HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 73/16
EN
Official Journal of the European Union
15.3.2013
COUNCIL IMPLEMENTING REGULATION (EU) No 215/2013
of 11 March 2013
imposing a countervailing duty on imports of certain organic coated steel products originating in
the People's Republic of China
THE COUNCIL OF THE EUROPEAN UNION,
GOC was invited for consultations with the aim of clar
ifying the situation as regards the contents of the
complaint and arriving at a mutually agreed solution.
The GOC accepted the offer of consultations and consul
Having regard to the Treaty on the Functioning of the European
tations were subsequently held. During the consultations,
Union,
no mutually agreed solution could be arrived at.
However, due note was taken of comments made by
the authorities of the GOC in regard to the allegations
contained in the complaint regarding the lack of counter
Having regard to Council Regulation (EC) No 597/2009 on
vailability of the schemes. Following the consultations,
protection against subsidised imports from countries not
submissions were received from the GOC.
members of the European Community ( 1 ), and in particular
Article 17 thereof,
1.2. ANTI-DUMPING PROCEEDING
Having regard to the proposal from the European Commission,
(4) On
21
December
2011,
the
European
Commission
announced by a notice published in the Official Journal
of the European Union ( 3 ), the initiation of an anti-
Whereas:
dumping proceeding concerning imports into the
Union of certain organic coated steel products orig
inating in the PRC.
1. PROCEDURE
1.1. INITIATION
(5) On
20
September
2012,
the
Commission,
by
Regulation
(1) On
22
February
2012,
the
European
Commission
(EU) No
845/2012
( 4 ), imposed a provisional anti-
("Commission") announced by a notice published in
dumping duty on imports of certain organic coated
the Official Journal of the European Union ( 2 ) ('Notice of
steel products originating in the PRC.
initiation'), the initiation of an anti-subsidy proceeding
with regard to imports into the Union of certain
organic coated steel products originating in the People's
Republic of China ('PRC' or the 'country concerned').
(6) The
injury
analyses
performed
in
this
anti-subsidy
and
the parallel anti-dumping investigation are identical, since
the definition of the Union industry, the representative
(2) The
anti-subsidy
proceeding
was
initiated
following
a
Union producers and the investigation period are the
complaint lodged on 9 January 2012 by EUROFER
same in both investigations. For this reason, comments
('the complainant') on behalf of producers representing
on injury aspects put forward in any of these proceedings
in this case more than 70 % of the total Union
were taken into account in both proceedings.
production of certain organic coated steel products.
The complaint contained prima facie evidence of
subsidisation of the said product and of material injury
resulting therefrom, which was considered sufficient to
justify the initiation of a proceeding.
1.3. PARTIES CONCERNED BY THE PROCEEDING
(7) The
Commission
officially
advised
the
complainants,
other known Union producers, the known exporting
(3) Prior to the initiation of the proceeding and in
producers in the PRC, importers, traders, users,
accordance with Article 10(7) of the basic Regulation,
suppliers and associations known to be concerned, and
the Commission notified the Government of the PRC
the representatives of the PRC of the initiation of the
('the GOC') that it had received a properly documented
proceeding. Interested parties were given the opportunity
complaint alleging that subsidised imports of certain
to make their views known in writing and to request a
organic coated steel products originating in the PRC
hearing within the time limit set in the notice of initi
were causing material injury to the Union industry. The
ation.
( 1 ) OJ L 188, 18.7.2009, p. 93.
( 3 ) OJ C 373, 21.12.2011, p. 16.
( 2 ) OJ C 52, 22.2.2012, p. 4.
( 4 ) OJ L 252, 19.9.2012, p. 33.

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15.3.2013 Official
Journal
of
the
European
Union L
73/17
(8) In view of the apparent high number of exporting
(12) Five unrelated importers provided the requested
producers, Union producers and unrelated importers, all
information and agreed to be included in the sample.
known exporting producers and unrelated importers
In view of the limited number of cooperating importers,
were asked to make themselves known to the
sampling was deemed to be no longer necessary.
Commission and to provide, as specified in the notice
of initiation, basic information on their activities related
to the product concerned during the period from
1 October 2010 to 30 September 2011. This
(13) The
Commission
sent
questionnaires
to
the
represen
information was requested under Article 27 of the
tatives of the PRC, the two sampled exporting
basic Regulation in order to enable the Commission to
producers in the PRC, 14 other exporting producers in
decide whether sampling would be necessary and if so, to
the PRC that requested so, the six sampled Union
select samples. The authorities of the PRC were also
producers, the five cooperating importers in the Union
consulted.
and to the known users.
(14) Replies
were
received
from
the
representatives
of
the
PRC, nine exporting producers and related companies
(9) Initially
19
Chinese
exporting
producers/groups
of
in the PRC, the six sampled Union producers, two
producers provided the requested information and
unrelated importers and ten users.
agreed to be included in a sample. On the basis of the
information received from the exporting producers and
in accordance with Article 27 of the basic Regulation the
Commission initially proposed a sample of 3 exporting
(15) The
Commission
sought
and
verified
all
information
producers/groups of exporting producers. However one
deemed necessary for the determination of subsidisation,
of the exporting producers included in this sample
resulting injury and Union interest. Verification visits
withdrew its cooperation. Consequently it was replaced
were carried out at the premises of the following State
with the next exporting producer with the highest
authority and companies:
volume of exports sales to the Union. Following the
notification also this exporting producer withdrew its
cooperation.
(a) Government of the People Republic of China
— Chinese Ministry of Commerce, Beijing, China
(10) In order not to cause any further delay to the proceeding
it was decided to limit the sample to two groups of
exporting producers, which had the highest export
volume to the Union, i.e. Zhangjiagang Panhua Steel
(b) Union producers
Strip Co., Ltd and its related companies and Zhejiang
Huadong Light Steel Building Material Co., Ltd and its
related companies. The sample of these two groups of
— ArcelorMittal Belgium, Belgium and related sales
exporting producers serves as the basis to determine the
company ArcelorMittal Flat Carbon Europe SA,
level of subsidisation for those groups as well as the level
Luxembourg
of subsidisation for all cooperating exporting producers
not included in the sample, as required by Articles 15.2
and 15.3 of the basic Regulation.
— ArcelorMittal Poland, Poland
— ThyssenKrupp Steel Europe AG, Germany
(11) As regards the Union producers, the Commission
announced in the notice of initiation that it had
provisionally selected a sample of Union producers.
This sample consisted of six Union producers that were
— voestalpine Stahl GmbH and voestalpine Stahl
known to the Commission to produce the like product
Service Center GmbH, Austria
selected on the basis of sales, production volume, size
and geographical location in the Union. The sampled
Union producers accounted for 46 % of the Union
production and 38 % of the Union sales. Interested
— Tata Steel Maubeuge SA (formerly known as
parties were also invited in the notice of initiation to
Myriad SA), France
make their views known on the provisional sample.
One of the Union producers stated that it did not wish
to be included in the sample and was replaced in the
sample by the next largest producer.
— Tata Steel UK Ltd, United Kingdom

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L 73/18
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Official Journal of the European Union
15.3.2013
(c) Groups of Exporting producers (and related
excluding so-called 'sandwich panels' of a kind used for
companies) in the PRC
building applications and consisting of two outer metal
sheets with a stabilising core of insulation material sand
wiched between them, and excluding those products with
a final coating of zinc-dust (a zinc-rich paint, containing
— Zhangjiagang Panhua Steel Strip Co., Ltd and its
by weight 70 % or more of zinc).
related companies: Chongqing Wanda Steel Strip
Co., Ltd, Zhangjiagang Wanda Steel Strip Co.,
Ltd, Jiangsu Huasheng New Construction
Materials Co. Ltd and Zhangjiagang Free Trade
Zone Jiaxinda International Trade Co., Ltd;
2.2. PRODUCT EXCLUSION REQUESTS
(20) The
China
Iron
and
Steel
Association,
two
importers
and
— Zhejiang Huadong Light Steel Building Material
two users, proposed the exclusion of five product types.
Co. Ltd and its related company Hangzhou
These requests were received and have been analysed as
P.R.P.T. Metal Material Company Ltd;
follows:
(d) Importers in the Union
2.2.1. OCS WITH METALLIC COATING OF CHROMIUM OR
TIN
— ThyssenKrupp Mannex, Germany
(21) A user of OCS submitted a request to exclude OCS with
a substrate with a metallic coating of chromium or tin
from the product scope. The investigation has established
— Macrometal, Hamburg, Germany
that the metallic coating of chromium or tin renders this
product type physically and technically different to the
OCS under investigation. Moreover, OCS with a substrate
with a metallic coating of chromium or tin is almost
(16) Subsequently all parties were informed of the essential
exclusively used in the food packaging and cable indus
facts and considerations on the basis of which it was
tries. Finally, the Union industry explained that it did not
intended to recommend the imposition of definitive
intend for the above-mentioned product type to be
countervailing duties on imports of certain organic
included in this investigation. Given the above-
coated steel products originating in the PRC ('the final
mentioned reasons, OCS with a substrate with a
disclosure'). All parties were granted a period within
metallic coating of chromium or tin is not included in
which they could make comments on the final
the product scope.
disclosure.
(17) The
comments
submitted
by
the
interested
parties
were
considered and taken into account where appropriate.
2.2.2. HOT-ROLLED PLATES WITH PROTECTIVE PRIMER,
WHETHER ORGANIC OR INORGANIC
(22) This
request
was
rejected
because
these
products
do
not
1.4. INVESTIGATION PERIOD AND PERIOD CONSIDERED
fall under the CN codes under investigation. The painting
or coating is only for rust protection and therefore fall
(18) The
investigation
of
subsidisation
and
injury
covered
the
under CN heading 7208 and not CN heading 7210. Hot-
period from 1 October 2010 to 30 September 2011 (the
rolled plates with a protective primer, whether organic or
'investigation period' or 'IP'). The examination of trends
inorganic, are not included in the product scope and as a
relevant for the assessment of injury covered the period
result cannot be removed from it.
from 1 January 2008 to the end of the IP ('the period
considered').
2. PRODUCT CONCERNED AND LIKE PRODUCT
2.2.3. OCS WITH SUBSTRATE THICKNESS BETWEEN 0,6
AND 2,0 MM
2.1. PRODUCT CONCERNED
(23) CISA
and
two
importers
requested
the
exclusion
of
OCS
(19) In
the
notice
of
initiation
the
product
subject
to
the
with substrate thickness between 0,6 and 2,0 mm, repre
investigation was certain organic coated steel products
senting 5 – 10 % of imports from China, stating that
('OCS'), i.e. flat-rolled products of non-alloy and alloy
there was only direct competition between Chinese
steel (not including stainless steel) which are painted,
exports and Union industry production for OCS with
varnished or coated with plastics on at least one side,
substrate thickness of between 0,25 and 0,6 mm.

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15.3.2013 Official
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of
the
European
Union L
73/19
(24) This request was rejected, given that both Chinese
(30) The product concerned is therefore certain organic
exporters and the Union industry manufacture and sell
coated steel products ('OCS'), i.e. flatrolled products of
OCS with a substrate thickness of between 0,6 and
non-alloy and alloy steel (not including stainless steel)
2,0 mm and that therefore these products are clearly in
which are painted, varnished or coated with plastics on
competition with each other. No evidence was provided
at least one side, excluding so-called 'sandwich panels' of
to show that OCS with a substrate thickness of over
a kind used for building applications and consisting of
0,6 mm does not compete with OCS with a substrate
two outer metal sheets with a stabilising core of insu
thickness of less than 0,6 mm and that therefore this
lation material sandwiched between them, excluding
would constitute a different product type. OCS with
those products with a final coating of zinc-dust (a
substrate thickness of less than and above 0,6 mm
zinc-rich paint, containing by weight 70 % or more of
have the same basic physical and technical characteristics
zinc), and excluding those products with a substrate with
and same end uses and therefore are the same product.
a metallic coating of chromium or tin, currently falling
within CN codes ex 7210 70 80, ex 7212 40 80,
ex 7225 99 00, ex 7226 99 70, and originating in the
People's Republic of China ('the product concerned').
2.2.4. OCS WITH ALUMINIUM-ZINC ALLOY COATED
SUBSTRATE
(25) The two importers alleged that only four Union
producers have the licence to produce this product
2.5. LIKE PRODUCT
type and that only one company was in fact producing
it. They also alleged that this product differs from zinc
(31) The
investigation
has
shown
that
OCS
produced
and
sold
coated OCS in terms of product characteristics.
by the Union industry in the Union, OCS produced and
sold on the domestic market of the PRC and OCS
imported into the Union from the PRC have the same
basic physical and chemical characteristics and the same
basic end uses. Therefore these products are considered
(26) This
request
was
rejected
as
the
two
product
types
are
interchangeable with overlapping uses and at least two
to be alike within the meaning of Article 2(c) of the basic
cooperating Union producers manufactured this product
Regulation.
type during the investigation period. It should be noted
that only one cooperating Chinese exporting producer
exported this product type to the Union during the
investigation period.
3. SUBSIDISATION
3.1. PRELIMINARY REMARKS
2.2.5. OCS WITH ZINC ALLOY COATED SUBSTRATE
(32) Both the GOC and the sampled Chinese exporting
producers submitted questionnaire replies and accepted
(27) This request was rejected because, contrary to the
on-spot visits in order to verify the replies.
assertion by one user, this product is produced and
sold in significant quantities by several Union
producers and has the same essential physical and
technical characteristics and end uses as other types of
OCS.
(33) With respect to the GOC, following the analysis of the
questionnaire reply, the Commission sent a deficiency
letter and two pre-verification letters. The Commission
provided to the GOC ample time for the preparation
2.3. PRODUCT INCLUSION REQUEST
and submission of its representations whenever this
was requested and justified. Indeed substantial deadline
(28) One
association
requested
that OCS with a metallic
extensions were granted to the GOC, i.e. 20 days
coating of chromium or tin, classified under TARIC
extension for the reply to the questionnaire which
codes 7210 12 20 10 and 7210 50 00 10 be included
resulted in an eventual deadline of 57 days for the
in the product scope. This request was rejected as these
submission of the questionnaire reply and 25 days for
codes were not included in the original complaint and
the reply to the deficiency letter.
the products covered by such codes have different
physical and technical characteristics from the products
covered by the complaint.
(34) In
its
replies
to
the
questionnaire,
deficiency
letters
and
various other submissions the GOC provided a reply only
2.4. PRODUCT CONCERNED
concerning schemes used by the sampled exporting
producers and argued that it should not be requested
(29) Given the acceptance of the exclusion of OCS with
to provide replies to questions relating to alleged
metallic coating of chromium or tin, as outlined in
subsidy schemes available also to non-sampled
recital (21), the product concerned is amended by this
producers or producers which had not made themselves
exclusion.
known.

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Official Journal of the European Union
15.3.2013
(35) The Commission respectfully disagreed with this
on-spot verification visit that refusals to provide
approach and explained to the GOC that the purpose
necessary information or to assist the investigating
of the questionnaire sent to the GOC is for the
authority in verifying information and data deemed
Commission to obtain information of subsidisation of
necessary for the purposes of the proceeding might
the industry producing organic coated steel in China
seriously undermine the investigation process. The GOC
and to determine to what extent Union imports of the
was also reminded of the consequences of the provision
product concerned are subsidised. The Commission
of Article 28 of the basic Regulation.
informed the GOC that broader information on the
extent of subsidisation is required in order to address
any significant non-cooperation by exporters which are
alleged to have received benefits under particular subsidy
schemes not used by the sampled or cooperating
companies and possible requests for individual exam
(38) During
the on-spot verification visit to the Chinese
ination by cooperating exporting producers. However
Ministry of Commerce in Beijing, the Commission
the GOC did not alter its approach and did not
endeavoured to verify information provided on the
provide information on most of the other subsidy
basis of the supporting documents that were used to
schemes alleged in the complaint but not used by the
prepare the GOC's response, in line with the provisions
sampled companies.
of Articles 11 and 26 of the basic Regulation. In doing

so, the Commission came preliminarily to the 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 requested
and certain questions were simply not replied to.
Consequently, the GOC was made aware of the
(36) Prior
to
the
on-spot
verification
visit,
the
GOC
requested
consequences of non-cooperation in accordance with
the Commission to provide further information in
Article 28(1) and (6) of the basic Regulation.
writing, in particular a list of all the questions that it
intended to ask during the verification plus a list of the
Government departments which were expected to
participate in the on-spot visit. In the absence of these,
it was argued that the GOC "was left unaware of what
should have been prepared or could be expected during the
(39) The
GOC also submitted that the Commission was
verification" and that the pre-verification letter "certainly does
imposing an unreasonable burden on the GOC and
not provide any indication of what the Commission actually
had requested irrelevant and unnecessary information in
intends to verify…".
the questionnaire and subsequent deficiency letter.
(40) With
respect
to
the
requested
information
it
is
noted
that
the Commission requested only information concerning
(37) The
Commission
could
not
grant
the
GOC's
request.
In
allegations in the complaint that is deemed necessary for
this respect it is noted that the Commission has fulfilled
the purposes of arriving at a representative finding and
all the relevant conditions of Article 26 of the basic
remained consistent in its requests by asking for the
Regulation. A detailed pre-verification letter had been
same data and information during the investigating
sent to the GOC confirming the agenda (days and
process and requesting the GOC to explain the
group of schemes to be discussed per verification day)
submitted information and its implication for the inves
and requesting the presence of the authorities responsible
tigated schemes. In other words, the Commission only
for the relevant schemes and of the officials involved in
requested information that was necessary to assess the
the preparation of the GOC submissions. The
existence and level of subsidisation available to the
Commission also explained before the on-spot verifi
product concerned pursuant to other subsidy schemes
cation visit that only the GOC could identify the auth
alleged in the complaint. Such information would have
orities responsible for the schemes under investigation as
allowed for an adequate determination of the amount of
well as those officials which are best placed to take part
subsidisation granted pursuant to the other subsidy
in the verification and answer questions. As regards the
schemes under investigation available to the non-
list of specific questions, the Commission explained that
cooperating exporting producers. Since neither the repre
such a list is not required by EU legislation (nor by WTO
sentatives of the PRC nor the non-cooperating exporting
requirements) and that the purpose of this investigation
producers provided the necessary information to
is to verify the GOC reply to the questionnaire and the
determine whether the other subsidy schemes were
relevant supplementary submissions; therefore the verifi
available to the non-cooperating exporting producers,
cation would follow the structure of these documents.
on the basis of best facts available, the Commission
The Commission would also seek to obtain and clarify
concluded that the other alleged subsidy schemes were
further information necessary for the on-going
indeed available to the other non-cooperating exporting
proceeding but precise questions in this context would
producers, and proceeded to calculate the amounts of
depend on the GOC's replies to the initial verification of
benefit conferred through those schemes on the basis
its replies. It was also made clear to the GOC before the
of best facts available.

