Commission Implementing Regulation (EU) 2025/291 of 13 February 2025 imposing a provisional anti-dumping duty on imports of decor paper originating in the People’s Republic of China

COMMISSION IMPLEMENTING REGULATION (EU) 2025/291 of 13 February 2025 imposing a provisional anti-dumping duty on imports of decor paper 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) (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

(1) On 14 June 2024, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of decor paper originating in the People’s Republic of China (‘PRC’ or ‘the country concerned’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (2) (‘the Notice of Initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 2 May 2024 by four Union producers of decor paper (‘the complainants’). The complaint was made by the Union industry of decor paper 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) 2024/2718 (‘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 complainants, other known Union producers, the known exporting producers, and the Chinese authorities, known importers, suppliers and users, traders, as well as associations known to be concerned 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) Hearings took place with the complainants (Felix Schoeller, Koehler Paper, Malta Decor & Munksjö Paper), LamiGraf S.A. and Interprint GmbH.

(7) The China National Forest Products Industry Association (CNFPIA) LamiGraf S.A., Kastomonu Italia S.p.a., Kastamonu Romania S.A., and Kastamonu Bulgaria AD (herein referred as the ‘Kastamonu Group’) and Marburger Tapetenfabrik, submitted comments on initiation. These concerned the standing of the complainants, the application of Article 2(6a) of the basic Regulation and evidence of significant distortions, the choice of representative country in the complaint, raw material distortions, the injury indicators, causation, and the Union interest. All those comments are addressed below in the relevant sections of this Regulation.

(8) After initiation, the CNFPIA submitted that Felix Schoeller and Munksjö, two of the four complainants, were related to Chinese companies, and that one of the two also had imports from China from their related company. The CNFPIA argued that, based on the provisions of Article 4(1) of the basic Regulation, the two companies should thus have been excluded from the Union industry. In light of this, the CNFPIA added that the standing requirements set out in Article 5(4) of the basic Regulation might not be met.

(9) According to the wording of Article 4(1)(i), as confirmed by the Court of Justice, it is for the Commission, in the exercise of its discretion, to determine whether it should exclude from the ‘Union industry’ producers which are related to exporters or importers or are themselves importers of the dumped product. The discretion must be exercised on a case-by-case basis, by reference to all the relevant facts. (4) Given that both related companies in the PRC mostly served their domestic market, and that quantities imported by the Union producers from their related companies in the PRC, if any, were negligible, the Commission considered that the exclusion of Felix Schoeller and Munksjö from the definition of the Union industry was unwarranted. Therefore, these claims were dismissed.

(10) The CNFPIA submitted that the conditions set out in Article 3 of the basic Regulation for the determination of injury had not been met, arguing that during the period considered, there was no evidence of material injury to the Union industry.

(11) The Commission recalled that in accordance with Article 5(3) of the basic Regulation, an investigation shall be initiated where the complaint contains sufficient evidence to justify the initiation of an investigation. In the complaint, the complainant argued that dumped imports of decor paper from the PRC have caused material injury to the Union industry. To support its argument, the complainant used Thailand as representative country to calculate a weighted average dumping margin in the range of [35-45 %], and analysed the Union industry consumption, profitability, sales and market share, production volume and production cost. The Commission considered that these were relevant elements for its assessment of the merits of the file, and that together with other information provided by the complainant, constituted sufficient evidence, meeting the requirements of Article 5(3) for the initiation of the investigation. Therefore, the claim by the CNFPIA was rejected.

(12) LamiGraf submitted similar arguments on the injury trends, arguing that broader economic factors, such as the COVID-19 pandemic, geopolitical instability and energy crisis significantly impacted the industry’s financial performance, and thus injury could not have been mainly attributed to Chinese imports. LamiGraf added that the fluctuations in Union consumption can be attributed to the pandemic-led ‘stay-at-home’ economy followed by a market correction, and cannot be attributed to Chinese imports, and that overall sales and export sales of the complainants have been severely affected by the sanctions against Russia. The conditions in 2021 led to a growth in decor paper demand, which entailed diversification resulting in a rise in imports from China. The competitiveness of Chinese prices stems from the use of cost-efficient equipment, contrary to the complaining producers. Yet, at the same time, LamiGraf submitted that the heavy investments undertaken by the complainants do not indicate material injury.

(13) The Commission considered that the complaint contained sufficient evidence of injury caused by dumped imports from China, including assessments of the effects of the COVID-19 pandemic on Union consumption, the impact of the energy crisis and the rising cost of raw materials, as well as Russia’s invasion of Ukraine and subsequent trade sanctions. Therefore, these claims were rejected.

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

Sampling of Union producers

(15) In the 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 volume of production and sales of the like product in the EU between 1 April 2023 to 31 March 2024 and the geographic location. This sample consisted of three Union producers. The sampled Union producers accounted for 60 % of the estimated total volume of production and 61 % of sales of the like product in the Union. The Commission invited interested parties to comment on the provisional sample. No comments on the provisional sample were received. The sample was considered representative of the Union industry.

Sampling of unrelated importers

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

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

Sampling of exporting producers in the PRC

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

(19) Five 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 two 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. No comments were received.

(20) 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’).

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

(22) The Commission sent questionnaires to the sampled Union producers, the sampled exporting producers in China, the known importers and users. The same questionnaires were made available online (5) on the day of initiation.

