Commission Implementing Regulation (EU) 2025/2314 of 17 November 2025 imposing a provisional anti-dumping duty on imports of phosphorous acid originating in the People’s Republic of China

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	2025/2314	18.11.2025

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 [^ntr1-L_202502314EN.000101-E0001] (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 19 March 2025, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of phosphorous acid 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 [^ntr2-L_202502314EN.000101-E0002] (‘the Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 3 February 2025 by ICL Europe Coöperatief U.A. (‘the complainant’). The complaint was made by on behalf of the Union industry of phosphorous acid in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

1.2.   Registration

• (3) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2025/1334 [^ntr3-L_202502314EN.000101-E0003] (‘the registration Regulation’).

1.3.   Interested parties

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

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

1.4.   Sampling

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

1.4.1.   No sampling of Union producers

• (7) As mentioned in the Notice of Initiation, the Commission made available questionnaires to the only two known Union producers, namely to the complainant and Italmatch Chemicals SPA. Sampling of Union producers was not considered necessary.

1.4.2.   Sampling of unrelated importers

• (8) 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.

• (9) No unrelated importers provided the requested information or agreed to be included in the sample. The Commission therefore did not select any sample of importers.

1.4.3.   Sampling of exporting producers

• (10) 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 People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

• (11) Five companies in the country concerned provided the requested information and agreed to be included in the sample:

• (a) Hebei Jia’ao Glycerin Chemicals Co., Ltd. (‘Hebei Jia’ao’);

• (b) Jiyuan Qingyuan Water Treatment Co., Ltd (‘JQWT’);

• (c) Linyi Chunming Chemical Co., Ltd. (‘Linyi Chunming’);

• (d) Yichang Chengkai Chemical Technology Co., Ltd (‘YCCT’);

• (e) Zibo Tiandan Chemical Co., Ltd. (‘Zibo Tiandan’).

1.4.3.1.   Article 18 letters

• (12) With their sampling replies, Linyi Chunming and Zibo Tiandan informed the Commission that, in addition to their own product, they exported to the Union phosphorous acid manufactured by other unrelated producers. The companies claimed that they were not able to distinguish in their records own and purchased product.

• (13) On that basis, the Commission considered that the companies had not provided necessary information concerning the export sales to the Union of phosphorous acid manufactured by the companies in its sampling reply within the deadline. On 14 April 2025, the Commission informed the companies of its intention to apply Article 18 of the basic Regulation, and thus base the findings in respect of normal value, export price and dumping margin on facts available. The companies were given the opportunity to provide comments.

• (14) In response to the Article 18 letters, Linyi Chunming and Zibo Tiandan provided clarifications showing that the companies were, contrary to their earlier claims, able to track the origin (production or purchase) of phosphorous acid sold to the Union. Those clarifications were, at that stage, sufficiently supported by evidence. In case of Linyi Chunming, this exercise led to a reduction of its export sales to the Union of phosphorous acid manufactured by the company by approximately one third.

• (15) Consequently, the Commission decided not to apply the provisions of Article 18(1) of the basic Regulation and included the two companies in its considerations when selecting the provisional sample of exporting producers.

• (16) In addition, Hebei Jia’ao revised without proper justification its sampling reply reducing the quantity of sales to the Union to one third of the quantity originally reported. The Commission requested the company to provide additional information proving the accuracy of the revised sampling reply. The company, however, failed to submit the requested evidence.

• (17) Therefore, the Commission concluded that the company had not provided necessary information concerning the export sales to the Union of phosphorous acid manufactured by the company in its sampling reply within the deadline. On 14 April 2025, the Commission informed the company of its intention to apply Article 18(1) of the basic Regulation and thus base the findings in respect of normal value, export price and dumping margin on facts available and the reasons for this.

• (18) Hebei Jia’ao was given the opportunity to comment on the Commission’s intentions and the underlying reasoning described in recitals 16 and 17. The company however did not provide any comments. Therefore, the Commission considered that the company did not cooperate in the investigation.

• (19) By a Note Verbale of 14 April 2025, the Commission informed the Government of the People’s Republic of China (‘GOC’) of its intention to apply facts available within the meaning of Article 18 of the basic Regulation to findings concerning Linyi Chunming, Zibo Tiandan and Hebei Jia’ao, and gave the GOC an opportunity to comment. No comments were received from the GOC.

1.4.3.2.   Provisional and definitive sampling decisions

• (20) Following the clarifications sought and partially received from the cooperating Chinese companies (see Section 1.4.3.1), the Commission provisionally selected two companies in the sample of exporting producers based on the largest representative volume of exports to the Union during the investigation period, which could reasonably be investigated within the time available:

• (a) Linyi Chunming;

• (b) YCCT.

• (21) These companies represented 15 % of the estimated export quantity of phosphorous acid to the Union from the PRC in the investigation period and 70 % of the exports to the Union by the companies that replied to the sampling questions.

• (22) By a Note Verbale of 30 April, the Commission informed the GOC of the selection of the provisional sample of exporting producers and invited it to comment. No comments were received from the GOC.

• (23) The Commission also invited the interested parties to comment on the selection of the sample of exporting producers. Comments were received from the complainant.

• (24) The complainant argued that the two companies selected for the sample were not representative of the Chinese industry producing phosphorous acid, as both companies produced phosphorous acid from a by-product of dimethyl phosphite (‘DMHP’). The complainant argued that, since both companies produced phosphorous acid from a by-product, their production cost would not reflect the actual cost of the main input – the by-product of DMHP. Its purchase price would rather mirror the notional savings the supplier achieved by not having to dispose of the by-product as waste.

• (25) Following the complainant’s comments on the provisional sample of exporting producers, the Commission requested all cooperating Chinese companies to explain their production process in detail and provide for each production step, a detailed description of the respective processing operation, equipment/machinery employed, inputs used, and outputs and by-products obtained.

• (26) Based on the companies’ replies, the Commission found that only one of the four companies produced phosphorous acid using the production process described in recital 47, i.e. the hydrolysis of phosphorus trichloride (PCl3). Three companies used one or more of the following processing operations:

• (a) They purchased liquid phosphorous acid and converted it to a solid product.

