central, provincial and local governments must focus on. Relevant plans exist at all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of a binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government.

(97) Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (62).

(98) The Chinese authorities have enacted a number of policies guiding the functioning of the sector MWF.

(99) For example, the Forestry Guiding Opinion contains also the following provision: ‘By 2025, the system and mechanism for the rational utilization of forest and grass resources will be basically formed, the supporting capacity of forest and grass resources will be significantly enhanced, the output of high-quality forest and grass products will be significantly increased, and the trade of forest products will be further expanded, striving to increase the national forestry output value by 50% on the current basis. […] By 2035, […] the scale of the forest and grass industry will be further expanded, […] the industry structure will be further optimized, the product quality and level of service will be comprehensively improved, the supervision of resource utilisation will be more efficient, so as to continuously enhance the sector’s capacity to serve national strategies.’

(100) Furthermore, at provincial level, the Guangxi Autonomous Province’s 14th FYP on economic and social development and 2035 perspectives (63) aims to ‘complement, strengthen and extend advantageous industry chains’, including by ‘promot[ing] the transformation and upgrading of traditional industries such as […] wood processing’. Further, concerning the forestry processing industry: ‘focus on the development of papermaking [and] wood-based panels […]’ and ‘focus on building an entire industry chain of manufactured board, furniture and home furnishing.’

(101) Also at local level, the Shuyang District (Jiangsu province) adopted in January 2024 an Opinion on the High Quality Development of wood processing and furniture manufacturing industry (64) aiming to ‘[b]y the end of 2026, cultivate 1-2 listed companies, 1-2 enterprise groups with an output value exceeding RMB 5 billion and continuously improve the total quality of the industry […] [and] improve the industry chain, increase the share of finished products such as high-end flooring, furniture and decorative materials.’

(102) Additionally, still in the Jiangsu province, the investigation confirmed the existence preferential policies of the public authorities and state-owned banks towards individual MWF manufacturers, as in the case of Der which signed in 2020 ‘a strategic cooperation agreement with Suzhou Municipal Bureau of Industry and Information Technology, the Industrial and Commercial Bank of China (Suzhou Branch) and the Bank of China (Suzhou Branch)’ (65). This agreement was signed under the supervision of CCP members of the Suzhou Municipality Party Committee and aims to ‘support the development of [the] private enterprise and jointly promote the transformation and upgrading of [the] enterprise’.

(103) Through these and other means, the GOC therefore directs and controls virtually every aspect in the development and functioning of the sector, as well as the upstream inputs.

(104) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives concerning the sector. Such measures impede market forces from operating freely.

(105) According to the information on file, 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 interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement.

(106) The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the state in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings (66).

(107) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China (67). All land is owned by the state (collectively owned rural land and state-owned urban land) and its allocation remains solely dependent on the state. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates (68). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (69).

(108) Much like other sectors in the Chinese economy, the producers of the product concerned are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the forestry and wood processing sector, and therefore MWF, sector. The present investigation revealed nothing that would call those findings into question.

(109) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the sector of the product concerned.

(110) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of fundamental ILO conventions, in particular those on freedom of association and on collective bargaining (70).

(111) Under national law, only one trade union organisation is active. However, this organisation lacks independence from the state authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary (71). Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area.

(112) This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration (72).

(113) No evidence was submitted to the effect that the MWF sector would not be subject to the Chinese labour law system described. The sector is thus affected by the distortions of wage costs both directly (when making the product concerned or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in China).

(114) Access to capital for corporate actors in China is subject to various distortions.

(115) First, the Chinese financial system is characterised by the strong position of state-owned banks (73), which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similar to non-financial SOEs, the banks remain connected to the state not only through ownership but also via personal relations (the top executives of large state-owned financial institutions are ultimately appointed by the CCP) (74) and they regularly implement public policies designed by the GOC.

(116) In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the state (75). While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

(117) For example, the GOC has clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. One of the state’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues (76). Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ (77) .

(118) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm's strategic importance to the GOC and the strength of any implicit guarantee by the government (78). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (79). This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

(119) Second, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the state sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

(120) Third, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 (80). Official media in China have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ (81). Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(121) Overall credit growth in the China indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly, with the GOC a number of times opting to either avoid defaults, thus creating so called ‘zombie’ companies, or to transfer the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

(122) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in China is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

(123) No evidence was submitted in the present investigation demonstrating that the sector of the product concerned is not affected by the government intervention in the financial system in the sense of Article 2(6a)(b), sixth indent of the basic Regulation. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

(124) The Commission noted that the distortions described in the Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above as well as in Part I of the Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above and in Part II of the Report.

