HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 128/18
EN
Official Journal of the European Union
14.5.2011
COUNCIL IMPLEMENTING REGULATION (EU) No 452/2011
of 6 May 2011
imposing a definitive anti-subsidy duty on imports of coated fine paper originating in the People's
Republic of China
THE COUNCIL OF THE EUROPEAN UNION,
to the Union industry. The GOC was invited for consul
tations with the aim of clarifying the situation as regards
the contents of the complaint and arriving at a mutually
agreed solution. The GOC accepted the offer of consul
Having regard to the Treaty on the Functioning of the European
tations and consultations were subsequently held. During
Union,
the consultations, no mutually agreed solution could be
arrived at. However, due note was taken of comments
made by the authorities of the GOC as regards the alle
gations contained in the complaint concerning the lack
Having regard to Council Regulation (EC) No 597/2009 of
of countervailability of the schemes. Following the
11 June 2009 on protection against subsidised imports from
consultations, submissions were received from the GOC.
countries not members of the European Community ( 1 ) (‘the
basic Regulation’), and in particular Article 15(1) thereof,
1.2.
Having regard to the proposal submitted by the European
ANTI-DUMPING PROCEEDING
Commission (‘the Commission’) after consulting the Advisory
(4) On
18
February
2010,
the
Commission
published
a
Committee,
notice in the Official Journal of the European Union ( 3 ),
on the initiation of an anti-dumping proceeding
concerning imports into the Union of coated fine
paper originating in the PRC.
Whereas:
1. PROCEDURE
(5) On
17
November
2010,
by
Regulation
(EU)
No
1.1. INITIATION
1042/10 ( 4 ), the Commission imposed a provisional
anti-dumping duty on imports of coated fine paper orig
(1) On
17
April
2010,
the
Commission
published
a
notice
inating in the PRC.
in the Official Journal of the European Union ( 2 ) (‘Notice of
initiation’), on the initiation of anti-subsidy proceedings
with regard to imports into the Union of coated fine
paper originating in the People's Republic of China
(‘PRC’ or the ‘country concerned’).
(6) The
injury
analyses
performed
in
the
present
anti-subsidy
and the parallel anti-dumping investigation are identical,
since the definition of the Union industry, the represen
tative Union producers and the investigation period are
(2) The
anti-subsidy
proceedings
were
initiated
following
a
the same in both investigations. For this reason,
complaint lodged on 4 March 2010 by CEPIFINE, the
comments on injury aspects put forward in both these
European association of fine paper manufacturers, (‘the
proceedings were taken into account in both
complainant’) on behalf of producers representing a
proceedings.
major proportion, in this case more than 25 %, of the
total Union production of coated fine paper. The
complaint contained prima facie evidence of subsidisation
of coated fine paper and of material injury resulting that
subsidisation, which was considered sufficient to justify
1.3. PARTIES CONCERNED BY THE PROCEEDING
the initiation of proceedings.
(7) The
Commission
officially
notified
the
complainant,
other known Union producers, the known exporting
producers in the PRC and an association of producers
(3) Prior
to
the
initiation
of
the
proceedings
and
in
(a paper association), the representatives of the country
accordance with Article 10(7) of the basic Regulation,
concerned, known importers and known users of the
the Commission notified the Government of the PRC
initiation of the proceedings. Interested parties were
(‘the GOC’) that it had received a properly documented
given the opportunity to make their views known in
complaint alleging that subsidised imports of coated fine
writing and to request a hearing within the time limit
paper originating in the PRC were causing material injury
set in the Notice of initiation.
( 1 ) OJ L 188, 18.7.2009, p. 93.
( 3 ) OJ C 41, 18.2.2010, p. 6.
( 2 ) OJ C 99, 17.4.2010, p. 30.
( 4 ) OJ L 299, 17.11.2010, p. 7.

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/19
(8) In view of the apparent high number of exporting
(b) Union producers and association
producers, Union producers and unrelated importers,
sampling was envisaged in the Notice of initiation in
accordance with Article 27 of the basic Regulation. In
— CEPIFINE, Brussels, Belgium
order to enable the Commission to decide whether
sampling would be necessary and if so, to select
samples, all exporting producers and their known paper
— Sappi Fine Paper Europe, Brussels, Belgium
association, all Union producers and unrelated importers
were asked to make themselves known to the
Commission and to provide, as specified in the Notice
— LECTA Group (CARTIERE DEL GARDA SpA,
of initiation, basic information on their activities related
Riva del Garda, Italy CONDAT SAS, Le Plessis
to the product concerned (as defined in section 2.1
Robinson, France and TORRASPAPEL, S.A.,
below) during the period from 1 January 2009 to
Barcelona, Spain), Barcelona, Spain
31 December 2009. The authorities of the PRC were
also consulted.
— Burgo Group spa, Altavilla Vicentina, Italy and its
related companies Burgo Distribuzione srl, Milan,
Italy and Ebix sa, Barcelona, Spain
(9) As
explained
in
recital
(51)
below,
two
Chinese
exporting
producer groups provided the requested information and
agreed to be included in a sample. On the basis of the
— Papierfabriek Scheufelen GmbH, Lenningen,
above it was decided that sampling was not necessary for
Germany
exporting producers in the PRC.
(c) Exporting producers in the PRC
(10) As explained in recital (53) below, it was decided that
sampling was not necessary for Union producers.
(1) Sinar Mas Paper (China) Investment Co Ltd, the
holding company of the Asia Pulp & Paper
Group (‘APP’)
(11) As explained in recital (54) below, it was decided that
sampling was not necessary for unrelated importers.
— Gold East Paper (Jiangsu) Co., Ltd, Zhenjiang
City, Jiangsu Province, PRC
(12) The
Commission
sent
questionnaires
to
all
parties
known
— Gold Huasheng Paper (Suzhou Industrial
to be concerned and to all other parties that so requested
Park) Co., Ltd, Suzhou City, Jiangsu
within the deadlines set out in the Notice of initiation,
Province, PRC
namely the complainant, other known Union producers,
the known exporting producers in the PRC and an
association of producers, the representatives of the
— Ningbo Zhonghua Paper Co., Ltd, Ningbo
country concerned, known importers and known users.
City, Zhejiang Province, PRC
— Ningbo Asia Pulp & Paper Co., Ltd, Ningbo
(13) Replies
to
the
questionnaires
and
other
submissions
were
City, Zhejiang Province PRC
received from two groups of Chinese exporting
producers, CEPIFINE, the four complainant Union
producers and one additional Union producer, 13
(2) Chenming Paper Group (‘Chenming’)
unrelated importers and traders, 5 users and one
association of the printing industry.
— Shangdong Chenming Paper Holdings
Limited, Shouguang City, Shandong
Province, PRC
(14) The
Commission
sought
and
verified
all
information
deemed necessary for the determination of subsidisation,
resulting injury and Union interest. Verification visits
— Shouguang Chenming Art Paper Co., Ltd,
were carried out at the premises of the following State
Shouguang City, Shandong Province, PRC
authority and companies:
(d) Importers in the Union
(a) Government of the People Republic of China
— Cartaria Subalpina, Turin, Italy
— Chinese Ministry of Commerce, Beijing, China
— Paperlinx, Northampton, UK

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L 128/20
EN
Official Journal of the European Union
14.5.2011
1.4. INVESTIGATION PERIOD AND PERIOD CONSIDERED
(20) However, contrary to the above claim, the investigation
confirmed that there are indeed distinct technical and
(15) The
investigation
of
subsidisation
and
injury
covered
the
physical characteristics such as humidity and stiffness
period from 1 January 2009 to 31 December 2009 (the
between paper used in web-fed and the one used in
‘investigation period’ or ‘IP’). The examination of trends
sheet-fed printing. The investigation further confirmed
relevant for the assessment of injury covered the period
that the technical characteristics listed in recital (18)
from 1 January 2006 to the end of the IP (‘the period
above are unique to rolls suitable for use in web-fed
considered’).
presses. Due to these differences paper used in web-fed
or the one used in sheet-fed printing cannot be used in
the same type of printing machine and they are therefore
not interchangeable. It is noted that all parties agreed that
2. PRODUCT CONCERNED AND LIKE PRODUCT
the two types of paper are distinct as regards their
2.1. PRODUCT CONCERNED
surface strength and tensile strength.
(16) The
product
concerned
is
coated
fine
paper
which
is
paper or paperboard coated on one or both sides
(excluding kraft paper or kraft paperboard), in either
(21) Furthermore, the party in question claimed that
sheets or rolls, and with a weight of 70 g/m
customers view CFP in the form of sheets, cutter rolls

2 or more
but not exceeding 400 g/m
and web rolls as a single market and thus distribution