• (b) They obtained phosphorous acid from a by-product of DMHP. The Commission found that the by-product in question was a solution containing primarily phosphorous acid, some excess water, impurities and residua of DMHP. In this case, the company mainly removed impurities and water to obtain solid phosphorous acid. In addition, the company produced a negligible quantity of phosphorous acid from the residua of DMHP.

• (c) They obtained phosphorous acid from a by-product generated in the production of PCl3. In this case, the by-product solution contained mainly phosphorous acid, some water and a small portion of hydrogen chloride (HCl). Water and HCl were removed from the by-product to manufacture solid phosphorous acid.

• (27) In the Commission’s initial assessment none of the three methods described above could be considered as production of phosphorous acid. In all three cases phosphorous acid was being purchased in diluted form, sometimes together with impurities. It was then purified and concentrated.

• (28) On 12 June 2025, the Commission published a Note for the file on the production processes used by the cooperating Chinese companies and sought the views of the parties as to whether the processing operations described in recital 26 could be considered production of phosphorous acid and whether the inputs used in those processes could be considered the product under investigation.

• (29) Only the complainant provided its views. It submitted that the inputs used in all three processing operations constituted the product under investigation, as it was defined as ‘phosphorous acid, in solid or liquid (aqueous) forms, also denominated phosphonic acid, […]’. Furthermore, the complainant argued that none of the three processes represented production of phosphorous acid. It explained that in all three processes, the phosphorous acid molecule had already been produced via hydrolysis of PCl3 in an upstream production step. The processes carried out by the cooperating Chinese companies represented mere purification and/or drying of liquid phosphorous acid. Only in the process involving by-product of DMHP, a negligible volume of new phosphorous acid was produced from the residua of DMHP contained in the solution. Consequently, the complainant argued that all Chinese producers performing the processing operations described in recital 26 should not be considered exporting producers.

• (30) The Commission analysed the information received from the cooperating Chinese companies and comments submitted by the complainant. Indeed, the chemical reaction that created the phosphorous acid molecule occurred at an upstream stage of the value chain. Upstream companies produced the product under investigation as a by-product and supplied the cooperating Chinese producers with a solution containing mainly phosphorous acid, some water and impurities. The cooperating Chinese companies performed minor processing operations limited to, in particular, purification and transformation of a liquid product into solid crystals.

• (31) As a result, the Commission decided that the following three cooperating Chinese companies should not be considered exporting producers of the product under investigation as they were merely performing limited processing operations:

• (a) Linyi Chunming;

• (b) YCCT;

• (c) Zibo Tiandan.

• (32) The only remaining exporting producer, JQWT, represented less than 4 % of the estimated volume of phosphorous acid exported from the PRC to the Union. Thus, it was not sufficiently representative to serve as a basis for country-wide findings. In addition, although the company indicated that it would request individual examination, it failed to submit a questionnaire reply within the deadline, i.e. the individual information of the only exporting producer was not available.

• (33) Consequently, on 10 July 2025, the Commission informed the interested parties of the results of its analysis described in recitals 30 to 32 and that it considered the degree of non-cooperation in this investigation was likely to materially affect the outcome of the investigation within the meaning of Article 17(4) of the basic Regulation, and thus intended to apply the relevant provisions of Article 18 of the basic Regulation to establish findings of dumping at country-wide level (‘definitive sampling decision’).

• (34) The GOC was equally informed of the definitive sampling decision by a Note Verbale of 10 July 2025. It did not submit any comments.

• (35) In response to the Commission’s definitive sampling decision, the three affected companies requested a hearing. During the hearing, they argued that since they owned production lines and processed liquid phosphorous acid as a raw material into solid phosphorous acid, they should be considered producers and as such exporting producers in this investigation. The two initially sampled companies requested an individual dumping margin to be established for them.

• (36) The three companies confirmed during the hearing that they used liquid phosphorous acid as their main input in the processing operations they performed. In addition, they did not provide any substantial arguments against the Commission’s conclusion that the product under investigation was manufactured at an upstream stage by their suppliers. Consequently, the Commission confirmed its conclusions on the degree of non-cooperation and the subsequent application of Article 18 of the basic Regulation to establish findings of dumping at country-wide level.

1.5.   Questionnaire replies and verification visits

• (37) 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 GOC.

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

• (39) The GOC did not reply to any of the questionnaires. Therefore, by a Note Verbale of 10 July 2025, the Commission informed the GOC that it intended to use facts available within the meaning of Article 18 of the basic Regulation concerning the existence of significant distortions and of raw material distortions in the PRC. The GOC was provided an opportunity to comment. No comments were received from the GOC.

• (40) The Commission sent questionnaires to the two initially sampled Chinese companies.

• (41) All questionnaires, including a questionnaire for unrelated importers and a questionnaire for users, were made available online [^ntr4-L_202502314EN.000101-E0004] on the day of initiation.

• (42) A questionnaire reply was received within the deadlines from the complainant. The second Union producer, Italmatch Chemicals SPA, did initially not reply to the questionnaire. The company explained to the Commission that this was due to the fact that it did not sell the product under investigation on the free market. However, upon request by the Commission, at a later stage it provided a questionnaire reply which allowed the Commission to base the injury analysis on the entire Union industry of phosphorous acid [^ntr5-L_202502314EN.000101-E0005].

• (43) The Commission sought and verified all the information deemed necessary for a provisional determination of injury and Union interest. As explained in Section 1.4.3.2, the determination of dumping was based on facts available.

• (44) A verification visit pursuant to Article 16 of the basic Regulation was carried out at the premises of the complainant, ICL Europe Coöperatief U.A. (Amsterdam, The Netherlands). The Commission carried out remote crosschecks (‘RCC’) of the questionnaire reply of the second Union producer, Italmatch Chemicals SPA (Genoa, Italy).