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15.3.2013 Official
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of
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European
Union L
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3.2. INDIVIDUAL EXAMINATION ('IE')
— Provision of various inputs for less than adequate
remuneration
(41) Claims for IE were submitted by two cooperating
exporting producers pursuant to Article 27(3) of the
basic Regulation, i.e. Union Steel China (Union Steel)
(II) Preferential
loans
and
interest
rates
to
the
OCS
industry
and Shenzhen Sino Master Steel Co. Ltd. It was not
possible to grant these IEs to both companies as, due
to the high number of alleged subsidy schemes and
(III) Equity
programmes
time consuming nature of anti-subsidy investigation, it
would be unduly burdensome and could prevent
completion of the investigation in good time.
— Debt for equity swaps
— Equity infusions
(42) However,
Union Steel had already been individually
examined in the parallel anti-dumping investigation and
consequently individual injury margin was calculated for
— Unpaid dividends
this company.
(IV) Income
and
other
direct
taxes
(43) Given
that
the
GOC
provided
only
a
reply
concerning
schemes used by the sampled exporting producers as
— Tax policies for the deduction of research and devel
explained in recital (34) above, it was practically
opment expenses
impossible to analyse some of the subsidy schemes
possibly used by Union Steel. Consequently, on the
basis of facts available under Article 28 of the Basic
— Tax concessions for Central and Western regions
Regulation, the average subsidy rate applicable to other
co-operating companies was attributed to this company.
— Income tax credit for the purchase of domestically
manufactured production equipment
3.3. SPECIFIC SCHEMES
— Preferential tax policies for companies that are
(44) On the basis of the information contained in the
encouraged as high and new technology enterprises
complaint the Commission sought information related
to the following schemes, which allegedly involved the
granting of subsidies by the Governmental authority:
— Income tax concessions for the enterprises engaged in
the comprehensive resource utilisation ('special raw
materials')
(I) Government
Provision
of
Goods
and
Services
for
Less
than Adequate Remuneration ("LTAR")
— Tax credit concerning the purchase of special
equipment
— Provision of inputs at less than adequate remuner
— Preferential income tax policy for the enterprises in
ation: Hot-rolled and cold-rolled steel
the Northeast region
— Income Tax exemption for investment in domestic
— Provision of land use rights for less than adequate
technological renovation
remuneration
— Various local tax discounts (Shandong Province,
Chongqing City, Guangxi Region Zhuang, Tax
— Programmes consisting of provision of water for less
privileges to develop central and western regions)
than adequate remuneration
— Dividend exemption between qualified resident enter
prises
— Programme consisting of provision of electricity for
less than adequate remuneration
— Two free, three half tax exemptions for the
productive FIEs
— Programme consisting of provision of electricity and
water at less than adequate remuneration in the
— Local income tax exemption and reduction
Jiangsu Province
programmes for the productive FIEs

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Official Journal of the European Union
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— Income tax credit for FIEs purchasing domestically
— Grants under the Science and Technology
produced equipment
programme of Hebei Province
— Income tax subsidies for FIEs based on geographical
location
(IX) Ad hoc subsidies referred to in the complaint
(V) Indirect
Tax
and
Import
Tariff
Programmes
3.3.1. GOVERNMENT PROVISION OF GOODS AND
SERVICES FOR LESS THAN ADEQUATE REMUN
ERATION ("LTAR")
— Import tariff and VAT exemptions for FIEs and
3.3.1.1. Provision of hot-rolled and cold-rolled steel
certain domestic enterprises using imported
(HRS and CRS) for less than adequate remun
equipment in encouraged industries
eration
(45) The allegation in the complaint was that the GOC
— VAT refunds to FIEs purchasing domestically
controls certain upstream industries and products so as
produced equipment
to provide favourably priced inputs to producers of OCS.
On this basis OCS producers receive countervailable
subsidies through the purchase from State-owned enter
prises (SOEs) of government-produced HRS and CRS at a
— VAT deduction on fixed assets in the Central region
below the market price and thus at less than adequate
remuneration for the SOEs.
— Other tax privileges of Ma'anshan
Non-cooperation
(VI) Grant
Programmes
(46) The Commission requested from the GOC detailed
information concerning SOEs providing HRS and CRS
to the Chinese exporting producers of OCS in order to
verify the allegations in the complaint and to establish
— China World Top Brand programme
whether these SOEs are public bodies. In particular, the
Commission created Appendix B to the questionnaire for
the GOC intended for the SOEs and invited the GOC to
— Famous Brands programme
provide information requested therein. In the deficiency
letter the Commission again asked the GOC to provide
the information requested in Appendix B and encouraged
GOC to coordinate the responses with the SOEs
— The State key technology project fund
concerned.
— Programmes to rebate anti-dumping legal fees
(47) However,
GOC
did
not
provide
a
reply
to
any
of
the
questions in Appendix B and also failed to provide
relevant information requested in the main questionnaire
(VII) Purchase of goods by the Government for higher than
(e.g. on the ownership and control of Chinese
adequate remuneration
government of the SOEs in the steel sector and its
involvement in the reorganisation of Chinese steel
industry). Instead of providing the requested information
(VIII) Other regional programmes
the GOC stated in its response to the questionnaire that
the complainants have failed to demonstrate that the
HRS and CRS producers are public bodies.
— Subsidies provided in the Tianjin Binhai New Area
and the Tianjin Economic and Technological Devel
opment Area
(48) Because of the lack of cooperation from the GOC the
Commission had to look into other best information
available. The Commission notified GOC about this
— Programmes related to the Northeast Region
course of action. In assessing whether the SOEs
providing HRS and CRS to the Chinese exporting
producers of OCS are public bodies the Commission
considered the limited information provided by the
— Grants under the Science and technology programme
GOC, information in the complaint, publicly available
of Jiangsu Province
factual information from similar proceedings conducted

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15.3.2013 Official
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of
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European
Union L
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by other investigating authorities, as well as other
Commission (NDRC) and adopted by the China's highest
publicly available information, and based its findings
legal authority State Council point to the very strong grip
on the totality of the information on the file.
of the Chinese government in the economy.
(a) SOEs providing OCS producers with hot-rolled and cold-
rolled steel are public bodies
(53) As regards the steel sector, the information on the file
Preliminary remarks
suggests that the SOEs producing HRS and CRS in China
often perform governmental functions described, inter
(49) The
complainant
claims
that
SOEs
in
China
are
public
alia, in the sectoral plans for iron and steel industry.
bodies within the meaning of Article 2(b) of the basic
These plans confirm that the GOC has chosen to be
Regulation which provide goods (HRS and CRS) to OCS
closely involved in the management and development
producers at below-market prices and thus confer a
of the steel industry in China and their implementation
benefit to them.
by SOEs can therefore be considered to fall under the
heading of governmental practices. The plans provide
targets and goals for all operators in the iron and steel
industry and direct the whole sector to produce specific
(50) The WTO Appellate Body (AB), in its report in United
outcomes. In fact, the GOC is using the iron and steel
States – Definitive Anti-Dumping and Countervailing
SOEs as a prolonged arm of the state in order to achieve
Duties on Certain Products from China ( 5 ) (the AB
goals and targets set in the plans.
report) defined a public body as an entity that "possesses,
exercises or is vested with governmental authority" ( 6 ).
The AB also considered that public bodies are also char
acterised by the "performance of governmental func
tions" ( 7 ) which would "ordinarily be considered part of
governmental practice in the legal order of the relevant
(54) Order
No.
35
of
the
NDRC
–
Policies
for
Development
of
Member" ( 8 ).
Iron and Steel Industry, inter alia, outlines a policy to
decrease the number of iron and steel smelting enter
prises and sets goals on the output for those steel
enterprise groups that rank top 10 in the domestic
(51) In
light
of
the
WTO
AB
conclusions,
there
are
two
market (Article 3), for the production capacity prohibits
questions for the analysis, i.e. (a) whether the SOEs in
the establishment of new iron and steel associated enter
question perform functions which are ordinarily
prises (Article 10), prescribes the conditions to access
considered part of governmental practice in China and
into the iron and steel industry on the equipment level
(b) if so, whether they exercise government authority
and also prescribes the technical and economic indexes
when doing so?
steel and iron enterprises should follow (Article 12), sets
rules for the changes in the organisational structure of
steel enterprises (Article 20), manages investments
(Articles 22, 23), conditions access to financial funds
(Articles 25,26), gives state the right to intervene in the
Performance of governmental functions
purchase of raw materials (Article 30).
(52) In the context of the GOC, there is ample evidence to
show that the government is deeply involved in the
management of the economy. The primary role of the
Chinese government in the economy is guaranteed by the
Constitution of the People's Republic of China.
According to Article 7 of the Constitution reads: "The
(55) Twelfth
5
Year
Development
Plan
for
the
Steel Industry
state economy is the sector of socialist economy under
summarises the achievement of goals set in the
ownership by the whole people; it is leading force in the
previous plan, covers the development strategy and sets
national economy. The state ensures the consolidation and
goals for the entire steel industry. Similarly to the Order
growth of the state economy". Similarly Article 15 of the
No.35 it sets very specific targets on the industrial clus
Constitution reads: "The state practices economic planning on
tering level (Section III.(III).6), encourages certain projects
the basis of socialist public ownership". Also the Constitution
and discourages other (Section IV(IV))and discriminates in
of the Communist Party of China prescribes the primary
support for iron and steel industry in different provinces
role of the public ownership, e.g. preamble of the Consti
(Section IV(V), provides for support of large-scale steel
tution of CCP reads: "the Party must uphold and improve the
enterprises and gives a leading role to the biggest state-
basic economic system, with public ownership playing a
owned Chinese steel producers such as Bao Steel, Anshan
dominant role…" Also the various 5-year plans prom
Iron and Steel, Wuhan Iron and Steel etc ( 9 ). The plan
ulgated by the National Development and Reform
also provides for the strengthening of the regulation and
management of the existing steel enterprises' production
operation (Section V(IV).
( 5 ) Document WT/DS379/AB/R, 11 March 2011.
( 6 ) Para 317 of the AB report.
( 7 ) Para 290 of the AB report.
( 9 ) Page 33 of the English version of 12th 5 year Development Plan for
( 8 ) Para 297 of the AB report.
Steel Industry.

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L 73/24
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Official Journal of the European Union
15.3.2013
(56) Law of the People's Republic of China on the State-owned
act like an arm of the government in performing govern
Assets of Enterprises also obliges the SOEs (or State-
mental functions which subsequently lead to the
invested enterprises (SIEs) are referred to in this law) to
fulfilment of goals and targets set in the plans.
comply with the national industrial policies ( 10 ). Similarly
the Tentative Measures for the supervision and Administration
of the Investments by Central Enterprises oblige SOEs (SIEs)
to follow development plans and industrial policies of
the state ( 11 ). According to Measures for the Administration
of Development Strategies and Plans of Central Enterprises all
SIEs shall formulate a development and strategy plan
Government control of SOEs
which State-owned Asset Supervision and Administration
Commission of the State Council (SASAC) must examine
(59) Having
established
that
SOEs
are
performing
government
and approve. When performing such examination and
functions, the question remains as to whether they
prior the approval SASAC must consider, inter alia,
exercise government authority in doing so. In this
whether or not this plan complies with the national
regard, a key question is whether they are meaningfully
development planning and industrial policies and
controlled by the government ( 15 ). If this is the case, it is
whether or not it complies with the strategic adjustment
reasonable to determine, in the light of all the relevant
of the layout and structure of the State-owned econ
evidence, that SOEs act as an arm of government and
omy (
effectively implement policy set out in the plans above.

12 ).
(57) The
concrete
examples
of
the
implementation
of
the
(60) The
governmental
control
described
below
indicates
that
measures described in the plans such as the relocation
SOEs possess, exercise or are vested with governmental
of the Capital Steel Corporation
( 13 ) or numerous
authority. Control can be exercised, inter alia, through
mergers of steel enterprises ( 14 ) show that the plans are
government ownership, administrative regulation and
not only indicative documents which serve as guidelines
involvement of SASAC, boards of directors, government
but they result in concrete actions by the state-owned
plans.
steel enterprises orchestrated by the government (repre
sented by the NDRC and State Council).
Government ownership
(58) All of the specific actions described in the above recitals
(61) As
already
mentioned
in
the
section
above
concerning
must be followed and executed by the enterprises
non-cooperation (recitals (46) to (48)), GOC did not
covered by the plans. It is concluded that through this
provide the requested information on the ownership
direct government involvement in steel enterprises'
structure of the producers of HRS and CRS in China.
commercial behaviour, the state-owned steel enterprises
With the reply to the questionnaire the GOC submitted
a list of 54 companies in which the GOC is the largest
( 10 ) Article 36 of the Law of the People's Republic of China on the
shareholder, but during the verification visit it claimed
State-owned Assets of Enterprises reads: "A state-invested enterprise
that the list is not correct and also includes privately
making investment shall comply with the national industrial policies,…".
owned companies. The GOC did not correct the list
( 11 ) Article 6 of Tentative Measures for the supervision and Adminis
and also did not specify which of the companies are
tration of the Investments bt Central Enterprises reads: "the principle
privately owned and which are owned by the GOC.
of meeting the development plans and industrial policies of the state shall
Because of the non-cooperation the Commission had to
be observed for the investment activities of the enterprises as well as
SASAC supervision ad administration over the enterprises' investment
look at other evidence on the file and publicly available
activities".
information.
( 12 ) Articles 13(1) and 13(2) of the Measures for the Administration of
Development Strategies and Plans of Central Enterprises.
( 13 ) Chinese Vice Premier Zheng Peiyan said the replocation of the
Capital Steel in Hebei represents a major policy decision made by
the Comunist Party of China Central Committee and the State
Council (Xinhua News Agency, October 23, 2005).
( 14 ) see e.g. "China approves Anshan Steel merger with Panzhihua",
http://www.reuters.com/article/2010/05/25/us-china-steel-merger-
(62) The
complainant
provided
evidence
that
the
major
HRS
idUSTRE64O2G020100525
and CRS producers are state owned and submitted
"Steel merger will become China's biggest", http://www.chinadaily.
detailed information in this respect in Annex 10 to the
com.cn/bizchina/2010-04/19/content_9747309.htm
"Four Chinese steel makers agree to merge", http://online.wsj.com/
article/SB10001424052748703792704575366830150284538.
( 15 ) " … in our view, that evidence that a government exercises mean
html
ingful control over an entity and its conduct may serve, in certain
"New steel group formed by merger in China's Hubei Province",
circumstances, as evidence that the relevant entity possesses govern
http://www.steelorbis.com/steel-news/latest-news/new-steel-group-
mental authority and exercises such authority in the performance of
formed-by-merger-in-chinas-hubei-province-685647.htm
governmental functions." DS379 Appellate Body Report para.318.

---

EN
15.3.2013 Official
Journal
of
the
European
Union L
73/25
complaint ( 16 ). Also other publicly available (66) SASAC is also responsible for remuneration and
information ( 17 ) confirms that the GOC has ownership
assessment of the SOEs' managers; furthermore, it
stake in many of the producers of HRS and CRS.
appoints and decides on the rewards and punishments
to the SOE managers ( 20 ). In fact, all the evidence
suggests that the careers of SOE managers depend on
SASAC. These circumstances show that he SASAC
clearly is vested with Governmental authority.
(63) Taking into account all the information on the file it is
reasonable to conclude that the GOC has a significant
ownership stake in many of the Chinese HRS and CRS
producers.
Board of directors
(67) The composition of the Boards of SOEs also demon
strates the high level of control by the GOC of the
SOEs. The evidence on file ( 21 ) shows that many of the
members of boards of directors and boards of super
Administrative regulation and involvement of SASAC
visors hold or held in the past government and/or

party functions and that their selection is strongly
(64) SASAC performs the responsibilities of the State as an
influenced by governmental authorities such as SASAC
investor and manages the state-owned assets under its
or Communist Party of China (CCP).
supervision. It is noted that although the GOC in its
response to the questionnaire and subsequent
submissions claimed that SASAC is not involved in the
commercial operations of SOEs and supported this claim
with reference to Article 7 of the Interim Measures for
Government plans
the Supervision and Administration of State-owned
Assets of Enterprises ( 18 ), other articles of the same law
(68) The
GOC's
policies,
interests
and
goals
concerning
steel
and also other evidence on file ( 19 ) suggest otherwise.
industry are set in various governmental plans on central
and also sub-central level, The SOEs are encouraged to
follow these policies (the non-compliant companies are
even subject to sanctions) and from the recent actions of
some major steel SOEs in China it is obvious that these
policies are adhered to and the steel SOEs are working
towards reaching the targets and goals set in the plans.
(65) In fact, the GOC reply to the anti-subsidy questionnaire

shows that SASAC, authorised by the State Council,
appoints and removes the top executives of the
supervised enterprises, and evaluates their performances
through legal procedures. It is also responsible for urging
the supervised enterprises to carry out the guiding prin
(69) According
to
the Twelfth 5 Year Development Plan for the
ciples and policies, has responsibility for the fundamental
Steel Industry only the "enterprises that comply with the
management of the state-owned assets of enterprises and
nation's policies for the iron and steel industry and the
directs and supervises the management work of local
Standards and Conditions for Production and Operation
state-owned assets according to the law.
of the iron and steel industry play a primary role in
merging and reorganization." ( 22 )
( 16 ) The 17 companies listed in the Annex belong to some of the
biggest state-owned steel producers in China.
( 17 ) e.g http://en.wikipedia.org/wiki/Shougang_Corporation, http://en.
wikipedia.org/wiki/Hebei_Iron_and_Steel, http://companies.china.
org.cn/trade/company/559.html, http://companies.china.org.cn/ (70) A number of provincial and local level plans also
trade/company/557.html etc.
( 18 ) Article 7 of Interim Measures for the Supervision and Adminis
mention specific SOEs and set goals and targets for
tration of State-owned Assets of Enterprises: "the people's governments
them. The complainant provided extracts from these
at various levels shall strictly execute the laws and regulations on the
plans ( 23 ). All these plans were requested from the GOC
administration of state-owned assets, shall stick to the separation of the
in the questionnaire and in the deficiency letter for the
government's function of administration of public affairs and the function
as the contributor of state-owned assets, and stick to the separation of
government bodies and enterprises and the separation of ownership and
( 20 ) Articles 22, 27, 29 of the Law of the People's Republic of China on
management power. The state-owned assets supervision and administration
the State-owned Assets of Enterprises.
bodies shall not exercise the government's function of administration of
( 21 ) The state-business nexus in China's steel industry – Chinese market
public affairs, and the other bodies and departments of the government
distortions in domestic and international perspective, 2009 study
shall not perform duties of the contributor of state-owned assets in enter
prepared by Think!Desk – China research & Consulting for Eurofer,
prises".
Analyses of State-owned Enterprises and State Capitalism in China,
( 19 ) The state-business nexus in China's steel industry – Chinese market
2011, Capital Trade Incorporated prepared for the U.S.-China
distortions in domestic and international perspective, 2009 study
Economic and Security Review Commission and Annex 10 to the
prepared by Think!Desk – China research & Consulting for Eurofer,
complaint.
Analyses of State-owned Enterprises and State Capitalism in China,
( 22 ) Twelfth 5 Year Development Plan for the Steel Industry, Section IV(VII)
2011, Capital Trade Incorporated prepared for the U.S.-China
– Accelarate merging and reorganisation.
Economic and Security Review Commission.
( 23 ) Pages 108-109 of the complaint.