(125) The Commission recalls that in order to produce the product concerned, certain inputs are needed. When the producers of the product concerned purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors. These distortions were described in detail above, in particular in recitals (78) - (123). The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, MWF producers being subject to those rules as any other economic operator in China. The distortions have therefore a direct bearing on the cost structure of the product concerned.

(126) As a consequence, not only the domestic sales prices of the product concerned are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts I and II of the Report.

(127) Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout China. This means, for instance, that an input that in itself was produced in China by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth.

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

(129) On 2 September 2024, the Jinfa Group and the Fusong Jinlong Group jointly submitted a set of comments in response to the FOP Note.

(130) First, the parties took the position that Article 2(6a) of the basic Regulation is inapplicable due to its incompatibility with the WTO agreements and the rulings of the WTO Dispute Settlement Body (‘DSB’).

(132) Second, the parties submitted that the alleged distortions are not well evidenced and, even if they were to exist, they did not affect the product concerned.

(134) As to the parties’ arguments on compatibility with WTO law, the Commission recalled that in anti-dumping proceedings concerning products from China, the parts of section 15 of China’s Accession Protocol to the WTO that have not expired continue to apply when determining normal value, both with respect to the market economy standard and with respect to the use of a methodology that is not based on a strict comparison with Chinese prices or costs.

(135) As to the parties’ reference to DS473, the Commission recalled that the Report of Appellate Body in DS473 did not concern the implementation of Article 2(6a) of the basic Regulation, but of a particular stipulation within Article 2(5) of the basic Regulation. Nevertheless, WTO law, as interpreted by the Appellate Body in DS473, permits the use of data from a third country, duly adjusted when such adjustment is necessary and substantiated. Therefore, the parties’ arguments could not be accepted.

(136) Concerning the parties’ arguments on sufficiency of evidence to demonstrate the existence of significant distortions, the Commission recalled at the outset that according to Article 2(6a)(e) of the basic Regulation, if the Commission deems the evidence submitted by the complainants on the significant distortions sufficient, it can initiate the investigation on this basis. The Commission pointed out in this context that, as confirmed by the General Court in Viraj Profiles, the quantity and quality of the evidence necessary to meet the criteria of the sufficiency of the evidence for the purpose of initiating an investigation is different from that which is necessary for the purpose of a preliminary or final determination of the existence of dumping, injury or of a causal link (82). Hence, the complaint met the standards set in Article 5(9) of the basic Regulation, in combination with Article 2(6a)(d). Indeed, as indicated in the Notice of Initiation, the Commission considered at the initiation stage that there was sufficient evidence pursuant to Article 5(9) of the basic Regulation tending to show that, due to significant distortions affecting prices and costs, the use of domestic prices and costs in the PRC would be inappropriate, thus warranting the initiation of an investigation on the basis of Article 2(6a) of the basic Regulation.

(137) The Commission therefore proceeded to prove such distortions. In order to do so, the Commission has, in line with Article 2(6a)(e) of the basic Regulation, collected the data necessary to determine the existence and impact of significant distortions and the consequent use of the methodology prescribed by Article 2(6a)(a) of the basic Regulation. The data collected by the Commission and the resulting conclusions, whether on presence of state-owned companies in the sector of the product concerned or the links to the CCP are presented in sections 3.2.1.2 and 3.2.1.3 of this Regulation. Therefore, the parties’ arguments on the evidence contained in the complaint could not be accepted.

General remarks

(139) As explained in recital (38), on 23 August 2024 the Commission issued a note for the file on the sources for the determination of the normal value and on factors of production (hereinafter ‘the Note’). The Note described the facts and evidence underlying the relevant criteria and informed interested parties of the possibility to consider Türkiye as an appropriate representative country in the present case if the existence of significant distortions pursuant to Article 2(6a) of the basic Regulation would be confirmed.

A level of economic development similar to the PRC

(140) In the Note on factors of production, the Commission identified Türkiye, Malaysia and Indonesia as countries with a similar level of economic development as the PRC according to the World Bank, i.e. they are all classified by the World Bank as ‘upper-middle income’ countries on a gross national income basis where production of the product under investigation was known to take place.

(141) No comments were received with respect to the level of economic development of the identified countries. Comments regarding the economic conditions in Türkiye were provided by the JINFA group and the Fusong group. These are addressed in recital (151) below.

Availability of relevant readily available data in the representative country

(142) In the Note, the Commission indicated that for the countries identified as countries where product under investigation is being produced, i.e. Türkiye, Malaysia and Indonesia, the availability of data needed to be further verified, in particular with regard to the readily available data which would allow the Commission to establish undistorted benchmarks for the factors of production, as well as with regard to the readily available financial data from producers of the product under investigation which would allow the Commission to establish an undistorted and reasonable amount for administrative, selling and general costs ('SG&A') and for profits.