1.6.   Investigation period and period considered

• (45) The investigation of dumping and injury covered the period from 1 January 2024 to 31 December 2024 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2021 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (46) The product under investigation is phosphorous acid (‘PA’), in solid or liquid (aqueous) forms, currently falling under CN code ex 2811 19 80 (TARIC code 2811 19 80 60), also denominated phosphonic acid, usually falling under Chemical Abstracts Service (‘CAS’) numbers 13598-36-2 and 10294-56-1, originating in the People’s Republic of China (‘PRC’). The Customs and Statistics (‘CUS’) numbers usually corresponding to this product are 0021895-1 and 0043878-8 and originating in the People’s Republic of China (‘the product under investigation’).

• (47) The product under investigation can be produced through two different methods. By far the most used is the hydrolysis of PCl3. Phosphorous acid can, however, also be produced through hydrolysis of phosphorus trioxide (P4O6). There are two main reasons as to why the hydrolysis of PCl3 is commonly used. First, PCl3 serves as an input in a variety of downstream products and is thus more readily available than P4O6. Second, P4O6 is more complex to produce, more reactive and therefore less stable.

• (48) Phosphorous acid is used in a wide range of applications, it is the raw material in the production of phosphonates and other specialty chemicals, which have a wide range of applications across various industries (water treatment, detergents and cleaning agents, agriculture, oil and gas, construction and building materials, textile and leather industry, paper and pulp industry, pharmaceuticals and personal care, food and beverage industry).

2.2.   Product concerned

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

2.3.   Like product

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

• — the product concerned when exported to the Union,

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

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

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

2.4.   Claims regarding product scope

• (52) Linyi Chunming made two submissions. The first submission sought to add a new PCN criterion to identify the raw materials used in production. The second submission requested the exclusion of its phosphorous acid produced using another raw material in comparison with the Union producer. Linyi Chunming justified its request explaining that PA produced using its specific production process, a different raw material generated a PA with a slightly lower purity level, involves different production costs, has a low environmental impact, and could serve different applications compared to the PA produced by the Union producers. For these reasons its product should be excluded from the investigation.

• (53) In response to Linyi Chunming’s first claim on the PCN structure, ICL contested the Linyi Chunming’s submission explaining that it found the submission insufficiently clear, in particular the explanation of the production process. Furthermore, the raw material used was found to already contain a certain percentage of phosphorous acid, which was further processed through drying and purifying steps to reach the final crystal forms. On these grounds, ICL requested the Commission to reject the PCN modification request.

• (54) The Commission, after having evaluated the Linyi Chunming’s claims and ICL submission, concluded that there was no justification to modify the PCN structure or exclude phosphorous acid produced via alternative processes. In a note for the file [^ntr6-L_202502314EN.000101-E0006] published on 12 June 2025, the Commission clarified that other production methods for phosphorous acid primarily use raw materials already containing phosphorous acid. Even though these inputs undergo a transformation process, they should already be considered product under investigation. Therefore, both claims were rejected.

3. DUMPING

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

• (55) 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.

• (56) 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 the product. As explained in Section 1.4.3.2, the degree of non-cooperation by the Chinese exporting producers was likely to significantly affect the outcome of the investigation. Therefore, the Commission applied the relevant provisions of Article 18 of the basic Regulation to establish findings of dumping at country-wide level.

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

• (58) In point 5.3.2 of the Notice of Initiation the Commission also specified that, in view of the evidence available, it had provisionally selected Brazil as an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks. The Commission further stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in Article 2(6a)(a) first indent of the basic Regulation.

• (59) On 2 September 2025, the Commission informed by a note (‘the Note on sources’) interested parties on the relevant sources it intended to use for the determination of the normal value. In the Note on sources, the Commission provided a list of all factors of production such as raw materials, labour and energy used, as well as by-product generated in the production of phosphorous acid. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified Brazil, Indonesia, Malaysia, and Serbia as possible representative countries. Considering the availability of necessary information in the four potential representative countries, the Commission selected Brazil as an appropriate representative country. The Commission also informed interested parties that it would establish manufacturing overheads (‘MOH’), selling, general and administrative (‘SG & A’) cost and profits based on available information for two Brazilian manufacturers of products in the same general category, namely Nortox S.A. and Vittia S.A.

• (60) The Commission received comments on the Note on sources from the complainant. They concerned the determination of undistorted value of by-product. The comments are addressed in Section 3.2.5.2.

3.2.   Normal value

• (61) 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’.

• (62) 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 to hereinafter as ‘SG & A’).

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

3.2.1.   Existence of significant distortions

• (64) In recent investigations concerning the chemical sector in the PRC [^ntr7-L_202502314EN.000101-E0007], the Commission found that significant distortions in the sense of Article 2(6a)(b) of the basic Regulation were present.

• (65) In those investigations, the Commission found that there is substantial government intervention in the PRC resulting in a distortion of the effective allocation of resources in line with market principles [^ntr8-L_202502314EN.000101-E0008]. In particular, the Commission concluded that in the chemical sector not only does a substantial degree of ownership by the GOC persist in the sense of Article 2(6a)(b), first indent of the basic Regulation [^ntr9-L_202502314EN.000101-E0009], but the GOC is also in a position to interfere with prices and costs through State presence in firms in the sense of Article 2(6a)(b), second indent of the basic Regulation [^ntr10-L_202502314EN.000101-E0010]. The Commission further found that the State’s presence and intervention in the financial markets, as well as in the provision of raw materials and inputs have an additional distorting effect on the market. Indeed, overall, the system of planning in the PRC results in resources being concentrated in sectors designated as strategic or otherwise politically important by the GOC, rather than being allocated in line with market forces [^ntr11-L_202502314EN.000101-E0011]. Moreover, the Commission concluded that the Chinese bankruptcy and property laws do not work properly in the sense of Article 2(6a)(b), fourth indent of the basic Regulation, thus generating distortions in particular when maintaining insolvent firms afloat and when allocating land use rights in the PRC [^ntr12-L_202502314EN.000101-E0012]. In the same vein, the Commission found distortions of wage costs in the chemical sector in the sense of Article 2(6a)(b), fifth indent of the basic Regulation [^ntr13-L_202502314EN.000101-E0013], as well as distortions in the financial markets in the sense of Article 2(6a)(b), sixth indent of the basic Regulation, in particular concerning access to capital for corporate actors in the PRC [^ntr14-L_202502314EN.000101-E0014].