(24) The investigation of dumping and injury covered the period from 1 April 2023 to 31 March 2024 (‘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’).

(27) Decor paper is used as a surface material for decorative applications. Decor paper’s end use is mainly in the furniture, interior-design and construction and renovation industries as a laminate on a backing material.

(28) The product concerned is decor paper originating in the People’s Republic of China, currently falling under CN codes ex 4802 54 00 , ex 4802 55 , ex 4805 91 00 and ex 4811 60 00 (TARIC codes 4802 54 00 10, 4802 55 15 10, 4802 55 25 10, 4802 55 30 10, 4802 55 90 10, 4805 91 00 10, and 4811 60 00 10) (‘the product under investigation’).

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

(31) 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.

(32) 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 decor paper. Two exporting producers submitted the relevant information.

(33) 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.

(34) 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.

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

(36) On 2 October 2024, the Commission informed by a First Note (‘the First Note’ or ‘1st FOP Note’) interested parties on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production (‘FOP’) such as raw materials, labour and energy used in the production of decor paper. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Thailand as an appropriate representative country.

(37) CNFPIA made the following general comments, in response to the ‘1st FOP Note’: (1) ‘Significant distortions with respect to the product concerned in China do not exist and have not been proved by the Commission in China.’ (2) ‘Only those factors of production proven to be distorted should be replaced.’ (3) ‘The application of Article 2(6a) of the Basic Regulation in the case and its resulting methodology is inconsistent with the WTO [Anti-dumping Agreement (‘ADA’)].’ No other parties submitted comments on the 1st FOP Note. The comment on the existence of significant distortions, is addressed in Section 3.2.1. below where the Commission described the relevant significant distortions. Concerning the comment regarding the factors of production, the Commission recalled that, according to Article 2(6a)(a) of the basic Regulation, once the Commission found that significant distortions exist, domestic costs may be used but only to the extent that they are positively established not to be distorted, on the basis of accurate and appropriate evidence Finally, with regard to the alleged inconsistency of Article 2(6a) of the Basic Regulation in the case and its resulting methodology with the WTO ADA, the Commission refers to Sections 3.2.1.9 and 3.2.1.10 below.

(38) On 6 December 2024, the Commission informed the interested parties by a Second Note (‘the Second Note’) on the relevant sources it intended to use for the determination of the normal value, with Thailand as the representative country. It also informed interested parties that it would establish selling, general and administrative (‘SG&A’) costs and profits based on four companies SIAM KRAFT INDUSTRY CO LTD, DOUBLE A (1991) PUBLIC COMPANY, THAI CONTAINERS GROUP CO LTD and SIG COMBIBLOC CO LTD. No comments were received to the Second Note within the deadline.

(39) 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’.

(40) 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 referred hereinafter as ‘SG&A’).

(41) 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, the application of Article 2(6a) of the basic Regulation was appropriate.

(43) 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.

(44) 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.

(45) 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’.

(46) Pursuant to this provision, the Commission issued a country report concerning China (‘the 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 (7) was placed on the investigation file at initiation. The complaint also contained some relevant evidence complementing the Report.

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

(48) The complainant explained that the production of decor paper in the PRC is 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. In particular, the complainants argued the presence of significant distortions in the costs of the raw materials used to produce decor paper in the PRC, mainly wood pulp and TiO2, as well as distortions in the cost of energy (8).

(49) To support this position, the complainant relied heavily on the evidence contained in the Report, as well as to findings in past Commission’s cases.

(50) The complainants mentioned that the decor paper industry is part of the Chinese forestry and wood products sectors and recalled the following elements pointing to the existence of significant distortions.

(54) Fourth, much like in other sectors of the Chinese economy, the decor paper sector is subject to the distortions resulting from public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces (28).

(55) Fifth, the decor paper sector is subject to the distortions resulting from the lack, discriminatory application, or inadequate enforcement of bankruptcy, corporate or property laws (29).

(56) Sixth, wage costs are distorted in the decor paper sector as well (30).

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

(58) 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.

(59) 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.

(60) 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’ (31).

(61) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ (32). 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.

(62) 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 (33).

(63) 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.

(64) 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.

(65) 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’ (34). This illustrates the unquestioned and ever-growing control of the CCP over the economic system of China.

(66) This leadership and control are inherent to the Chinese system and go 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.

(67) 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 (35). 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.

(68) 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.

(69) 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.

(70) 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.).

(71) 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 (36).

(72) 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 (37).

(73) 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 (38).

(74) 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 (39).

(75) 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 (40).

(76) 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 (41).

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

(78) The sector of the product concerned is mainly served by private companies, such as Hangzhou Huawang New Material Technology (also called ‘Huawon’) (42), Zhejiang Kingdecor Paper (43), Qifeng New Materials (44), or Zhejiang Hengda New Materials (45).

(79) The investigation however established that the main raw material used for the production of decor paper, i.e. wood pulp and TiO2, are served both by SOEs. For instance, the sector of wood pulp is served by several state-controlled companies such as Fujian Qingshan Paper Industry Co. (46) and Shandong Chenming Paper Holding Co. (47).