(143) As regards the readily available data which would allow it to establish undistorted benchmarks of the factors of production (‘FOPs’), the Commission analysed in the Note data reported by GTA regarding imports of the main FOPs into the possible representative countries, from China and from other countries with potential distortions, including Russia.

(144) The Commission noted that for the HS Codes corresponding to certain FOPs (veneers of different wood types blockboard plywood, and poplar sawn wood), there was a high proportion of imports from China into Indonesia and into Malaysia. Moreover, for the HS Code 4408 90 , corresponding to veneers (including oak veneers), there was a high proportion of imports from Russia into Türkiye. The Commission considered that, due the sanctions imposed in 2022 on Russia on wood products following the military aggression against Ukraine and the high proportion of imports from Russia into Türkiye, the prices of imports from Russia into Türkiye were likely to be distorted.

(146) In view of the above, the Commission considered in the Note that, based on the information that was available to it at that time, Türkiye could be an appropriate representative country. The Commission invited interested parties to provide comments on the appropriateness of the possible representative countries, on the identified producers in the potential representative countries, and on the factors of production.

(147) The Commission received comments on the Note from the European Parquet Federation (complainant) on 2 September 2024. The Commission received joint comments also from two groups of exporting producers, namely the JINFA group and the Fusong Jinlong Group, in two submissions (the first on 2 September 2024 and the second on 19 November 2024).

(148) The European Parquet Federation (‘EPF’) stated in its comments that Türkiye could, and in fact, should be selected as the most appropriate representative country, for the following reasons: a) the significant volumes of key raw materials imported into Malaysia and Indonesia from China; b) the specialisation of Malaysia and Indonesia on MWF made from tropical wood, which is not representative of the product imported into the Union from China; c) the lack or incompleteness of appropriate financial information available for producers in Malaysia and Indonesia; and d) the alleged lower level of social and environmental protection in Malaysia and Indonesia compared to Türkiye.

(149) As regards the volumes of raw materials imported from China into Malaysia and Indonesia and the lack or incompleteness of appropriate financial information for these countries, the Commission noted that EPF’s statements are consistent with its preliminary findings as provided in the Note. As regards the alleged focus of Malaysia and Indonesia on MWF made from tropical wood, the Commission noted that, although plausible, the claim was not substantiated, and was therefore provisionally rejected. As regards the relevance of the level of social and environmental protection in the potential representative countries, this is addressed in recital (166) below.

(150) The European Parquet Federation also submitted that four companies listed by the Commission as potential producers of the product under investigation in Türkiye in fact do not produce the product under investigation, but produce other products in the wood sector. In this regard, the Commission conducted further desk research on their activities and confirmed that they are active in the broader wood sector, however it did not find evidence that they are producers of the product under investigation. The Commission took this information into account for the determination of the list of companies whose financial data were used to establish undistorted benchmarks for SG&A and profit, as detailed in recitals (163) and (164) below.

(151) In their first submission with comments on the Note, the JINFA group and the Fusong group stated that they were not in a position to propose an appropriate representative country. However, they stated that Türkiye is not an appropriate representative country, inter alia due to its unstable and exceptional economic situation, including high inflation which would affect all costs of production and other economic indicators, rendering them unreliable and unsuitable as a source for the determination of the normal value. To support their claims, the two parties quoted the most recent Commission country report for Türkiye (85). The comments on the economic situation of Türkiye and its appropriateness as a representative country were reiterated in their second submission on the Note.

(152) In this respect, the Commission recalled the criteria of Article 2(6a)(a) of the basic Regulation for the choice of a representative country and noted that in accordance with the first criterion, all three countries, including in particular Türkiye, have the same level of economic development as China, as evidenced by the database of the World Bank. None of the information in the Commission report cited by JINFA and Fusong Jinlong can call into question the appropriateness of Türkiye on the basis of the first criterion. As regards the claim related to inflation, the Commission noted that the undistorted prices it establishes for the costs of production are expressed in the currency of the country concerned, and differences in inflation between the representative country and the country concerned are already reflected to a significant degree in the respective exchange rate. Therefore, the calculated benchmarks are largely unaffected by inflation in the representative country. The respective argument was therefore rejected.

(153) In their first submission with comments on the Note, the JINFA group and the Fusong group also claimed that if the Commission concludes that the existence of significant imports of one or several main FOPs from a country where the price is distorted is not problematic to such extent that would immediately exclude that country to be a suitable representative country, this reasoning should not apply only to Türkiye, but also to Malaysia and Indonesia. Therefore, these two countries shall not be considered as inappropriate, on the mere ground that for some of the main FOPs there has been a significant percentage of imports from China.