• (66) Like in previous investigations concerning the chemical sector in the PRC, the Commission examined in the present investigation whether it was appropriate or not to use domestic prices and costs in the PRC, 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, including the evidence contained in the complaint, and in the Commission Staff Working Document on Significant Distortions in the Economy of the People’s Republic of China for the Purposes of Trade Defence Investigations [^ntr15-L_202502314EN.000101-E0015] (‘Report’), which relies on publicly available sources. That analysis covered the examination of the substantial government interventions in the PRC’s economy in general, but also the specific market situation in the relevant sector including the product under investigation. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in the PRC as also found by its previous investigations in this respect.

• (67) The complaint alleged that significant distortions exist in the Chinese phosphorous acid sector. It referred to the Report and in particular to the PRC’s economic system being a ‘socialist market economy’ and the active role of the Chinese Communist Party (‘CCP’) in both the public and private sectors in the PRC.

• (68) More specifically, the complaint pointed out that:

• — There is State intervention in the chemical sector and the phosphorous acid market in particular. In this regard, the complaint referred to the specific chapter on chemicals of the Report to highlight the significant overcapacities present in the Chinese chemicals market [^ntr16-L_202502314EN.000101-E0016].

• — The main legal and regulatory instrument governing the GOC’s intervention in the chemical sector is the 14th Five-Year Plan (‘FYP’), which lays out the strategic visions of the GOC for the transformation and upgrading of traditional industries and the development axis for strategic emerging industries, including the industries of chemicals, building materials, new materials, and chemical fibers. Additionally, the 14th FYP on Developing the Raw Materials Industry targets the chemical and petrochemical industries as part of the ‘raw materials industry’ protected and incentivised by the FYP. It also indicates that key sectors, such as the chemicals sector, should have specific implementation strategies based on the FYP objectives. Concerning the specific planning for the industrial structure, the document clearly mandates a production capacity increase of yellow phosphorous, which is the main raw material for the production of phosphorous acid. The aim is to make leading enterprises as big and as strong as possible by means of State intervention and support. The Guiding Opinion on Promoting the High-Quality Development of the Petrochemical and Chemical Industry One of the main objectives set by the Guiding Opinion is the concentration of bulk chemical production, which shall be increased for capacity utilisation levels above 80 %. The complaint also refers to various province-specific systems of sub-plans aimed at organising State intervention in the chemical sector. For instance, the Shandong 14th FYP on the Development of the Chemical Industry and the Jiangsu 14th FYP on High-End Development of the Chemical Industry, both of which target provinces with the strongest presence of companies producing phosphorous acid. These provincial plans foster strong financial support and the creation of chemical industrial parks [^ntr17-L_202502314EN.000101-E0017].

• — The market of phosphorous acid is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance by the GOC. The complaint argued that the GOC and CCP exercise control over both State-owned enterprises (‘SOEs’) and private companies in the chemical sector. The GOC established the State-owned Assets Supervision and Administration Commissions (‘SASAC’) to represent the State’s shareholder interests in SOEs. Its basic functions guiding the reform of SOEs, taking daily charge of supervisory panels assigned to large SOEs, appointing and removing chief executives and other top management officials of SOEs, and supervising the preservation and appreciation of value of State-owned assets. In addition, the GOC adopted the Law on State-owned Assets of Enterprises which mandates State control and ownership over strategic industries, such as the chemical industry. According to the complaint, further reinforcing the Party’s influence over enterprises in China is the ‘Social Credit System’, that the GOC will be using to monitor, rate and condition the conduct of all domestic and foreign companies in China. In addition, the complaint also argues that with respect to SOEs, the FYP aims at building a stronger connection between the GOC and SOEs. Finally, the complainant states that with respect to the industry of phosphorous acid, a substantial degree of ownership by the GOC persists. Publicly available information indicates that some key producers of phosphorous acid targeted by the complaint in China are SOEs. For instance, Hubei Xingfa Chemicals Group Co. Ltd belongs to the Xingfa Group, which is an SOE. In addition, it is stated, that the major shareholder (19,5 %) of Hubei Xingfa Chemicals Group Co. Ltd., is Xingshan Country SASAC. The CEO of Hubei Xingfa Chemicals Group Co. Ltd. was a delegate at the 20th National Congress of the CCP and several directors, supervisors and senior managers of the Hubai Xingfa Group are CCP members [^ntr18-L_202502314EN.000101-E0018].

• — Regarding private companies, the complaint alleged that privately owned companies have to align their policies with the central government and it mentions recent initiatives aiming at pressuring private companies to invest in, or merge with, SOEs. The complainant also refers to the 2022 Annual Report of Henan Qingshuiyuan Technology Co. Ltd., a seemingly privately owned company, which clearly refers to the decision-making and deployment of the higher-level party committee and government, and to the promotion of in-depth integration of party building and production and operation. According to the same annual report, directors and managers of the company are also members of the CCP.

• — The Chinese presence in phosphorous acid companies allows the State to interfere with respect to prices or costs. According to the complaint, the GOC preserves its influence in SOEs through the appointment and removal of key management personnel in SOEs, which is the main responsibility of SASAC. It also does so by heavily influencing the production of critical raw materials for the production of phosphorous acid, notably yellow phosphorous. Additionally, SOEs in China benefit from preferential access to a wide variety of inputs like land and energy, but also to financing systems. The strong State intervention within companies results therefore in a distorted allocation of resources, which is then translated into distorted costs and distorted prices for the products manufactured. For example, the complaint argued that Hubei Xingfa Chemicals Group received government grants during 2023 in the context of the GOC’s strong presence in the company. It also mentions that Henan Qingshuiyuan Technology, received government grants in 2023. The complainant refers to previous Commission investigations to demonstrate that the GOC has set in motion a strategy to control and intervene in the production of yellow phosphorous. In addition to the support expressed through governmental policies, the GOC also maintains an export tax on yellow phosphorous set at 20 % which prevents this raw material from being exported and creates immense overcapacities in the country. Through Chinese export taxes on yellow phosphorus and the enforcement of the dual control policy, the GOC has not only created internal price distortions for yellow phosphorus, but also international distortions that make this product about 20 % more expensive to purchasers anywhere else than in China. Furthermore, the GOC further interferes with respect to prices and costs of energy [^ntr19-L_202502314EN.000101-E0019].