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L 73/26
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Official Journal of the European Union
15.3.2013
purpose of verification and clarification but the GOC
(b) Benefit (public bodies)
decided not to provide them. It is however noted that
the GOC did not dispute the accuracy of these citations
General considerations
during the proceeding. Moreover, companies mentioned
in the provincial and local plans admit their cooperation
(74) In order to assess whether there is a benefit in
with authorities and describe how they act or acted in
accordance with Article 3(2) of the basic Regulation, it
the past in line with the plans (
is necessary to compare the prices of HRS and CRS paid

24 ).
by the exporting producers concerned to the relevant
benchmark. The AB report confirmed that in a case
where the market of the country of provision is
distorted by the role of the government, the use of
external benchmarks was permitted. It also noted that
"where the government is the predominant supplier, it is
(71) Although
the
GOC
claims
that
some
of
the
above
plans
likely that private prices will be distorted, but a case-by-case
are only indicative, not binding and are supposed to
analysis is still required" (
serve merely as a guidance, this allegation is not

26 ). The AB also stated that: "…
we are not suggesting that there is a threshold above which the
supported by other evidence on file. On the contrary,
fact that the government is the predominant supplier in the
many laws and regulations which certainly are legally
market alone becomes sufficient to establish price distortion, but
binding ( 25 ) make the state development plans and
clearly, the more predominant a government's role in the
industrial policies obligatory for the SOEs.
market is, the more likely this role will result in the distortion
of private prices" ( 27 ). The AB further stated that: "when the
government is a "significant" supplier, evidence pertaining to
factors other than government market share will be needed, as
the government's role as a significant supplier cannot, on its
own, prove distortion of private prices". Therefore, the first
Conclusion
question to be answered is whether the government
share of the production of HRS and CRS in China is
(72) The GOC formulates the goals and targets for the iron
predominant or merely significant.
and steel industry through the 5-year plans and other
relevant official documents and achieves these goals via
the functions and activities described therein. Since these
plans and documents are formulated by departments of
the Chinese Government such as National Council or
NDRC the functions and activities to which they refer
should be considered governmental. Since as described
above the steel SOEs are obliged to follow the plans
(75) The
Commission
requested
from
the
GOC
information
and policies they act as an arm of the government
on the market of HRS and CRS in respect to the
and, since the government exercises meaningful control
proportion of output of HRS and CRS produced by the
over them, they are in fact exercising government auth
SOEs and private companies but the GOC did not submit
ority.
any relevant information in this respect ( 28 ).
(73) In view of the lack of cooperation from the GOC, the
scope of those entities which are considered "public
bodies" was not defined to the full extent. In any
(76) The
Commission
used
other
information
available
( 29 )
event, any SOE in which the government is the
concerning this issue on the basis of which it was estab
majority or the largest shareholder is a public body.
lished that at least 63 % of HRS in China is produced by
Entities in which the government has no shareholding
steel SOEs. It is important to note that this 63 % share of
are private bodies. Having that said, there is no need
SOEs was arrived at after very conservative analysis and
to draw a bright line between public and private
bodies here, since in recitals (85) to (98) below, it is
( 26 ) DS 379 AB report Para 441.
demonstrated that all private bodies in the steel sector
( 27 ) DS 379 AB report Para 444.
are entrusted and directed by the State and so, for all
( 28 ) The GOC submitted a table with figures relating to the output of
relevant purposes, behave in the same way as public
HRS and CRS produced by SOEs and private companies but during
bodies.
the verification it was found that this table is not complete and the
GOC refused to provide the information used for preparation of
this table which would allow for proper verification.
( 24 ) e.g Chongqing Iron and Steel website (http://en.cqgtjt.com/),
( 29 ) The responses of 4 Chinese exporting producers (2 sampled, 2
Baosteel website (http://www.baosteel.com/group_e/01news/
voluntary responses) concerning their purchases of HRS (and
ShowArticle.asp?ArticleID=2553)
CRS). The similar investigations by other investigating authorities
( 25 ) E.g. Tentative Measures for the supervision and Administration of
confirm these figures. For example the USDOC established that the
the Investments by Central Enterprises, Measures for the Adminis
following proportions of HRS in China were produced by SOEs in
tration of Development Strategies and Plans of Central Enterprises,
the past: High Pressure Steel Cylinders (70 %), Wire Decking
Law of the People's Republic of China on the State-owned Assets of
(OSDOC determined that government authorities accounted for a
Enterprises, Order No. 35 of the NDRC – Policies for Development
majority of the HRS produced during the POI), Light-Walled
of Iron and Steel Industry.
Rectangular Pipe and Tube (70,81 %).

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15.3.2013 Official
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of
the
European
Union L
73/27
represents the absolute minimum figure. The fact that
to the questionnaire the GOC did not provide any such
many of the allegedly private suppliers reported by the
information. The investigation at the exporters of OCS
exporters seem to be trading companies (which may well
established that the prices paid by the four exporting
have purchased from the product from SOEs), the non-
producers/groups during the IP for the HRS and CRS
cooperation of the GOC (see recitals (46) to (48) above)
sourced from private producers of HRS and CRS or
and findings of other investigating authorities (see
from traders were consistently very close to the prices
footnote 32) leads to the conclusion that the real share
of SOEs ( 31 ). Thus the observed data, together with the
of SOEs on the HRS market is much higher. Also the
predominance of SOEs in this sector, demonstrates that
strong involvement of the GOC in this sector HRS
the price of private suppliers effectively tracks the prices
market (see recitals (85) to (94) below) limits the
paid to SOEs. Furthermore, in the contract submitted by
manoeuvring of the private operators.
one of the sampled exporting producers for the provision
of HRS by a privately owned supplier there is even a
condition to link the price to the SOE supplier price.
(77) Taking
the
above
into
consideration
it
was
established
that the SOEs are predominant in the HRS market in
China. This predominance of SOEs in the HRS market
is so considerable that the private producers have no
choice but to align their prices with the SOEs, as is
demonstrated below.
(81) On the basis of the totality of the information on the file
it is established that the prices of HRS and CRS sold by
SOEs in China are distorted, as a result of the strong
predominance of the SOEs in the HRS and CRS market
in China. The prices of HRS and CRS of private suppliers
are aligned with the prices of SOEs. Taking this into
account it is concluded that there are no reliable
(78) With
regard
to
CRS,
the
reported
share
of
SOEs
from
the
market prices in China for the HRS and CRS. Since
Chinese exporting producers (18 %) was much lower
there are no "prevailing market terms and conditions"
than in the case of HRS, however it was contradicted
on the HRS and CRS market in China, the Commission,
with other information (see recital (79) below). In view
in accordance with Article 6(d) of the basic Regulation,
of non-cooperation from the GOC, the fact that many of
had to look for an alternative benchmark. Since the
the allegedly private suppliers reported by the exporters
whole of the Chinese market is distorted, it is considered
seem to be trading companies (which may well have
impractical to adjust costs and prices in China in any
purchased from the product from SOEs) and the limi
meaningful way and import prices would appear to be
tations on commercial activities of private operators
similarly distorted by the predominance of SOEs.
caused by the strong involvement of the GOC in this
Therefore, in accordance with Article 6(d)(ii) of the
sector (see recitals (85) to (94) below) it is concluded
basic Regulation, an external benchmark was sought.
(partly on the basis of facts available (see recital (79)
below) within the meaning of Article 28 of the basic
Regulation) that SOEs also predominate in the CRS
market in China.
(82) The most appropriate benchmark appears to be a
(79) This conclusion is corroborated by the World Steel
constructed benchmark on the basis of the world
Capacity Book, which contradicts the 18
% share
market prices of HRS and CRS regularly published in
reported by the Chinese exporters and shows that more
various specialised steel journals like Steel Business
than 70 % of the whole production capacity of CRS in
Briefing, MEPS and CRU.
China is state-owned ( 30 ).
(80) The
Commission
requested
information
from
the
GOC
on prices of HRS and CRS by state-owned and privately
owned companies sold on Chinese market. In the reply
(83) Comparing the SOE prices to the out of country
benchmark (constructed as explained in recital p.
below) showed that these prices were well below the
( 30 ) According to the World Steel capacity Book, the production
capacity of CRS in China is around 81,035,000 tonnes per year
and on the basis of publicly available data on ownership around
( 31 ) The price difference between the SOE prices and prices of private
57,490,000 tonnes is produced by state-owned companies.
suppliers were on average only 3,75 % different during the IP.

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L 73/28
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Official Journal of the European Union
15.3.2013
benchmark prices and consequently resulted in benefit
companies and on a number of occasions it can be
for the Chinese exporting producers of OCS within the
observed that this "guidance" resulted in action by steel
meaning of Article 3(2) of the basic Regulation.
companies as is recommended in the plans.
(c) Specificity
(88) For
example, Order of the NDRC No.35- Policies for the
(84) This subsidy programme is specific within the meaning
development of Iron and Steel Industry encourages the steel
of Article 4(2)(c) of the basic Regulation given that the
companies to act in certain way ( 32 ), sets conditions on
HRS and CRS is only used by limited number of
investments and makes investment subject to approval
industries and enterprises in China in their production.
by the authorities
( 33 ), influence competition for
resources ( 34 ) and even provide for sanctions for non-
complying companies ( 35 ). Also the Twelfth 5 Year Devel
opment Plan for the Steel Industry influences the business
decisions of the steel companies which consequently can
have impact on cost structure and prices ( 36 ).
(d) Entrustment and direction of private suppliers
(85) The
next
question
to
be
addressed
is
whether
the
private
producers of HRS and CRS, which are not public bodies,
are nevertheless entrusted or directed by the GOC to
provide HRS and CRS to the OCS producers, within
(89) In
addition
to
this
the
complainant
provided
in
the
the meaning of Article 3.1(a)(iv) of the basic Regulation.
Annex 24 to the complaint a collection of extracts
from various policy documents of different government
( 32 ) Article 18 of Order No.35-The policies of imported technologies
and equipment: enterprises are encouraged to use home-made
equipment and technologies and reduce export.
Article 20 of Order No.35-The iron and steel enterprises are
encouraged to develop into groups and carry out strategic reorgani
Government policy
sation by way of alliance between mighty enterprises…
( 33 ) Article 22 of Order No. 35-The investment in any iron and steel
project shall be subject to the examination and approval or verifi
(86) At
the
outset,
it
has
already
been
established
that
the
cation of the NDRC according to relevant provisions.
GOC has a policy to provide HRS and CRS to the
Article 23 of Order No.35- For any foreign investment in the iron
OCS sector, because public bodies, which are part of
and steel industry of China, foreign investors are not allowed to
the government, are engaged in such provision and
have a controlling share as is the general principle.
hold a predominant place in the market, which enables
( 34 ) Article 24 of the Order No.35- For any project that fails to comply
them to offer below-market prices. And in any event,
with the development policies for the iron and steel industry and
regardless of the characterisation of those bodies as
hasn't been subject to examination and approval or where the
"
examination and approval thereof fails to comply with the
public" or not, the same evidence shows the existence
relevant provisions, the department of state land and resources
of government policy strongly interfering in this sector. It
shall not handle the formalities for land use and the department
now has to be determined whether that policy extends to
of industry and commerce shall not accept its registration, the
private suppliers.
administrative department of commerce shall not approve its
contract and constitution, the financial institution shall not
provide any loan or give credit support in any other form…
Article 25 of the Order No.35-To grant mid- and long-term loans for
the fixed asset investment to the projects of iron smelting, steel
smelting and steel rolling, a financial institution shall comply with
the development policies for the iron and steel industry, and
strengthen their risk management.
( 35 ) Article 30 Where two or more domestic enterprises are engaged in
vicious competition for overseas resource, the state may adopt
Extension of policy to private suppliers of HRS and CRS
administrative coordination to hold alliance or select one of them
to make investment so as to avoid vicious competition.
Government plans providing guidance and encouragement
( 36 ) Section III (III)6 of the Twelfth 5 Year Development Plan for the Steel
Industry.-Industrial clustering level: significantly reduce the quantity of
(87) In a number of government plans and policy documents
the steel enterprises; the proportion of the steel production of the
there are indications that steel producers in China (both
top-10 steel enterprises to the national aggregate rises to approxi
SOEs and privately owned) are encouraged and
mately 60 % from 48,6 %.
supported by the GOC. Certain sections of these
III.(V) of the 12th FYP for I&S -Optimising the Industry Layout.
This chapter describes how the steel and iron industry should be
documents suggest that there is a direct link between
reconstructed with the help of mergers, relocations, control of
the government and the conduct of the private steel
production capacity, bans in some provinces and support in others.

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European
Union L
73/29
organisations highlighting the GOC support to the steel
is another sign that the private producers of HRS and
industry in general or organic coated business specifi
CRS cannot act independently from the actions of GOC
cally ( 37 ).
and other public bodies.
(93) This fact is also supported by the information provided
by the Chinese exporting producers which submitted
(90) Furthermore, there is publicly available information
replies to the anti-subsidy questionnaires which shows
showing that the privately owned companies act in
that the prices of private suppliers of HRS and CRS are
accordance with different government plans and policy
almost aligned with those of SOEs. Furthermore, in the
documents ( 38 ).
contract submitted by one of the sampled exporting
producers for the provision of HRS by a privately
owned supplier there is even a condition to link the
price to the SOE supplier price.
Export restrictions on hot-rolled and cold-rolled steel
(91) The
GOC
has
taken
steps
to
discourage
the
export
of
(94) In
view
of
the
above
finding
that
SOE
prices
are
at
HRS and CRS by means of export restrictions imposed
below-market levels, it is clear that the prices of
through the complex VAT refund system. More
privately owned suppliers, being aligned to those of
specifically HRS and CRS is subject to the payment of
SOEs, are also at below-market levels.
VAT at 17 %. VAT for domestically sold OCS produced
from CRS (which is produced from HRS) is refundable at
13 % whereas if the company chooses to export HRS or
CRS the VAT is not at all refunded. This system means
that the privately owned producers of HRS and CRS are
(e) Financial contribution
not able to act with normal commercial freedom and has
the effect of increasing the domestic supply of HRS and
(95) According
to
Article
3.1(a)(iv)
–
second
indent
-
of
the
CRS and inevitably depressing its price on the Chinese
basic Regulation, a financial contribution exists where a
market. Thus private-owned HRS and CRS producers (in
government: "entrusts or directs a private body to carry
the same way as SOEs) are unable to act independently
out one or more of the type of functions illustrated in
from the GOC policy.
points (i), (ii) and (iii) which would normally be vested in
the government, and the practice, in no real sense, differs
from practices normally followed by governments;". The
WTO Appellate Body has interpreted "direction" as
referring to situations where a government exercises its
authority, including some degree of compulsion, over a
private body, and "entrustment" as referring to situations
Pricing of private suppliers
in which a government gives responsibility to a private
body ( 39 ). In addition, the WTO panel on US-Export
(92) In
the
section
above
concerning
benefit
for
public
bodies,
Restraints ( 40 ), established a three-pronged test for the
it was established that due to the predominance of the
existence of entrustment and direction, which requires
steel SOEs in the HRS and CRS market the private
the existence of (a) a government action, which is (b)
producers of HRS and CRS have no choice but to
addressed to particular party and (c) the objective of
align their prices with the SOEs prices. In other words
which is a particular task or duty ( 41 ).
they do not set the prices but they rather take them. This
( 37 ) Annex 24 to the complaint – compilation of relevant citations from
various plans and legislations.
( 38 ) e.g. Jiangsu Shagang Group on its website (http://www.sha-steel.
com/eng/index.html) stated: Shagang Group will conscientiously
(96) On
this
basis,
the
inclusion
of
private
suppliers
in
the
implement tha State policy concerning the steel industry devel
GOC policy to supply HRS and CRS constitutes
opment. With the guidance of Scientific Outlook on development,
government "entrustment" and "direction" of private
Shagang would pursue the sustainable development strategy, take a
suppliers for the following reasons:
new road to industrialisation, speed up transformation and
upgrading, vigorously promote the readjustment of product
structure, further extend its industrial chain, pay adequate
( 39 ) Appellate Body Report, US – Countervailing Duty Investigation on
attention to supporting enterprises, build modern logistics,
DRAMS, paras. 111 and 116.
implement capital operation, constantly improve its overall
( 40 ) Dispute No DS194 United States – Measures treating export
competitiveness in order to further make Shagang perfect, strong
restraints as subsidies (Panel report 29 June 2001).
and excellent and try to our best to build Shagang as a famous
( 41 ) Paras 8.28 -8.30 of panel report. Although the government "action"
brand of "Hundred-year Old Factory". Also Shagang people will
was originally qualified as "explicit and affirmative", subsequent
make new contributions to building harmonious Jiangsu nd
findings of the Appellate Body suggest that this may be too rigid
making China become a powerful steel country.
a standard.

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Official Journal of the European Union
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A government "action":
(98) Furthermore, in view of the above analysis, the evidence
on the file and other publicly available information led
the Commission to the conclusion that private producers
of HRS and CRS in China are entrusted and directed by
the GOC to provide goods in line with Articles 3.1(a)(iii)
and 3.1(a)(iv) of the Basic regulation and act in the same
— The GOC "policy" (see recital (86) above), constitutes
way as steel SOEs.
an "action" or "actions". The policy is carried out by
public bodies (SOEs), which are predominant in the
market and sell at below-market prices and by the
GOC, through plans and the manipulation of export
restrictions. The overall effect is that private suppliers
(f) Benefit (private suppliers)
are effectively compelled to follow the below-market
prices of public bodies.
(99) The
Commission
established
that
the
private
suppliers
of
HRS and CRS act under entrustment and direction of the
GOC and the investigation showed that the prices of
privately owned suppliers of HRS and CRS are aligned
with SOEs prices (see the section above).
"Addressed to a particular party":
(100) Taking this into account it is concluded that the findings
concerning benefit and specificity from the provision of
— The government policy (notably the plans and export
HRS and CRS for below market prices by the SOEs also
restrictions) applies to all HRS and CRS producers,
apply to the provision of HRS and CRS by privately
both state-owned and private. In this sense the policy
owned suppliers.
is "addressed" to all producers. This is evidenced by
the fact that SOE and private prices are aligned and
that private suppliers sell at prices which are
commercially unreasonable.
(g) Findings of the investigation
(101) Two sampled exporting producers have benefited from
this programme. One exporting producer (Panhua Steel
Group) has benefited from the provision of HRS for less
"the objective of which is a particular task or duty":
than adequate remuneration and the other exporting
producer (Huadong Steel Group) has benefited from the
provision of CRS for less than adequate remuneration.
— The objective of the government policy, as evidenced
by the price levels in China, is the provision of HRS
and CRS at below-market prices. The actions of the
(h) Calculation of the subsidy amount
GOC and SOEs leave private suppliers with no other
(102) The amount of countervailable subsidy is calculated in
choice but to follow the practices of public bodies
terms of the benefit conferred on the recipient, which is
and this effectively imposes a particular task or duty
found to exist during the IP. That benefit is calculated by
on them. The GOC policy, especially through the
taking the sum of the differences between the actual
plans and VAT manipulation, severely restricts the
purchase values and appropriate benchmark values of
freedom of private suppliers from this task or duty.
the HRS and CRS purchases. The resulting amount was
then allocated over the total sales turnover of the
cooperating exporting producer during the IP, because
the subsidy is not contingent upon export performance
and was not granted by reference to the quantities manu
Conclusion
factured, produced, exported or transported.
(97) Taking
all
of
the
above
factors
into
consideration
it
can
be concluded that the GOC export restriction,
government planning and the predominance of SOEs
limits the freedom of private suppliers of HRS and
(103) Since the Chinese market for HRS and CRS is distorted,
CRS, obliging them to act in a non-commercial
world market prices of HRS and CRS were considered
manner and to accept economically irrational (below-
appropriate bases for constructing benchmark prices for
market) prices which they would not do in a free and
HRS and CRS. On the basis of various steel journals (SBB
open market. This confirms that the government policy
and MEPS) domestic prices, net of taxes, of five coun
to supply HRS and CRS (including to the organic coated
tries/regions were selected (i.e. Europe, USA, Turkey,
steel sector) extends to private suppliers.
Japan and Brazil). In order to arrive at the representative

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European
Union L
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benchmark the Commission selected the biggest market
GOC did not provide any data with respect to the actual
for each relevant geographical region, i.e. Europe (EU),
land-use rights prices, minimum land prices formulated
North America (USA), Latin America (Brazil), Asia (Japan)
by the government which were mentioned in the reply to
and Middle East/North Africa (Turkey). The monthly
the anti-subsidy questionnaire and during the verification
average prices for the IP period of each of the five coun
visit.
tries/regions were arithmetically averaged so as to arrive
at the monthly benchmark prices. The five countries/
regions selected did not have the highest prices during
the IP, they are all members of WTO, are among the ten
biggest steel producers worldwide and are located in
different continents. The benchmark prices thus estab
lished are therefore considered reasonable and appro
priate.
(108) During the verification the Commission requested from
the GOC evidence to support its claim that all the
industrial land in China is assigned through bidding,
quotation or auction. GOC was not able to provide
such evidence during the verification visit, but
submitted some information in this respect after the
verification visit. However, all this evidence shows is
(104) The subsidy rate established with regard to this scheme
that from thirteen land-use rights transactions concerning
during the IP for the sampled exporting producers
sampled exporting producers, only six were to be subject
amounts to 23,02 % for the Huadong Group and
to bidding or auction process. No information on the
27,63 % for the Panhua Group.
auction/bidding process participant was provided as
requested by the Commission and in fact on all
occasions the final price paid by the company was
same as the price arbitrarily set by the local authorities.
(105) The weighted average subsidy rate for the cooperating
companies not included in the sample is 25,37 %.
(109) The Commission also requested from the GOC, under
the assumption that there is no market price for land
in the PRC, its views on possible benchmarks. Although
(106) Given the low level of cooperation, the subsidy rate for
this was only an assumption and by no means a finding
all non-cooperating companies is set at the level of the
or conclusion at the time when the questionnaire was
highest subsidy rate established for this scheme for an
sent to the GOC, the GOC expressed its view that this
entity related to one of the sampled cooperating
assumption is false and did not provide any possible
companies, i.e. 32,44 %.
benchmarks. GOC also pointed out to the alleged defi
ciency in the complaint that on one hand the
complainant alleges that there is no market for land in
China and "out of country benchmark" should be used,
but on the other hand alleges that the SOEs receive land
from the government at favourable terms vis-à-vis private
industry and suggested that should any benchmark be
3.3.1.2. Provision of land use rights for less than the
used it should be the prices that "not favoured"
adequate remuneration
Chinese industries are paying, but did not provide any
information on these prices. In this context it should be
(a) Introduction
noted that the complainant alleged that the land use
rights market in China was distorted as a whole and
(107) The complainant alleged that there is no functioning
both state-owned and private OCS producers have
market for land in China and the amount paid by the
received land-use rights for less than adequate remuner
companies for the use of land is below the normal
ation.
market rate. In its reply to the anti-subsidy questionnaire
the GOC stated that "In accordance with the Land
Administration Law of the PRC, land in urban districts
shall be owned by the State; land in rural areas and
suburban areas, except otherwise provided for by the
State, shall be collectively owned by peasants". GOC
claimed that there is a standardised and orderly
competitive land market, land use rights must be
(b) Legal basis
publicly traded in accordance with the law in the land
market. GOC also stated that industrial and commercial
(110) The land-use right provision in China falls under Land
land should be obtained by compensation for the use in
Administration Law of the People's Republic of China
open market by bidding, auction and competition. The
and Real Right Law of the People's Republic of China.