(154) In this respect, the Commission clarified that, considering that Malaysia and Indonesia were in the list of possible representative countries in the Note, it is evident that they were not a-priori excluded. The Commission recalled that the choice of the representative country is based on the criteria of Article 2(6a)(a) of the basic Regulation. These criteria also include the availability of relevant financial data, which was considered to be lacking for both Malaysia and Indonesia. The respective claim was therefore rejected.

(155) In their first submission with comments on the Note, the JINFA group and the Fusong group argued that only companies with available financial data for 2023 should be considered for the benchmarks for SG&A and profit. The Commission took this argument into account for the final determination of the list of companies whose financial data were used to establish undistorted benchmarks for SG&A and profit, as detailed in recital (163) below.

(156) In their second submission to the Note, the JINFA group and the Fusong group stated that unlike Türkiye, Malaysia would be an appropriate representative country.

(157) In support of this statement, these two parties provided a number of arguments related to specific FOPs. These are detailed and addressed in recitals (175) to (179) below on the sources used to establish undistorted costs, and on undistorted costs and benchmarks.

(158) Moreover, these parties identified two Malaysian flooring producers for which the audited financial statements for 2023 are available with sufficient level of detail. The companies are Unilin (Malaysia) Sdn. Bhd. and Kim Teck Lee Timber Flooring Sdn. Bhd. In view of this, Fusong and JINFA argued that compared to Türkiye, Malaysia is also better positioned to offer financial data of quality relating to the investigation period. The parties also provided sources for labour cost and energy prices in Malaysia.

(159) The Commission confirmed the availability of financial data for the IP for the two Malaysian companies identified by Fusong and JINFA.

(160) Upon further research, the Commission noted that the first of the two companies, namely Unilin (Malaysia) Sdn. Bhd. is a producer of the product under investigation. However, this company, which is part of a multinational group, reported a very low level of selling, general and administrative (SG&A) expenses, i.e. 2,8% expressed as a percentage of its cost of goods sold. Such level is likely to reflect company specific characteristics that are not representative for the sector. For instance, in view of the fact that the company is part of a multinational group and its operations are focused on production, it is likely that certain SG&A functions, such as sales, IT and HR management are to a certain extent centralised and their costs are not reflected in the company’s reported SG&A. This SG&A appears significantly lower as compared to the average SG&A in a country with a significantly more developed MWF sector such as Türkiye (see recital (163) below). This SG&A is also significantly lower compared to the average SG&A reported by the Union industry, which is around 9%, and even compared to the average SG&A reported by the sampled exporting producers, which is about 11%. In view of the above, the SG&A of the afore-mentioned Malaysian producer cannot be considered as appropriate to be used for the establishment of a reasonable and undistorted benchmark.

(161) For the second company, namely Kim Teck Lee Timber Flooring Sdn. Bhd., the Commission noted that it is active only in a niche segment of the flooring market, i.e. high-quality sports flooring. Sports flooring represents a very small part of the overall flooring market, which is focused on serving the residential and business customers. This is also because products used in this specific segment must comply with strict technical standards, as evidenced by the relevant certifications obtained and advertised by the company. Based on this the Commission provisionally concluded that they are not representative for the MWF, or for the broader flooring sector.

(162) Furthermore, the Commission noted that in comparison to Türkiye, the MWF sector in Malaysia is significantly underdeveloped. This is evidenced by the very low number of MWF producers in Malaysia (limited to one or two), compared to several tens of MWF producers in Türkiye (86). It is also evidenced by the level of exports of MWF from Malaysia, which during the IP was about one third of the respective exports from Türkiye (87). On this basis, the Commission provisionally concluded that the MWF sector in Türkiye is better reflecting the size of the PRC MWF sector in terms of quantity produced and sold and number of producers active on the market.

(164) For Pelit Arslan Kontraplak Fabrikasi Anonim Sirketi, the Commission considered that the level of its profit is too high to be representative. For Dendro Parke Sanayi Anonim Sirketi, the Commission noted that in its reports, it did not distinguish between different types of costs with sufficient granularity to allow for a calculation of its SG&A percentage. For the other two companies, the Commission concluded that their reported SG&A and profit levels are suitable for the establishment of a reasonable and undistorted benchmark for SG&A and profit.

(165) In view of the above, the Commission concluded that Türkiye is an appropriate representative country.

Level of social and environmental protection

(166) Having established that Türkiye was the only available appropriate representative country, based on all of the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

Conclusion

(167) In view of the above analysis, Türkiye met the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country.

Sources used to establish undistorted costs

(168) In the Note, the Commission listed the factors of production such as materials, energy and labour used in the production of the product under investigation by the exporting producers and stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use GTA to establish the undistorted cost of most of the factors of production, notably the raw materials. In addition, the Commission stated that it would use national statistics for establishing undistorted costs of labour and energy.