• — The GOC has consistently given a strong focus to the chemical industry in its different policy documents and shaped its measures to favour domestic chemical producers. In this regard, the complaint referred to the Decision of the State Council Regarding Promulgating the Implementation of Interim Provisions on the Promotion of Industrial Restructuring, the 2024 version of the Guidance Catalogue for the Industrial Structure Adjustment which sets the basis for guiding the investment direction of the GOC and to formulate its public policies and, the Implementation Plan for Promoting the Efficient and High-value Utilization of Phosphorus Resources. According to the complainant the Guidance Catalogue particularly mentions yellow phosphorous, thus showing the relevance of this raw material within the Chinese planned economy [^ntr20-L_202502314EN.000101-E0020]. Finally, the complaint shows that the focus on phosphorous chemistry is not new by referring to the 2022 Guiding Opinions on Promoting the High-quality Development of the Petrochemical and Chemical Industry during the 14th FYP or the Jiangsu Province Notice of 14th FYP Industrial Green Development and Other Planning notes during the 14th FYP cycle.

• — There is a lack of, a discriminatory application of or inadequate enforcement of bankruptcy, corporate or property laws in China [^ntr21-L_202502314EN.000101-E0021].

• — Wage costs are being distorted since they do not result from normal market forces or free collective bargaining. The complainant states that workers and employers are impeded in their rights to collective organisation mentioning the existence of only one trade union which lacks independence from the state, and the fact that the PRC has still not ratified a number of major international conventions of the International Labour Organisation. Furthermore, the mobility of the Chinese workforce is affected by the household registration system. The complaint also refers to the fact that the industry of phosphorous acid is also subject to Chinese labour laws and thus to these distortions in wage costs referring to the annual report of Henan Qingshuiyuan Technology Co. Ltd. Wage cost distortions are further enhanced by labour subsidies provided by the Chinese State, in particular, to phosphorous acid producers. For example, Hubei Xingfa Chemical Group Co. Ltd., and Henan Qingshuiyuan Technology Co. Ltd. reported several such subsidies [^ntr22-L_202502314EN.000101-E0022].

• — Phosphorous acid producers in China have access to finance granted by institutions that implement public policy objectives or are otherwise not acting independently from the State [^ntr23-L_202502314EN.000101-E0023]. The complaint mentions a strong government presence in the financial institutions, and artificially low borrowing costs, in order to stimulate investment growth. The banking sector is heavily influenced by the State, not only through ownership, but also by the power given to the GOC, as the main shareholder, to appoint the top management positions, with strong decisive powers. Moreover, such banks also have shareholding in Chinese companies producing the product concerned. For instance, IIndustrial and Commercial Bank of China Ltd. holds 0,17 % of the shares in Henan Qingshuiyan Technology Co. Ltd., Taikang Life Insurance Co. and Guangfa Fund Management Co. Ltd. – Social Security Fund hold 0,96 % and 0,75 % in Hubei Xingfa Chemical Group Co. Ltd. respectively. Furthermore, Henan Qingshuiyan Technology Co. Ltd. took loans from several Chinese banks, like the Agricultural Bank of China, Bank of China, China Construction Bank, China Merchants Bank and the CITIC Bank. The complaint argues that the lending policies of banks in China are shaped to attain policy objectives and the bank’s performance is usually superseded by compliance with the requirements to support the GOC’s industrial policies. Relying notably on Decision No 40, the complaint claims that legislative provisions provide binding rules for all economic institutions in the form of guidelines on the promotion and support of encouraged industries. Finally, bond and credit ratings are thus heavily distorted for various reasons, such as the influence of the firm’s strategic importance on the risk assessment and the strength of any implicit guarantee by the government. In this regard, it appears that the phosphorous acid industry benefits from the distortions on the bond market since high ratings have been granted to Chinese producers. For instance, CSCI Pengyuan issued a credit rating of AA+ to Hubei Xingfa for 2022 with respect to convertible bonds.

• (69) In conclusion, the complaint took the position that prices or costs, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation. On that basis, according to the complaint, it is not appropriate to use domestic prices and costs to establish normal value in this case.

• (70) 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. 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.

• (71) In this regard, the Commission first assessed whether the phosphorous acid sector in the PRC is being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the Chinese authorities, within the meaning of the first indent of Article 2(6a)(b) of the basic Regulation. The sector of the product concerned is served by both private companies, such as Taizhou Yongchang Chemical Co. Ltd [^ntr24-L_202502314EN.000101-E0024], as well as by SOEs such as Yuntianhua Group [^ntr25-L_202502314EN.000101-E0025], The exact ratio of private versus State-owned producers in the phosphorous acid market could not be determined. However, the Commission found that several producers are directly controlled by the State. Examples include Yunnan Yuntianhua Co. Ltd. which is controlled by Yuntianhua Group [^ntr26-L_202502314EN.000101-E0026] of which 64,8 % of the shares are held by the Yunnan Provincial Government State-owned Asset Supervision and Administration Commission. Additionally, Hubei Xingfa Chemicals Group Ltd [^ntr27-L_202502314EN.000101-E0027] is controlled by Yichang Xingfa Group [^ntr28-L_202502314EN.000101-E0028], an SOE wholly owned by the Xingshan County Government State-owned Asset Supervision and Administration Commission [^ntr29-L_202502314EN.000101-E0029]. Also, Hubei Yihua Chemical Industry Co. Ltd [^ntr30-L_202502314EN.000101-E0030] is controlled by Hubei Yihua Group Ltd., an SOE wholly owned by the Yichang Municipal Government State-owned Assets Supervision and Administration Commission [^ntr31-L_202502314EN.000101-E0031] and SD Lomon [^ntr32-L_202502314EN.000101-E0032] is ultimately controlled by the Sichuan Provincial Government State-owned Assets Supervision and Administration Commission [^ntr33-L_202502314EN.000101-E0033].