2 and brightness of more than
84 (measured according to ISO 2470-1), originating in
channels are the same. The different technical char
the PRC (‘the product concerned’ or ‘CFP’) currently
acteristics are only reflected in minor price differences
falling within CN codes ex 4810 13 20, ex 4810 13 80,
among these product groups.
ex 4810 14 20,
ex 4810 14 80,
ex 4810 19 10,
ex 4810 19 90,
ex 4810 22 10,
ex 4810 22 90,
ex 4810 29 30,
ex 4810 29 80,
ex 4810 99 10,
(22) However,
the
investigation
revealed
that
the
two
types
of
ex 4810 99 30 and ex 4810 99 90.
rolls are also non-interchangeable from an economic
point of view because rolls for web-fed printing are
used for mass-volume printing jobs and are generally
made to order and require just-in-time delivery,
(17) CFP
is
high
quality
paper
and
paperboard
generally
used
therefore these products are not stocked by inter
for the printing of reading material such as magazines,
mediaries but are shipped directly to the final users, i.e.
catalogues, annual reports, yearbooks. The product
they are also sold through a different distribution channel
concerned includes both sheets and rolls suitable for
than rolls used in sheet-fed printing. The different
use in sheet-fed (‘cut star’) printing machines. Rolls
production process and the different economies of scale
suitable for use in sheet-fed presses (‘cutter rolls’) are
in the printing process are reflected in distinct price
designed to be cut into pieces before printing, and are
differences.
thus considered to be substitutable and directly

competitive with sheets.
(23) Furthermore,
no
rolls
for
use
in
web-fed
presses
were
imported from the PRC during the period considered.
(18) The
product
concerned
does
not
include
rolls
suitable
for
It may also be considered unlikely that these products
use in web-fed presses. Rolls suitable for use in web-fed
would be imported in the future as sourcing these
presses are defined as those rolls which, if tested
products from far away is economically not viable for
according to the ISO test standard ISO 3783:2006
the reasons mentioned in the previous recital.
concerning the determination of resistance to picking –
accelerated speed method using the IGT tester (electric
model), give a result of less than 30 N/m when
measuring in the cross-direction of the paper (CD) and
(24) On
this
basis,
these
claims
were
rejected.
a result of less than 50 N/m when measuring in the
machine direction (MD). Also, in contrast to rolls used
in sheet-fed printing machines, rolls for use in web-fed
presses are normally directly fed into the printing
(25) The
same
party
claimed
that
the
resistance
to
picking
was
machines and are not cut beforehand.
not a suitable technical characteristic for differentiating
between products as this test would be of a general
nature and test results may moreover be affected by
the moisture content of the paper tested. The party
(19) One party claimed that the product scope of the inves
further claimed that on the basis of some other tests
tigation was too narrowly defined and that rolls of CFP
conducted in its own laboratory measuring the resistance
suitable for web-fed printing should have been included.
to picking of web rolls produced by the Union
It was claimed that web-fed rolls and the ones included
producers, it can be seen that these products would
in the scope of the present investigation (cutter rolls and
not fall into the current product definition which
sheets) shared the same basic technical and physical char
would show that the criterion of ‘resistance to picking’
acteristics and were not distinguishable from one
for distinguishing CFP used in web-fed and sheet-fed
another. Furthermore it was claimed that both were
printing is unsuitable. With this evidence the party
used for high quality printing and that they were
alleged that the exclusion of web rolls was made on an
therefore to some extent interchangeable.
arbitrary basis.

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/21
(26) No
evidence
was
submitted
with
regard
to
the
claim
that
different test conditions and thus a potential non-
the moisture content of the paper may render test results
compliance with the ISO 3783:2006 standard, i.e. the
for ISO test standard ISO 3783:2006 unreliable.
standard according to which resistance to picking set in
recital (16) of the provisional Regulation should be
measured.
(27) The
test
results
presented
by
the
exporting
producer
consisted of a summary of the test results performed in
its own laboratory. Crucially, the results were not made
(32) After
disclosing
the
definitive
findings,
the
exporting
available for inspection and comments by other
producer questioned the Commission's objectivity in
interested parties, in particular the Union industry, nor
rejecting the test result of the external laboratory. It
did the exporting producer submit a meaningful non-
claimed that the testing was carried out blindly by the
confidential summary thereof despite repeated reminders.
independent expert and in accordance with the relevant
ISO standard. It provided an affidavit of its manager
explaining the sourcing process of the samples used in
the testing in order to prove the independence,
(28) After
disclosure,
no
further
detailed
information
was
correctness and representativeness of the testing.
provided by the exporting producer which could help
assess the reliability of the test. Since no non-confidential
version of this test was provided, the companies whose
web rolls were allegedly tested could not respond to the
(33) Firstly, the objectivity of the external laboratory test
report was never questioned by the Commission and in
conclusions of the test. The Commission thus could not
this regard it is irrelevant that the testing was carried out
objectively check whether the test results submitted were
blindly. On the other hand, doubts were raised as to the
reliable and correct and could be relied upon for the
assurances on the selection and origin of the samples
purposes of the investigation. On the basis of the facts
tested and not on the test itself. The arguments of the
available to the Commission, the objectivity and relia
exporting producer did not remove these doubts as these
bility of the test was found to be insufficient since the
were not comprehensive and were unclear in several
information submitted under confidentiality could not be
aspects, for example the inclusion of products other
counterchecked by any reliable sources.
than web rolls were claimed to have been caused by
administrative errors or were blamed on mistakes by
the suppliers in providing possibly wrong samples.
(29) After the disclosure of the findings, the same exporting
producer presented the results of a further test conducted
on its behalf by an external test laboratory and reiterated
(34) Since both the source as well as the samples of the
that CFP used in web-fed printing has been arbitrarily
allegedly tested products were not clear and the results
excluded from the scope of the investigation. The test
of the testing by the different parties were contradictory,
reports stated that the resistance to picking has been
it was considered that the submitted test report of the
measured on 25 samples of web-fed rolls provided and
external laboratory acting on behalf of the Chinese
identified by the exporting producer to the laboratory as
exporting producer did not demonstrate conclusively
paper samples produced by Union producers. According
that the resistance to picking test was not appropriate
to this report, none of the paper met both the criteria
to distinguish between CFP suitable for use in web-fed
referred to in recital (18) above.
printing on the one hand and CFP used in sheet-fed
printing on the other hand. Consequently, the test
report did not demonstrate that CFP used in web-fed
printing had been arbitrarily excluded from the scope
(30) The
assessment
of
the
test
report
brought
to
light
that,
of the investigation.
first of all, the test report by the external laboratory
related mostly to products for which these results were
irrelevant as the vast majority of the samples tested were
not in fact web rolls; secondly, the test report related to
(35) As
regards
the
relevance
of
the
resistance
to
picking
as
a
products which were not sufficiently identified, as it
distinguishing criterion for rolls suitable for web-fed
could not be ascertained from the test report whether
printing, it is recalled that in the product definition the
the paper tested was for sheet-fed printing or web-fed
two product groups are distinguished from each other
printing as the paper brand described in the report
based on, among other things, the use of the products,
existed in both formats. Furthermore the test report
i.e. whether the product is suitable for use in web-fed or
provided no assurance that the sample rolls indicated
sheet-fed printing as determined by the requirements of
were indeed the ones that were tested.
the presses on which they are used which is reflected in,
inter alia, the characteristic of resistance to picking.
Furthermore it is noted that resistance to picking is
only one of the characteristics that distinguish CFP
(31) In
response
to
the
external
laboratory's
test
report,
the
suitable for use in web-fed printing from CFP used in
complainant provided the results of the testing
sheet fed printing; recitals (18) and (20) above set out
performed by one of the Union producers on the same
additional criteria which have not been contested by the
samples of web rolls that were allegedly tested by the
exporting producer concerned. One party claimed that
external laboratory. This test showed different results.
humidity as defined in recital (20) was not a distinct
The complainant attributed the differences to possibly
basic characteristic to distinguish products. During the

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L 128/22
EN
Official Journal of the European Union
14.5.2011
investigation however differing claims in this regard were
(42) In order to provide a further criterion to distinguish web
made by other parties. In any event, it was found that
rolls which do not fully meet all the criteria for resistance
stiffness and resistance to picking are the most relevant
to picking, the complainant suggested that a roll which
factors.
does not fully sat the picking resistance test but has an
internal core size of less than 80 mm, should be
considered as a web roll.
(36) In its responding submission, the complainant
acknowledged that there might be rolls that do not
fully meet all the criteria for resistance to picking
(43) The
GOC
and
the
exporting
producer
claimed
that
the
referred to in recital (18) above, but which could still
addition of core size as a new element into the product
be used in web-fed printing. However, it maintained its
definition constituted a revision of the definition of web
view that resistance to picking is the only test that is able
rolls and thus the product concerned. It also claimed that
to identify with certainty that a roll is indeed suitable for
the internal core size is not a suitable criterion as there
web-fed printing, i.e. if a roll meets the criteria for
exist web rolls with higher than 80 mm core size and
resistance to picking referred to in recital (18) above, it
cutter rolls with lower than 80 mm core size.
is certainly a web roll.
(37) In support of the above claims concerning resistance to
(44) The
Commission
endeavoured
to
further
refine
the
defi
picking the exporting producer referred to arguments put
nition of rolls suitable for use in web-fed printing and to
forward by one of the complainant Union producers in
give further clarification in order to distinguish even
anti-dumping and anti-subsidy investigations in the USA
more clearly between the product concerned and other
in which the Union producer allegedly acknowledged
products, also with a view to minimize the possibility of
that web rolls cannot be differentiated based on
circumvention of the measures. The evidence submitted
resistance to picking test or by any other measurement.
on the suitability of the core size as an alternative
criterion in the definition however proved that this
criterion would lead to the possible exclusion of
product concerned, i.e. cutter rolls with a core size of
(38) The complainant contested these statements of the
less than 80 mm from the measures. Therefore this
exporting producer and claimed that contrary to what
criterion to define rolls suitable for use in web-fed
has been claimed, it follows from the proceedings in
printing was abandoned.
the USA that there is a clear dividing line distinguishing
web rolls from CFP.
(45) The above is without prejudice to the reliability of the
method according to which rolls suitable for use in web-
(39) Firstly,
it
should
be
noted
that
the
statements
referred
to
fed printing have been excluded from the scope of the
by the exporting producer were presented in investi
investigation as it was claimed by the Chinese group of
gations under other jurisdictions and by different
exporting producers.
parties than the ones in the current proceedings and

thus are not relevant. Secondly, the US authorities in
the mentioned investigations concluded that there was
a clear distinction between on one hand CFP used in
(46) During the course of the investigation, certain parties
sheet-fed printing and on the other hand rolls suitable
also claimed that multi-ply paper and multi-ply
for use in web-fed printing. Cutter rolls were regarded as
paperboard,as defined in the recital (47),should be
semi-finished products while rolls suitable for web fed
excluded from the scope of the investigation. They
printing were not considered as product concerned.
claimed that multi-ply paper and multi-ply paperboard
The US authorities did not explicitly define web rolls in
had different physical characteristics such as multiple
their definition of the product scope. For this reason, the
plies, higher stiffness and lower density and that the
criterion of resistance to picking was not relevant in the
final use of these products was different as these are
definition of the product scope in the mentioned inves
usually used for folding carton and packaging appli
tigations.
cations. These parties finally claimed that single-ply and
multi-ply paper and paperboard would be easily distin
guished by their physical appearance.
(40) Based on the above comments, the technical char
acteristic ‘resistance to picking’ was confirmed as being
a reliable characteristic to describe CFP suitable for use in
(47) Multi-ply
paper
and
multi-ply
paperboard,
as
defined
in
web-fed printing.
the Harmonised System Explanatory Notes to subheading
4805, are products obtained by pressing together two or
more layers of moist pulps of which at least one char
(41) The
comments
put
forward
have
however
also
revealed
acteristics different from the others. These differences
that there exist web rolls that can be used in web-fed
may arise from the nature of pulps used (e.g. recycled
printing even if they do not fully meet all the criteria for
waste), the method of production (e.g. mechanical or
resistance to picking. For this reason it was considered
chemical) or, if the pulps are of the same nature and
necessary to further refine the definition of rolls suitable
have been produced by the same method, the degree
for web-fed printing.
of processing (e.g. unbleached, bleached or coloured).