Undistorted costs and benchmarks

Factors of production

(169) Considering all the information submitted by the interested parties and collected during the verification visits, the Commission consolidated and harmonised the descriptions of the factors of production listed in the Note, and corrected or amended, where appropriate, the respective HS Codes. The added HS Codes include 4407 12 (Spruce Sawnwood), 4407 93 Maple Sawnwood, 4407 95 Ash Sawnwood, and 4808 10 Corrugated Paperboard.

(170) As regards the sources for the determination of the normal value, the main change compared to the Note concerns veneers of different wood species. In the Note, the source considered for these FOPs were GTA data on imports under HS Codes 4408 90 and 4408 10 . The Commission took note of the fact that these HS codes are not wood species specific but concern rather broad categories of wood. In particular, HS Code 4408 90 includes all non-coniferous and non-tropical wood species, such as oak, poplar, maple and ash. Similarly, HS Code 4408 10 includes all coniferous woods. The investigation confirmed that prices of this FOP are significantly influenced by the wood species. Therefore, in the absence of any information on the wood species of the imports of veneers into the potential representative countries, the Commission considered that, in particular for certain veneers which constitute main factors of production, such as veneers of oak and poplar, GTA data on imports under these HS Codes are not appropriate source of information for establishing a corresponding cost.

(171) The Commission therefore established a benchmark for veneers on the basis of the respective benchmark for sawn wood, where the respective information is available and is wood species specific. In particular, for veneers made of oak, pine, ash, maple and poplar, the benchmarks were established on the basis of the respective benchmarks for sawn wood (HS Codes 4407 91 , 4407 11 , 4407 95 , 4407 93 and 4409 97).

(172) The calculation is specific for each exporting producer group and relied on the information that the respective group provided during the verification visits, regarding the yield of the raw material and regarding the additional factors for processing one cubic meter of sawn wood into veneers. For one exporting producer group which, due to its production process, did not have this information available, the calculation was based on the average values for the yield and the additional processing factors provided by the other two groups. For reasons of confidentiality, the details of the calculation were provided to exporting producers as part of the specific disclosure.

(173) With respect to poplar sawn wood (classified under HS Code 4407 97 ), which is also a main factor of production, the Commission noted that quantities imported into Türkiye are very low and therefore, the respective import price might not be representative. In view of this, for establishing a benchmark for poplar sawn wood, the Commission used information on imports into Malaysia. The selection took into account that Malaysia has some production of the product under investigation, products classified under this HS code are imported in significantly higher quantities in Malaysia, and with no or limited share of imports from China and from countries listed in Annex 1 of Regulation (EU) 2015/755. This is in contrast to Indonesia, where imports from China were significant.

(174) For veneers made of hickory and walnut (for which no wood specific HS Code exists for the respective sawn wood), and for veneers for which the wood species is not specified, the benchmark was established on the basis of imports into Türkiye under Code 4408 90 95 , corresponding to veneers of non-tropical and non-coniferous woods thicker than 1mm. The Commission noted that veneers of wood species other than oak, poplar and pine represent a very small percentage of the total quantity of veneers and of the overall cost of production.

(176) As regards the first, the third, and the fourth point, as explained in recitals (170) to (172) above, for veneers made of oak, pine, ash, maple and poplar, the benchmarks were established on the basis of the respective benchmarks for sawn wood. Therefore, the imports from Russia and the PRC under HS Code 4408 90 were not relevant for these benchmarks, while the HS Codes for the respective sawn wood do not have significant imports from Russia and the PRC. Moreover, the distinction made in the Malaysian nomenclature under HS Code 4408 90 (face veneers and other veneers) is still not wood specific, and therefore cannot be used to establish a reliable benchmark for the veneers which are main FOPs, or to draw conclusions on distortions.

(177) As explained above, for veneers made of hickory and walnut, for which no wood specific HS Code exists for the respective sawn wood, as well for veneers made from other (unspecified) types of wood, the benchmarks were established on the basis of imports under CN Code 4408 90 95 . This is because, as Fusong and JINFA also suggested, this CN Code corresponds more closely to the input used, in particular in terms of veneer thickness. In any event and as explained above, veneers made of hickory, walnut, or other types of wood are not main FOPs, but constitute a very small proportion of the total raw material costs. Therefore, the benchmarks for these FOPs cannot have an appreciable impact on the calculation of the normal value.

(178) As regards the second point, the Commission noted that out of the two raw materials, only poplar sawn wood is a main FOP. As explained in recital (173), for this FOP the Commission decided to use data on imports from Malaysia, which show significantly higher quantities compared to Türkiye.