(80) Moreover, in Commission Implementing Regulation (EU) 2024/1923 (48) imposing a provisional anti-dumping duty on imports of titanium dioxide originating in the People’s Republic of China (‘TiO2’), the Commission established that the sector of TiO2 is also served by a number of state-controlled companies, such as Pangang Group Vanadium and Titanium Resources, Ltd. (49) (‘Pangang’) part of Pangang Group, a subsidiary of the SOE group Anshan Iron and Steel Group (‘Ansteel’) (50), had a significant degree of state ownership (more than 54 %) (51).

(81) Fujian Qingshan Paper Industry Co. states that ‘In the new development stage, the company will be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’ (52). Additionally, Article 98 of the company’s Articles of Association stipulates that ‘The company’s Party committee shall perform its duties in accordance with the Party constitution and other Party regulations: (i) Ensure supervision of the Party and state policies and the implementation of the decisions and arrangements of the Party Central Committee, the State Council, the Provincial Party Committee and the Provincial Government in the company’ (53) . Similarly, Shandong Chenming Paper Holding Co’s Party committee claims that ‘[w]herever the enterprise develops, the Party organization will be established, wherever the key points are, the Party building work will be extended, so as to achieve resonance, mutual integration and progress between Party building and production, operation and management’ (54).

(82) Moreover, CCP interventions into operational decision making have become the norm not only in SOEs but also in private companies (55), 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.

(83) The decor paper sector is also subject to several government policies, as the wood pulp sector has been listed as an encouraged industry both in the 2019 Guiding Catalogue for Industry Structural Adjustment (56), as well as in its 2024 updated version (57). Similarly, and as established in Implementing Regulation (EU) 2024/1923 imposing a provisional anti-dumping duty on imports of titanium dioxide originating in the People’s Republic of China (58), in the 2024 version of Guidance Catalogue for the Industry Structural Adjustment directly addresses the TiO2 sector by listing the TiO2 sulfuric acid process as a restricted industry, while its 2019 version lists the TiO2 chloride process as an encouraged one (59).

(84) Furthermore, the 14th FYP on economic and social development and 2035 perspectives sets the following objective: ‘Transform and upgrade traditional industries, promote the optimization of layout and structural adjustment of raw material industries such as petrochemicals, steel, nonferrous metals, and building materials, expand the supply of high-quality products such as light industry and textiles, accelerate the transformation and upgrading of key industries such as chemicals and papermaking’ (60).

(85) Also, the 2022 Guiding Opinion on Promoting the High Quality Development of the Light Industry (61) requires to ‘Accelerate breakthroughs in key technologies: Regarding the weak links in industries such as papermaking (…) a number of technological innovation roadmaps in key areas will be examined, drawn up and released (…) technological research and development, engineering and industrialization will be deepened and fostered, the establishment of core technological systems will be accelerated, and the industry’s technological level will be raised (62)’ and ‘foster a number of smart manufacturing outstanding scenari in industries such as […] papermaking’ (63) .

(86) Government control and policy supervision can be also observed at the level of the relevant industry associations (64). For instance, the China National Forest Products Industry Association (‘CNFPIA’) has set up a special committee on decor paper (65). The 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’ (66).

(87) Hangzhou Huawang New Material Technology is a member of the CNFPIA and serves as a vice-president of CNFPIA’s special committee on decor paper (67).

(88) Zhejiang Kingdecor Paper is also a member of CNFPIA and serves as a director of CNFPIA’s special committee on decor paper (68)

(89) 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.

(90) 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.

(91) 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 (69)) and the company shall provide the necessary conditions for the activities of the Party organisation.

(92) 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 (70), including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline (71).

(93) 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 (72). 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.

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

(95) 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 (74).

(96) The present investigation confirmed that overlaps exist between managerial positions and CCP membership/functions in the decor paper sector. To provide an example, a member of the board of directors of Xianhe, the holding company of Kingdecor, also serves as the Party secretary of the company (75). As the investigation has found, Xianhe ‘responded to the call of the Party central committee and actively integrated into the new development pattern’ (76).

(97) Another example of this overlap between managerial positions and CCP membership/functions, is the case of Qifeng New Material, whose chairman of the board of directors is a member of the CCP (77). In 2023, Qifeng New Material, ‘adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and under the strong leadership of the company’s Party Committee and Board of Directors, [the company] actively explored both international and domestic markets’ (78) .

(98) An additional example was found in Fujian Qingshan Paper Industry Co. where the chairman of the board of directors also serves as the secretary of the Party committee (79). In the first half of 2024, the company ‘adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, comprehensively strengthened party building, [and] actively promoted the deep integration of party building and production and operation business’ (80) .

(99) 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 (81). Thus, the state presence in firms, in the decor paper and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

(100) 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.

(101) 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 (82).

(102) The Chinese authorities have enacted a number of policies guiding the functioning of the decor paper sector.

(103) For example, in its 14th FYP on Economic and Social Development and 2035 perspectives, the Shandong province intends to ‘optimize and upgrade traditional industries: […] optimize and refine classical industries such as textiles and clothing, food, papermaking, […]’ (83) .

(104) Furthermore, the Fujian province 14th special FYP on the High-Quality Development of Manufacturing Industry requires to ‘focus on improving the quality of household paper, packaging paper and cardboard, special paper and cardboard, optimize the variety structure, research and development of pulp and paper fiber resources comprehensive utilization’ (84).