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/23
(48) The investigation showed that multi-ply paper and
from the PRC to the Union. In these circumstances, the
paperboard have indeed some different physical and
Commission decided that sampling was not necessary for
technical characteristics; more specifically they are
exporting producers in the PRC.
composed of several layers of pulp, which increases
rigidity. Multi-ply paper and paperboard are produced
by a different production method requiring a different
(52) Two out of four related exporting producers of the APP
paper machine than the one used for the production of
group were found to produce only multi-ply paperboard
CFP, as in the production process several layers of pulp
referred to in recital (47) above. In this respect it is
are layered into a single product. Finally, multi-ply paper
recalled that it was concluded that multi-ply paperboard
and paperboard serve different purposes (mainly
should be excluded from the product scope of the
packaging) compared to CFP, which is used for high
current investigation. It is also recalled that the multi-
quality printing of promotional material, magazines,
ply paperboard was excluded from the product scope
etc. Multi-ply paper and paperboard as defined in
of the parallel anti-dumping proceedings. It is therefore
recital (47) is therefore considered as not being the
concluded that the two related exporting producers
product concerned. Consequently, the CN codes
found to produce only multi-ply paperboard are not
mentioned covering imports of multi-ply paper and
concerned by the current proceedings. Thus the
multi-ply paperboard are excluded from the scope of
findings presented in this Regulation are not based on
the investigation.
their information and data.
3.2. SAMPLING OF UNION PRODUCERS
(49) Finally,
one
Chinese
producer
claimed
that
so
called
‘paperboard’ should be excluded from the scope of the
(53) In view of the potentially large number of Union
investigation as it does not fall under the definition of
producers, sampling was envisaged in the Notice of
fine paper (whether coated or not) because of alleged
initiation in accordance with Article 27 of the basic
differences in its weight, thickness and rigidity. It was
Regulation. However, after examination of the
found that the term ‘paperboard’ is generally used for
information submitted and given that only four Union
paper with high substances making the paper in
producers came forward within the deadlines set in the
general heavier, i.e. ‘paperboard’ is commonly defined
Notice of initiation, it was decided that sampling was not
as paper with a basis weight of above 224 g/m 2 .
necessary. Those four producers were considered to be
However, the investigation revealed that the difference
representative (covering 61 % of total production) of the
in weight does not have a significant impact on the
Union industry as defined in recital (372). The
remaining physical and technical characteristic and end
information provided by the four companies was
uses which would it make distinguishable from the
verified on-the-spot and was used for the micro
product concerned. It is also noted that, as outlined in
indicators as explained in recital (386).
recital (16), all CFP with a weight of 70 g/m 2 or more
but not exceeding 400 g/m 2 were explicitly included in
the definition of the product concerned. Therefore
paperboard is considered as being ‘the product
3.3. SAMPLING OF UNRELATED IMPORTERS
concerned’.
(54) In view of the potentially large number of importers,
sampling was envisaged for importers in the Notice of
initiation in accordance with Article 27 of the basic
Regulation. However, after examination of the
2.1.1. LIKE PRODUCT
information submitted and given by the small number
of importers which indicated their willingness to co-
(50) The
product
concerned,
the
product
produced
and
sold
on the domestic market of the PRC as well as the
operate, it was decided that sampling was not necessary.
product manufactured and sold in the Union by the
Union producers were found to have the same basic
physical and technical characteristics as well as the
4. SUBSIDISATION
same basic uses. They are therefore considered as ‘alike’
within the meaning of Article 2(c) of the basic Regu
4.1. PRELIMINARY REMARKS
lation.
(55) It is recalled that both the GOC and the four Chinese
exporting producers submitted replies to the ques
tionnaire and accepted on-the-spot visits in order to
verify the replies.
3. SAMPLING
3.1. SAMPLING FOR EXPORTING PRODUCERS IN THE PRC
(56) With respect to the GOC, following the submission of
(51) Only
two
exporting
producers
groups
in
the
PRC
came
the reply to the questionnaire, the Commission sent to
forward and replied to the request for sampling data in
the Chinese side three deficiency letters and a pre-verifi
the Notice of initiation. One group (Chenming)
cation letter. The Commission provided to the GOC
represents 2 related exporting producers while the
ample time for the preparation and submission of its
other group (APP) represents 4 related exporting
representations whenever this was requested and justified.
producers. The cooperating exporting producers
Indeed substantial deadline extensions were granted to
represent the total exports of the product concerned
the GOC, i.e. two weeks extension for the reply to the

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L 128/24
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Official Journal of the European Union
14.5.2011
questionnaire which led to a total deadline of 49 days for
basis of the supporting documents that were used to
the submission of the reply to the questionnaire and
prepare the GOC's response, in line with the provisions
three weeks for the reply to the first deficiency letter
of Articles 11 and 26 of the basic Regulation. In doing
which led to a total deadline of 40 days.
so, the Commission came to the preliminary conclusion
that the lack of information and supporting documents
available did not allow a proper verification of the reply
to the questionnaire. Moreover, certain information was
not submitted at all although it was specifically
(57) Prior to the on-the-spot verification visit, the GOC
requested, and certain questions had not been
requested the Commission to provide further information
answered. The GOC has been made aware of the conse
in writing, in particular a list of all the questions that it
quences of non-cooperation in accordance with
intended to ask during the verification plus a list of the
Article 28(1) and (6) of the basic Regulation.
Government departments which were expected to
participate in the on-the-spot verification visit. In the
absence of these, it was argued that the Commission
would not fulfil its obligations as an investigating
authority set out in the Agreement on Subsidies and
Countervailing Measures (‘SCM Agreement’) and in
particular those contained in paragraph 8 of Annex VI.
(60) The
GOC
argued
that
the
investigating
authority
should
The GOC also submitted that due to lack of such
determine the necessity of information in a reasonable
information it would not be in a position to guarantee
manner that would not amount to abuse of rights. It was
the outcome of the verification.
also argued that even if information is considered not
ideal in all aspects it should not be disregarded. On the
basis of the above arguments the GOC submitted that it
cooperated to the best of its ability and that its reply to
(58) The Commission respectfully disagreed with GOC's
the questionnaire was complete. It was also argued that
request. In this respect it is noted that the Commission
the on-the-spot verification was poorly scheduled as the
has fulfilled all the relevant conditions of paragraph 8 of
pre-verification letter failed to provide a reasonable
Annex VI of the SCM Agreement as well as of Article 26
understanding of what was to be verified and the
of the basic Regulation. A detailed pre-verification letter
Commission did not conduct specific on-the-spot visits
was sent to the GOC confirming the agenda (days and
at each government entity. It was also submitted that the
group of schemes to be discussed per verification day)
Commission imposed an unreasonable burden on the
and requesting the presence of the authorities responsible
GOC and requested irrelevant and unnecessary
for the relevant schemes and of the officials involved in
information.
the preparation of the GOC submissions. The
Commission also explained before the on-the-spot verifi
cation visits that only the GOC knows the authorities
responsible for the schemes under investigation as well
as those officials whose are best placed to take part in
the verification and answer questions. As regards the list
of specific questions, the Commission explained before
(61) With respect to the scheduling of the on-the-spot verifi
and during the on-the-spot verification visit that such a
cation, it is recalled that the GOC agreed to the timing,
list is not required by WTO or EU legislation and that
the schedule of visit and the venue. Indeed, discussions
the purpose of the investigation is to verify the GOC
on the timing of the on-the-spot visit took place in
reply to the questionnaire and the relevant supple
August 2010. The Commission initially proposed the
mentary submissions; therefore the verification would
on-the-spot verification visit to take place on the first
follow the structure of those documents. The
week of October 2010 and subsequently amended its
Commission would also seek to obtain and clarify
proposal twice, on the basis of Chinese requests, first
further information necessary for the ongoing
for the second week of October 2010 and finally for
proceedings, but precise questions in this context
the third week of October 2010. Thus there is no
would depend on the GOC's replies to the initial verifi
basis to any complaints concerning scheduling of on-
cation of its replies. It was also made clear to the GOC
the-spot visits as the Commission did its utmost to
before the on-the-spot verification visit that refusals to
accommodate any duly justified request from the GOC.
provide necessary information or to assist the investi
With respect to the information requested, it is noted
gating authority in verifying information and data
that the GOC has never disputed the format of the ques
deemed necessary for the purposes of the proceedings
tionnaire or the way information was requested. The
may seriously undermine the investigation process. The
Chinese Ministry of Commerce submitted the reply to
GOC was also reminded of the consequences of the
the questionnaire and subsequent representations on
provisions of Article 28 of the basic Regulation.
behalf of the GOC. The Commission requested
information that was deemed necessary for the
purposes of arriving at a representative finding and
remained consistent in its requests by asking for the
same data and information during the investigating
(59) During the on-the-spot verification visit to the Chinese
process and requesting the GOC to explain the
Ministry of Commerce in Beijing, the Commission
information submitted and the implications of that
endeavoured to verify information provided on the
information for the schemes under investigation.