(179) Overall, the Commission considered that the points made by JINFA and Fusong do not call into question a) the chosen sources and methodology for establishing undistorted prices for raw materials; and b) the selection of Türkiye as an appropriate representative country and were therefore dismissed.

(181) The Commission included a value for manufacturing overhead costs in order to cover costs not included in the factors of production referred to above. To establish this amount, the Commission expressed the manufacturing overhead cost incurred by the sampled exporting producers for the production of the product under investigation as a percentage of the actual cost of the used raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted manufacturing overhead cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported overhead costs could be reasonably used as an indication to estimate the undistorted manufacturing overhead costs when delivered to the company’s factory.

(182) In order to establish the undistorted price of raw materials as delivered at the gate of a representative country producer, the Commission used as a basis the weighted average import price to the representative country as reported in the GTA to which import duties and transport costs were added. An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding the PRC and countries which are not members of the WTO, listed in Annex 1 of Regulation (EU) 2015/755 of the European Parliament and the Council (88). The Commission decided to exclude imports from the PRC into the representative country as it concluded in recitals (126) and (127) that it is not appropriate to use domestic prices and costs in the PRC due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation. Given that there is no evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected export prices. The remaining volumes were considered by the Commission to be representative.

(183) Furthermore, in the Note, the Commission had observed that a significant percentage of imports falling under HS Code 4408 90 (veneers) into Türkiye were from imported from Russia, and due to the sanctions imposed on Russia the prices of such imports were likely to be distorted. In view of this, the Commission considered that if Türkiye is selected as the representative country, imports from Russia should not be taken into account for the benchmark determination of 4408 90 .

(184) In their first submission on the Note, Fusong and JINFA argued that Russian imports should not be excluded from the calculation of the undistorted value because their prices have been rising in 2022 and 2023 and therefore, they cannot have been affected by sanctions.

(185) In view of the methodology adopted for the establishment of the benchmark for the main FOPs for veneers, the Commission considered that the percentage of Russian imports under HS Code 4408 90 is no longer relevant. In view of the zero or limited proportion of Russian imports for the other raw materials, and without taking a position on the likelihood that such imports are distorted, the Commission decided to include Russian imports in its calculations.

(186) In order to establish the undistorted price of raw materials, as provided by Article 2(6a)(a), first indent of the basic Regulation, the Commission added the relevant import duties to the CIF value recorded in the import statistics of the representative country, as available in GTA.

(187) The Commission expressed the transport cost incurred by the sampled exporting producers for the supply of raw materials as a percentage of the actual cost of such raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted transport cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported transport costs could be reasonably used as an indication to estimate the undistorted transport costs of raw materials when delivered to the company’s factory.

(188) The Turkish Statistical Institute (89) publishes detailed information on wages in different economic sectors in Türkiye. The Commission used the latest available statistics covering 2022 for average labour cost for the economic activity C.16 Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials) according to NACE Rev.2 classification. The 2022 average monthly value was duly adjusted for inflation using the labour cost index as published by the Turkish Statistical Institute (90) to adapt to 2023 (IP), i.e. 36,10 CNY/hour.

(189) The Commission used the electricity price statistics published by the Energy Market Regulatory Authority (EMRA) (91) in its regular press releases. The Commission used the data of the industrial electricity prices in Kuruş/kWh for the industrial sector for 2023 covering the investigation period, i.e. 0,89 CNY/KWh.

(190) The Commission used the price of gas for industrial users in Türkiye as published by the Turkish Statistical Institute in its regular press releases. The Commission used the data of the gas prices in the corresponding consumption band in Kuruş/m3 duly adjusted for inflation using the Producer Price Index published by the Turkish Statistical Institute (92) adapted to the investigation period, i.e. 4,11 CNY/m3. The price is adjusted for VAT of 18%, as the quoted price is VAT included.

(191) The Commission calculated the price of steam in Türkiye for the investigation period using the methodology suggested by the U.S. Department for Energy (93) based on the cost of gas required to produce it, and adding reasonable margins for other operating costs, SG&A and profit. The resulting average price for 2023 is 0,4 CNY/kg.

(192) The Commission used the average cost of water in Türkiye as published by the Presidency of the Republic of Türkiye Investment Office (94) for 2023, i.e. 4,96 CNY/m3. This price includes sewage allowance and cleaning fee, but excludes VAT.

(193) According to Article 2(6a)(a) of the basic Regulation, ‘the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits’. In addition, a value for manufacturing overhead costs needs to be established to cover costs not included in the factors of production referred to above.

(194) The manufacturing overheads incurred by the cooperating exporting producers were expressed as a share of the costs of manufacturing actually incurred by the exporting producers. This percentage was applied to the undistorted costs of manufacturing.