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L 73/32
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Official Journal of the European Union
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(c) Practical implementation
Zhejiang Huadong Light Steel Building Material Co., Ltd
(111) According to Article 2 of the Land Administration Law,
(115) Zhejiang Huadong Light Steel Building Material Co., Ltd
all land is government-owned since, according to the
obtained two of its land-use rights from local Land and
Chinese constitution and relevant legal provisions, land
Resources Bureau, Xiaoshan District and one from the
belongs collectively to the People of China. No land can
private company. No evidence on bidding or auction
be sold but land-use rights may be assigned according to
could be provided as according to the GOC for the
the law. The State authorities can assign it through public
land-use rights purchased before 1 September 2006
bidding, quotation or auction.
there were no sales confirmation for land use rights
transactions and in fact the GOC did not confirm or
deny that these transactions were subject to bidding or
auction.
(d) Findings of the investigation
(112) The cooperating exporting producers have reported
information regarding the land they hold as well as
(116) The findings of the proceeding confirm that the situation
most of the relevant land-use rights contracts/certificates,
concerning land provision and acquisition in China is
but only very limited information was provided by the
unclear and non-transparent and the prices are often
GOC about pricing of land-use rights.
arbitrarily set by the authorities. The authorities set the
prices according to the Urban Land Evaluation System
which instruct them among other criteria to consider
also industrial policy when setting the price of industrial
land. Also, at least in the steel sector, the access to
industrial land is by law limited only to companies
respecting the industrial policies set by the State (
(113) As mentioned above the GOC claimed that the land-use

43 ).
rights in China are assigned through bidding, auction and
competition. This is also provided for in the Article 137
of the Real Right Law of the People's Republic of
China ( 42 ).
(117) Also, the independent information submitted by the
complainant suggest that the land in China is provided
for below the normal market rates ( 44 ).
Panhua Group Co. Ltd.
(114) However, during the verification of cooperating
exporting producers it was found that this system as
described by the GOC does not always work like that
(e) Conclusion
in practice. For example out of six land-use rights
purchased by Chongqing Wanda Steel Strip Co. Ltd.
(118) Accordingly, the provision of land-use rights by the GOC
(part of Panhua Group Co. Ltd) for four of them, as
should be considered a subsidy within the meaning of
confirmed by company officials, there was no bidding
Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation
process. Chongqing Wanda was the only participant
in the form of provision of goods which confers a
and the final transaction price paid by the company
benefit upon the recipient companies. As explained in
was in fact exactly the same as the initial price arbitrarily
recitals (114) - (115) above, there is no functioning
set by the local Land Resources Bureau. As for the
market for land in China and the use of an external
remaining two land-use rights there was a bidding
benchmark demonstrates that the amount paid for
process, but no evidence for this was provided neither
land-use rights by the cooperating exporters is well
by the company nor by the GOC. In fact, from the
below the normal market rate. The subsidy is specific
documents submitted by the GOC after the verification
under Article 4 2(a) and 4 2(c) of the basic Regulation
visit it appears that also these two land-use rights were
because the access to industrial land is by law limited
purchased for the price identical to the price set by the
only to companies respecting the industrial policies set
local Land Resources Bureau. Zhangjiagang Panhua Steel
by the State, only certain transactions were subject to a
Strip Co., Ltd (also part of Panhua Group Co. Ltd)
obtained three land-use rights by transfer from private
( 43 ) Article 24 of the Order of the NDRC No.35 (Policies for Devel
companies in exchange for share in Panhua Group Co.
opment of Iron and Steel Industry): For any project that fails to
Ltd.
comply with the development policies for the iron and steel
industry and has not been subject to examination and approval
or where the examination and approval thereof fails to comply
( 42 ) As regards the land used for purposes of industry, business, enter
with the relevant provisions, the department of state land and
tainment or commercial dwelling houses, etc. as well as the land
resources shall not handle the formalities for land-use rights.
with two or more intended users, the alienation thereof shall adopt
( 44 ) George E. Peterson, Land leasing and land sale as an infrastructure-
such means as auction, bid invitation or any other public bidding
financing option, World Bank Policy Research Working Paper
method.
4043, 7 November 2006.

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bidding process, prices often being set by the authorities
of the basic Regulation this subsidy amount (numerator)
and government practices in this area are unclear and
has been allocated to the IP using the normal life time of
non-transparent.
the land use right for industrial use land in China, i.e. 50
years. This amount has then been 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 was not granted by
(119) Consequently, this subsidy is considered countervailable.
reference to the quantities manufactured, produced,
exported or transported.
(f) Calculation of the subsidy amount
(124) The subsidy rate established with regard to this scheme
(120) As it was concluded that the situation in China with
respect to land-use rights is not market-driven, there
during the IP for the cooperating exporting producers
appear to be no available private benchmarks at all in
amounts to 0,34 % for the Huadong Group and 1,12 %
China. Therefore, an adjustment of costs or prices in
for the Panhua Group.
China is not practicable. In these circumstances it is
considered that there is no market in China and, in
accordance with Article 6(d)(ii) of the basic Regulation,
the use of an external benchmark for measuring the
amount of benefit is warranted. Given that the GOC
(125) The weighted average subsidy rate for the cooperating
did not cooperate or failed to submit any proposal for
companies not included in the sample is 0,73 %.
an external benchmark the Commission had to resort to
facts available in order to establish an appropriate
external benchmark. In this respect it is considered
appropriate to use information from the Separate
Customs Territory of Taiwan as an appropriate
(126) Given the low level of cooperation, the subsidy rate for
benchmark.
all non-cooperating companies is set at the level of the
highest subsidy rate established for this scheme for an
entity related to one of the sampled cooperating
companies, i.e. 1,36 %.
(121) The Commission considers that the land prices in Taiwan
offer the best proxy to the areas in China where the
cooperating exporting producers are based. The
majority of the exporting producers are located in the
3.3.1.3. Programme consisting of provision of water for
eastern part of China, in developed high-GDP areas in
less than adequate remuneration
provinces with a high population density.
(a) Introduction
(127) The complaint alleged that water prices in China are
exclusively determined by public authorities and that
(122) The amount of countervailable subsidy is calculated in
the pricing structure is set according to industrial
terms of the benefit conferred on the recipients, which is
macro-policies. It also reported that water prices were
found to exist during the IP. The benefit conferred on the
different in the various local areas and that there was
recipients is calculated by taking into consideration the
also a differentiation of rates on a company-by-
difference between the amount paid by each company
company basis. The complaint alleged that it was likely
for land use rights and the amount that should have been
that OCS producers had benefitted from water prices for
normally paid on the basis of the Taiwanese benchmark.
less than adequate remuneration in accordance with the
policy to encourage high-added value steel products.
(123) In doing this calculation, the Commission used the
average land price per square meter established in
(128) The water supply and market in China is administered by
Taiwan corrected for currency depreciation and GDP
the NDRC, the Ministry of Water Resources and the
evolution as from the dates of the respective land use
Ministry of Environment. The water supply market is
right contracts. The information concerning industrial
still largely dominated by local state-owned companies,
land prices was retrieved from the website of the
although the entrance of foreign investment companies
Industrial Bureau of the Ministry of Economic affairs of
in some water supply projects of certain cities has broken
Taiwan. The currency depreciation and GDP evolution
the monopoly of state suppliers. However, the GOC was
for Taiwan were calculated on the basis of inflation
unable to provide a detailed list of water suppliers with
rates and evolution of GDP per capita at current prices
their service area and volumes supplied (see recital (129)
in USD for Taiwan as published by the IMF in its 2011
below), but limited its reply to a list of water suppliers in
World Economic Outlook. In accordance with Article 7(3)
the areas of the sampled exporting producers.

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(129) As for pricing, the NDRC formulates the main pricing
(d) Benefit
policy and the local authorities set the local water price
after a hearing procedure with the aim to pursue a
(134) Huadong Steel Group received a benefit within the
sustainable utilisation of water resources. The prices
meaning of Article 3(2) of the basic Regulation to the
reflect the costs together with a reasonable profit for
extent that the government has provided water for less
the local water suppliers. The GOC submitted the
than adequate remuneration. It has been established that
relevant price lists applicable in the municipalities
this exporter has not paid the full price for water supply
where the sampled OCS producing exporters were
normally applicable to the category of users to which it
located. It was clarified that the various municipal
belongs, as the "sewage treatment fee" component of the
prices apply to all industrial users uniformly and do
water price has not been paid.
not vary by company or users.
(e) Specificity
(b) Findings of the investigation
(135) The subsidy in form of provision of water to one of the
cooperating exporters is specific within the meaning of
(130) The investigation confirmed that the NDRC sets the basic
Article 4(2)(c) of the basic Regulation, since the sewage
price of water, and the municipal price administrative
treatment fee is not waived for all enterprises. Notwith
authorities set the price for each municipality on the
standing the absence of legislation limiting this subsidy
basis of several parameters (e.g. costs of distribution,
to certain enterprises, the possibility for a certain
profit, and reasonable surplus). The water price is supple
enterprise producing the product concerned to obtain
mented by a 'sewage treatment' fee also set at municipal
water supply for less than adequate remuneration,
level.
coupled with the apparent discretion conferred with the
local authorities to waive part of the rate normally paid
for water, makes the subsidy in fact specific. The
Commission could not collect any further evidence
concerning the basis on which this fee was waived as
the exporting producer was unable to provide it.
(131) While the basic water price, the sewage treatment fee and
other possible local surcharges are equally applicable to
all users falling in the same categories, it was found that
one of the two sampled exporters, Zhejiang Huadong
Group, did not pay the sewage treatment fee.
(f) Calculation of subsidy amount
(136) 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 considered to
be the amount of sewage treatment fee not paid for
(132) The exporter claimed that it paid this fee as a lump-sum
water consumption during the IP. In accordance with
amount to the Environment Protection Bureau. However,
Article 7(2) of the basic Regulation, this subsidy
it is not considered that this payment was made on the
amount (numerator) has been allocated over the total
place of the sewage treatment fee for the following three
sales turnover of the cooperating exporting producers
reasons: (1) the official document reads "waste water
during the IP, because the subsidy is not contingent
emission" fee and not "sewage treatment" fee; (2) the
upon export performance and was not granted by
payment is not proportional to the actual water
reference to the quantities manufactured, produced,
consumption; (3) the total amount paid is quite small
exported or transported.
as compared to the actual amount that would have
been payable if the sewage treatment fee on the actual
water consumption had been due.
(137) Zhejiang Huadong Group has benefited from the non-
payment of the sewage treatment fee. The subsidy rate
established for it is 0,01 %.
(c) Financial contribution
(133) Zhejiang Huadong Group received a financial
contribution within the meaning of Article 3(1)(a)(iii) of
(138) The weighted average subsidy rate for the cooperating
the basic Regulation in that the government provided
companies not included in the sample is 0,01 %.
water through the local public water supply company
(i.e. Hangzhou Xiaoshan Water Supply Co. Ltd.). This
constitutes a government financial contribution in the
form of provision of goods other than general infra
structure within the meaning of the basic Regulation.
(139) Given the low level of cooperation, the subsidy rate for
Alternatively, this could be viewed as revenue foregone
all non-cooperating companies is set at the level of the
by the government because a public body did not collect
highest subsidy rate established for this scheme for the
revenue otherwise due in the sense of Article 3(1)(a)(ii).
sampled cooperating companies, i.e. 0,01 %.

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3.3.1.4. Programme consisting of provision of elec
role that all relevant bodies or entities play. The GOC
tricity for less than adequate remuneration
failed to submit the full set of the relevant pricing
decisions issued by the NDRC and the local price
(a) Introduction
bureaux not only with regard to the non-sampled
producing exporters, but also with regard to the
(140) The complaint alleged that the GOC has provided elec
sampled producing exporters. The GOC also failed to
tricity for less than adequate remuneration through pref
describe accurately the role of the NDRC and the local
erential rates. In particular, the complaint asserted that
price bureaux in the setting of the prices. The
electricity rates were set differently in different provinces
Commission informed the GOC of these shortcomings
and also that preferential rates were used as an industrial
with regard to the sampled producing exporters in its
policy tool to encourage high added-value steel products
letter of 12 August 2012. It was also discovered after
and discourage outdated production capacities.
the verification visits that the GOC indicated an incorrect
electricity rate applicable to one of the sampled
cooperating exporters.
(141) The NDRC is responsible for regulating the electricity
market and setting the pricing in China. The trans-prov
incial and provincial grids are operated by two state-
owned suppliers: State Grid Corporation of China and
(c) Findings of the investigation
China Southern Power Grid Corporation. The electricity
suppliers at municipal level are subsidiaries of these
(144) The investigation confirmed that it is the NDRC that sets
companies. A competition mechanism is in the process
the prices of electricity applicable in the various prov
of being introduced in China through a few pilot
inces. It was verified that the local price bureau merely
projects, but its impact is still negligible at this stage.
acts as an executive arm of the decision taken at central
level by the NDRC. This is also confirmed by the fact
that the NDRC issues Notices in which it sets the actual
prices set for each province and then these notices are
formally transposed into local notices adopted by the
local price bureaux and implemented at local level. The
(142) The electricity prices are set by the NDRC on the basis of
investigation also established that differential electricity
a procedure that includes cost investigation, expert
rates applicable for certain sectors and/or at provincial
appraisal, public hearings, and final price determination
and local level are set in accordance with certain factors,
and publication. The NDRC publishes the prices
including notably the pursuit of the industrial policy
applicable to each province into Notices, and then the
goals set by the central and local governments in their
local price bureaux publish a corresponding notice at
5-year plans and in the sectoral plans.
local level implementing the prices decided by the
central NDRC. The final price reflects purchasing costs,
transmission costs and losses, and government
surcharges. The prices are differentiated by province
depending on the local situation and policy objectives
pursued in the various provinces. They are set for
different end user categories (e.g. residential, industrial
(145) The investigation of the cooperating sampled exporters
users). An additional price differential exists for
showed that one of them, i.e. Chongqing Wanda Steel
different industrial users to pursue the industrial
Strip ("CWSS") benefited from an electricity rate lower
policies set by the GOC and reflected in the catalogue
than the rate generally applicable for large industrial
contained in Decision No. 40 (2005) of the NDRC (see
users. It was found that in the specific area where this
further explanation in recital (182)). Users falling in the
exporter was located a sub-category of certain industrial
'encouraged' enterprises according to the NDRC
users, including those producing the product concerned,
catalogue pay the basic electricity rate, whereas users
were entitled to this lower rate.
falling in the 'outdated' or 'prohibited' enterprises pay a
surcharge on top of the basic rate. Users not falling into
any category listed in the catalogue fall in the default
category of 'allowed' enterprises and also pay the basic
rate without surcharges. OCS producers would normally
fall in the category of 'encouraged' enterprises according
to Decision No. 40 of the NDRC.
(d) Financial contribution
(146) One of the cooperating sampled exporters (CWSS)
received a financial contribution in the sense of
Article 3(1)(a)(iii) of the basic Regulation in that the
government provided electricity through the local
(b) Non–cooperation
public electricity supply company. This constitutes a
government contribution in the form of provision of
(143) The Commission requested from the GOC the regulatory
goods other than general infrastructure within the
framework of the electricity market and pricing and the
meaning of the basic Regulation.