• (72) Moreover, CCP interventions into operational decision-making have become the norm, not only in SOEs but also in private companies [^ntr34-L_202502314EN.000101-E0034], 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.

• (73) The investigation found that the industry national association covering the chemical sector is the China Petroleum and Chemical Industry Federation (‘CPCIF’). The CPCIF adheres to the overall leadership of the CCP, carries out Party activities, and provides necessary conditions for the activities of party organizations [^ntr35-L_202502314EN.000101-E0035]. Moreover, the ‘registration and management authority of the Association is the Ministry of Civil Affairs’ [^ntr36-L_202502314EN.000101-E0036] and the conditions to be eligible as a representative of the CPCIF include to ‘adhere to the leadership of the CCP, support socialism with Chinese characteristics, resolutely implement the Party’s line, principles, and policies, and possess good political qualities’ [^ntr37-L_202502314EN.000101-E0037].

• (74) Yichang Xingfa Group is a member of CPCIF and is one of its vice-presidents [^ntr38-L_202502314EN.000101-E0038]. Moreover, Yuntianhua Group is a member of CPCIF and is one of its executive directors [^ntr39-L_202502314EN.000101-E0039]. Also, Yihua Chemical Industry Co. Ltd is a member of CPCIF [^ntr40-L_202502314EN.000101-E0040].

• (75) More specifically, the investigation found that the industry national association representing the producers of phosphorous acid is the China Phosphorus Coumpound Fertilizer Industry Association (‘CPFIA’) [^ntr41-L_202502314EN.000101-E0041]. The CPFIA adheres to the overall leadership of the CCP, carries out Party activities, and provides necessary conditions for the activities of party organisations [^ntr42-L_202502314EN.000101-E0042]. Moreover, the ‘registration and management authority of the Association is the Ministry of Civil Affairs’ [^ntr43-L_202502314EN.000101-E0043] and the conditions to be eligible as a representative of the CPFIA include to ‘adhere to the leadership of the CCP, support socialism with Chinese characteristics, resolutely implement the Party’s line, principles, and policies, and possess good political qualities’ [^ntr44-L_202502314EN.000101-E0044].

• (76) Hubei Xingfa Chemicals Group Ltd, Yuntianhua Group and Hubei Yihua Group Ltd. are members and executive directors of CPFIA [^ntr45-L_202502314EN.000101-E0045].

• (77) Both public and privately owned enterprises in the chemical sector are subject to policy supervision and guidance. The latest Chinese policy documents concerning the chemical and petrochemical sector confirm the continued importance which the GOC attributes to the sector, including the intention to intervene in the sector to shape it in line with the government policies. This is exemplified by the 14th FYP on Economic and Social Development and 2035 Perspectives, according to which the GOC intends to ‘accelerate the transformation and upgrading of key industries such as chemicals’ [^ntr46-L_202502314EN.000101-E0046] .

• (78) Additionally, the Guiding Opinion on Promoting the High-Quality Development of the Petrochemical and Chemical Industries during the 14th FYP [^ntr47-L_202502314EN.000101-E0047] (‘the Guiding Opinion’) also stipulates that the GOC will ‘accelerate the transformation and upgrading of traditional industries, vigorously develop new chemical materials and fine chemicals, […] and foster China’s transition from a large petrochemical and chemical country into a strong petrochemical and chemical power. […] By 2025, […] [t]he production concentration of bulk chemical products will be further improved, and the capacity utilization rate will reach more than 80 %; the supply security of new chemical materials will reach more than 75 %’ [^ntr48-L_202502314EN.000101-E0048]. Also, the GOC shall ‘[p]romote industrial structure adjustment: strengthen specific measures and scientifically regulate the scale of the industry[and] strictly control new capacity additions […]in the yellow phosphorus industry’ [^ntr49-L_202502314EN.000101-E0049] .Yellow phosphorus is an input to produce phosphorous acid.

• (79) This requirement to control the yellow phosphorus input sector is also confirmed in the 14th FYP on Developing the Raw Materials Industry [^ntr50-L_202502314EN.000101-E0050] as well as in the 14th FYP on Developing the Green Industry [^ntr51-L_202502314EN.000101-E0051].

• (80) Additionally, the 2024 Guidance Catalogue for Industry Structural Adjustment [^ntr52-L_202502314EN.000101-E0052] lists the ‘production technology of yellow phosphorus by fully enclosed high-pressure water quenching slag’ as an ‘encouraged industry’.

• (81) Furthermore, the Implementation Plan for the Promotion of Efficient and High-value Utilization of Phosphorous Resources aims at ‘implement[ing] the key tasks of relevant national plans, realize efficient and high-value utilization of phosphorus resources, and enhance the competitive advantage of the entire industrial chain’ and stipulates that the GOC will ‘[o]n the basis national strategic needs, promote the deep integration of production, learning, research and application, focus on overcoming the key technologies and equipment that restrict the high-quality development of the phosphorus chemical industry, vigorously cultivate new quality productivity, and build an independent and controllable industrial chain supply chain’ [^ntr53-L_202502314EN.000101-E0053].

• (82) Similar examples of the intention of the Chinese authorities to supervise and guide the developments of the phosphorous acid sector can be found at the provincial level, such as in the Shandong 14th FYP on the Development of the Chemical Industry [^ntr54-L_202502314EN.000101-E0054] seeking to ‘[c]omprehensively promote the upgrading of industrial foundation and modernization of industrial chain, accelerate the withdrawal of backward and inefficient production capacity, and promote the development of chemical products in the direction of functionalization, refinement and differentiation. Guide enterprises to merge and reorganize, optimize resource allocation and industrial chain structure, and improve production efficiency and profitability’ [^ntr55-L_202502314EN.000101-E0055].