(196) On the basis of the above, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

(197) First, the Commission established the undistorted manufacturing costs. The Commission applied the undistorted unit costs to the actual consumption of the individual factors of production of the cooperating exporting producer. These consumption rates provided by the applicant were verified during the verification. The Commission multiplied the usage factors by the undistorted costs per unit observed in the representative country, as described in section 3.2.2.1.

(198) Then the Commission added manufacturing overheads and depreciation, as explained in recital (194) to the undistorted cost of manufacturing in order to arrive at the undistorted costs of production.

(199) To the costs of production established as described in the previous recital, the Commission applied SG&A and profit of the three companies listed in recital (195). SG&A expressed as a percentage of the Costs of Goods Sold (‘COGS’) and applied to the undistorted costs of production, amounted to 19,5%. The profit expressed as a percentage of the COGS and applied to the undistorted costs of production, amounted to 28%.

(200) On that basis, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

(201) The sampled exporting producers exported to the Union either directly to independent customers, or through related companies in the PRC which however performed minimal functions.

(202) In view of this, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(203) Article 2(10) of the basic Regulation requires the Commission to make a fair comparison between the normal value and the export price at the same level of trade and to make allowances for differences in factors which affect prices and price comparability. In the case at hand the Commission chose to compare the normal value and the export price of the sampled exporting producers at the ex-works level of trade. As further explained below, where appropriate, the normal value and the export price were adjusted in order to: (i) net them back to the ex-works level; and (ii) make allowances for differences in factors which were claimed, and demonstrated, to affect prices and price comparability.

(204) As explained in recital (196), the normal value was established at the ex-works level of trade by using costs of production together with amounts for SG&A costs and for profit, which were considered to be reasonable for that level of trade. It follows that no netting back was necessary.

(205) Regarding allowances, the Commission found that the HS code under which the product under investigation is classified for exports in the PCR is subject to a non-refundable VAT of 13%, whereas the normal value had been constructed net of VAT. Therefore, in order to ensure a fair comparison, an upward adjustment of the normal value has been made in accordance with Article 2(10)(k) of the basic Regulation for the exporting producers subject to this VAT.

(206) The Commission found no reasons for making any other allowances to the normal value, nor were such allowances claimed by any of the sampled exporting producers.

(207) In order to net the export price back to the ex-works level of trade, adjustments were made on the account of transport, insurance, handling and loading, as well as packing.

(208) Allowances were made for the following factors affecting prices and price comparability: credit costs, bank charges and commission. These, as well the costs in the previous recital were deducted from the export price, on the basis of the data reported by the exporter, at transaction level.

(209) For the sampled cooperating exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(211) For the cooperating exporting producers outside the sample, the Commission calculated the weighted average dumping margin, in accordance with Article 9(6) of the basic Regulation. Therefore, that margin was established on the basis of the margins of the sampled exporting producers.

(212) On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 50,7%.

(213) For all other exporting producers in the PRC, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation. To this end, the Commission determined the level of cooperation of the exporting producers. The level of cooperation is the volume of exports of the cooperating exporting producers to the Union expressed as proportion of the total imports from the country concerned to the Union in the IP, that were established on the basis of data from Eurostat.

(214) The level of cooperation in this case is high because the exports of the cooperating exporting producers constituted more than 80% of the total imports during the IP. On this basis, the Commission decided to establish the dumping margin for non-cooperating exporting producers at the level of the cooperating sampled company with the highest dumping margin.

(216) The like product was manufactured by around 200 (95) producers in the Union during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(217) The total Union production during the investigation period was established at around 48 000 square meters. The Commission established the figure on the basis of the verified macro questionnaire submitted by FEP. As indicated in recital (7), three sampled Union producers represented more than 20% of the total Union production of the like product.

(218) To establish whether the Union industry suffered injury and to determine consumption and the various economic indicators related to the situation of the Union industry, the Commission examined whether and to what extent the subsequent use of the Union industry’s production of the like product had to be taken into account in the analysis.

(219) MWF can be used in the production of finished goods for the construction industry such as stairs and skirting boards. The Commission found that a very small proportion of the Union producers’ production was destined for captive use (less than 1% on average over the period considered). In this respect, MWF was simply transferred (without invoice) within the same production site or company for further downstream processing.

(220) The distinction between captive and free market is relevant for the injury analysis because products destined for captive use are not exposed to direct competition from imports. By contrast, production destined for free market sale is in direct competition with imports of the product concerned.

(221) However, due to the very small quantity of MWF used captively, the Commission did not consider that it would be meaningful to separate the injury indicators between captive and free consumption beyond the data shown in Table 2.