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/25
4.2. SPECIFIC SCHEMES
— Special fund for reduction of total emissions of
major pollutants at municipal level of Suzhou
(62) On the basis of the information contained in the
municipality
complaint and the replies to the Commission's ques
tionnaire, the following schemes, which allegedly
involved the granting of subsidies by the Governmental
— Subsidy for water-saving and emission reduction
authority, were investigated:
(I) Preferential lending to the coated paper industry
— Environmental Protection award received from
Suzhou Environmental Protection Bureau
(II) Income tax Programmes
— Energy saving award in Shouguang
— Preferential tax policies for companies that are
recognised as high or new technology enter
(V) Government Provision of Goods and Services for
prises
Less than Adequate Remuneration (‘LTAR’)
— Preferential tax policies for Research & Devel
opment
— Provision of land-use rights
— Dividend exemption between qualified resident
— Provision of paper-making chemicals
enterprises
(III) Indirect Tax and Import Tariff Programmes
— Provision of electricity
— VAT and Tariff exemption on imported
4.2.1. PREFERENTIAL LENDING TO THE COATED PAPER
equipment
INDUSTRY
(a) Introduction
— VAT rebates on domestically produced

equipment
(63) It
is alleged that Chinese producers of the product
concerned benefit from low-interest rate loans from
— City maintenance and Construction Taxes and
government policy banks and state-owned commercial
education surcharges for Foreign Invested Enter
banks (‘SOCBs’) pursuant to the GOC's policy to
prises
provide financial assistance in order to encourage and
support the growth and development of the paper
industry in China. As illustrated in the five-year plans
(IV) Grant Programmes
and industrial policy, preferential financing initiatives
were granted by the banking system to the papermaking
— Famous Brands
industry.
— Special Funds for Encouraging Foreign
Investment Projects
(b) Use of facts available
(64) On the basis of the information contained in the
— Anti-dumping Respondent Assistance
complaint, the Commission sought to investigate the
bank which was lending to the coated paper industry.
— Shouguang Technology Renovation Grant
For these purposes it was considered necessary to ask the
GOC to provide in its reply to the questionnaire and
subsequent submissions specific information and data
— Suzhou Industrial park Intellectual Property
on a series of government plans and projects to
Right Fund
encourage and support the development of China's
paper sector. These plans and projects were:
— Subsidy of High-Tech Industrial Development
Fund
— China Civilian Economy and Social Development
10th Five-Year Plan (‘The 10th Five Year Plan’)
— Award received from Suzhou Industrial Park for
maintaining growth
— The ‘10th Five year Plan’ in the Papermaking Industry
— Special fund for water pollution treatment of
(‘Papermaking Plan’)
Taihu lake of Jiangsu province
— The 10th Five year and 2010 Special Plan for the
— Special funds for energy-saving of Suzhou
Construction of a National Forestry and Papermaking
Industrial Park
Integration Project (‘Integration Project’)

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L 128/26
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Official Journal of the European Union
14.5.2011
— Decision No. 40 of the State Council on Promul
(66) With respect to the above it is noted that the
gating and Implementing the ‘Temporary Provisions
Commission requested information that was deemed
on Promoting Industrial Structure Adjustment’
necessary for the investigation as the abovementioned
(‘Decision No. 40’)
documents had been identified in the complaint.
Moreover the Commission had repeatedly emphasized
the need to provide the requested documents in
English. This is necessary for this type of significant
— Directory Catalogue on Readjustment of Industrial
document given that, on the basis of the index only, it
Structure (‘Directory Catalogue’)
was not possible to determine which part of the
document is relevant for the investigation. Moreover,
the plans provided in Chinese were not voluminous
— Guidelines for the Eleventh Five-Year Plan for
and it appears that copies in English of the relevant
National Economic and Social Development (2006-
documentation exist either from independent sources
2010) (‘11th Five-year Plan’)
(legal firms that specialize in Chinese law) or from
anti-subsidy investigations conducted in China by the
United States of America (‘USA’).
— State Council Circular on Realizing the Major Targets
in (The 11th Five Year-Year Plan) and the Division of
Tasks (‘11th five-year plan implementing circular’)
(67) Consequently, the Commission had the possibility to
verify only the following documents: the Decision
No. 40, the Directory Catalogue and the 2007 Paper
— 2007 Development Policy for the Papermaking
making Plan, an English version of which was in the
Industry (‘2007 Papermaking Plan’)
complaint and it was also made available from an
exporting producer.
— The Guandong Development Plan
(68) In order to investigate the level of government inter
vention in the Chinese financial market and obtain the
— The Zhanjiang City 11th Five-Year plan
necessary overview of the financial sector in the PRC, the
Commission requested information on the percentage of
government ownership of financial institutions and on
the records of amounts/percentages of loans given by
— The 11th Five Year Plan of Jining Municipality
State owned banks. The GOC claimed that they did
not have any records on the bank shareholding
although Article 61 of the Law on Commercial Banks
[2003] No. 13 provides that banks report these data ‘to
(65) The GOC only partially provided the information
requested in relation to the plans. Only two of the
the banking regulatory organ of the State Council and People's
plans requested were provided in full, i.e. in the
Bank of China’. As regards the amounts/percentages of
Chinese version together with an English translation
loans given by State owned banks, the GOC confirmed
(Decision No. 40 and Directory Catalogue on Read
that although relevant data was kept, it could not provide
justment of Industrial Structure). For the three regional
it. The Commission further facilitated the work of GOC
plans originally requested by the Commission, the
by limiting the requested information on the percentage
Chinese authorities submitted that they were not
of government ownership only to such financial insti
relevant since the co-operating exporting producers are
tutions that were found to provide loans to the co-
not located in these regions. They were thus not
operating exporting producers. Nevertheless, the GOC
provided. The Commission accepted this but requested
did not provide relevant data even for this restricted
the development plans related to the areas (regions,
segment of financial institutions operating in China.
provinces, municipalities) where the cooperating
exporting producers are established. The GOC provided
Chinese copies of the 11th Five year plan for Jiangsu
Province and 11th Five year plan for Shandong
(69) In order to investigate the lending policies of the Chinese
Province, but no translation whatsoever, not even a
banks (e.g. methods used as regards the setting of the
translation of the table of contents. In relation to two
interest loan rates, assessment of loans etc), the GOC was
plans that were not provided, the GOC submitted that
asked to provide information with respect to the policies
they covered the period between 2000 and 2005 and
followed by the relevant state authorities namely the
were thus irrelevant. The Commission accepted this. The
People's Bank of China (‘PBOC’) and the Bank Regulatory
remaining plans were provided only in Chinese (Inte
Commission. The GOC did not provide any relevant
gration Project, 11th Five-year Plan, 11th five-year plan
information on the loan policies. No document, regu
implementing circular, 2007 Papermaking Plan) together
lation or guidelines addressed to the banking system
with English tables of the contents. The GOC claimed
from the PBOC was provided in order to substantiate
that the Commission's requests were too burdensome,
the role of the PBOC in setting interest rates and its
that they only had limited resources and therefore
relation with the banking system. Furthermore no expla
could not translate the texts.
nation was given, although specifically requested, with

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/27
respect to the application of the Law on Commercial
accordance with Article 28(1) and (6) of the basic Regu
Banks [2003] No. 13 and particularly Articles 34, 38
lation. In view of this lack of cooperation, it was
and 39 that set out the basic rules governing loans
considered necessary to base any findings with respect
and other businesses of commercial banks.
to the relevant loans provided by banks to that producer
on facts available. The co-operating exporting producer
disputed the use of facts available but did not provide
any further evidence.
(70) In order to investigate the lending policies of the Chinese
banks that provided loans during the IP to the coop
erating exporting producers, the Commission requested
the GOC to arrange meetings with specific banks that
(c) Findings of the investigation
have provided loans to the cooperating exporting
producers in order to verify information concerning pref
(i) Government intervention in the financial banking
erential lending to the CFP industry in China. The GOC
system for a preferential lending to paper making
claimed that it was unable to intervene with State-owned
industry
banks to arrange such meetings. Therefore, no evidence
was collected from Chinese banks as to whether and, if
— Role of government plans
so, how those banks evaluate credit risk when providing
(74) The
investigation
established
the
existence
of
specific
loans.
policy plans with respect to the papermaking industry.
These plans stipulate that the state authorities monitor
closely the performance of the papermaking industry and
implement special policies (e.g. implementing decrees) for
(71) The GOC was made aware of the consequences of non-
the fulfilment of the goals of the policy plans.
cooperation in accordance with Article 28(1) and (6) of
Furthermore, the investigation also established that the
the basic Regulation. In view of this lack of cooperation,
specific policy plans provide for preferential lending to
it has been necessary, in addition to taking account of
the paper making industry.
relevant GOC documents submitted by other parties, to
use information from secondary sources, including the
complaint and publicly available information retrieved
from internet. The GOC disputed the use of facts
(75) Indeed,
by
examining
Decision
No
40
and
the
specific
available but did not provide any further new evidence.
financing section of the 2007 Papermaking Plan, it is
obvious that the Chinese state planning system directs
banks to provide loans to the paper making industry.
(72) The
cooperating
exporting
producers
were
also
asked
to
arrange meetings with specific banks that have provided
loans to them during the IP in order to verify
(76) With
reference
to
Decision
No
40,
it
is
noted
that
that
information concerning preferential lending to the CFP
act is an order from the State Council i.e. the highest
industry in China. However, no such meetings took
administrative body in the PRC and so legally binding for
place. The cooperating exporting producers
other public bodies and the economic operators. It
communicated the repeated requests of the Commission
classifies the industrial sectors into ‘Encouraged,
for such meetings but the relevant banks refused to
Restrictive and Eliminated Projects’. This Act represents
cooperate with the investigation. The co-operating
an industrial policy guideline that along with the
exporting producers were made aware of the conse
Directory Catalogue shows how the GOC maintains a
quences of non-cooperation in accordance with
policy of encouraging and supporting groups of enter
Article 28(1) and (6) of the basic Regulation. In view
prises or industries, such as the paper industry, classified
of this lack of cooperation, it was considered necessary
by the Directory Catalogue as an ‘Encouraged industry’.
to base any findings with respect to the loans provided
With respect to the number of industries listed as
by banks to the co-operating exporting producers on
‘Encouraged’ it is noted that there are in total 26, repre
facts available. The co-operating exporting producers
senting only a portion of the Chinese economy.
disputed the use of facts available but did not provide
Furthermore, only certain activities within these 26
any further evidence.
sectors are given ‘encouraged’ status. Decision No 40
also stipulates under Article 17 that the ‘Encouraged
investment projects’ shall benefit from specific privileges
and incentives (financial support, import duty exemption,
(73) One Chinese exporting producer was requested to
VAT exemption, tax exemption). On the other hand, with
provide specific information concerning a specific debt
reference to the ‘Restrictive and Eliminated Projects’,
restructuring agreement with three Chinese banks. The
Decision No 40 empowers the state authorities to
aforesaid exporting producer refused to provide the
intervene directly to regulate the market. In fact,
necessary information. Consequently, it was not
Articles 18 and 19 ask the relevant authority to stop
possible to verify the relevant overall agreement and
financial institutions from supplying loans; they also
corresponding contract loans as well as all specific
order the State price administrative department to raise
points like duration of loans, repayment schedules and
the electricity price and instruct the electricity supply
interest rates. The co-operating exporting producer was
companies to stop supplying electricity to such
made aware of the consequences of non-cooperation in
‘Restrictive and Eliminated Projects’. It is obvious from