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(e) Benefit
performance and was not granted by reference to the
quantities manufactured, produced, exported or trans
(147) CWSS received a benefit within the meaning of
ported.
Article 3(2) of the basic Regulation to the extent that
the government has provided electricity for less than
adequate remuneration. It has been established that this
exporter was entitled to a rate lower than the rate
generally applicable to other large industrial users.
(151) One of the cooperating sampled exporting producers
belonging to the Panhua Group of companies (i.e.
CWSS) has benefited from this lower electricity rate.
The subsidy rate established for the Panhua Group is
0,14 %.
(f) Specificity
(148) The subsidy in form of provision of electricity to one of
the cooperating exporters is specific within the meaning
of Article 4(2)(a) and 4(3) of the basic Regulation. The
(152) The weighted average subsidy rate for the cooperating
lower electricity rate is set out in the relevant NDRC
companies not included in the sample is 0,07 %.
Notice and incorporated in the Notice issued by the
local Price Bureau, i.e. it is mandated by a central
authority and administered at local level. This lower
rate is limited to certain enterprises in certain specified
sectors (mainly producers of ferroalloy in electronic
(153) Given the low level of cooperation, the subsidy rate for
furnace and fertilizer companies) included in a sub-
all non-cooperating companies is set at the level of the
category of large-scale industrial users. Therefore, this
highest subsidy rate established for this scheme for an
lower rate is limited de jure only to companies falling
entity related to one of the sampled cooperating
into these categories in the meaning of Article 4(2)(a) of
companies, i.e. 0,17 %.
the basic Regulation.
3.3.1.5. Provision of various goods for less than
adequate remuneration
(149) The subsidy is also limited to a certain region in that it
only applies in a limited designated geographical area
(154) The complaint referred to a number of other goods
where the exporting producer is located. This area is
provided by the GOC to OCS producers through its
encouraged according to legislation issued by the
SOEs. In particular, the complaint listed a number of
Central Government, i.e. the Circular of the State Council
specific transactions concerning the provision of several
Concerning Several Policies on Carrying out the Development
steel outputs manufactured by SOEs, including iron ore
of China's Vast Western Regions (see for more details recital
concentrate, pellets, sintered ore, scrap, billet, sintered
(233) below). This Circular explicitly mentions price
ore, alloys and many others. The complaint showed
mechanism in electricity transmission and provision as
that the price for the provision of these goods was set
one of the tools to achieve development of certain
by reference to different elements and/or benchmarks,
sectors. As the electricity rates applicable in this area
and that there were price caps or adjustments
are set by a central authority, this subsidy is also
depending on the different goods and on whether the
regionally specific within the meaning of Article 4(3) of
transaction concerned related parties.
the basic regulation.
(155) The GOC replied that it did not have this programme for
steel makers during the IP. Given the lack of further
(g) Calculation of subsidy amount
information provided by the GOC on this programme,
the Commission based its findings on the information
(150) The amount of countervailable subsidy is calculated in
available on file according to Article 28 of the basic
terms of the benefit conferred on the recipients, which is
Regulation.
found to exist during the IP. The benefit to the exporting
producers has been calculated by considering the
difference between the actual electricity rate per Kwh
paid and the rate that should have been paid per Kwh
for large industrial users, multiplied by the electricity
(156) To the extent that prices for the various goods
volume consumed during the IP. In accordance with
mentioned above do not reflect adequate remuneration,
Article 7(2) of the basic Regulation this amount
this programme is countervailable according to
(numerator) has then been allocated over the total sales
Article 3(1)(a)(iii) and Article 6(d) of the basic Regulation.
turnover of the cooperating exporting producers during
However, the complexity of the various transactions for
the IP, because the subsidy is not contingent upon export
the provision of these goods and of the underlying

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contracts which were not available in the record of the
of profits, and other financial statement and statistical reports
proceeding did not enable the Commission to come to a
and documents to the banking regulatory organ of the State
firm conclusion on this programme. Therefore the
Council and People's Bank of China".
Commission has decided not to assess this programme
further.
(160) The Commission also requested information (by means
of a specific questionnaire – Appendix A) concerning the
structure of government control in the Chinese banks
concerned and the pursuit of government policies or
3.3.2. PREFERENTIAL LOANS AND INTEREST RATES TO
interests with respect to the steel industry (i.e. board of
THE OCS INDUSTRY
directors and board of shareholders, minutes of share
holders/directors meetings, nationality of shareholders/di
(a) Introduction
rectors, lending policies and assessment of risk with
respect to loans provided to the cooperating exporting
(157) The complainant alleged that the OCS producers benefit
from low (subsidised) interest rates from state-owned
producers). Nevertheless, in the reply to the questionnaire
commercial banks and government banks in accordance
the GOC submitted only one Appendix A which
with the GOC policy to support and develop the
contained some general information (mostly compiled
expansion of the Chinese steel industry under the five
from websites of the banks). Most of the specific
year plans.
information requested in Appendix A was not
provided. To some of the questions the GOC replied
that it does not have such information at this time and
to some it only provided information on selected banks
(e.g. Articles of Association were only provided for eight
banks). In the deficiency letter, the Commission repeated
its request and invited the GOC to provide all the
information as originally requested in the questionnaire.
(b) Non-cooperation and the use of facts available
In its reply to the deficiency letter the GOC submitted
some additional information. However, the answer was
(158) The Commission requested from the GOC information
still very incomplete and much of the requested
concerning the proportion of loans provided by the
information (e.g. the percentage of government
banks where the GOC is the largest or sole shareholder,
ownership in state-owned banks, the Articles of
banks where the GOC has a shareholding stake but is not
Association of some banks listed in the questionnaire,
the largest shareholder, banks where the GOC is not a
complete replies questions in Appendix A) was not
shareholder and banks which are foreign owned, to both
provided.
industry as a whole and to the industry concerned by
this proceeding. The GOC replied that it does not retain
records of the amounts and percentages of the loans
provided by the state-owned banks and that the GOC
also does not retain the records of loans for steel
industry. GOC did not suggest any alternative source
(161) In the questionnaire, deficiency letter and again during
for this information.
the on-spot verification visit the Commission requested
circulars of the People's Bank of China (PBOC)
concerning expansion of financial institutions' loan
interest rate policy (YinFa [2003] No.250 and YinFa
[2004] No 251). The Commission learned about the
existence of these circulars in the course of previous
investigation. However, instead of providing these
circulars the GOC referred the Commission to the
(159) The Commission also sought information about the state
ownership of the banks and financial institutions but the
PBOC website to find out about the financial institutions'
GOC did not provide the information claiming that it
loan interest rate policy. During the verification two
does not retain such records. Although it is unlikely
exhibits were submitted in this respect, but these were
that the GOC is not aware of the assets it owns, it is
only printouts from the website. It is noted that no
noted that according to the publicly available
complete content of these Circulars could be found on
information (
the PBOC website.

45 ) ( 46 ) the GOC is a major shareholder in
many of the major banks established in China and
therefore, as in the case of the SOEs producing HRS
and CRS, it has access to banks' Articles of Association
where the information on shareholdership should be
described in detail. In this respect it is also noted that
(162) The Commission requested also the Circular of PBOC
according to Article 61 of the Law on Commercial Banks
concerning the changes of 8 June 2012 to be
[2003] the banks "shall report the balance sheets, statements
submitted during the on-spot verification. The GOC did
not provide the Circular and instead it only provided
( 45 ) 2006 Deutsche Bank Research on China's banking sector.
general information printed from the PBOC website
( 46 ) Documents WT/TPR/S/230, p. 79 and WT/TPR/C/264, p. 122.
concerning adjustment of benchmark interest rates.

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(163) The Commission also asked the GOC to arrange
government presence on the board of directors, the
meetings with specific banks in order to verify
government control over their activities, the pursuit of
information concerning preferential lending to the OCS
government policies or interests and whether entities
industry. However the GOC failed to organise such
were created by statute.
meetings and claimed that it was unable to intervene
with state-owned banks to arrange such meetings. It is
also noted that in the pre-verification letter of 7 June
2012 the Commission explained that it would be
prepared to start the verification one day earlier and in
fact allow more time for the verification should the GOC
consider that banks are best placed to provide clarifi
(166) From the available information it is concluded that the
state-owned banks in China hold the highest market
cations and explanations concerning preferential
share and are the predominant players in the Chinese
lending. The Commission therefore requested the GOC
financial market. According to the 2006 Deutsche Bank
to confirm the presence of the banks before the verifi
Research on China's banking sector (
cation so that necessary arrangements could be made by

47 ), the state-owned
banks' share may amount to more than 2/3 of the
the verification team. In its letter of 15 June 2012 the
Chinese market. For the same matter the WTO Trade
GOC stated that it would continue to request the banks
Policy Review of China noted that "The high degree of
to cooperate but that it could not coerce them to do so.
state ownership is another notable feature of the financial
Eventually, it was only during the first day of the verifi
sector in China" (
cation that the Commission team was informed that the

48 ) and "there has been little change in the
market structure of China's banking sector, which is dominated
representative of the China Construction Bank was
by state-owned banks" (
available for the questions and explanations. Since the

49 ). It is pertinent to note that the
five largest state-owned commercial banks (Agricultural
Commission had not been informed about this
Bank, Bank of China, Construction Bank of China, Bank
(although specifically requested in the pre-verification
of Communications and Industrial and Commercial
letter) it was not possible to address specific questions
Bank) appear to represent more than half of the
about contracts and loan terms but only questions of a
Chinese banking sector (
general character. In any event, no supporting documen

50 ).
tation was provided for the statements made by the
representative of the China Construction Bank with the
explanation that all the documents that the Commission
requested would be confidential and of an internal char
acter.
(167) The Commission also requested information concerning
the structure of government control in those Chinese
banks and the pursuit of government policies or
interests with respect to the steel industry (i.e. board of
directors and board of shareholders, minutes of share
(164) The GOC was made aware of the consequences of non-
holders/directors meetings, nationality of shareholders/di
cooperation in accordance with Article 28(1) and (6) of
rectors, lending policies and assessment of risk with
the basic Regulation. In view of this lack of cooperation,
respect to loans provided to the cooperating exporting
it has been necessary, in addition to taking account of
producers). Nevertheless, as noted in recital (160) above,
relevant GOC documents submitted by other parties, to
the GOC provided only very limited information in this
use information from secondary sources, including the
respect. Consequently, the Commission had to use the
complaint and publicly available information retrieved
information available. It concluded on the basis of the
from internet.
available data that those banks are controlled by the
government and exercise government authority in a
manner that their actions can be attributed to the
State. The relevant data used in order to arrive at the
aforesaid findings is derived from information submitted
by the GOC, the annual reports of Chinese banks that
(c) Findings of the investigation
were either submitted from GOC or publicly available,
information retrieved from the 2006 Deutsche Bank
State involvement in the banking sector
Research on China's banking sector, WTO Policy
review on China (2010 and 2012), China 2030 World
(165) The investigation has established that the Chinese
Bank Report, information submitted from the co-
financial market is characterised by government inter
operating exporting producers and information existing
vention because most of the major banks are state-
in the complaint. As for foreign banks, independent
owned. The Chinese authorities have provided only
sources estimate that they represent a minor part of
very limited information concerning shareholding/
the Chinese banking sector and consequently play an
ownership of banks in China. However, as further
insignificant role in policy lending; with relevant
outlined below, the Commission compiled available
information suggesting that this may represent as little
information in order to arrive at a representative
finding. In performing its analysis whether banks are
entities vested with or exercising government authority
( 47 ) http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/
(public bodies) the Commission also sought information
PROD0000000000204417.PDF
( 48 ) Document WT/TPR/S/230 p. 79, April 2010.
concerning not only the government ownership of the
( 49 ) Document WT/TPR/S/264 p. 122, July 2012.
banks but also other characteristics such as the
( 50 ) Ibid.

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as 1 % of the Chinese market ( 51 ). Relevant publicly
relevant information in this respect which would suggest
available information also confirms that Chinese banks,
the situation changed since May 2011 when the
particularly the large commercial banks, still rely on
Commission concluded its anti-subsidy investigation
state-owned shareholders and the government for replen
concerning Coated Fine Paper ( 53 ) it is established that
ishment of capital when there is a lack of capital
the PBOC is involved and influences setting of interest
adequacy as result of credit expansion ( 52 ).
rates by state-owned commercial bank.
(168) With respect to the banks that provided loans to the
cooperating exporting producers, the great majority of
The GOC did not provide any evidence that the situation
them are state-owned banks. Indeed on the basis of the
as established in the Coated Fine Paper investigation
available information it was found that at least 14 out of
has changed, therefore on the basis of facts available
the 17 reported banks are state-owned banks, including
and the other evidence cited above, it was concluded
the major Commercial banks in China like Bank of
that the situation concerning the methodology for deter
China, China Construction Bank and Industrial and
mining interest rates should remain the same during the
Commercial Bank of China. With respect to the
entire IP.
remaining state-owned banks concerned, again the
Commission requested the same information mentioned
above concerning the government control and the
pursuit of government policies or interests with respect
to the steel industry. No such detailed information was
provided. It is therefore concluded that the banks are
Entrustment and direction
controlled by the government and exercise government
authority in a manner that their actions can be attributed
(170) The Commission also endeavoured to analyse whether
to the State. For this reason the state-owned commercial
the privately owned commercial banks in China are
banks in China should be considered public bodies.
entrusted or directed by the GOC to provide preferential
(subsidised) loans to the organic coated steel producers,
within the meaning of Article 3.1(a)(iv) of the basic
Regulation.
(169) Another sign of GOC involvement in Chinese financial
market is the role played by the PBOC in setting the
specific limits on the way interest rates are set and fluc
tuate. Indeed, the investigation established that the PBOC
has specific rules regulating the way interest rates float in
GOC policy
China. According to the information available, these rules
(171) From the section above concerning state involvement in
are set out in the PBOC's Circular on the Issues about the
the banking sector (recitals (165) to (169)) it is clear that
Adjusting Interest Rates on Deposits and Loans-Yinfa
the GOC has a policy to provide preferential lending to
(2004) No 251 ("Circular 251"). Financial institutions
the organic coated steel sector, because public bodies
are requested to provide loan rates within a certain
(state-owned commercial banks) ( 54 ) are engaged in
range of the benchmark loan interest rate of the PBOC.
such provision and hold a predominant place in the
For commercial bank loans and policy bank loans
market, which enables them to offer below-market
managed commercially there is no upper limit range
interest rates. It now has to be determined whether
but only a lower limit range. For urban credit cooper
that policy extends to private suppliers.
atives and rural credit cooperatives there are both upper
and lower limit ranges. For preferential loans and loans
for which the State Council has specific regulations the
interest rates do not float upwards. The Commission
sought clarifications from the GOC on the definition
and wording stated in the Circular 251 as well as to
its preceding legislation (Circular of PBOC concerning
Extension of policy to private banks
expansion of Financial Institution's Loan Interest Rate
Float Range – YinFa [2003] No. 250). However as
(172) The Commercial banking law [2003] applies in the same
described in the recitals (161) and (162) above, the
way to state-owned commercial banks and privately
GOC refused to provide these Circulars which
owned commercial banks. For example Article 38 of
prevented the Commission to verify their content and
this law instructs all Commercial banks (i.e. also those
seek explanations. Since the GOC did not provide any
which are privately owned) to "determine the loan rate in
accordance with the upper and lower limit of the loan rate set
by the PBOC", Article 34 of the Commercial Banking Law
( 51 ) Information retrieved from the 2006 Deutsch Bank Research on
China's banking sector, pages 3-4.
( 52 ) Information retrieved from the China Monetary Report Quarter
( 53 ) Recitals (87) and (90) of the Council implementing regulation (EU)
Two, 2010 of the Monetary Policy Analysis Group of the
No 452/2011.
People's Bank of China, dated 5 August 2010, page 10.
( 54 ) See finding on public bodies in recital 53.

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instructs the commercial banks to "carry out their loan
documents and perform some kind of credit risk analyses
business upon the needs of national economy and the social
before the loans are granted. However, they could not
development and with the spirit of state industrial policies".
support their claims with any evidence. During the on-
spot verification the Commission asked for the evidence
that the banks requested such documents or that these
documents were provided to the banks by the companies
or any kind of report issued by the banks proving that
(173) Also the Order No.35 - Policies for the development of Iron
and Steel Industry, in particular Articles 24 and 25 which
such credit risk analyses was performed. However the
limit the provision of loans only to those companies
sampled groups of exporting producers were not able
which comply with the national development policies
to provide such evidence, neither were they able to
for the Iron and steel industry do not distinguish
provide any other evidence supporting their claims. It
between state-owned and privately-owned commercial
is also noted that none of the sampled groups of
banks.
exporting producers or individual companies within

these groups has a credit rating assigned.
(174) Further the above mentioned (recitals (161) and (162))
Circulars of the PBOC are also binding for
privately–owned commercial banks.
(178) The information concerning credit risk assessment was
repeatedly requested from interested parties as it is
considered crucial inter alia account taken of (i) the
finding of the IMF 2006 report which suggested that
(175) The above citations from laws and regulations relevant
the bank liberalisation in China is incomplete and
for the banking sector show that the GOC policy to
credit risk is not properly reflected ( 56 ), (ii) the IMF
provide preferential lending to the organic coated steel
2009 report which highlighted the lack of interest rate
producers extends also to privately-owned commercial
liberalisation in China ( 57 ), (iii) the IMF 2010 Country
banks and in fact the GOC instructs them to "carry out
Report which stated that cost of capital in China is
their loan business upon the needs of national economy and the
relatively low, credit allocation is sometimes determined
social development and with the spirit of state industrial
by non-price means and high corporate saving is partly
policies" (
linked to low cost of various factor inputs (including

55 ).
capital and land)
( 58 ) and (iv) the OECD 2010
Economic Survey of China ( 59 ) and OECD Economic
Department Working Paper No. 747 on China's
Financial Sector Reforms
( 60 ) which stated that
Credit risk assessment
ownership of financial institutions remains dominated
by the State raising issues as the extent to which
(176) The Commission requested relevant information from the
banks' lending decisions are based purely on commercial
GOC in order to assess how the banks in China are
considerations while banks' traditional role appears to be
performing credit risk assessment of the OCS
that of government agencies with ties to the government.
companies before deciding whether to grant them or
not loans and deciding on the conditions of the loans
which are granted. In the Appendix A to the ques
tionnaire the Commission requested information on
how do the banks take account of risk when granting
loans, how is the creditworthiness of the borrower
(d) Financial Contribution
assessed, what are the risk premiums charged for
different companies/industries in China by the bank,
(179) Having regard to the totality of the evidence, it is
which are the factors the bank takes into account
concluded that the vast majority of loans to the 2
when assessing the loan application, the description of
sampled groups of exporting producers are provided by
loan application and approval process etc. However,
state-owned banks which are considered to be public
neither the GOC nor the individual banks identified in
bodies because they are vested with government
the questionnaire provided any evidence in this respect.
authority and exercise government functions. There is
The GOC provided only replies of general nature not
further evidence that these banks effectively exercise
supported by any evidence whatsoever that any kind of
government authority since as it is explained in recital
credit risk assessment actually takes place.
( 56 ) IMF Working Paper, "Progress in China's Banking Sector Reform:
Has Bank Behaviour Changed?", WP/06/71, March 2006, (see pages
3-4, 13, 18-20).
( 57 ) IMF Working Paper, "Interest Rate Liberalization in China",
(177) The Commission also requested the similar information
WP/09/171, August 2009, (see pages 3-4, 21-23).
from the cooperating exporting producers and attempted
( 58 ) IMF Country Report, PRC: 2010 Article IV Consultation,
to verify it during the on-spot verification visits of
No 10/238, July 2010, (see pages 22, 24 and 28-29).
sampled exporting producers. Both groups of sampled
( 59 ) OECD 2010 Economic Survey of China, February 2010, (see
exporting producers replied that banks request certain
Chapter 3, pages 71, 73-81, 97).
( 60 ) OECD China's Financial Sector Reforms, Economic Department
Working Paper No. 747, ECO/WKP (2010) 3, 1 February 2010,
( 55 ) Article 34 of the Commercial Banking Law.
(see pages 2, 8-15, 36).