(105) Additionally, at provincial level, the Fujian Special Plan for the High-Quality Development of Manufacturing Industry during the 14 FYP period, specifies that for ‘papermaking and paper products: [the government shall] guide (…) Qingshan paper and other enterprises to strengthen indigenous innovation capacity building, raise design integration capacities and improve the level of production process, technology and equipment’ (85).

(106) Also, in the Zhejiang province, the investigation confirmed the existence of preferential policies of the public authorities and state-owned banks towards paper manufacturers as the province ‘guides the Longyou county financial institutions to improve the financial environment of key enterprises, continues to optimize financial services, increase support to the real economy, especially to paper industry’ (86).

(107) Furthermore, the inputs used to produce decor paper are also subject to governmental policies. More specifically, this is the case for wood pulp which is covered by the PRC’s 14th FYP on the Development of the Forest and Grassland Industry (2021-2025) (87) (‘14th Forest FYP’) requiring as regards ‘pulp and papermaking: [to] accelerate the elimination of obsolete production capacity and reduce polluting emissions [and] to promote the technological transformation and improve energy and raw materials utilization’. The investigation in the sector of TiO2 also found that the GOC has measures in place to induce operators to comply with the public policy objectives concerning that sector (88).

(108) 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.

(109) 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.

(110) 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.

(111) 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 (89).

(112) 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 (90). 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 (91). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (92).

(113) 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 the decor paper sector. The present investigation revealed nothing that would call those findings into question.

(114) 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.

(115) 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 (93).

(116) 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 (94). 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.

(117) 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 (95).

(118) No evidence was submitted to the effect that the decor paper 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).

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

(120) First, the Chinese financial system is characterised by the strong position of state-owned banks (96), 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) (97) and they regularly implement public policies designed by the GOC.

(121) 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 (98). 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.

(122) 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 (99). 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’ (100) .

(123) 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 (101). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (102). 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.

(124) 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.

(125) 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 (103). Official media in China have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ (104). Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(126) 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.

(127) 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.

(128) 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.

(129) 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.

(130) 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 (51) to (128) above. The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, decor paper 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.

(131) 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.

(132) 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.

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

(134) First, the CNFPIA 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’).

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

(138) 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.

(139) 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. Indeed, the existence of significant distortions renders costs and prices in the exporting country inappropriate for the construction of normal value. Therefore, the parties’ arguments could not be accepted.

(140) 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 (106). 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 (107), 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.

(141) 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 Section 6.3 of this Regulation. Therefore, the parties’ arguments on the evidence contained in the complaint could not be accepted.

(142) The analysis set out in this section, which includes an examination of all the available evidence relating to China’s intervention in its economy in general as well as in the sector of the product concerned showed that prices and costs of the product concerned, including the costs of raw materials and inputs, 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 as shown by the actual or potential impact of one or more of the relevant elements listed therein.

(143) On that basis, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

(144) Consequently, the Commission proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as discussed in the following section.

(146) As explained in recitals (36) to (38), the Commission issued two notes for the file on the sources for the determination of the normal value: the First Note on factors of production dated 2 October 2024 (the ‘First Note’) and the Second Note on the factors of production dated 6 December 2024 (the ‘Second Note’).

(147) These notes described the facts and evidence underlying the relevant criteria, and also addressed the comments received by the parties on these elements and on the relevant sources.

(148) In the Second Note on factors of production, the Commission informed interested parties of its intention to consider Thailand 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

(149) In the First Note on factors of production, the Commission identified Thailand, Brazil, Indonesia and Türkiye 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.

(150) No comments were received concerning the countries identified in that note.

Existence of relevant readily available data in the representative country

(151) In the Second Note, the Commission indicated that for the countries identified as countries where product under investigation is being produced, i.e. Thailand, Brazil, Indonesia and Türkiye, the availability of readily available data needed to be further verified in particular with regard to the readily available financial data from producers of the product under investigation.

(152) The Commission looked at the presence of producers of decor paper in each of the four potential representative countries and searched for readily available financial data of companies producing the product under investigation. The Commission could not identify such companies in the four potential representative countries.

(153) The Commission then looked at producers of a product in the same general category of the product under investigation in each of the four potential representative countries, that also includes specialty paper (mainly flexible packaging and labels) and printing paper. No company was identified in this category with readily available financial data. The complainants identified in the complaint a Thai company (Thai Paper Mill) in this category and provided documents, allegedly for their financial data of 2022. However, the referenced period did not include any part of the IP, and the data was an unofficial excel extraction from a database (109). Hence, the Commission was unable to confirm the financial data from any readily available source.

(154) The Commission then looked at other products in the same general category as the product under investigation (‘paper and packaging producers’) (110), as packaging is also mentioned in the description of the four concerned HS codes (111), which excludes wood pulp, which is an upstream product/raw material completely different in nature from the product concerned. The Commission identified readily available financial data in Orbis for the Thai producers, namely: SIAM KRAFT INDUSTRY CO LTD; DOUBLE A (1991) PUBLIC COMPANY; THAI CONTAINERS GROUP CO LTD and SIG COMBIBLOC CO LTD. also mentioned below in Section 3, which showed profitability for 2023 Thailand was the only possible representative country, for which readily available financial data of paper and packaging producers was found. For the other potential representative countries, the Commission found in Orbis information concerning some companies which were either loss-making in the financial year 2023 or companies with no available financial data for the investigation period.