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L 128/28
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Official Journal of the European Union
14.5.2011
the above that Decision No 40 provides binding rules to
(79) In
addition,
Article
34
of
the
Law
on
Commercial
Banks
all the economic institutions in the form of directives on
[2003] No. 13 states that banks ‘carry out their loan
the promotion and support of encouraged industries, one
business upon the needs of the national economy and
of which is the paper making industry.
the social development and under the guidance of the
state industrial policy’. In this particular case the relevant
state industrial policy is the 2007 Papermaking Plan.
Thus, it only logical to conclude that loans received by
(77) The
2007
Papermaking
Plan
provides
specific
conditions,
the CFP producers from SOCBs are made pursuant to
orientations and targets for the papermaking industry. It
government directives.
describes the state of the papermaking industry in China
(e.g. number of enterprises, production, consumption and
exports, statistics on the type of raw materials used). It
sets out the policies and goals for the papermaking
industry with respect to the industrial layout, the use
of raw materials, the use of technology and equipment,
(80) The
role of the National Development and Reform
the product structure and the organizational structure of
Commission (‘NDRC’) was also investigated. It was
the papermaking producers. The text also sets industry
submitted by the GOC that the NDRC is an agency of
‘admission criteria’, as it lays down specific assets/liability
the State Council coordinating macro-economic policy
ratio requirements for the papermaking industry, sets
and managing the Government investments. That state
specific credit ratings for the papermaking industry and
authority issued, inter alia, the 2007 Papermaking Plan.
specific targets for economies of scale, market share
No available information was submitted, although
ratios, energy and water consumption to be achieved
explicitly requested, on the legal framework under
or attained by companies. It requests enterprises to
which the NDRC was established and operates, e.g. its
formulate development plans based on the 2007 Paper
statute. The only explanation provided by the GOC was
making Plan. It also instructs the local provinces and
that the State Council, the highest governmental adminis
regions to participate in the implementation of the
trative body, gives the instructions which the NDRC has
plan, while an entire chapter is devoted to ‘Investment
to follow and that in any event this information is
and Financing’ of the papermaking industry. In this
irrelevant to the investigation. This argument cannot be
respect it is pertinent to note that the Plan clearly
accepted. The statutes of the authority that issues
states that financial institutions shall not provide loans
government plans are considered relevant to the investi
for any project which does not comply with its regu
gation, in view of the fact that government plans and
lations. In sum it is clear from the reading of the text
projects are under investigation in these proceedings. The
and the wording used that the 2007 Papermaking Plan is
Commission also enquired about the reasons why the
a specific state instrument aimed at regulating the paper
NDRC collects, on a permanent basis, detailed
making industry in China and can only be considered as
information from companies. The GOC clarified that
a compulsory industrial policy tool that has to be
the information could be collected through industrial
concretely implemented by relevant interested parties in
associations and other public sources. Nevertheless, the
China (state authorities, financial institutions and
existence of a systematic mechanism to collect company
producers).
related data to be used in government plans and projects

reveals that these plans and project are considered as an
important element of state industrial policy.
(78) The GOC argued that the 2007 Papermaking Plan is to
be considered a guideline plan without binding force. It
was also submitted that in the same context none of the
government plans and projects are legally binding and as
(81) It
follows
from
the
above
that
any
decision
taken
by
a result no financial contribution or benefit can be
financial institutions with respect to the papermaking
granted in the framework of such plans and projects.
industry would have to take into consideration the
However, a simple reading of the text on the 2007
need to fulfil the goals of the relevant policy plans.
Papermaking Plan and its above-stated specific provisions
Indeed, companies qualified by these specific policy
reveals that the text cannot be considered as a non-
plans as ‘Encouraged industries’ are considered of high
binding guideline. In this respect it is noted that the
credit rating, something that has direct consequences on
2007 Papermaking Plan text inter alia reads ‘The industrial
the assessment of the creditworthiness by the Chinese
development policy is formulated based on the requirements of
financial system. Furthermore, from examining the
perfecting the reform of the socialist market economy and the
specific financing section of the 2007 Papermaking
related laws and regulations, so as to establish a fair market
Plan and a credit rating note that was made available
order and good development environment, solve the issues
from one co-operating exporting producer it is obvious
existing in the development of papermaking industry and
that the Chinese state planning system directs banks to
direct the healthy development of the industry’. With respect
provide loans to the papermaking industry and
to the remaining plans and projects as listed under recital
companies are considered of high credit rating because
(64) above it is noted that at least one refers to an
they qualify for specific policy plans. It is pertinent to
implementing circular of the 11th Five Year Plan. It is
note that the particular credit rating note obtained during
difficult to understand how an allegedly non-legally
the investigation directly links the positive future
binding document (a government plan) can have a
prospects of the company with the existence of the
legally binding implementing act (in this case a circular
papermaking policy plans and the fulfilment of their
of the State Council).
objectives. There is also evidence that the State

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EN
14.5.2011 Official
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European
Union L
128/29
authorities monitor the performance of companies as
Trade Policy Review of China noted that ‘The high degree
they examine annually their business licenses and retain
of state ownership is another notable feature of the financial
in this way financial and performance statistics.
sector in China’ ( 1 ). It is pertinent to note that the four big
Furthermore, there is also evidence, derived from
state-owned banks (Agricultural Bank, Bank of China,
information submitted from co-operating exporting
Construction Bank and Industrial and Commercial
producers, that the PBOC monitors, in line with the
Bank) appear to represent more than half of the
provisions of Article 9 of the Regulation on Registration
Chinese banking sector. Policy banks and other state-
and Consultation of Banks, the loan situation of
owned banks are more than 50 % state-owned. The
companies through the annual examination of the
Commission also requested information concerning the
loans companies avail themselves of each year.
structure of government control in those Chinese banks
and the pursuit of government policies or interests with
respect to the Papermaking industry (i.e. board of
directors and board of shareholders, minutes of share
holders/directors meetings, nationality of shareholders/
(82) All the above facts demonstrate the link between the
directors, lending policies and assessment of risk with
specific policy plans and the financing of the paper
respect to loans provided to the cooperating exporting
making industry.
producers). Nevertheless, neither the GOC nor the banks
provided such information. They only repeatedly referred
to information in the Annual reports of the banks they
had submitted. However, the information in the Annual
reports of banks did not (and cannot) contain the
required level of detailed information.
— Government intervention in the banking sector
(83) With
respect
to
the
co-operating
exporting
producers
the
investigation established that two of them were, in the
majority of cases, automatically granted the lowest
possible interest rate within the limits set out by the
Consequently, the Commission had to use the
PBOC while other two co-operating exporting
information available. It concluded on the basis of the
producers benefited from a substantial rescheduling of
available data that those banks are controlled by the
their loans that took place in 2008. Indeed, Chinese
government and exercise government authority in a
state-owned banks purchased all loans due to foreign
manner that their actions can be attributed to the
banks and the rescheduled loans did not provide for a
State. The relevant data used in order to arrive at the
significant risk premium over the PBOC interest rate
aforesaid findings is derived from information submitted
benchmark.
by the GOC, the annual reports of Chinese banks that
were either submitted from GOC or publicly available,
information retrieved from the 2006 Deutsche Bank
Research on China's banking sector, information
submitted from the co-operating exporting producers
(84) In
addition,
the
investigation
has
established
that
the
and information existing in the complaint. As for
Chinese financial market is characterised by government
foreign banks, independent sources estimate that they
intervention because most of the major banks are state-
represent a minor part of the Chinese banking sector
owned. The Chinese authorities have provided only very
and consequently play an insignificant role in policy
limited information concerning shareholding/ownership
lending; with relevant information suggesting that this
of banks in China. However, as further outlined below,
may represent as little as 1 % of the Chinese market ( 2 ).
the Commission compiled available information in order
Relevant public available information also confirms that
to arrive at a representative finding. In performing its
Chinese banks, particularly the large commercial banks,
analysis whether banks are entities vested with or exer
still rely on state-owned shareholders and the
cising government authority the Commission also sought
government for replenishment of capital when there is
information concerning not only the government
a lack of capital adequacy as result of credit expansion ( 3 ).
ownership of the banks but also other characteristics
With respect to the banks that provided loans to the co-
such as the government presence on the board of
operating exporting producers, the great majority are
directors, the government control over activities, the
state-owned banks. Indeed on the basis of the available
pursuit of government policies or interests and whether
information it was found that at least 13 out of the 19
entities were created by statute.
reported banks are state-owned banks, including two
Policy banks (Export-Import Bank of China, the China
Development Bank) and the major Commercial banks
in China like Agricultural Bank of China, Bank of
China, China Construction Bank and Industrial and
(85) From
the
available
information
it
is
concluded
that
the
Commercial Bank of China.
state-owned banks in China command the highest
market share and are the predominant players in the
( 1 ) Document WT/TPR/S/230 p. 79.
Chinese financial market; according to the 2006
( 2 ) Information retrieved from the 2006 Deutsch Bank Research on
Deutsche Bank Research on China's banking sector, the
China's banking sector, pages 3-4.
( 3 ) Information retrieved from the China Monetary Report Quarter Two,
state-owned banks’ share may amount to more than 2/3
2010 of the Monetary Policy Analysis Group of the People's Bank of
of the Chinese market. For the same matter the WTO
China, dated 5 August 2010, page 10.