• (83) More specifically, the Hubei 14th FYP on Economic and Social Development and 2035 Perspectives requires to ‘transform and upgrade traditional industries such as the phosphorous chemical industry’ [^ntr56-L_202502314EN.000101-E0056].

• (84) Furthermore, the Hubei 14th FYP on the High Quality Development of the Manufacturing Industry also requires to ‘transform and upgrade traditional chemical industries such as […] phosphorous chemicals [and] to focus on developing high-end chemicals’ [^ntr57-L_202502314EN.000101-E0057].

• (85) Also, the Hubei 14th FYP on the High Quality Development of the New Materials Industry confirms the GOC intends to develop the ‘Yichang new material industry base [to] optimize, upgrade and modernize the phosphorus industry chain, focusing on developing the new materials sector of the phosphorus fine chemical industry’ [^ntr58-L_202502314EN.000101-E0058] .

• (86) Another example of the intention of the Chinese authorities to supervise and guide the developments of the phosphorous acid sector at the provincial level can be found in the Guizhou 14th FYP on the Development of Strategic and Emerging Industry Clusters stipulates that the GOC will ‘[a]ccelerate the development of the fine phosphate chemical industry; promote the development of the phosphate chemical industry and refining, scientifically and rationally develop and utilize phosphate rock resources, […] vigorously develop […] yellow phosphorus post-processing products, [and] will focus on developing specialized phosphorous chemicals such as electronic-grade yellow phosphorus, etching solutions, and flame retardants, and strive to extend the yellow phosphorus deep processing industry chain’ [^ntr59-L_202502314EN.000101-E0059].

• (87) As to the GOC being in a position to interfere with prices and costs through State presence in firms in the sense of Article 2(6a)(b), second indent of the basic Regulation, the Commission found that the Party building activities at Yuntianhua Group aimed at ‘displaying the new thinking, new measures and new results of grassroots Party building integrated into production and business operations […] so as to effectively transform the leading advantages of Party building into a strong momentum to promote the high quality development of the Group’ [^ntr60-L_202502314EN.000101-E0060].

• (88) Furthermore, the chairman of Yunnan Yuntianhua Co. Ltd. serves as the Secretary of the Party Committee, while the executive director and deputy chairman of the company also serves as the Deputy Secretary of the Party Committee [^ntr61-L_202502314EN.000101-E0061].

• (89) The Chairman of Hubei Xingfa Group Ltd. also serves as the Chairman of the mother company Yichang Xingfa Group and as the Deputy Secretary of its Party Committee. Also, one of the Directors of Hubei Xingfa Group Ltd. also serves as the General Manager of the mother company Yichang Xingfa Group and as its deputy secretary of the Party Committee [^ntr62-L_202502314EN.000101-E0062].

• (90) The chairman of Hubei Yihua Chemical Industry Co. Ltd. also serves as the secretary of the Party Committee and the general manager of the company serves as the deputy secretary of the Party Committee [^ntr63-L_202502314EN.000101-E0063].

• (91) It was not possible to systematically establish the existence of personal connections between all of the Chinese phosphorous acid producers and the CCP. However, given that the product under investigation represents a subsector of the chemical sector, the Commission considered that the information established in the recent investigations concerning the chemical sector, as indicated in recital 65, is relevant also to the product under investigation.

• (92) Further, policies discriminating in favour of domestic producers or otherwise influencing the market in the sense of Article 2(6a)(b), third indent of the basic Regulation, are in place in the phosphorous acid sector. The Commission identified several documents demonstrating that the phosphorous acid industry benefits from the governmental guidance and intervention into the chemical sector, given that phosphorous acid represents a subsector of the chemical sector. Furthermore, the Commission also found documents specifically addressing the phosphorous sector.

• (93) The chemical industry is consistently regarded as a key industry by the GOC [^ntr64-L_202502314EN.000101-E0064]. This is confirmed in the numerous plans, directives and other documents focused on chemicals, which are issued at national, regional, and municipal level. Under the 14th FYP, the GOC earmarked the chemical industry for optimisation and upgrade [^ntr65-L_202502314EN.000101-E0065]. Similarly, the 14th FYP on Developing the Raw Materials Industry stipulates that the GOC will ‘Optimize the organizational structure: Make leading enterprises bigger and stronger. […] [S]upport enterprises to accelerate cross-regional and cross-ownership mergers and reorganizations, increase industrial concentration, and conduct international operations. In the chemical, petrochemical, steel, non-ferrous metals, building materials and other industries, cultivate a group of leading enterprises in the industrial chain with ecological dominance and core competitiveness’ [^ntr66-L_202502314EN.000101-E0066] .

• (94) More specifically, the Explanatory Note to the Implementation Plan for the Promotion of Efficient and High-value Utilization of Phosphorous Resources states that ‘[i]t is urgent to focus on different stages and regions of the industry chain and implement specific policies in order to optimize product structure, company structure and reginal layout’ [^ntr67-L_202502314EN.000101-E0067]. The Explanatory Note also specifies that the GOC intends to ‘cultivate advantageous industrial clusters, encouraging the Yunnan, Guizhou, Hubei and Sichuan provinces to build advanced manufacturing clusters [and to] build a series of high-quality enterprises to improve phosphate mining, increase the concentration of primary phosphorus chemical production, promote the coordinated development of upstream and downstream industries, […] cultivate leading phosphorus chemical companies with control over resources and dominance over the industry chain, accelerate the cultivation of specialized and innovative “little giants” and manufacturing single champions, strengthen the characteristic industrial clusters of phosphorus chemical small and medium-sized enterprises, and promote transformation and upgrading of the industry chain’ [^ntr68-L_202502314EN.000101-E0068].

• (95) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives of supporting encouraged industries, including the production of the product under investigation. Such measures impede market forces from operating freely.

• (96) The present investigation has not revealed any evidence that the discriminatory application or inadequate enforcement of bankruptcy and property laws in the chemical sector, according to Article 2(6a)(b), fourth indent of the basic Regulation would not affect the manufacturers of the product under investigation.