(155) No comments were received within the deadline. One party, KINGDECOR, submitted comments after the deadline which will be treated at the definitive stage.

Level of social and environmental protection

(156) Having established that Thailand may be considered as an appropriate representative country based on all the above elements,, there was no need to assess the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

(157) In view of the above analysis, Thailand 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.

(158) In the First 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 invited the interested parties to comment and propose publicly available information on undistorted values for each of the factors of production mentioned in that note.

(159) Subsequently, in the Second Note, the Commission stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use Global Trade Atlas (‘GTA’) (112) 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 the statistics published by National Statistical Office through the Bank of Thailand (113), OECD library (114) and the publication ‘Cost of Doing Business in Thailand 2023’ (115). for establishing undistorted costs of labour and the electricity price statistics published by the Metropolitan Electricity Authority Thailand (116) for electricity.

(160) The Commission explained in the Second Note its intention to calculate the price of steam in Thailand using, as basis, the methodology suggested by the U.S. Department for Energy (117). This methodology provides a cost for steam based on the heat input required to produce it by natural gas. To this end, the Commission intended to use the natural gas as heat input and, thus, the price of natural gas in Thailand as published by the Thai Ministry of Energy (118). Since this methodology calculates only the fuel cost of steam, the Commission would adjust this cost for water, consumables, other costs, SG&A and profit.

(161) In the Second Note, the Commission also informed the interested parties that gas, compressed air and water, all together account for less than 0,3 % of the total production cost, thus, would be merged into consumables. Further, the Commission informed that it would calculate the percentage of the consumables on the total cost of inputs and apply this percentage to the recalculated cost of raw materials when using the established undistorted benchmarks in the appropriate representative country

(162) The total of the factors of production that were merged into consumables, accounted for around 3 % of the total production cost, and thus finally, about 4 % of the total production cost is accounted as consumables.

(164) The Commission included a value for manufacturing overhead costs in order to cover costs not included in the factors of production referred to above. The methodology is duly explained under section Manufacturing overhead costs, SG&A, profits and depreciation below.

Raw materials and inputs

(165) 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 (CIF) to the representative country as reported in the GTA to which import duties and transport costs were added.

(166) As regards wood pulp (eucalyptus), a type of wood not common in China or nearby countries, which is the second most important raw material for the production of decor paper, the two Chinese producers proved during the verification that they only buy from non-Chinese sources from unrelated suppliers. This means that their import prices were accepted and not replaced.

(167) Concerning the main raw material, titanium dioxide, KINGDECOR claimed and proved during the verification that it imported a limited amount of its titanium dioxide from unrelated suppliers, outside China. This concerned qualities unavailable in China. For this part of titanium dioxide, its imports prices were accepted and not replaced.

(168) For all other raw materials, 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 to Regulation (EU) 2015/755 of the European Parliament and the Council (119).

(169) The Commission decided to exclude imports from the PRC into the representative country as it concluded in Section 3.2 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 to be representative.

Labour

(170) The Commission used the latest available statistics of National Statistical Office through the Bank of Thailand, OECD library and the publication ‘Cost of Doing Business in Thailand 2023’, indexed to the IP, using the average labour cost in the manufacturing sector of Thailand (120).

Electricity

(171) The price of electricity for companies (industrial users) in Thailand is published by the Metropolitan Electricity Authority Thailand (121). The Commission used the data on the industrial electricity prices in the corresponding consumption band in THB/kWh as published periodically for every month of the IP.

Steam

(172) As described in section 3.2.3, the Commission calculated the price of steam in Thailand using, as basis, the methodology suggested by the U.S. Department for Energy (122). This methodology provides a cost for steam based on the heat input required to produce. To this end, the Commission used the natural gas as heat input and, thus, the price of natural gas in Thailand as published by the Thai Ministry of Energy (123). Since this methodology calculates only the fuel cost of steam, the Commission adjusted this cost for water, consumables, other costs, SG&A and profit. The Commission considered that an overall rate covering these costs and profit would be reasonable. No comments on this point in the 2nd Note were received from interested parties.

Manufacturing overhead costs, SG&A costs, profits

(173) 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.

(174) 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.

(175) For establishing an undistorted and reasonable amount for manufacturing overheads, SG&A costs and profit, the Commission relied on the financial data of the four Thai companies, SIAM KRAFT INDUSTRY CO LTD, DOUBLE A (1991) PUBLIC COMPANY, THAI CONTAINERS GROUP CO LTD and SIG COMBIBLOC CO LTD. as extracted from Orbis.

(176) SG&A costs expressed as a percentage of the Costs of Goods Sold (‘COGS’) and applied to the undistorted costs of production, amounted to 11,38 %. The profit expressed as a percentage of the COGS and applied to the undistorted costs of production, amounted to 9,29 %. The Commission considered that these rates, when applied to the undistorted costs of production, would result in an amount for profit that would be reasonable, within the meaning of Article 2(6a)(a) of the basic Regulation, for the ex-works level of trade.

Calculation

(177) 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.

(178) 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 were verified by the Commission. The Commission multiplied the consumption rates by the undistorted costs per unit observed in the representative country, as described in Section 3.2.4.1.

(179) Then the Commission added manufacturing overheads, as explained in recital (173) to the undistorted cost of manufacturing in order to arrive at the undistorted costs of production.