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L 128/30
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Official Journal of the European Union
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With respect to the remaining state-owned banks, again
Deposits and Loans-Yinfa (2004) No 251 (‘Circular 251’).
the Commission requested the same information
Financial institutions are requested to provide loan rates
mentioned above concerning the government control
within a certain range of the benchmark loan interest
and the pursuit of government policies or interests
rate of the PBOC. For commercial bank loans and
with respect to the Papermaking industry. Again, no
policy bank loans managed commercially there is no
such detailed information was provided apart from a
upper limit range but only a lower limit range. For
repeated claim to refer to information in the relevant
urban credit cooperatives and rural credit cooperatives
Annual reports of the banks which in the majority of
there are both upper and lower limit ranges. For prefer
cases was only in Chinese and without any English trans
ential loans and loans for which the State Council has
lation. However, information in the Annual reports of
specific regulations the interest rates do not float
banks cannot provide the required level of detailed
upwards. The Commission sought clarifications from
information. With respect to the Policy banks, the inves
the GOC on the definition and wording stated in the
tigation established that there are no clear legal
Circular 251 as well as to its preceding legislation
provisions regulating their role and their relationship
(Circular of PBOC concerning expansion of Financial
with the government. Nonetheless, according to
Institution's Loan Interest Rate Float Range – YinFa
statements made by the GOC during the on-the-spot
[2003] No. 250). The GOC explained that those
verification it appears that Policy banks supported
Circulars formed part of the marketization reform of
government policies in China and are not operating for
interest rates in China but gave no further explanation.
profit. All the above points confirm that the four banks
The GOC was also asked to explain what are the prefer
are controlled by the government and exercise
ential loans and other loans specified by the State
government authority in a manner that their actions
Council.
can be attributed to the State.
GOC argued that the wording of the relevant Chinese
(86) The
Commission
also
sought
to
investigate
the
difference
text refers to an assumption of other loans specified by
between the Policy banks (according to available
the State Council. No other explanation or relevant docu
information these are the Export-Import Bank of China,
mentation was provided by the GOC to explain why
the China Development Bank and the Agricultural Devel
preferential loans are defined in the Chinese legislation.
opment Bank of China) and State Owned Commercial
As to the other types of loan, even if one accepts the
banks. The Commission requested clarifications on
argument of the GOC, it is unclear why the legislator felt
these two different types of financial institutions. The
it necessary to introduce the possibility of other loans set
GOC submitted that the Policy banks do not have any
out by the State Council. The Commission also requested
written legal provisions regulating their sector, given that
clarifications on the existence of policy loans managed
the Chinese authorities are currently drafting a law on
commercially, as mentioned in Circular 251. No expla
Policy banks. It was also argued that one Policy bank
nation or any evidence was provided by the GOC on this
(namely the China Development Bank) should not be
matter. The GOC was also requested to provide any
considered as a Policy bank since it has become a share
updates or subsequent legislation issued on the
holding company and is in a transitional period.
aforesaid Circulars in relation to the loan policy of
Information submitted confirms that policy banks are
commercial and policy banks but no such information
treated differently to State Owned Commercial banks.
was provided.
Despite the lack of any rules governing the Policy
banks sector or the way these banks act in the Chinese
financial market, it appears from the PBOC circulars,
where they are mentioned explicitly, that Policy banks
have a special status as compared to the State Owned
(88) Finally it is noted that no other data or statistics
Commercial banks. As to the status of the China Devel
concerning the structure of the Chinese banking system
opment Bank, the Chinese State (through the Chinese
was provided by the GOC.
Ministry of Finance) holds more than 50 % of the
bank's shares and thus its transformation into a share-
holding company has no impact on the government
control.
(89) On
the
basis
of
recitals
(74)
to
(88)
above
and
taking
account of the lack of Chinese cooperation (and in the
light of the considerations in recital (90) below), the
Commission concludes that, the financing market in
(87) Another
factor
that
creates
a
distortion
on
the
Chinese
China is distorted by government intervention and
financial market is the role played by the PBOC in setting
interest rates charged by non-government banks and
the specific limits on the way interest rates are set and
other financial institutions are likely to be aligned with
fluctuate. Indeed, the investigation established that the
government rates. Therefore, the interest rates charged by
PBOC has specific rules regulating the way interest
non-governmental banks and other financial institutions
rates float in China. According to the information
cannot be considered as appropriate commercial
available, these rules are set out in the PBOC's Circular
benchmarks when determining whether government
on the Issues about the Adjusting Interest Rates on
loans confer a benefit.

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EN
14.5.2011 Official
Journal
of
the
European
Union L
128/31
(ii) Financial Contribution
partially, so that relevant information is thereby withheld, the
result may be less favourable to the party than if it had co-
(90) Furthermore, having regard to the totality of the
operated’. The facts considered included the following:
evidence, it is concluded that the vast majority of loans
to the two co-operating producers are provided by policy
or other state-owned banks which are considered to be
— The evidence of specificity submitted by the
public bodies because of their close relationship to the
complainant.
government. They are more than 50 % state-owned and
are thus considered controlled by the government. There
is further evidence that these banks effectively exercise
— The findings (see recitals (77) and (78)) that specific
government authority since as it is explained in recital
subsidies are channelled to the papermaking industry
(65) there is a clear intervention by the State (i.e. PBOC)
through a specific sectoral plan i.e. the Papermaking
in the way commercial banks take decisions on interest
Plan.
rates for loans granted to Chinese companies while in
some cases as explained in recital (83) companies were
attributed quasi automatically the lowest possible rate
— The evidence (see recital (76)) that the papermaking
within the limits set by the State. In these circumstances,
industry is an ‘encouraged industry’ (Decision
the lending practices of these entities are directly
No. 40).
attributable to the government. The fact that banks
exercise government authority is also confirmed by the
way the 2007 Papermaking Plan, Decision 40 and
— The provisions of Article 34 of the Law on
Article 34 of the Law on Commercial Banks act with
Commercial Banks [2003] No. 13 (see recital (79))
respect to the fulfilment of the government industrial
stipulating that commercial banks shall carry out
policies (see recitals (74) to (81) above). There is also a
their loan business upon the needs of the national
great deal of circumstantial evidence, supported by
economy and the social development and in the spirit
objective studies and reports, that a large amount of
of the state industrial policies i.e. in this particular
government intervention is still present in the Chinese
case in the spirit of the Papermaking Plan.
financial system (see recital (312) below). Finally, China
failed to provide information which would have enabled
a greater understanding of the state-owned banks’ rela
— The findings (see recital (81)) that the Chinese state
tionship with government (see recitals (68) to (70) and
planning system directs banks to provide loans to the
recital (84) to (86) above) Thus, in the case of loans
papermaking industry and companies are considered
provided by policy or other state-owned banks, the
of high credit rating because they qualify for specific
Commission concludes that there is a financial
policy plans.
contribution to the coated paper producers in the form
of a direct transfer of funds from the government within
the meaning of Article 3(1)(a)(i) of the basic Regulation.
(93) In the light of the above, and in the absence of any
cooperation by the GOC, the available evidence
indicates that subsidies granted to companies in the
paper industry are not generally available and are
(iii) Benefit
therefore specific under Article 4(2)(a) of the basic Regu
lation. In the light of the GOC's non-cooperation, there is
(91) There
is
a
benefit
according
to
Articles
3(2)
and
6(b)
of
nothing to suggest that eligibility for the subsidy is based
the basic Regulation to the extent that the government
on objective criteria or conditions under Article 4(2)(b)
loans are granted on terms more favourable than the
of the basic Regulation.
recipient could actually obtain on the market. Since it
has been established that non-government loans in China
do not provide an appropriate market benchmark, this
(d) Conclusion
has been constructed using the method described in
recitals (96) to (102) below.
(94) Accordingly, the financing of the papermaking industry
should be considered a subsidy.
(iv) Specificity
(95) In view of the existence of a financial contribution, a
benefit to the exporting producers and specificity, this
(92) The
GOC
was
asked
to
provide
information
on
the
eligi
subsidy should be considered countervailable.
bility criteria for obtaining this subsidy and on the use of
the subsidy, in order to determine the extent to which
access to the subsidy is limited to certain enterprises and
(e) Calculation of the subsidy amount
whether it is specific according to Article 4 of the basic
Regulation. The GOC provided no such information. The
(96) The
amount
of
countervailable
subsidy
is
calculated
in
Commission, mindful of the requirement of Article 4(5)
terms of the benefit conferred on the recipients, which is
of the basic Regulation that any determination of
found to exist during the IP. According to Article 6(b) of
specificity shall be ‘clearly substantiated’ on the basis of
the basic Regulation, the benefit conferred on the
positive evidence, therefore had to base its findings on
recipients is considered to be the difference between
the facts available in accordance with Article 28 of the
the amount that the company pays on the government
basic Regulation. It is noted that Article 28(6) states that
loan and the amount that the company would pay for a
‘If an interested party does not cooperate, or cooperates only
comparable commercial loan obtainable on the market.