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(169) there is a clear intervention by the State (i.e. PBOC)
(f) Specificity
in the way commercial banks take decisions on interest
rates for loans granted to Chinese companies. In these
(182) The steel industry belongs to the encouraged category
circumstances, the lending practices of these entities are
according to the Decision No. 40. Decision No 40, is
directly attributable to the government. The fact that
an Order from the State Council, which is the highest
banks exercise government authority is also confirmed
administrative body in the PRC and in that regard the
by the way NDRC Order No.35- Policies for the development
decision is legally binding for other public bodies and the
of Iron and Steel Industry ( 61 ), Decision 40 and Article 34 of
economic operators. It classifies the industrial sectors
the Law on Commercial Banks act with respect to the
into 'Encouraged, Restrictive and Eliminated Projects'.
fulfilment of the government industrial policies. There
This Act represents an industrial policy guideline that
is also a great deal of circumstantial evidence,
along with the Directory Catalogue shows how the
supported by objective studies and reports, that a large
GOC maintains a policy of encouraging and supporting
amount of government intervention is still present in the
groups of enterprises or industries, such as the steel/ OCS
Chinese financial system as already explained in recital
industry, classified by the Directory Catalogue as an
(178) above. Finally, the GOC failed to provide
'Encouraged industry'. With respect to the number of
information which would have enabled a greater under
industries listed as 'Encouraged' it is noted that these
standing of the state-owned banks' relationship with
represent only a portion of the Chinese economy.
government as explained in recitals (159) to (164).
Furthermore, only certain activities within these
encouraged 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, inter alia, from financial
support. On the other hand, with reference to the
'Restrictive and Eliminated Projects', Decision No 40
Thus, in the case of loans provided by state-owned
empowers the state authorities to intervene directly to
commercial banks in China, the Commission concludes
regulate the market. In fact, Articles 18 and 19 provide
that there is a financial contribution to the organic
that the relevant authority prevents financial institutions
coated steel producers in the form of a direct transfer
from supplying loans to such 'Restrictive and Eliminated
of funds from the government within the meaning of
Projects'. It is clear from the above that Decision No 40
Article 3(1)(a)(i) of the basic Regulation. In addition,
provides binding rules to all the economic institutions in
the same evidence shows that SOCBs (as well as
the form of directives on the promotion and support of
privately owned banks) are entrusted or directed by the
encouraged industries, one of which is the part of OCS
government and this consequently means that a financial
industry:
contribution exists within the meaning of
Article 3(1)(a)(iv) of the basic Regulation.
(183) Furthermore, Order No. 35 of the NDRC - Policies for the
development of Iron and Steel Industry, in particular Articles
24 and 25, limit the provision of loans only to steel
enterprises which fully comply with the development
(180) In view of the analysis in Recitals (170) to (175) above, it
is also determined that privately-owned banks are
policies for the iron and steel industry.
entrusted and directed by the GOC to provide loans to
the OCS producers and that a financial contribution
exists under Articles 3(1)(a)(i) and 3(1)(a)(iv) of the
basic Regulation.
(184) The complainant also provided evidence that some other
government plans and documents are encouraging and
instructing for the financial support of steel industry in
general and also in specific geographical regions of
China ( 62 ) ( 63 ).
(e) Benefit
( 62 ) Notice concerning implementation measures for the adjustment and
revitalisation of ten key industries for Hubei Province suggest to
(181) A benefit within the meaning of Articles 3(2) and 6(b) of
"actively integrate the supportive provincial financial capital for industrial
the basic Regulation exists to the extent that the
development, optimize capital investment, be innovative in various
government loans are granted on terms more favourable
supporting ways. Increase the support intensity for innovation and tech
than the recipient could actually obtain on the market.
nological progress of iron and steel…", "Make use of financial measures to
Since it has been established that non-government loans
promote industry consolidation and make it easier for competitive enter
prises to obtain financing for M&A", Implement supporting plans for
in China do not provide an appropriate market
pillar industries. Iron and Steel industry: All financial institutions should
benchmark (privately owned banks being entrusted and
improve and optimize the credit service to deep processing projects of the
directed by the GOC), such a benchmark has been
steel and nonferrous metals industries to meet the financial needs of
constructed using the method described in recitals
relevant companies with regard to investments, export sales and other
(191) and (192) below.
essential areas" etc.
( 63 ) Detailed rules for implementing the adjustment and revitalisation
program for the steel industry [2009] provides for "increasing the
( 61 ) Articles 16, 24 and 25.
financial support for key backbone enterprises".

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(185) Taking all the above into consideration it becomes clear
measurement of risk and the establishment of credit
that the authorities only allow the financial institutions to
ratings, it is considered necessary not to take the credi
provide preferential loans to limited number of indus
tworthiness of the Chinese exporters at face value, but to
tries/companies which comply with the development
apply a mark-up to reflect the potential impact of the
policies of the GOC. On the basis of the evidence on
Chinese distorted market on their financial situation.
the file and in the absence of the cooperation from the
GOC on this matter it is concluded that the subsidies in
form of preferential lending are not generally available
and are therefore specific in the meaning of Article 4(2)(a)
(192) With respect to the above as explained in recitals (160),
of the basic Regulation. Moreover there was no evidence
(163) and (164) both the GOC and the cooperating
submitted by any of the interested parties suggesting that
exporting producers were requested to provide
the subsidy is based on objective criteria or conditions
information on the lending policies of the Chinese
under Article 4(2)(b) of the basic Regulation.
banks and the way loans were attributed to the
exporting producers. Parties failed to provide such
information, although repeatedly requested to do so,
and refused access to the state-owned banks. Accordingly
(186) The investigation showed that the two groups of sampled
in view of this lack of cooperation and the totality of
exporting producers benefited from the preferential
facts available, and in line with the provisions of
lending in the investigation period.
Article 28(6) of the basic Regulation, it is deemed appro
priate to consider that all firms in China would be
accorded the highest grade of "Non-investment grade"
bonds only (BB at Bloomberg) and apply the appropriate
(g) Conclusion
premium expected on bonds issued by firms with this
(187) Accordingly, the financing of the organic coated steel
rating to the standard lending rate of the People's Bank
industry should be considered a subsidy.
of China. The benefit to the exporting producers has
been calculated by taking the interest rate differential,
expressed as a percentage, multiplied by the outstanding
amount of the loan, i.e. the interest not paid during the
(188) In view of the existence of a financial contribution, a
IP. This amount was then allocated over the total
benefit to the exporting producers and specificity, this
turnover of the co-operating exporting producers.
subsidy should be considered countervailable.
(193) The subsidy rate established with regard to this scheme
(h) Calculation of the subsidy amount
during the IP for the sampled exporting producers
amounts to 0,25
% for the Huadong group of
(189) The amount of countervailable subsidy is calculated in
companies and 0,89
% for the Panhua group of
terms of the benefit conferred on the recipients, which is
companies.
found to exist during the IP. According to Article 6(b) of
the basic Regulation the benefit conferred on the
recipients is considered to be the difference between
the amount that the company pays on the government
loan and the amount that the company would pay for a
(194) The weighted average subsidy rate for the cooperating
comparable commercial loan obtainable on the market.
companies not included in the sample is 0,58 %.

(190) As explained above (recitals (165) to (178)), since the
(195) Given the low level of cooperation, the subsidy rate for
loans provided by Chinese banks reflect substantial
all non-cooperating companies is set at the level of the
government intervention in the banking sector and do
highest subsidy rate established for this scheme for an
not reflect rates that would be found in a functioning
entity related to one of the sampled cooperating
market, an appropriate market benchmark has been
companies, i.e. 0,97 %.
constructed using the method described below.
Furthermore, due to the lack of cooperation by the
GOC, the Commission has also resorted to facts
available in order to establish an appropriate
3.3.3. EQUITY PROGRAMMES
benchmark interest rate.
(196) A number of alleged subsidy programmes concerning
equity were detailed in the complaint in relation to
exporting producers not selected in the sample and/or
(191) When constructing an appropriate benchmark, it is
not cooperating with the investigation. The Commission
considered reasonable to apply Chinese interest rates,
asked the GOC to submit information about these
adjusted to reflect normal market risk. Indeed, in a
programmes in the original and supplementary question
context where the exporters' current financial state has
naires, and subsequently gave ample opportunity to the
been established in a distorted market and there is no
GOC to provide replies on these programmes. The GOC
reliable information from the Chinese banks on the
took the view that it would only provide replies on

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alleged subsidy programmes concerning the two sampled
In the absence of any cooperation from the GOC, the
exporting producers and confirmed this stance
evidence on the record demonstrates that AMCs are
throughout the proceeding.
public bodies because they were specifically created by
the GOC to dispose of massive non-performing loans in
key industries including the steel sector and to restructure
the debts of SOEs. Consequently, they are considered to
exercise government authority.
(197) The significant level of non-cooperation in this
proceeding hindered the possibility for the Commission
to acquire information and evidence on these
programmes mentioned in the complaint. The
Commission verified that the sampled exporting
producers did not make use of these programmes.
(200) Furthermore, the complainant has provided prima facie
Therefore the Commission had to determine the
evidence that the huge amount of debt cancellation was
existence of the subsidy programmes and establish the
not subject to normal commercial considerations as the
residual duty with regard to all the other programmes for
GOC did not carry out an assessment that a normal
which the GOC did not submit information and that
private investor would carry out with respect to the
were not available for or used by the sampled
expected reasonable rate of return these equity swaps
exporting producers on the basis of the evidence
would generate over time. Instead, complaint alleged
available on file in accordance with the provisions of
that the GOC exchanged massive amounts of debt in
Article 28(1) of the basic Regulation.
exchange for equity with the objective to reduce the
liabilities-to-assets ratio of steel producers to increase
their competitiveness aside from commercial consider
ations that a private investor would make. The
Commission, after careful analyses of the information
3.3.3.1. Debt for equity swaps
provided in the complaint and in the absence of any
other information on the file concluded that, the
(a) Description
measures are therefore considered to confer a benefit
within the meaning of Article 6(a) of the basic Regu
(198) The complaint contained evidence that several steel
lation.
producers were involved in debt for equity swaps in
the year 2000 for a combined total of 62.5 billion
RMB of debts. It is alleged that outstanding debt due
by State-owned steelmakers to State-owned commercial
banks ("SOCBs") was cancelled in exchange for equity
through the involvement of four Chinese Asset
(201) This subsidy is specific in the sense of Article 4(2) of the
basic Regulation as it is restricted only to selected entities
Management Companies ("AMCs") which was not on
participated by the State and the award of this financing
the basis of market considerations. The complaint
is discretionary and no objective criteria exist. Therefore
further asserted that AMCs were specifically created to
it is concluded that this programme constitutes a
dispose of massive non-performing loans in key
countervailable subsidy for exporting producers of the
industries including the steel sector and to restructure
the debts of SOEs through inter alia debt to equity
product concerned.
swaps. Given that the GOC has failed to provide any
information on this programme, the Commission draws
its findings on the basis of the information available in
the file according to Article 28 of the basic Regulation
(see recitals (33) - (35) above). For the same reason,
(c) Calculation of the subsidy amount
Article 28 of the basic Regulation was applied with
regard to the Equity Infusion and Unpaid Dividend
(202) The amount of countervailable subsidy is calculated in
programmes described in recitals (204) - (215) below.
terms of the benefit conferred on the recipients, which is
found to exist during the IP. The benefit conferred on the
recipients is a non-recurring benefit and is considered to
be the full amount of the debt for equity swaps, i.e. the
amount of debt forgiven. In the absence of other
(b) Findings of the investigation
information for the assessment of this benefit
submitted by the GOC, the Commission based its
(199) The findings on this programme are based on the
findings on information contained in the complaint. In
information contained in the complaint. Debt for
accordance with Article 7(3) of the basic Regulation the
equity swaps constitute a financial contribution in the
subsidy amount so calculated has been allocated to the IP
form of equity infusion and/or loan within the
on the basis of the normal depreciation period of assets
meaning of Article 3(1)(a)(i) of the basic Regulation or
of the recipient companies. The amount has been
in the form of revenue forgone resulting from debt
adjusted by adding interest during this period in order
cancelled or not repaid within the meaning of
to reflect the value of the benefit over time and thereby
Article 3(1)(a)(ii) of the basic Regulation. This financial
establish the full benefit of this scheme to the recipients.
contribution was provided by the government through
In accordance with Article 7(2) of the basic Regulation,
public bodies involved in these transactions, i.e. the four
this subsidy amount has been allocated over the level of
AMCs and various SOCBs (refer to recital (168) above).
production of the product concerned during the IP,

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because the subsidy is not contingent upon export
Article 6(a) of the basic Regulation as they are incon
performance and was not granted by reference to the
sistent with the usual investment practice of private
quantities manufactured, produced, exported or trans
investors. The inconsistency of these equity infusions
ported.
with private investors' practice is proven in detail in
the complaint. With regard to these specific transactions,
the complaint shows firstly that the SOE steel producer
paid an overvalued price of its portion of the new share
issue not in line with fair market conditions, and
secondly that it used the funds raised to purchase state-
(203) The subsidy rate thus obtained for all non-cooperating
companies amounts to 0,05 %. It was not necessary to
owned assets and equity investments at below-market
calculate the subsidy rate for the sampled and other
prices. The complaint also shows that the GOC paid
cooperating producers for the reasons described in
the same price as other investors despite its shares
recitals (196) and (197).
were worth less as they had different rights and
prospects than the shares sold to other shareholders.
3.3.3.2. Equity infusions
(a) Description
(207) These subsidies are specific in the sense of Article 4(2)(c)
of the basic Regulation because they were provided to a
(204) The complaint alleges that the GOC has provided over
limited number of selected entities in which the
the years substantial amounts of cash to steel producers
government participated. Therefore it is concluded that
through equity infusions. According to the complaint,
this programme constitutes a countervailable subsidy for
the GOC (through various state-owned entities)
exporting producers of the product concerned.
acquired shares in companies in which it was already
the main shareholder without acquiring additional share
holder rights. The complaint also details specific trans
actions involving State-controlled entities, including
China International Capital Corporation (CICC) and
SASAC.
(c) Calculation of the subsidy amount
(208) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. The benefit conferred on the
(b) Findings of the investigation
recipients is considered to be the amount of the equity
(205) Since the GOC failed to provide any information on this
infusions. In the absence of other information for the
programme (see recitals (196) and (197) above), the
assessment of this benefit submitted by the GOC, the
findings on this programme are based on the
Commission based its findings on information
information contained in the complaint, as supported
contained in the complaint. In accordance with
by adequate sources. Equity infusions constitute a direct
Article 7(3) of the basic Regulation the subsidy amount
transfer of funds within the meaning of Article 3(1)(a)(i)
so calculated has been allocated to the IP on the basis of
of the basic Regulation. These financial contributions
the normal depreciation period of assets of the recipient
were provided by the government through public
companies. The amount has been adjusted by adding
bodies involved in these transactions, including CICC
interest during this period in order to reflect the value
and SASAC. The complaint contains specific evidence
of the benefit over time and thereby establish the full
on equity infusions concerning an SOE steel producer
benefit of this scheme to the recipients. In accordance
where CICC acted as the lead underwriter and manager
with Article 7(2) of the basic Regulation, this subsidy
of the share issuance. According to information in the
amount has been allocated over the total level of
complaint, CICC is 51 % state-owned and it is ultimately
production of the recipients during the IP as appropriate
controlled by SASAC, which in the specific transactions
denominator, because the subsidy is not contingent upon
documented in the complaint also acted as the GOC
export performance and was not granted by reference to
entity controlling the steel producer SOE (for the
the quantities manufactured, produced, exported or trans
analysis of SASAC's functions see recitals (64) to (66))
ported.
above). Therefore, these transactions were carried out by
the GOC through public bodies within the meaning of
Article 2(b) of the basic Regulation and the relevant
WTO jurisprudence.
(209) The subsidy rate thus obtained for all non-cooperating
companies amounts to 0,08 %. It was not necessary to
calculate the subsidy rate for the sampled and other
(206) These equity infusions are considered to confer a benefit
cooperating producers for the reasons described in
to the recipient companies within the meaning of
recitals (196) and (197).

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3.3.3.3. Unpaid dividends
found to exist during the IP. The benefit conferred on the
recipients is considered to be the amount of the unpaid
(a) Description
dividends. In the absence of other information for the
assessment of this benefit submitted by the GOC, the
(210) The complaint alleged that according to GOC policy,
Commission based its findings on publicly available
state-owned enterprises including the steel companies
financial information on the recipients. In accordance
producing OCS do not have to pay dividends to the
with Article 7(2) of the basic Regulation, the subsidy
government as their owner even when they earn
amount so calculated has been allocated over the total
profits. As a result, SOE steel producers are able to
turnover of the recipients during the IP as appropriate
finance massive investment through retained profits not
denominator, because the subsidy is not contingent upon
distributed as dividends according to this programme.
export performance and was not granted by reference to
the quantities manufactured, produced, exported or trans
ported.
(b) Findings of the investigation
(211) Since the GOC failed to provide any information on
(215) The subsidy rate thus obtained for all non-cooperating
dividend distributions by the SOE steel producers (see
companies amounts to 1,36 %. It was not necessary to
recitals (196) and (197) above), the findings on this
calculate the subsidy rate for the sampled and other
programme are based on the information contained in
cooperating producers for the reasons described in
the complaint, as supported by adequate sources. Unpaid
recitals (196) and (197).
dividends must be considered as a disguised grant in the
meaning of Article 3(1)(a)(i) of the basic Regulation or as
revenue forgone under Article 3(1)(a)(ii) of the basic
Regulation in that the GOC does not collect dividends
that are normally paid to private investors on their
3.3.4. INCOME AND OTHER DIRECT TAX PROGRAMMES
shares. These disguised grants were provided by the
government through the entity directly holding the
3.3.4.1. Tax Policies for the deduction of research and
shares in the SOE steel producers, in principle SASAC.
development (R&D) expenses
The analysis concerning SASAC shows that it performs
Government functions (see for details recitals (64) to (66)
(216) This scheme provides a benefit to companies which
above).
introduce new technologies, new products or new tech
niques in their production. The eligible companies can
decrease their corporate income tax by 50 % of the actual
expenses for approved projects.
(212) The full amount of unpaid dividends is considered to
confer a benefit to the recipient SOE steel producers
within the meaning of Article 6(a) of the basic Regu
(217) It is noted that although the GOC limited its reply to the
lation as this is inconsistent with the usual investment
questionnaire and deficiency letter to the schemes used
practice of private investors that require dividend
by the sampled companies it did not provide any
distributions normally attached to their shares. For
information on this scheme, despite the fact that one
SOEs partially owned by private investors, the amount
of the sampled companies reported benefits under this
of the benefits equals the amount of unpaid dividends
scheme in its questionnaire reply. When requested again
distributed to them on a pro rata basis.
during the on spot verification to provide the necessary
information, GOC provided a partial supplementary
response concerning this programme. Despite the late
provision of this information the verification team
asked for clarifications on several issues (see recital
(219) below) however these were not provided. As a
(213) These subsidies are specific under Article 4(2) of the
basic Regulation because they were provided to a
result the Commission had to base its findings on the
limited number of selected entities in which the
best fact available.
government participated. Therefore it is concluded that
this programme constitutes a countervailable subsidy for
exporting producers of the product concerned.
(a) Legal Basis
(218) This scheme is provided as preferential tax treatment by
Article 30(1) of the Corporate Income Tax Law of the
(c) Calculation of the subsidy amount
PRC (Order No 63 of the President of the People's
Republic of China, effective from 1 January 2008),
(214) The amount of countervailable subsidy is calculated in
Article 95 of the Regulations on the Implementation of
terms of the benefit conferred on the recipients, which is
Enterprise Income Tax Law of the PRC (Decree No 512

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of the State Council of the PRC) and the Guide to Key
(d) Findings of the investigation
Fields (Notification n.6, 2007). The GOC did not provide
Decree No 512 and Notification No 6 in this proceeding.
(222) This scheme was used by one of the cooperating
exporting producers, Zhejiang Huadong Light Steel
Building Material Co. Ltd during the IP. Because of the
lack of cooperation from the GOC and because of its late
and incomplete reply concerning this scheme, it was not
possible to determine the application and approval
procedure which must be undertaken by the companies
(b) Eligibility
benefiting from this scheme. As noted above, the
(219) As noted above the GOC did not provide any relevant
Commission had to partially rely on the facts established
information for this scheme in the replies to the
in the Coated Fine Paper investigation.
questionnaire and deficiency letter. In the document
submitted during the on spot verification GOC stated
that only the "research and development fees incurred by
Enterprises in the development of new technology, new
(e) Conclusion
products and new skills" may be computed in the taxable
income for the purpose of deduction. However, the GOC
(223) This scheme should be considered a subsidy within the
did not elaborate on the meaning of terms "new tech
meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic
nology", "new product" and "new skills". The
Regulation in the form of foregone government revenue
Commission also endeavoured to find the exact
which confers a benefit upon the recipient companies.
meaning of these terms during the verification of
Zhejiang Huadong but the company was not able to
provide any concrete explanation and replied that these
are general terms only.
(224) The GOC was requested to provide information on the
eligibility criteria for obtaining benefits from this scheme
and on the use of the subsidy, in order to determine to
what extent access to the subsidy is limited to certain
enterprises and whether it is specific according to
Article 4 of the basic Regulation. The GOC provided
(220) However, in the Coated Fine Paper investigation, it was
established that only R&D projects of the companies of
no such information in its reply to the questionnaire
New and High Tech Sectors Receiving Primary Support
and to the deficiency letter. In addition, the information
from the State and projects listed in the Guide to Key
submitted in this respect during the on-spot verification
Fields of High Tech Industrialization under the current
visit appears to be incomplete in view of the findings
Development Priority promulgated by the NDRC are
concerning same scheme found to be used by the
eligible for this scheme (
companies in Coated Fine Paper investigation. The