(180) To the costs of production established as described in the previous recital, the Commission applied the SG&A costs and profit percentages calculated in recitals (174) to (175).

(181) 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.

(182) The sampled exporting producers exported to the Union either directly to independent customers or through related companies.

(183) For the exporting producers that exported the product concerned directly to independent customers in the Union, 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.

(184) One exporting producer partially exported the product concerned to the Union through a related user, acting as an importer who further processed the product concerned. The exporting producer did not provide detailed information about the cost of further processing and the final selling price, the Commission therefore provisionally decided to use for these transactions the export price to the related user. The Commission requested data about the cost of processing and the final selling price, which then will be used at definitive stage to establish the export price on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation.

(185) 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.

(186) As explained in recital (177) the normal value was established at the ex-works level of trade by using costs of production together with amounts for SG&A and for profit, which were considered to be reasonable for that level of trade. Therefore, no adjustments were necessary to net the normal value back to the ex-works level.

(187) Save for a VAT adjustment on the account of non-refundable VAT, the Commission found no reasons for making any allowances to the normal value, nor were such allowances claimed by any of the sampled exporting producers.

(188) In order to net the export price back to the ex-works level of trade, adjustments were made on the account of: customs duty, other import charges, freight, insurance, yearly rebates, handling loading and ancillary expenses and packing expenses.

(189) Allowances were made for the following factors affecting prices and price comparability: credit cost and bank charges

(190) For the sampled 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.

(192) 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, disregarding the margins of the exporting producers with zero and de minimis dumping margins, as well as margins established in the circumstances referred to in Article 18 of the basic Regulation.

(193) On this basis, the provisional dumping margin of the cooperating exporting producers outside the sample is 33,6 %.

(194) 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 Eurostat.

(195) The level of cooperation in this case was high because the exports of the cooperating exporting producers constituted around 90 % 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 sampled company with the highest dumping margin.

(197) The like product was manufactured by seven producers in the Union during the investigation period (124). They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

(198) The total Union production during the investigation period was established at around 473 000 tonnes. The Commission established the figure on the basis of all the available information concerning the Union industry, such as the macro questionnaire reply submitted by the complainant and verified by the Commission. As indicated in recital (15) the three sampled Union producers represented 60 % of the estimated total EU production and 61 % of the estimated total EU sales quantity of the like product.

(199) 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.

(200) As explained in recital (27), decor paper is used as a surface material for decorative applications. Decor paper is used as intermediate product which is then laminated onto wood-based panels such as medium density fibreboards or particleboard through the use of high temperatures and pressure, or, alternatively, by means of adhesives. Decor paper’s end use is mainly in the furniture, interior design or construction sector.

(201) There were no captive sales of the product under investigation on the Union market during the period considered. One of the sampled Union producers was part of a large group of companies purchasing decor paper from their related party and using it for the production of other downstream products. The Commission analysed the related sales transactions and associated documents, and considered those sales made to related companies as free market sales, as these sales to separate legal entities were made approximately at the same price as those charged to independent parties and those entities had a free choice of supplier.

(202) A non-complainant Union producer was also part of a larger group of companies involved in further processing of the product under investigation. However, given its lack of cooperation, the Commission was not able to ascertain the terms of sales to related parties for this producer. In the absence of detailed information, the Commission considered the estimated sales volume in the Union provided by the complainant as free market sales in the analysis of Union consumption and Union sales volume in the Union market.

(203) 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.

(204) The relevant CN codes also encompassed other types of specialty paper outside the definition of the product under investigation. In order to calculate the Union consumption, the Commission compared the import data statistics post-IP at both 8-digit CN and 10-digit TARIC code level from the Surveillance database. The TARIC codes were only available after the initiation of the investigation and related exclusively to the product under investigation. The comparison showed that for the period from July 2024 to November 2024, the volumes of decor paper imported into the Union at TARIC level constituted around 30 % of the overall volumes imported from China under the corresponding CN codes. Excluding China, imports of decor paper from the rest of the world at TARIC level accounted for around 15 % of total import volumes at CN level.

(207) Union consumption sharply increased by 17 % between 2020 and 2021. This was mainly due to the increase in market demand for construction materials that was prompted by the COVID-19 pandemic. The pandemic led to lockdowns and boosted the home renovations market, which resulted in higher demand for decor paper, as it is mainly used in the production of furniture and laminate flooring.

(208) Following 2021, Union consumption sharply dropped by 17 %, and in 2023 and in the investigation period by a further 11 %.

(209) The Commission established the volume of imports on the basis of the data provided by the cooperating exporting producers that were considered to represent almost 90 % of the volume of imports to the Union.

(210) The market share of the Chinese imports was established by comparing import volumes with the Union market consumption as per Table 2 above.

(212) Chinese imports in 2020 were limited at around 4 600 tonnes at the beginning of the period considered and with a market share of 1 %. However, in 2021, imports increased exponentially by 157 %; this sharp upward trend continued throughout the rest of the period considered. Throughout the entire the period considered, imports increased by 437 % to more than 24 000 tonnes. During the period considered, Chinese imports increased by 6 percentage points.

(213) The market share followed the same steep increase as the volume of imports from the People’s Republic of China, increasing by 521 % during the period considered. Moreover, the Chinese market share grew by three percentage points, from 4 % to 7 % in the span of one year, between 2022 and 2023.