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L 128/32
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Official Journal of the European Union
14.5.2011
(97) As
explained
above,
since
the
loans
provided
by
Chinese
maturity of the loan, repayment schedule etc. The
banks reflect substantial government intervention in the
exporting producer could also not prove that it repaid
banking sector and do not reflect rates that would be
the principals of the loans falling under this agreement.
found in a functioning market, an appropriate market
Therefore in the calculation of benefit these loans were
benchmark has been constructed using the method
considered as a grant and were allocated over the IP in
described below. Furthermore, due to the lack of coop
addition to the interest not paid during the IP as
eration by the GOC, the Commission has also resorted to
explained in recital (100) above.
facts available in order to establish an appropriate
benchmark interest rate.
(102) The subsidy rate established with regard to this scheme
during the IP amounts to 5,37 % for APP companies and
(98) When constructing an appropriate
benchmark, it is
considered reasonable to apply Chinese interest rates,
1,26 % for Chenming companies.
adjusted to reflect normal market risk. Indeed, in a
context where the exporters’ current financial state has
been established in a distorted market and there is no
reliable information from the Chinese banks on the
4.2.2. INCOME TAX PROGRAMMES
measurement of risk and the establishment of credit
— Preferential tax policies for companies that are
ratings, it is considered necessary not to take the credi
recognised as high and new technology enterprises
tworthiness of the Chinese exporters at face value, but to
apply a mark-up to reflect the potential impact of the
(103) This scheme allows a company that applies successfully
Chinese distorted market on their financial situation.
for the Certificate of High and New Tech Enterprise to
benefit from a reduced income tax rate of 15 %,
compared to the normal rate of 25 %.
(99) With
respect
to
the
above
as
explained
in
recitals
(68)
to
(72) both GOC and the cooperating exporting producers
were requested to provide information on the lending
policies of the Chinese banks and the way loans were
(a) Legal Basis
attributed to the exporting producers. Parties failed to
provide such information although repeatedly requested
(104) The scheme is provided as a preferential tax treatment by
Article 28 of the Enterprise Income Tax Law of the PRC
to do so. Accordingly in view of this lack of cooperation
(n. 63 promulgated on 16 March 2007) along with
and the totality of facts available, and in line with the
Administrative Measures for the determination of High
provisions of Article 28(6) of the basic Regulation, it is
and New Tech Enterprises. The Notice of the State
deemed appropriate to consider that all firms in China
Administration of Taxation on the Issues concerning
would be accorded the highest grade of ‘Non-investment
Enterprise Income Tax Payment of High & New Tech
grade’ bonds only (BB at Bloomberg) and apply the
nology Enterprises (Guo Shui Han [2008] No. 985) also
appropriate premium expected on bonds issued by
relates to this scheme, providing further details on its
firms with this rating to the standard lending rate of
implementation.
the People's Bank of China. For loans received in
foreign currency, the Commission applies the appropriate
premium expected on bonds issued by firms with this
rating to the standard lending rate as mentioned in the
relevant Chinese loan contracts (LIBOR rate). However,
(b) Eligibility
given the total non-cooperation of the GOC as regards
(105) Article 10 of Administrative Measures for the deter
providing information on, or access to, state-owned
mination of High and New Tech Enterprises lists the
banks, it is considered appropriate, in accordance with
eligibility criteria for the companies to benefit from this
Article 28(6) if the basic Regulation, to use a credit rating
scheme. If the company fulfils all the conditions set out
of BB (non-investment grade-speculative), in view of the
in Article 10, it has to submit an application to the
totality of the facts available.
relevant authorities according to the procedure in
Article 11 of the same Act.
(100) The benefit to the exporting producers has been
calculated by taking into consideration the interest rate
differential, expressed as a percentage, multiplied by the
(c) Practical implementation
outstanding amount of the loan, i.e. the interest not paid
during the IP. This amount was then allocated over the
(106) Any company that intends to apply for this scheme has
total turnover of the co-operating exporting producers.
to proceed to an on-line application to the local Science
and Technology Bureau that will make a preliminary
examination. Subsequently, the local Science and Tech
nology Bureau will make a recommendation to the prov
(101) As explained in recital (73), one exporting producer
incial Science and Technology department. Before taking
refused to provide an important debt restructuring
any decision on the issuance of the certificate of High
agreement. As a consequence it was not possible to
and New Tech Enterprise, the latter can also decide to
verify basic information reported in relation to the
carry out an investigation directly at the premises of the
loans falling under this agreement, such as interest rate,
applicant.

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of
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European
Union L
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(d) Findings of the investigation
(f) Calculation of the subsidy amount
(107) This subsidy scheme was used by the 3 cooperating
(112) The amount of countervailable subsidy is calculated in
exporting producers who obtained benefits during the
terms of the benefit conferred on the recipients which is
IP. Although no administrative rules were provided by
found to exist during the IP. The benefit conferred on the
the GOC, the exporting producers provided the available
recipients is considered to be the amount of total tax
legal texts. Even from these texts, however, it is difficult
payable according to the normal tax rate, after the
to discern the application procedure which remains
deduction of what was paid with the reduced preferential
vague and non-transparent.
tax rate. In accordance with Article 7(2) of the basic
Regulation this subsidy amount (numerator) has been
allocated over the total sales turnover of the cooperating
exporting producers during the IP, because the subsidy is
(e) Conclusion
not contingent upon export performance and was not
granted by reference to the quantities manufactured,
(108) Accordingly, the scheme should be considered a subsidy
produced, exported or transported.
within the meaning of Article 3(1)(a)(ii) and Article 3(2)
of the basic Regulation in the form of foregone
government revenue which confers a benefit upon the
recipient companies.
(113) The subsidy rate established with regard to this scheme
during the IP for the cooperating exporting producers
amounts to 1,22 % for the APP Group and 0,58 % for
the Chenming Group.
(109) The GOC was asked to provide information on the eligi
bility criteria for obtaining this subsidy and on the use of
the subsidy, in order to determine to what extent access
— Preferential tax policies for Research & Devel
to the subsidy is limited to certain enterprises and
opment (R&D)
whether it is specific according to Article 4 of the
basic Regulation. The GOC provided no such
(114) This scheme provides a benefit to all companies that are
information. The Commission, mindful of the
recognized as carrying out R&D projects. This qualifi
requirement of Article 4(5) of the basic Regulation that
cation permits that the corporate income tax is
any determination of specificity shall be ‘clearly
decreased by 50 % of the actual expenses for approved
substantiated’ on the basis of positive evidence,
projects.
therefore had to base its findings on the facts available,
as stated under Section 4.1, in accordance with
Article 28 of the basic Regulation.
(a) Legal Basis
(115) The scheme is provided as a preferential tax treatment by
Article 30(1) of the Enterprise Income Tax Law of the
(110) This subsidy scheme is specific within the meaning of
PRC (n. 63 promulgated on 16 March 2007), Art. 95 of
Article 4(2)(a) of the basic Regulation given that the
the Regulations on the Implementation of Enterprise
legislation itself, pursuant to which the granting
Income Tax Law of the PRC, Decree n. 512 of the
authority operates, limited the access to this scheme
State Council of the PRC, promulgated in date on
only to certain enterprises and industries classified as
6 December 2007 and the Guide to Key Fields (Notifi
encouraged, such as those belonging to the coated
cation n. 6, 2007).
paper industry. Indeed, in chapter 4 of the Enterprise
Income Tax Law of the PRC (No. 63 promulgated on
16 March 2007) devoted to ‘Tax Incentive’, Article 25
(b) Eligibility
provides that ‘the State grants enterprise income tax incentives
to key industries and projects supported and encouraged by the
(116) This scheme provides a benefit to companies that are
State’. According to the Commission's understanding, the
recognized as carrying out R&D projects. Only R&D
State Council in its Decision 40 (Article 14) and in the
projects of the companies of New and High Tech
Guiding Catalogue of the Industrial Restructuring offers
Sectors Receiving Primary Support from the State and
the principles and the classification to consider an
projects listed in the Guide to Key Fields of High Tech
enterprise as encouraged. In addition, there are no
Industrialization under the current Development Priority
objective criteria to determine eligibility and no
promulgated by the National Development and Reform
conclusive evidence to conclude that the eligibility is
Commission are eligible for the scheme.
automatic in accordance with Article 4(2)(b) of the
basic Regulation. Indeed, although some administrative
rules have been collected during the visit to the
(c) Practical implementation
exporting producers, the lack of cooperation from the
GOC authorities do not permit to assess the existence
(117) Any company that intends to apply for this scheme
of such objective criteria.
needs to file detailed information about the R&D
projects with the local Science and Technology Bureau.
After examination, the tax bureau will issue the notice of
approval. The amount subject to the corporate income
(111) Accordingly, this subsidy should be considered counter
tax is decreased by 50 % of actual expenses for approved
vailable.
projects.