64 ). Given the fact that no new
relevant information was provided in this proceeding
Commission, mindful of the requirement of Article 4(5)
which would rebut this conclusion it is established that
of the basic Regulation that any determination of
the scheme is not generally available, as only selected
specificity shall be 'clearly substantiated' on the basis of
industries/companies/projects are eligible.
positive evidence, therefore had to base its findings on
the facts available in accordance with Article 28 of the
basis Regulation. The best facts available included the
findings of the Coated Fine Paper investigation.
(c) Practical implementation
(225) This subsidy scheme is specific within the meaning of
(221) According to the GOC reply, companies which intend to
Article 4(2)(a) of the basic Regulation given that the
apply for this tax concession shall file their Income Tax
legislation itself, pursuant to which the granting
Return and "other relevant documents" with the taxation
authority operates, limited the access to this scheme
authority without specifying which these other relevant
only to certain enterprises and industries classified as
documents are. In the Coated Fine Paper investigation it
encouraged, such as those belonging to OCS industry.
was established that any company that intends to apply
In addition, there do not seem to be objective criteria
for the benefit from this scheme must file detailed
to limit eligibility and no conclusive evidence to conclude
information about the R&D projects with the local
that the eligibility is automatic in accordance with
Science and Technology Bureau and that only after
Article 4(2)(b) of the basic Regulation. It is noted that
examination will the Tax Bureau issue the notice of
the lack of cooperation from the GOC authorities does
approval. Following the approval the amount subject to
not permit the Commission to assess the existence of
corporate income tax is decreased by 50 % of actual
such objective criteria.
expenses for approved projects ( 65 ).
( 64 ) Recital 116 of Council Implementing Regulation (EU)
No 452/2011.
( 65 ) Recital 117 of Council Implementing Regulation (EU)
(226) Accordingly, this subsidy should be considered counter
No 452/2011.
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(f) Calculation of the subsidy amount
(a) Legal Basis
(227) The amount of countervailable subsidy is calculated in
(233) This scheme is provided for as preferential tax treatment
terms of the benefit conferred on the recipients, which is
by the Notice on Favourable Tax Policies for Western Region
found to exist during the IP. The benefit conferred on the
Development (issued by the Ministry of Finance, General
recipients is considered to be the amount of total tax
Tax Bureau and General Customs Office, effective from
payable according to the normal tax rate, after the
1 January 2001) which was updated by the Notice on
subtraction of what was paid with the additional 50 %
Further Implementation on Tax Policies of the Western Devel
deduction of the actual expenses on R&D for the
opment Strategy (issued the Ministry of Finance, General
approved projects. In accordance with Article 7(2) of
Tax Bureau and General Customs Office, effective from
the basic Regulation, this subsidy amount (numerator)
1 January 2011 onwards) which extends the period of
has been allocated over the total sales turnover of the
validity of this programme until 31 December 2020.
cooperating exporting producers during the IP, because
the subsidy is not contingent upon export performance
and was not granted by reference to the quantities manu
factured, produced, exported or transported.
(b) Eligibility
(234) It is noted that the GOC did not provide answers to any
of the questions concerning this scheme in its response
(228) One of the cooperating sampled exporting producers,
to the questionnaire, deficiency letter or during the on-
namely the Huadong Group of companies, has
spot verification visit. However, according to the Notice
benefited from this scheme. The subsidy rate established
on Favourable Tax Policies for Western Region Development
for the Huadong Group is 0,19 %.
this preferential tax treatment is available for the
encouraged type of enterprises in the Western Region
(encouraged refers to those enterprises with major
business accounting for 70 % or more of total income
as described in the Catalogue of industry, product &
(229) The weighted average subsidy rate for the cooperating
technologies encouraged by the State). During the on-
companies not included in the sample is 0,09 %.
spot verification of Chongqing Wanda, the company
confirmed that the reason for the preferential tax rate
is that they belong to the encouraged category of
industries in the Western and Central region.
(230) Given the low level of cooperation, the subsidy rate for
all non-cooperating companies is set at the level of the
highest subsidy rate established for this scheme for the
sampled cooperating companies, i.e. 0,19 %.
(c) Practical implementation
(235) Neither the GOC, nor the Chongqing Wanda Steel Strip
Co., Ltd provided information on the operation and
administration of this programme. According to the
3.3.4.2. Tax concessions for Central and Western
Circular of the State Council Concerning Several
Regions
Policies on Carrying out the Development of China's
Vast Western Regions, an approval of people's
(231) This scheme provides a benefit to companies located in
governments of the provincial level is necessary for the
the Central and Western Regions. The eligible companies
reduction of the normal tax rate of 25 % to the prefer
are subject to preferential income tax rate of 15 %
ential rate of 15 %. On the company's annual income tax
instead of normal income tax rate of 25 % applicable
declaration form the deducted (exempted) income tax
in China.
amount is listed under item 28 – deducted tax.
(232) The GOC was requested to provide information on this
(d) Findings of the investigation
scheme in the questionnaire, in the deficiency letter and
again during the on-spot verification visit. In its
(236) This scheme was used by one of the cooperating
responses to the questionnaire and deficiency letter the
exporting producers, Chongqing Wanda Steel Strip Co.,
GOC did not reply to any of the questions and stated
Ltd during the IP. Because of the non-cooperation from
that this programme is no longer valid as it expired on
the GOC it is difficult to discern the application and
31 December 2010 and also claimed that no sampled
approval procedure which must be undertaken by the
companies benefited from this scheme in the IP.
companies benefiting from this scheme. The Commission
However, this was in contradiction with the responses
had to draw its own conclusions from submitted
of one of the exporting producers (Chongqing Wanda
documents which form the legal basis for this scheme
Steel Strip Co., Ltd) and with the evidence collected
without being able to seek the explanations from the
during the on-spot verification visit of this company.
GOC.

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(e) Conclusion
(242) The subsidy rate established for the Panhua Group is
0,03 %.
(237) This 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 recipient companies.
(243) The weighted average subsidy rate for the cooperating
companies not included in the sample is 0,02 %.
(238) The GOC was requested to provide information on the
eligibility criteria for obtaining benefits from this scheme
and on the use of the subsidy in order to determine to
what extent access to the subsidy is limited to certain
enterprises and whether it is specific according to
(244) Given the low level of cooperation, the subsidy rate for
Article 4 of the basic Regulation. The GOC provided
all non-cooperating companies is set at the level of the
no such information. The Commission, mindful of the
highest subsidy rate established for this scheme for an
requirement of Article 4(5) of the basic Regulation that
entity related to one of the sampled cooperating
any determination of specificity shall be 'clearly
companies, i.e. 0,04 %.
substantiated' on the basis of positive evidence,
therefore had to base its findings on the facts available
in accordance with Article 28 of the basis Regulation.
3.3.5. OTHER INCOME TAX PROGRAMMES FOR WHICH
THE GOC PROVIDED INSUFFICIENT OR NO REPLIES
(239) This subsidy scheme is specific within the meaning of
Article 4(2)(a) and 4(3) of the basic Regulation given that
(245) A number of alleged subsidy programmes were detailed
the legislation itself, pursuant to which the granting
in the complaint in relation to exporting producers not
authority operates, limited the access to this scheme
selected in the sample and/or not cooperating with the
only to certain enterprises and industries classified as
investigation. The Commission asked the GOC to submit
encouraged, such as those belonging to the OCS
information about these programmes in the original and
industry, and in addition located in certain regions of
supplementary questionnaires, and subsequently gave
China. In addition, there do not seem to be objective
ample opportunity to the GOC to provide replies on
criteria to limit eligibility and no conclusive evidence to
these programmes. The GOC took the view that it
found to determine that the eligibility is automatic in
would only provide replies on alleged subsidy
accordance with Article 4(2)(b) of the basic Regulation.
programmes concerning the two sampled exporting
It is noted that the lack of cooperation from the GOC
producers and confirmed this stance throughout the
authorities does not permit the Commission to assess the
proceeding. However, the GOC did submit for some of
existence of such objective criteria.
these programmes information and evidence indicating
that they had been terminated and were not in force
during the IP. The Commission took into account this
evidence submitted by the GOC in its findings.
(240) Accordingly, this subsidy should be considered counter
vailable.
(246) For all the other programmes, the GOC failed to submit
any information or evidence. The significant level of non-
(f) Calculation of the subsidy amount
cooperation in this proceeding hindered the possibility
for the Commission to acquire information and
(241) The amount of countervailable subsidy is calculated in
evidence on these programmes included in the
terms of the benefit conferred on the recipients which is
complaint by the exporting producers. The Commission
found to exist during the IP. The benefit conferred on the
verified that the sampled exporting producers were not
recipients is considered to be the amount of tax payable
eligible or did not make use of these programmes
according to the normal income tax rate, after the
(mainly due to the fact that they were privately owned,
deduction of the amount of tax paid according to the
or their being outside the area of application of the
preferential income tax rate. In accordance with
programme, or their relatively limited size). Therefore
Article 7(2) of the basic Regulation this subsidy
the Commission had to determine the existence of this
amount (numerator) has been allocated over the total
programme and establish the residual duty with regard to
sales turnover of the co-operating exporting producers
all the other programmes for which the GOC did not
during the IP, because the subsidy is not contingent
submit information and that were not available for or
upon export performance and was not granted by
used by the sampled exporting producers on the basis of
reference to the quantities manufactured, produced,
the evidence available on file in accordance with the
exported or transported.
provisions of Article 28(1) of the basic Regulation.

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3.3.5.1. Income tax credit for the purchase of domes
the GOC in this respect, the Commission bases its
tically manufactured production equipment
findings on the information on the record (in this case
complaint) in accordance with Article 28 of the basic
(a) Description
Regulation.
(247) This programme allows a company to claim tax credits
on the purchase of domestic equipment if a project is
consistent with the industrial policies of the GOC. A tax
credit up to 40 % of the purchase price of domestic
equipment may apply to the incremental increase in
tax liability from the previous year.
(d) Findings of the investigation
(250) This programme constitutes a subsidy as it provides a
financial contribution in the form of revenue forgone
by the GOC according to Article 3(1)(a)(ii) of the basic
(b) Legal basis
Regulation. This programme provides a benefit to the
recipients for an amount equal to the tax saving in the
(248) The legal bases of this programme are the Provisional
meaning of Article 3(2) of the basic Regulation. This
measures on enterprise income tax credit for investment
subsidy is specific under Article 4(4)(b) of the basic Regu
in domestically produced equipment for technology
lation since the tax saving is contingent on the use of
renovation projects of 1 July 1999 and the Notice of
domestic over imported goods.
the State Administration of Taxation on Stopping the
Implementation of the Enterprise Income Tax
Deduction and Exemption Policy of the Investments of
an Enterprise in Purchasing Home-made Equipment, No.
52 [2008] of the State Administration of Taxation,
effective 1 January 2008.
(e) Calculation of the subsidy amount
(251) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
(c) Non cooperation
found to exist during the IP. Since this programme has
not been examined in an anti-subsidy proceeding by the
(249) The GOC replied that this programme has been
Union institutions yet, and in the absence of precise
terminated as from January 2008 according to the
quantification elsewhere, the most appropriate source of
mentioned Notice No. 52 and that to the best of its
information for the assessment of the benefit to the
knowledge no programme has replaced this programme.
exporting producers has been a comparable decision by
The Commission asked the GOC to provide relevant
the US authorities. When basing subsidy amounts on
additional information, namely details of the timetable
findings in other investigations, account is taken
for the phase-out of benefits. The GOC did not provide
throughout this regulation of, inter alia, whether there
this information and limited its reply on the actual
have been any significant changes in the scheme in
benefits accrued to all OCS producers by simply
question and whether the subsidy amount may have
referring to the questionnaire replies of the sampled
diminished over time. It is noted that the amount of
producers. The Commission has already explained the
recurring subsidies will normally not diminish in this
reasons why the GOC was required to provide
way. In the absence of any such changes or diminution
information with regard to all the OCS producers and
of the subsidy amount, the original rate from the inves
not just the sampled producers (see recitals (34) and (35)
tigation in question is used as the amount of subsidy in
above). Furthermore, the GOC also failed to provide
the present case.
information with regard to the sampled producers as it
merely referred to their replies. The Commission
considers that it is not sufficient to provide evidence of
termination of a programme without providing
additional evidence on the phasing out of the actual
benefits under the programme and potential replacement
programmes. With regard to this programme, a tax
benefit (i.e. a tax credit) accrued in a certain year may
actually be used in a different tax year and thus the
(252) The subsidy rate thus established with regard to this
benefits can extend beyond its period of validity even
scheme during the IP for all non-cooperating
if the programme has in the meantime been terminated.
companies is set at 0,38 % which is the rate for this
Other "terminated" tax programmes have turned out to
scheme as established in the US Decision Memorandum
continue to confer benefits for some years after their
of 17 November 2008 on Circular Welded Carbon
official expiry date. It may also be the case that
Quality Steel Line Pipe (Page No. 26) (Federal Register /
unusually large amounts of benefit can be allocated
Vol. 73, No. 227, page 70961 / 24 November 2008).
over time. In the absence of information provided by
With regard to investigations conducted by the US

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authorities, it is noted that the methodology used for
Regulation. The benefit for the recipient is equal to the
calculating the amount of benefit from tax programmes
tax saving enjoyed through this programme according to
is substantially the same as that employed by the
Article 3(2) of the basic Regulation. This subsidy is
Union ( 66 ).
specific within the meaning of Article 4(2)(a) of the
basic Regulation since it is limited to certain enterprises
and industries classified as encouraged, such as those
operating in the steel sector. Furthermore, there are no
3.3.5.2. Preferential tax policies for companies that are
objective criteria established by the legislation or the
recognised as high and new technology
granting authority on the eligibility of the scheme and
companies
this is not automatic pursuant to Article 4(2)(b) of the
basic Regulation.
(a) Description
(253) This programme allows an enterprise applying for a
Certificate of High and new technology Enterprise to
benefit from a reduced income tax rate of 15 % as
compared to the ordinary rate of 25
%. This
(e) Calculation of the subsidy amount
programme has been found countervailable by the
Union in the Coated Fine Paper investigation and also
(257) The amount of countervailable subsidy is calculated in
by the US authorities (
terms of the benefit conferred on the recipients, which is

67 ).
found to exist during the IP. The benefit conferred on the
recipients is considered to be the amount of total tax
payable according to the normal tax rate, after the
(b) Legal basis
deduction of what was paid with the reduced preferential
tax rate. In the absence of information for the assessment
(254) The legal basis of this programme are Article 28 of the
of this benefit and since this programme has already
PRC Law on Enterprise Income Tax (No. 63 promulgated on
been examined in a previous anti-subsidy proceeding
16 March 2007) along with the Administrative Measures
by the Union institutions, the most appropriate source
for the Determination of High and New Technology Enter
of information for the assessment of the benefit to the
prises, and the Notice of the State Administration of
exporting producers has been the assessment made for
Taxation on the issues concerning Enterprises Income Tax
this programme in the Council Implementing Regulation
Payment of High and New Technology Enterprises (Guo Shui
(EU) No 452/2011 of 6 May 2011 imposing a definitive
Han [2008] No. 985).
anti-subsidy duty on imports of coated fine paper orig
ination in the People's Republic of China ( 68 ), duly
adjusted if needed as mentioned in recital (252) above.
(c) Non cooperation
(255) The GOC replied that none of the sampled companies
made use of this programme during the IP and referred
to the responses of the sampled producers for
(258) The subsidy rate thus established for all non-cooperating
information concerning any benefits that may have
companies is set at 0,9 % which is the arithmetical
been received pursuant to this programme. The
average of the rates established for this programme in
Commission refers to the arguments developed above
the Regulation mentioned in the preceding recital.
with regard to the request to the GOC to provide full
replies not limited to the sampled exporters (recitals (34)
- (35) above). Therefore the Commission bases its
findings on this programme on the information
available on record (Coated Fine Paper findings and the
3.3.5.3. Income tax concessions for the enterprises
complaint in this case) in accordance with Article 28 of
engaged in comprehensive resource utilisation
the basic Regulation.
(special raw materials')
(a) Description
(d) Findings of the investigation
(259) This tax programme allows companies that use any of
the materials listed in the Catalogue of Income tax
(256) This programme constitutes a subsidy as it provides a
Concessions for Enterprises engaged in Comprehensive
financial contribution in the form of revenue forgone
Resource utilisation as its major raw material and
by the GOC according to Article 3(1)(a)(ii) of the basic
which manufacture products listed in the same
Catalogue in a way that meets relevant national and
industrial standards, to include the income they thereby
( 66 ) The methodology for the calculation of the subsidy amount is
explained on pages 25 and 26 of the US Decision Memorandum
obtain in the total income at the reduced rate of 90 %.
of 17 November 2008 on Circular Welded Carbon Quality Steel
Therefore, 10 % of income can be deducted when the
Line Pipe (Page No. 26) (Federal Register / Vol. 73, No. 227, page
companies calculate the income tax. This exemption is
70961 / 24 November 2008).
granted for 5 years.
( 67 ) Certain Steel Wheels From the People's Republic of China, Preliminary
Affirmative Countervailing Duty Determination, 6 September 2011,
US Federal Register, document number 2011-22720.
( 68 ) OJ L 128, 14.5.2011, p. 18.