(222) The Commission established the Union consumption on the basis of the verified macro questionnaire reply for the sales of the Union industry in the Union and Eurostat for imports.

(224) Total Union consumption increased from around 70,4 million square meters in 2020 to around 77,6 million square meters in 2022, an increase of 10%. However, in 2023 total Union consumption fell to around 50,5 million square meters which represented a fall of 28% as compared to 2020.

(225) Free Union consumption developed in a very similar manner as the total Union consumption. It increased from around 69,6 million square meters in 2020 to around 77,0 million square meters in 2022, an increase of 11%. However, in 2023 free Union consumption fell to around 49,7 million square meters which represented a fall of 29% as compared to 2020.

(226) Captive use was very low compared to total consumption. Its development was more stable and fell by only 2% over the period considered.

(227) The Commission established the quantity of imports on the basis of Eurostat data. Eurostat recorded the quantity of imports primarily in mass (kg) and also in square metres as a supplementary unit. However, as mentioned in the complaint, it was clear that the supplementary units recorded were not reliable because the resulting surface density for some of the recorded import data was not an appropriate surface density for MWF. In the complaint, the complainant adjusted the supplementary units if they were not in the range of 7 and 9,5 for surface density, in order to correct the figures reported in square metres. This range had been identified from publicly available sources by the complainant. However, during the investigation the Commission had access to a wider range of data than was available at the complaint stage. The adjustments were therefore made if the surface density was not in the range of 4,59 and 14,94 based on the data available for the co-operating companies in this investigation. If an adjustment was needed, the weighted average surface density obtained from the co-operating parties was used (7,73), and a revised import quantity in square metres was obtained. This methodology was applied to imports of all countries for the four years of the period considered. The market share of the imports from the country concerned was established on the basis of Union imports from all countries as recorded by Eurostat, but with adjustments to the supplementary units as mentioned above, plus the verified sales on the Union market submitted by FEP for the Union producers.

(229) Imports from the country concerned increased from around 11,7 million square meters in 2020 to around 19,6 million square meters in 2022, an increase of 67%. However, in 2023 these imports fell to around 11,2 million square meters which represented a fall of 4% as compared to 2020.

(230) Imports by weight in kg followed a very similar trend to that of square meters.

(231) In terms of market share, imports (in square meters) from the country concerned increased from 16,8% in 2020 to 25,4% in 2022, an increase of 51%. However, in 2023 the market share of these imports fell to 22,5% which still represented an increase of 34% as compared to 2020.

(232) The Commission established the prices of imports on the basis of the verified replies of the sampled Chinese exporting producers regarding invoice value (in CNY converted to EUR per square meters) and using Eurostat data in weight (EUR per kg). As mentioned above the prices of the imports using the supplementary data in square meters in Eurostat was not reliable.

(233) Price undercutting of the imports was established on the basis of the verified CIF prices of the sampled Chinese exporting producers and the EXW prices of the sampled Union producers.

(235) Chinese export prices as reported by the sampled Chinese exporting producers converted to EUR per square meters increased by 21% from 2020 to 2022. However, these prices fell by 10% in 2023. Prices in 2023 were 11% higher than those in 2020.

(236) Chinese import prices based on Eurostat in EUR/kg increased by 30% from 2020 to 2022. Prices increased by 20% in 2022 as compared to 2021. However, these prices fell by 13% in 2023. Prices in 2023 were 13% higher than those in 2020.

(238) The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the sampled Union producers’ theoretical turnover during the investigation period. It showed a weighted average undercutting margin of between 31,0% and 35,9% by the imports from the country concerned on the Union market. Over 95% of matched imports were found to be undercutting. In addition, around 93% of imports of the sampled exporting producers were matched to exact types sold by the Union industry.

(239) The Chinese exporting producer JINFA proposed changes to the Product Control Number (PCN) structure. JINFA proposed an increase in the granularity for the thickness of the top layer and for the grading. JINFA also proposed adding one more parameter on the overall thickness. F. W. Barth and Co. GmbH (Barth), Thede & Witte Holzimport GmbH & Co. KG (‘Thede &Witte’) Puderbach Holzhandel GmbH & Co. KG (Puderbach), MEFO Floor GmbH & Co. KG (MEFO Floor) and Floors 4Ever UAB (‘Floors 4Ever’) also made brief comments on grading issues.

(240) The Commission amended the PCN structure by increasing the granularity of the top layer since the previous ranges were not homogenous. The other parameters were left unchanged as the additional suggestions to the PCN structure made by parties were found not to be necessary and only complicate the PCN. In particular, the Commission noticed that the grading of non-prime products was subjective and each company had its own way of defining different types of non-prime products.

(241) AUMI argued that the undercutting calculation should take into account differences in the level of trade (LoT).