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L 128/34
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Official Journal of the European Union
14.5.2011
(d) Findings of the investigation
this subsidy amount (numerator) has been allocated over
the total sales turnover of the cooperating exporting
(118) This scheme was used by the cooperating exporting
producers during the IP, because the subsidy is not
producers who obtained benefits during the IP.
contingent upon export performance and was not
Although no administrative rules were provided by the
granted by reference to the quantities manufactured,
GOC, the exporting producers provided the available
produced, exported or transported.
legal texts. Even from these texts, however, it is
difficult to discern the application procedure - which
remains vague and non-transparent.
(124) The subsidy rate established with regard to this scheme
during the IP for the cooperating exporting producers
amounts to 0,02 % for the APP Group and 0,05 % for
(e) Conclusion
the Chenming Group.
(119) Accordingly, the scheme should be considered a subsidy
within the meaning of Article 3(1)(a)(ii) and Article 3(2)
of the basic Regulation in the form of foregone
— Dividend exemption between qualified resident
government revenue which confers a benefit upon the
enterprises
recipient companies.
(125) The scheme concerns resident enterprises in China which
are shareholders in other resident enterprises in China.
The former are entitled to a tax exemption on income
(120) The GOC was requested to provide information on the
from certain dividends paid by the latter.
eligibility criteria for obtaining this subsidy and on the
use of the subsidy, in order to determine to what extent
access to the subsidy is limited to certain enterprises and
(a) Legal Basis
whether it is specific according to Article 4 of the basic
Regulation. The GOC provided no such information. The
(126) This scheme is provided as a preferential tax treatment by
Commission, mindful of the requirement of Article 4(5)
Article 26 of the Enterprise Income Tax Law of the PRC
of the basic Regulation that any determination of
and further explained in Article 83 of the Regulations on
specificity shall be ‘clearly substantiated’ on the basis of
the Implementation of Enterprise Income Tax Law of the
positive evidence, therefore had to base its findings on
PRC, Decree n. 512 of the State Council of the PRC,
the facts available, as stated under Section 4.1, in
promulgated in date on 6 December 2007.
accordance with Article 28 of the basic Regulation.
(b) Eligibility
(121) This subsidy scheme is specific within the meaning of
Article 4(2)(a) of the basic Regulation given that the
(127) This scheme provides a benefit to all resident companies
legislation itself, pursuant to which the granting
which are shareholders in other resident enterprises in
authority operates, limited the access to this scheme
China.
only to certain enterprises and industries classified as
encouraged, such as those belonging to the coated
paper industry. In addition, there are no objective
(c) Practical implementation
criteria to limit eligibility and no conclusive evidence to
conclude that the eligibility is automatic in accordance
(128) The companies may make use of this scheme directly
with Article 4(2)(b) of the basic Regulation. Indeed,
through their tax return.
although some administrative rules have been collected
during the visit to the exporting producers, the lack of
cooperation from the GOC authorities does not permit
(d) Findings of the investigation
to assess the existence of such objective criteria.
(129) On the income tax statement of the cooperating
exporting producers there is an amount exempted from
income tax. This amount is referred to as Dividends,
(122) Accordingly, this subsidy should be considered counter
bonuses and other equity investment income of eligible
vailable.
residents and enterprises in line with the conditions in
Appendix 5 to the Income tax return (Annual Statement
of Tax Preferences). No income tax was paid by the
(f) Calculation of the subsidy amount
relevant companies on these amounts.
(123) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
(e) Conclusion
found to exist during the IP. That benefit is considered to
be the amount of total tax payable according to the
(130) Accordingly, the scheme should be considered a subsidy
normal tax rate, after the subtraction of what was paid
within the meaning of Article 3(1)(a)(ii) and Article 3(2)
with the additional 50 % deduction of the actual
of the basic Regulation in the form of foregone
expenses on R&D for the approved projects. In
government revenue which confers a benefit upon the
accordance with Article 7(2) of the basic Regulation
recipient companies.

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14.5.2011 Official
Journal
of
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European
Union L
128/35
(131) The GOC was requested to provide information on the
companies during the IP, because the subsidy is not
eligibility criteria for obtaining this subsidy and on the
contingent upon export performance and was not
use of the subsidy, in order to determine to what extent
granted by reference to the quantities manufactured,
access to the subsidy is limited to certain enterprises and
produced, exported or transported.
whether it is specific according to Article 4 of the basic
Regulation. The GOC provided no such information. The
Commission, mindful of the requirement of Article 4(5)
of the basic Regulation that any determination of
(136) The subsidy rate established with regard to this scheme
specificity shall be ‘clearly substantiated’ on the basis of
during the IP for the cooperating exporting producers
positive evidence, therefore had to base its findings on
amounts to 1,34 % for the APP Group and 0,21 % for
the facts available, as stated under Section 4.1, in
the Chenming Group.
accordance with Article 28 of the basic Regulation.
4.2.3. INDIRECT TAX AND IMPORT TARIFF PROGRAMMES
(132) This subsidy scheme is specific within the meaning of the
Article 4(2)(a) of the basic Regulation given that the
— VAT and Tariff exemption on imported equipment
legislation itself, pursuant to which the granting
authority operates, limited the access to this scheme
(137) This scheme provides benefits in the form of VAT
only to resident enterprises in China receiving dividend
exemption and duty free imports of capital goods to
income from other resident enterprises in China, as
the FIEs or domestic companies which are able to
opposed to those enterprises which invest in foreign
obtain the Certificate of State-Encouraged projects
enterprises.
issued by the Chinese authorities in line with relevant
investment, tax and customs-related legislation.
(133) In addition, since all the above tax schemes under
Chapter 4 of the Enterprise Income Tax Law of the
(a) Legal Basis
PRC are reserved exclusively to important industries
(138) The scheme is based on a set of legal provisions i.e. the
and projects supported or encouraged by the State as
Circular of the State Council on Adjusting Tax Policies
stated in Article 25, also this scheme is specific
on Imported Equipment No. 37/1997, the
because it is reserved only to certain enterprises and
Announcement of the Ministry of Finance, the General
industries classified as encouraged, such as the coated
Administration of Customs and the State Administration
paper industry. Indeed, according to the Commission's
of Taxation [2008] No. 43, the Notice of the NDRC on
understanding, the State Council in its Decision No. 40
the relevant issues concerning the Handling of Confir
(Article 14) and in the Guiding Catalogue of the
mation letter on Domestic or Foreign-funded Projects
Industrial Restructuring offers the principles and the clas
encouraged to develop by the State, No. 316 2006,
sification to consider an enterprise as encouraged.
dated 22 February 2006 and on the Catalogue on non-
Furthermore, in that case there are no objective criteria
duty-exemptible Articles of importation for either FIEs or
to limit eligibility and no conclusive evidence to conclude
domestic enterprises-2008.
that the eligibility is automatic in accordance with
Article 4(2)(b) of the basic Regulation. Indeed, although
some administrative rules have been collected during the
visit to the exporting producers, the lack of cooperation
(b) Eligibility
from the GOC authorities does not permit to assess the

existence of such objective criteria.
(139) Eligibility is limited to applicants, either FIEs or domestic
enterprises, which are able to obtain the Certificate of
State-Encouraged projects.
(134) Accordingly, this subsidy should be considered counter
vailable.
(c) Practical implementation
(140) According to the Notice of the NDRC on the relevant
(f) Calculation of the subsidy amount
issues concerning the Handling of Confirmation letter on
Domestic or Foreign-funded Projects encouraged to
(135) The amount of countervailable subsidy is calculated in
develop by the State, No. 316 2006, dated
terms of the benefit conferred on the recipients, which is
22 February 2006, Article I.1. the foreign investment
found to exist during the IP. That benefit is considered to
projects complying ‘with those of the encouraged category
be the amount of total tax payable with the inclusion of
in the Catalogue of industries for Guiding Foreign Investment
the dividend income coming from other resident enter
and the Catalogue of Priority Industries for Foreign Investment
prises in China, after the subtraction of what was actually
in Central-Western Region with technology transfer, the tariff
paid with the dividend tax exemption. In accordance with
and the VAT shall be exempted on the self-use equipment
Article 7(2) of the basic Regulation this subsidy amount
imported within the total investment and the technology,
(numerator) has been allocated over the total sales
parts and components, and spare parts imported along with
turnover of the co-operating exporting producers
the equipment according to the contract; excluded are those

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Official Journal of the European Union
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commodities that are listed in the Catalogue of Import
of the basic Regulation. Indeed, although some adminis
Commodities under Foreign Investment Projects not exempted
trative rules have been collected during the visit to the
from tax’. The Projects Confirmation Letter for foreign
exporting producers, the lack of cooperation from the
investment projects of the encouragement category
GOC authorities does not permit to assess the existence
with the total investment of USD 30 million or more
of such objective criteria.
shall be issued by the NDRC. The Project Confirmation
Letter for foreign investment projects of the encour
agement category with the total investment of less than
USD 30 million shall be issued by the commissions or
(145) Accordingly, this subsidy should be considered counter
economic municipalities at the provincial level. Once
vailable.
they have received the Project Confirmation Letter of
the encouragement category, the companies present the
certificates and other application documents to their local
Customs authorities in order to be eligible for customs
(f) Calculation of the subsidy amount
and VAT exemption on equipment imports.
(146) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. That benefit is calculated by
taking into consideration the VAT and duties exempted
(d) Findings of the investigation
on imported equipment. In accordance with Article 7(3)
of the basic Regulation this subsidy amount (numerator)
(141) All co-operating exporting producers benefited from this
has been allocated to the IP using a useful life corre
scheme.
sponding to the average depreciation period of the
industry concerned (i.e. 15 years). The resulting amount
was then allocated over the total sales turnover of the co-
operating exporting producers during the IP, because the
subsidy is not contingent upon export performance and
(e) Conclusion
was not granted by reference to the quantities manu
factured, produced, exported or transported.
(142) Accordingly, the scheme should be considered a subsidy
within the meaning of Article 3(1)(a)(ii) and Article 3(2)
of the basic Regulation in the form of foregone
government revenue which confers a benefit upon the
(147) The subsidy rate established with regard to this scheme
recipient companies.
during the IP for the cooperating exporting producers
amounts to 1,17 % for the APP Group and 0,61 % for
the Chenming Group.
(143) The GOC was requested to provide information on the
eligibility criteria for obtaining this subsidy and on the
— VAT rebates on domestically produced equipment
use of the subsidy, in order to determine to what extent
access to the subsidy is limited to certain enterprises and
(148) This scheme provides benefits in the form of VAT rebates
whether it is specific according to Article 4 of the basic
paid for purchase of domestically produced equipment
Regulation. The GOC provided no such information. The
by FIEs.
Commission, mindful of the requirement of Article 4(5)
of the basic Regulation that any determination of
specificity shall be ‘clearly substantiated’ on the basis of
positive evidence, therefore had to base its findings on
(a) Legal Basis
the facts available, as stated under Section 4.1, in
accordance with Article 28 of the basic Regulation.
(149) The scheme is based on the Circular of State Adminis
tration of taxation on the release of the provisional
measures for the Administration of tax refunds for
purchases of Domestically-Manufactured Equipment by
Foreign Invested Enterprises No. 171, 1999, 20.9.1999
(144) This subsidy sc