(214) The Commission established the prices of imports based on data provided by the cooperating exporting producers that were considered close to 90 % of imports to the Union.

(216) Import prices from China increased in 2021 and 2022, following a similar trend as the Union industry average sales prices shown in Table 8. However, during the whole period considered, Chinese import prices remained far below the average Union sales prices, which increased to a level of 2 220 EUR/tonne in the investigation period.

(218) 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 9,3 % and 10,9 % by the imports from the country concerned on the Union market.

(219) The Commission, in addition, established the existence of price suppression starting from 2022, when the Union industry was faced with increased cost of production due to higher costs of raw materials and energy. However, the Union industry was not able to increase their prices sufficiently to offset the increases in cost of production due to price suppression from Chinese imports, which started in 2022 and continued throughout the period considered.

(220) In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(221) As mentioned in recital (15), sampling was used for the determination of possible injury suffered by the Union industry.

(222) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators, related to all Union producers, on the basis of data contained in the reply to the macro-questionnaire provided by the complainant, the adjusted data from the cooperating Chinese exporting producers, and the adjusted Eurostat data on imports from third countries of the product under investigation, as explained in recital (204) and footnotes 126 and 127. The Commission evaluated the microeconomic indicators, related to the sampled Union producers, on the basis of data contained in the questionnaire replies from the sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

(223) The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the dumping margin.

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

(226) The production volume of the Union industry decreased by 13 % between 2020 and the investigation period, in line with the trends in sales volume as shown in Table 8 below. The temporary increase in production volumes in 2021 could be attributed to the uptick in demand caused, as explained in recital (207), by the ‘stay-at-home’ economy during the lockdowns following the COVID-19 pandemic. However, starting from 2022 production volumes started to decrease. The decrease was due to lower market demand for decor paper in the Union, which was further exacerbated by the high inventory levels that were built up through the supply chain, as explained in recitals (245) and (246). In addition, following the increase in dumped imports from the PRC that mostly concerned commercial grade decor paper (such as whites, light colours and browns), to keep market share several Union producers had to focus production on more intensive colours which led to longer and more frequent preparation and maintenance of the paper machines, leading to longer production downtimes.

(227) The total Union capacity fluctuated throughout the period considered. During 2021 the declared production capacity increased due to longer in-between periods scheduled for planned maintenance of the decor paper machines. Starting from 2022 onwards, capacity started to decrease. This was mostly due to the cessation of decor paper production at the end of 2022 of one Union producer, and the insolvency of another Union producer starting end of 2023.

(228) The capacity utilisation increase observed in 2021 was prompted by the increase in net production volumes due to increased market demand for decor paper during the COVID-19 pandemic. Production volumes and capacity utilisation in 2022, 2023 and in the investigation period were far below the pre-2022 levels, which was a consequence of the overall decrease in market demand for decor paper and intensified competition from Chinese dumped imports.

(230) Union industry sales volume increased in 2021 by 13 percentage points compared to 2020, mainly due to the aforementioned increase in demand prompted by COVID-19 lockdowns (see recital (207)). As explained above, the demand for decor paper started decreasing in 2022 after the high demand in 2021. As Chinese imports started increasing both in absolute terms and in market shares as from the second half of 2021, this resulted in a significant drop in Union sales volumes.

(231) Market share dropped from 93 % to 90 % during the period considered. The further reduction in 2022 to 88 % can be attributed to an increase in market share from third countries which abated in 2023 and the investigation period.

(232) As explained above, due to the boom in home renovation caused by lockdowns during the COVID-19 pandemic, the union industry was able to profit from high demand and sales price above cost of production, which led to 2021 as being the only profitable year of the period considered. However, this situation was reversed starting from 2022, when the Union industry was faced with dwindling demand, coupled with competition from Chinese dumped imports, which led to prices to be set at below cost of production, as shown in Table 8 below.

(234) After a slight increase by 2 % in the number of employees in 2021, the Union industry decreased its workforce from 2021 until the investigation period, as its production and sales volumes decreased. Moreover, some sampled Union producers had to resort to short-time work during the COVID-19 pandemic in 2020 and for the period starting from end of 2022 up to the investigation period due to lack of orders and consequent frequent stops of machines. This situation was however not reflected in the total number of employees, as the affected employees were still employed by the companies and kept on their payrolls.

(235) Productivity developed in line with the changes in production volumes. It decreased by 11 % over the period considered, with a temporary increase in 2021, thanks to the increase in Union industry’s production and sales due to above mentioned exceptionally favourable conditions in that year. The change in the product mix and subsequent increased machine maintenance and startup times, explained in recital (225), further reduced the productivity per FTE as from 2022.

(236) All dumping margins were significantly above the de minimis level. The impact of the magnitude of the actual margins of dumping on the Union industry was substantial, given the volume and prices of imports from the country concerned.

(237) This is the first anti-dumping investigation regarding the product concerned. Therefore, no data were available to assess the effects of possible past dumping.