• (97) Further, the product under investigation is also affected by the distortions of wage costs in the sense of Article 2(6a)(b), fifth indent of the basic Regulation, as referred to above in recital 65. Those distortions affect the sector both directly (when producing the product under investigation or the main inputs), as well as indirectly (when having access to inputs from companies subject to the same labour system in the PRC) [^ntr69-L_202502314EN.000101-E0069].

• (98) Moreover, no evidence was submitted in the present investigation demonstrating that the phosphorous acid sector 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. The abovementioned Guiding Opinion requiring to ‘improve supporting policies, strengthen the coordination between fiscal, financial, regional, investment, import and export […] policies with the industry policies [to] give full play to the national cooperation platform between industry and finance and [to] foster the connection between enterprises and banks’ [^ntr70-L_202502314EN.000101-E0070] also exemplifies this type of government intervention very well. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

• (99) Finally, the Commission recalls that in order to produce the product under investigation, a number of inputs is needed. When the producers of the product under investigation 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.

• (100) As a consequence, not only the domestic sales prices of the product under investigation 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. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout the PRC. This means, for instance, that an input that in itself was produced in the PRC 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.

• (101) In sum, the evidence available showed that prices or costs of the product under investigation, including the costs of raw materials, land, 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.

3.2.2.   Arguments raised by interested parties

• (102) The GOC did not comment or provide evidence supporting or rebutting the existing evidence on the case file, including the Report and the additional evidence provided by the complainant, on the existence of significant distortions and/or appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

• (103) The Commission did not at this stage receive any comments concerning the significant distortions affecting the phosphorous acid industry from any of the Chinese exporting producers.

3.2.3.   Conclusion

• (104) In view of the above, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case. 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 described in the following section.

3.2.4.   Representative country

3.2.4.1.   General remarks

• (105) The choice of the representative country was based on the following criteria pursuant to Article 2(6a) of the basic Regulation:

• — A level of economic development similar to the PRC. For this purpose, the Commission used countries with a gross national income per capita similar to the PRC on the basis of the database of the World Bank [^ntr71-L_202502314EN.000101-E0071],

• — Production of the product under investigation in that country,

• — Existence of relevant readily available data in the representative country,

• — Where there is more than one possible representative country, preference was given, where appropriate, to the country with an adequate level of social and environmental protection.

• (106) As explained in recitals 59 and 60, the Commission issued a Note on the sources for the determination of the normal value on 2 September 2025. The Note on sources described the facts and evidence underlying the relevant criteria and informed interested parties of its intention to consider name of the country 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.

3.2.4.2.   A level of economic development similar to the PRC

• (107) In the Note on sources, the Commission identified Brazil, Indonesia, Malaysia, and Serbia 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 or product in the same general category was known to take place.

• (108) In the Note on sources, the Commission explained that based on the export statistics, the product under investigation appeared to be produced only in Brazil. Indonesia, Malaysia and Serbia appeared to produce other phosphorus-based acids.

• (109) No comments were received in this respect.

3.2.4.3.   Existence of relevant readily available data in the representative country

• (110) In the Note on sources, the Commission analysed the availability and quality of data that could be used to establish undistorted cost of raw materials, as well as of financial data of producers of the product under investigation or product in the same general category.

• (111) The Commission identified the most important raw materials. Considering the lack of cooperation by genuine producers of phosphorous acid in the PRC, the Commission used the information included in the complaint as facts available.

• (112) According to the complaint, the most important raw material used to produce phosphorous acid was yellow phosphorus contributing, accounting for [55-60] % of the total cost of production. Another important input was chlorine accounting for [8-11] %. The value of hydrochloric acid generated as a by-product represented [17-20] % of the cost of raw materials.

• (113) From the four countries identified as potential representative countries, only Brazil imported yellow phosphorus, chlorine and hydrochloric acid in representative quantities. Negligible quantities of yellow phosphorus (less than 0,5 %) imported to Brazil originated in the PRC.

• (114) On the other hand, and in addition to the limited availability of imports of yellow phosphorus, significant quantities of certain raw materials imported to Indonesia (almost 32 % of yellow phosphorus, 52 % of caustic soda, and more than 30 % of hydrochloric acid) and Serbia (almost 100 % of yellow phosphorus) originated in the PRC.

• (115) The Commission further assessed the existence of market distortions by export and/or import restrictions on the product under investigation, as well as on the main raw materials [^ntr72-L_202502314EN.000101-E0072].

• (116) Neither the main raw materials, nor the product under investigation were subject to any known trade restriction that would render the domestic prices of the main inputs in Brazil, and thus the import prices as a proxy, an unsuitable source of undistorted cost.

• (117) In Indonesia, all main raw materials, as well as the product under investigation, were subject to export and import licensing. The licensing regime was relaxed in 2021 for companies with a good reputation [^ntr73-L_202502314EN.000101-E0073].

• (118) Malaysia had required import licences on certain nicotine-based products, chemicals and smoking replacement aids, including phosphorus, since 2016 [^ntr74-L_202502314EN.000101-E0074].

• (119) Imports and exports of the main raw materials and the product under investigation were not subject to any known trade restrictions in Serbia.

• (120) Imports of the main raw materials and the product under investigation originating in the four potential representative countries were not subject to any anti-dumping, anti-subsidy or safeguard measures introduced by third countries.

• (121) Contrary to the initial indications of phosphorous acid being produced in Brazil, neither the Commission nor the complainant were able to identify producers of the product under investigation with readily available financial information.

• (122) The complainant asserted that companies active in the agrochemical industry where phosphorous acid was used as a precursor in the manufacturing of agrochemicals should be considered producers of a product in the same general category. Both, the product under investigation and agrochemicals, target similar customers.

• (123) On this basis, the Commission identified NACE Rev. 2 [^ntr75-L_202502314EN.000101-E0075] code 20.20 – Manufacture of pesticides and other agrochemical products as relevant code for the industry classification. In addition, considering that phosphorous acid is an inorganic chemical, the Commission considered NACE Rev. 2 code 20.13 – Manufacture of other inorganic basic chemicals also relevant.