(239) During the period considered, sales prices followed a bell-shaped curve, peaking in 2022 and decreasing in 2023 and during the investigation period. The unit sales price followed the same trend as the cost of production. In 2020, the Union industry started in an unfavourable economic position due to temporary reductions in production and number of machines in operation, and it could not keep the average unit sales price above cost of production. After the second half of the year, demand rebounded, as the pandemic-led ‘stay-at-home’ economy pushed people to invest disposable income in home renovations. 2021 constituted the only year in which the Union industry was able to increase its prices above cost of production. This trend was quickly reversed in the following years when the Union industry was not able to keep sales prices above cost of production.

(240) The cost of production was driven mainly by raw material and energy costs. In particular, the trend in cost of production followed closely the trend in prices for the two main raw materials, titanium dioxide (‘TiO2’) and wood pulp. Moreover, in 2022, Russia’s unprovoked and unjustified military aggression against Ukraine caused a large increase in energy costs, which continued throughout 2023 and the investigation period.

(241) Moreover, as shown in Table 4, Chinese prices during the period considered were consistently lower as compared to the Union industry cost of production, with a difference in price ranging between 9 % during the peak of 2021 and around 25 % for the rest of the period considered, including the investigation period. Hence, during most of the period considered the Union industry was not able to increase its prices sufficiently to cover its costs of production, which indicated that the dumped imports from China suppressed the prices of the Union industry.

(243) Average labour cost per employee increased by 7 % over the period considered.

(245) The level of inventories in absolute terms and as a percentage of production increased by 53 % and 70 %, respectively. In 2021, peak consumer demand and production, coupled with compounding demand requests throughout the supply chain triggered a bullwhip effect. This created stockpiling in the warehouses of the Union producers and their customers, with some reporting delayed call-offs of produced quantities, lasting throughout the subsequent period.

(246) The decor paper business works mostly based on orders and call-off stock arrangements. Moreover, one of the sampled Union producers implemented a system characterised by a mix of made-to-order stock and express stock, made available for last minute orders of the most commonly sold types of decor paper. Compounding stock, coupled with decreasing demand and production quantity led to the increase in closing stock during the period considered, subsequently resulting also in an increase in closing stocks as a percentage of production.

(247) However, given that most product types of the like product were produced by the Union industry based on specific orders of users, the level of stocks was not considered to be a meaningful injury indicator for this industry.

(249) The Commission established the profitability of the three sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales.

(250) In the years prior to the period considered, from 2014 to 2019, the Union industry was profitable, see recital (281). At the start of the period considered however, the Union industry’s results were negative due to the economic downturn in 2020 caused by the COVID-19 pandemic and the consequent loss in demand during the first half of that year. This market contraction resulted in a decline in sales and increase in costs mainly due to frequent machine stoppages and the resort to short-time work by some Union producers, as explained in recital (234). In 2021, profitability experienced a peak due to the boom in house renovations following the COVID-19 pandemic, and started to deteriorate in 2022, reaching negative profitability levels in 2023 and the investigation period. As already shown in Table 11 above, the Union industry was able to keep its prices above cost of production only in 2021.

(251) The imbalance between cost of production and depressed prices translated into the erosion in profitability starting from 2022 onwards.

(252) The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow fluctuated during the period considered, experiencing a sharp increase in 2021 due to the favourable circumstances for the decor paper industry created by the effects of the lockdowns. Cash flow in 2022 returned to the same levels as 2020, before experiencing a sharp drop in 2023. Due to the period differences existing between the years prior the investigation period and the investigation, whereby the calculation for changes in inventories could not be considered as providing a reliable picture of the true cash flow positions of one of the EU sampled companies. Hence, the rebound shown during the investigation period can be considered as artificially inflated. In any event, even when taking the cash flow for the investigation period in full, the Union industry still experienced a decrease of 37 % during the period considered.

(253) Investments decreased by – 8 % in 2021, increased by + 42 % in 2022 before sharply dropping by – 59 % and – 21 % in 2023 and the investigation period, respectively. The increase in 2022 can be attributed to several investments undertaken following the high market demand and profit margins of 2021.

(254) The return on investments is the profit in percentage of the net book value of investments. Despite a negative return on investment experienced in 2020, it more than quadrupled in 2021 before decreasing again in 2022 and 2023. During the investigation period, return on investment reached 6,5 %, marking an increase of 94 % as compared to 2020. It must also be recalled that the return on investment is calculated on the overall profitability of the product under investigation, thus also including sales on the export markets. As explained in recital (239), while prices on the Union market were generally set below cost of production (with the exception of 2021), prices on export market were generally higher and above cost of production, as it will be shown in Table 13. While return on investment almost doubled between 2020 and the investigation period, other indicators such as investments and cash flow still showed a negative trend for the period considered.

(255) The sampled Union producers’ ability of the Union industry to raise capital was thus considered to be affected by the erosion of the profitability as well as of the cash flow incurred over the period considered.

(256) The majority of the injury indicators showed a negative trend during the period considered. Although the situation of the Union industry temporarily improved in 2021, the injury indicators such as production volume, sales volume on the Union market, and profitability decreased in 2022 and then further declined in the investigation period.

(257) The sales volume of the Union industry decreased by 16 % between 2020 and the investigation period. This decrease was more significant than the Union consumption, which decreased by 14 % during the period considered. In particular, the Union industry sales quantity on the Union market experienced a sharper drop in 2022 (9 %) and in the period covering 2023 and the investigation period (16 %) as compared to the decline in the consumption (3 % in 2022 and 14 % in 2023 and the investigation period).