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(b) Legal basis
(264) The subsidy rate thus established for all non-cooperating
companies amounts to 0,01 %.
(260) The legal bases of this programme are: Article 33 of the
PRC Law on Enterprise Income Tax, Article 99 of Regu
lations on Implementation of the PRC Law on Enterprise
Income Tax by the State Council and the Catalogue of
Income Tax Concessions for Enterprises engaged in
3.3.5.4. Tax credit concerning the purchase of special
Comprehensive Resource Utilisation.
equipment
(a) Description
(265) This programme allows firms to offset 10 % of the
(c) Non-cooperation
purchase cost of special equipment used for environ

mental protection, energy and water saving and
(261) The GOC stated that none of the sampled companies
production safety against the corporate income tax
made use of this programme during the IP and referred
payable in the year of purchase. The remaining part of
to the responses of the sampled producers for
the 10 % of the amount invested can be carried forward
information concerning any benefits that may have
to the following 5 years.
been received pursuant to this programme. The
Commission refers to the arguments developed above
with regard to the request to the GOC to provide full
replies not limited to the sampled exporters (recitals (34)
- (35) above). The Commission thus bases its findings on
(b) Legal basis
this programme on the information available on record
(in this case complaint), in accordance with Article 28 of
(266) The legal bases of this programme are: Article 34 of the
the basic Regulation.
PRC Law on Enterprise Income Tax, Article 100 of Regu
lations on Implementation of the PRC Law on Enterprise
Income Tax by the State Council.
(d) Findings of the investigation
(c) Non-cooperation
(262) This programme constitutes a subsidy since it provides a
financial contribution in the form of revenue forgone by
(267) The GOC replied that none of the sampled companies
the GOC within the terms of Article 3(1)(a)(ii) of the
made use of this programme during the IP and referred
basic Regulation. The scheme provides a benefit for the
to the responses of the sampled producers for
recipient equal to the amount of tax savings according to
information concerning any benefits that may have
Article 3(2) of the basic Regulation. This subsidy is
been received pursuant to this programme. The
specific within the meaning of Article 4(2)(a) of the
Commission refers to the arguments developed above
basic Regulation as it is limited only to certain enterprises
with regard to the request to the GOC to provide full
using as primary raw materials the resources listed in the
replies not limited to the sampled exporters (recitals (34)
above-mentioned Catalogue of Tax Concessions for the
- (35) above). The Commission thus bases its findings on
purpose of manufacturing products enlisted in that Cata
this programme on the information available in
logue.
accordance with Article 28 of the basic Regulation.
(e) Calculation of the subsidy amount
(d) Findings of the investigation
(263) The amount of countervailable subsidy is calculated in
(268) This programme confers a subsidy as it provides a
terms of the benefit conferred on the recipients, which is
financial contribution in the form of revenue forgone
found to exist during the IP. The benefit conferred on the
by the GOC within the terms of Article 3(1)(a)(ii) of
recipients is considered to be the amount of total tax
the basic Regulation. The scheme gives a benefit for
payable according to the normal tax rate, after the
the recipient equal to the amount of tax savings
deduction of what was paid with the reduced preferential
according to Article 3(2) of the basic Regulation.
tax rate. In the absence of other information for the
assessment of this benefit, the Commission based its
findings on information contained in the complaint. In
accordance with Article 7(2) of the basic Regulation, the
subsidy amount so calculated has been allocated over the
(269) With respect to the specificity of this programme, it is
total turnover of the recipients during the IP as appro
considered that there is insufficient information on the
priate denominator because the subsidy is not contingent
record for the Commission to make further findings and
upon export performance and was not granted by
subsequently to reach a definitive finding of specificity of
reference to the quantities manufactured, produced,
the programme. Therefore the Commission could not
exported or transported.
assess this programme any further.

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3.3.5.5. Preferential income tax policy for the enter
(d) Findings of the investigation
prises in the Northeast region
(273) This programme provides a subsidy in the form of
(a) Description
revenue forgone by the GOC within the meaning of
Article 3(1)(a)(ii) of the basic Regulation. The benefit
(270) This programme allows companies located in the
under Article 3(2) of the basic Regulation amounts to
Northeast Region (including Liaoning, Jilin, and
the tax savings generated for eligible companies by the
Heilongjiang Provinces, and Dalian Municipality), first,
deduction of accelerated depreciation and amortisation
to reduce the depreciation life of fixed assets by up to
expenses linked to the purchase of fixed assets. This
40 % for tax purposes, thereby increasing the annual
subsidy is specific within the meaning of Article 4(3)
amount of depreciation deductible from the income tax
of the basic Regulation since it is limited to enterprises
and, second, to shorten the period of amortisation of
located in a designated geographical area, i.e. the
intangible assets by up to 40 % for tax purposes,
Northeast Region.
resulting in a larger annual deduction. Under a
document released by the Ministry of Finance and State
Administration of Taxation, corporate taxpayers in
certain specified sectors including the metallurgical
sector may also benefit from other VAT, resource tax,
and corporate income tax advantages, namely in
connection with purchase of fixed assets.
(e) Calculation of the subsidy amount
(274) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. The benefit conferred on the
recipients is considered to be the difference between the
(b) Legal basis
amount of tax that would have been paid during the IP
under the normal depreciation schedule for the assets
(271) The legal bases of this programme are the Preferential
policies regarding enterprise income tax for revitalization
concerned and the amount actually paid under accel
of companies of the old industrial base in the Northeast
erated depreciation. Since this programme has not been
(Caishui, No 153, 20 September 2004), Notice of the
examined in an anti-subsidy proceeding by the Union
Ministry of Finance and the State Administration of
institutions yet, and in the absence of precise quantifi
taxation on the Assets Depreciation and the Implemen
cation elsewhere, the most appropriate source of
tation Calibre of Amortization Policy in the Northeast
information for the assessment of the benefit to the
Old Industrial Base (Caishui, No 17, 2 February 2005).
exporting producers has been a comparable decision
The GOC submitted the legal basis showing termination
(based on similarity in the nature of the programme ( 69 ))
of this programme on 1 January 2008, namely the
by the US authorities. As noted in recital (252) above,
Notice of the Ministry of Finance and State Adminis
when basing subsidy amounts on findings in other inves
tration of Taxation on Several Preferential Policies in
tigations, account is taken throughout this regulation of,
Respect of Enterprise Income Tax (No 1 [2008]).
inter alia, whether there have been any significant
changes in the scheme in question and whether the
subsidy amount may have diminished over time. It is
noted that the amount of recurring subsidies will
normally not diminish in this way. In the absence of
any such changes or diminution of the subsidy
amount, the original rate from the investigation in
(c) Non cooperation
question is used as the amount of subsidy in the
present case.
(272) Apart from providing the aforementioned legal basis
showing termination of the programme, the GOC
simply referred to the responses of the sampled
producers for information concerning any benefits that
may have been received pursuant to this programme. The
Commission refers to the arguments developed above
with regard to the request to the GOC to provide full
replies not limited to the sampled exporters (recitals (34)
(275) The subsidy rate thus established with regard to this
to (35) above). Furthermore, the Commission notes that
scheme during the IP for all non-cooperating
as this programme provides for subsidies linked to
companies is set at 0,08 % which is the rate for the
purchase of fixed assets that may be amortised over
'Income Tax Exemption for Investors in Designated
several years and the GOC has failed to provide any
Geographical Regions Within Liaoning' Scheme as estab
details on the phasing-out of benefits under the
lished in the US Decision Memorandum of 3 June 2010
programme or on the outstanding benefits still not
on Wire Decking (Page No. 25) (Federal Register / Vol.
fully amortised, the Commission has decided to base its
75, No. 111, page 32902 / 10 June 2010). With regard
findings on this programme on the information available
to investigations conducted by the US authorities, it
on record (in this case the complaint and relevant US
findings) in accordance with Article 28 of the basic
( 69 ) Both programmes relate to similar preferential income tax
Regulation.
treatment in the same geographical region.

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is noted that the methodology used for calculating the
Geographical Location (Zheijang and Shandong Prov
amount of benefit from tax programmes is substantially
inces): Income Tax Law of the PRC for Enterprises with
the same as that employed by the Union ( 70 ).
Foreign Investment and Foreign Enterprises, Article 7,
adopted on 9 April 1991, No. 45.
3.3.5.6. Income tax exemption for investment in
domestic technological innovation
(c) Non-cooperation
(a) Legal basis
(280) The GOC simply stated that none of the sampled
companies made use of this programme during the IP
(276) The legal bases for this programme are the Technological
and referred to the replies of the sampled companies for
Transformation of Domestic Equipment Investment
information relating to benefits which may have been
Credit management of Enterprise Income Tax Audit,
received by them. In addition to the arguments on the
adopted by the State tax Administration, No 13 of
obligation for the GOC to provide full replies (see recitals
17 January 2000, and the Notice concerning the Promul
(34) - (35) above), the Commission notes that at least
gation and Circulation of Measures for the Adminis
one of the lower tax rates listed under this section
tration of national Key Technological Renovation
benefited one of the cooperating exporters (see recitals
Projects.
(231) and following above). Therefore the Commission is
resorting to the information available on record (in this
case the complaint and relevant US findings) in
accordance with Article 28 of the basic Regulation for
the assessment of this programme.
(b) Findings of the investigation
(277) The GOC replied that this programme was terminated
since 1 January 2008 by the Notice of the State Adminis
tration of Taxation on Stopping the Implementation of
(d) Findings of the investigation
the Enterprise Income Tax Deduction and Exemption
Policy for the Investments of an Enterprise in Purchasing
(281) This programme confers a subsidy in the form of
home-made Equipment No. 52 [2008] of the State
revenue forgone by the GOC within the meaning of
Administration of Taxation. As this programme
Article 3(1)(a)(ii) of the basic Regulation. This recurring
provides recurring tax benefits that have terminated
benefit is equal to the amount of tax savings generated
since 2008 and there is no evidence on outstanding
by the lower corporate tax rate according to Article 3(2)
benefits still being amortised during the IP, the
of the basic Regulation. The programme is specific since
Commission concludes that this programme is not
it is limited to companies located in designated
countervailable.
geographical areas within the meaning of Article 4(3)
of the basic Regulation.
3.3.5.7. Various local tax discounts
(e) Calculation of the subsidy amount
(a) Description
(282) The amount of countervailable subsidy is calculated in
(278) The complaint lists a number of tax discounts available
terms of the benefit conferred on the recipients, which is
in several provinces (i.e. Shandong, Chongqing Munici
found to exist during the IP. The benefit conferred on the
pality, Guangxi Region Zhuang, Central and Western
recipients is considered to be the amount of total tax
Regions) in the form of a reduced corporate tax rate of
payable according to the normal tax rate reduced by
15 % as opposed to the generally applicable tax rate of
the amount paid under the preferential tax rate. Since
25 %.
this programme has not been examined in an anti-
subsidy proceeding by the Union institutions yet, and
in the absence of precise quantification elsewhere, the
most appropriate source of information for the
assessment of the benefit to the exporting producers
(b) Legal basis
has been a comparable decision (based on similarity in

the nature of the programme) by the US authorities. As
(279) The complaint reports the legal basis of Shandong tax
noted before, when basing subsidy amounts on findings
discount, namely Reduced Income Taxes based on
in other investigations, account is taken throughout this
regulation of, inter alia, whether there have been any
significant changes in the scheme in question and
( 70 ) The methodology for the calculation of the subsidy amount is
whether the subsidy amount may have diminished over
explained on page 25 of the US Decision Memorandum of
3 June 2010 on Wire Decking (Page No. 25) (Federal Register /
time. It is noted that the amount of recurring subsidies
Vol. 75, No. 111, page 32902 / 10 June 2010).
will normally not diminish in this way. In the absence of

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any such changes or diminution of the subsidy amount,
been received pursuant to this programme. The
the original rate from the investigation in question is
Commission refers to it arguments on the request to
used as the amount of subsidy in the present case.
the GOC to provide full replies (recitals (34) - (35)
above). Therefore it has decided to base its findings on
this programme on the information available on file
according to Article 28 of the basic Regulation, namely
the findings as included in the decision on Coated Fine
Paper.
(283) The subsidy rate thus established with regard to this
scheme during the IP for all non-cooperating
companies is set at 0,66 % which is the rate for the
'Reduced Income Taxes Based On Geographic Location'
Scheme as established in the US Decision Memorandum
of 12 June 2009 on Certain Tow Behind Lawn Groomers
(d) Findings of the investigation
and Certain Parts Thereof (Page No. 11) (Federal Register
/ Vol. 74, No. 117, page 29180 / 19 June 2009). With
(287) This programme confers a subsidy in the form of
regard to investigations conducted by the US authorities,
revenue forgone within the meaning of Article 3(1)(a)(ii)
it is noted that the methodology used for calculating the
of the basic Regulation. This benefit is equal to the
amount of benefit from tax programmes is substantially
amount of tax savings given by the tax exemption on
the same as that employed by the Union ( 71 ).
dividends, bonuses and other equity investments for
Chinese resident enterprises according to Article 3(2) of
the basic Regulation. The programme is de jure specific
within the meaning of Article 4(2)(a) of the basic Regu
lation given that the legislation pursuant to which the
granting authority operates limits its access only to enter
3.3.5.8. Dividend exemption between qualified resident
prises resident in China receiving dividend income from
enterprises
other resident enterprises, as opposed to enterprises
investing in non-resident enterprises. The programme is
(a) Description
also specific under Article 4(2)(b) of the basic Regulation
(284) This programme consists of a preferential tax treatment
given that this programme is reserved exclusively to
for Chinese resident enterprises that are shareholders in
important industries and projects encouraged by the
other Chinese resident enterprises in the form of tax
State, such as the steel industry (see e.g. recital (182)
exemption on income from certain dividends, bonuses
above) and also that there are no objective criteria to
and other equity investments for the resident parent
limit eligibility for this programme and no conclusive
enterprises. This programme was countervailed by the
evidence to conclude that eligibility is automatic.
Union in the anti-subsidy proceeding concerning Coated
Fine Paper ( 72 )
(e) Calculation of the subsidy amount
(b) Legal basis
(288) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
(285) The legal basis are Article 26 of the Enterprise Income
found to exist during the IP. The benefit conferred on the
Tax Law of the PRC, Article 83 of the Regulations on the
recipients is considered to be the amount of total tax
Implementation of Enterprise Income Tax Law of the
payable with the inclusion of the dividend income
PRC, Decree no. 512 of the State Council, promulgated
coming from other resident enterprises in China, after
on 6 December 2007.
the subtraction of what was actually paid with the
dividend tax exemption. In the absence of information
for the assessment of this benefit and since this
programme has already been examined in a previous
anti-subsidy proceeding by the Union institutions, the
most appropriate source of information for the
(c) Non-cooperation
assessment of the benefit to the exporting producers
has been the assessment made for this programme in
(286) The GOC replied that none of the sampled companies
Coated Fine Paper proceeding, duly adjusted if needed as
made use of this programme during the IP and referred
mentioned in recital (252) above.
to the responses of the sampled producers for
information relating to any benefits that may have
( 71 ) The methodology for the calculation of the subsidy amount is
explained on page 11 of the US Decision Memorandum of
12 June 2009 on Certain Tow Behind Lawn Groomer and
(289) The subsidy rate thus established for all non-cooperating
Certain Parts Thereof (Federal Register / Vol. 74, No. 117, page
companies is set at 0,77 % which is the arithmetical
29180 / 19 June 2019).
( 72 ) Recitals 125-136 of the Council Implementing Regulation (EU)
average of the rates established for this programme in
No 452/2011.
the Coated Fine Paper proceeding.

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3.3.5.9. Preferential Tax Programme for Foreign
burden for all the parties concerned, also in consideration
Invested Entities (FIEs)
of the approaching end of the progressive phase-out
period and the absence of indications on a possible
(290) The complaint lists the following preferential income tax
replacement programme.
schemes in favour of FIEs:
— Two free, three half-tax exemptions for the productive FIEs
3.3.6. INDIRECT TAX AND IMPORT TARIFF PROGRAMMES
3.3.6.1. Import tariff and VAT exemptions for FIEs
and certain domestic enterprises using
— Local income tax exemption and reduction programmes for
imported equipment in encouraged industries
the productive FIEs
(a) Description
(293) This programme provides an exemption from VAT and
import tariffs in favour of FIEs or domestic enterprises
— Income tax credit for FIEs purchasing domestically produced
for imports of capital equipment used in their
equipment
production. To benefit from the exemption, the
equipment must not fall in a list of non-eligible
equipment and the claiming enterprise has to obtain a
Certificate of State-Encouraged projects issued by the
— Income tax subsidies for FIEs based on geographical
Chinese authorities or by the NDRC in accordance with
location
the relevant investment, tax and customs legislation. This
programme was countervailed by the Union in the anti-
subsidy proceeding concerning Coated Fine Paper ( 73 ).
(291) The GOC submitted the relevant legal bases to show that
programmes concerning FIEs had been terminated with
the adoption on 16 March 2007 of the Corporate Income
Tax Law of 2008 at the 5th Session of the 10th National
(b) Legal basis
People's Congress of the People's Republic of China,
namely:
(294) The legal bases of this programme are Circular of the
State Council on Adjusting Tax Policies on Imported
Equipment, Guo Fa No. 37/1997, Announcement of
the Ministry of Finance, the General Administration of
Customs and the State Administration of Taxation
— Notice of the State Council on the Implementation of the
[2008] No. 43, Notice of the NDRC on the relevant
Transitional Preferential Policies in respect of Enterprise
issues concerning the Handling of Confirmation letter
Income Tax No. 39 [2007] of the State Council;
on Domestic or Foreign-funded Projects encouraged to
develop by the State, No. 316 2006 of 22 February
2006 and Catalogue on Non-duty-exemptible Articles
of importation for either FIEs or domestic enterprises,
— Notice of the State Administration of Taxation on
2008.
Stopping the Implementation of the Enterprise Income
Tax Deduction and Exemption Policy for the Investments
of an Enterprise in Purchasing Home-made Equipment,
No. 52 [2008] of the State Administration of Taxation
(c) Non cooperation
(295) The GOC claimed that none of the sampled companies
(292) These provisions show that income tax benefits for FIEs
benefited from this programme during the IP and
have been progressively phased out until the end of
referred to the responses of the sampled producers for
2011. The GOC has also stated that there is no
information relating to any benefits that may have been
replacement programme for FIEs and the tax treatment
received pursuant to this programme. The Commission
of FIEs is now the same as for other corporate taxpayers.
refers to its arguments on the request to the GOC to
The Commission notes that these preferential income tax
provide full replies (recitals (34) and following above),
programmes concerning FIEs are still countervailable as
and thereby will base its findings on this programme
OCS producers may still enjoy outstanding benefits at
on the information available on file according to
least for a part of the IP until the end of 2011 and it
Article 28 of the basic Regulation, namely its findings
cannot be ruled out that there exists a replacement
in the Coated Fine Paper proceeding.
programme for FIEs as from 2012. Nevertheless, the
Commission has decided not to assess them further
( 73 ) Recitals 137-147 of the Council Implementing Regulation (EU)
considering the need to reduce the administrative
No 452/2011.

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(d) Findings of the investigation
equipment must not exceed the total investment limit on
an FIE according to the 'trial Administrative Measures on
(296) This programme is considered a subsidy in the form of
Purchase of Domestically Produced Equipment'. This
revenue forgone by the GOC within the meaning of
programme was countervailed by the Union in the
Article 3(1)(a)(ii) as FIEs and other eligible domestic
anti-subsidy proceeding concerning Coated Fine
enterprises are relieved from payment of VAT and/or
Paper ( 74 ) and by the US authorities in a countervailing
tariffs otherwise due if they did not obtain the relevant
duty proceedings concerning Coated Free Sheet from the
NDRC certificate of State-encouraged project. It therefore
PRC ( 75 ).
confers a benefit on the recipient companies in the sense
of Article 3(2) of the basic Regulation. The programme is
specific within the meaning of Article 4(2)(a) of the basic
Regulation since the legislation pursuant to which the
granting authority operates limits its access to enterprises
that invest under specific business categories defined
exhaustively by law and obtaining the Certificate of
State-encouraged Projects. In addition, there are no
objective criteria to limit eligibility for this programme
(b) Legal basis
and no conclusive evidence to conclude that eligibility is
automatic under Article 4(2)(b) of the basic Regulation.
(300) The legal bases of this programme are Circular of State
Administration of taxation on the release of the
provisional measures for the Administration of tax
refunds for purchase domestically-manufactured
equipment by FIEs No 171, 199, 20.09.1999; Notice of
the Ministry of Finance and the State Administration of
Taxation on Stopping the Implementation of the Policy
of Refunding Tax to Foreign-funded Enterprises for Their
(e) Calculation of the subsidy amount
Purchase of Home-made Equipment, No 176 [2008] of
the Ministry of Finance.
(297) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. The benefit conferred on the
recipients is considered to be the amount of VAT and
duties exempted on imported equipment. In the absence
of information for the assessment of this benefit and
since this programme has already been examined in a
previous CVD proceeding by the Union, the most appro
priate source of information for the assessment of the
(c) Non-cooperation
benefit to the exporting producers has been the
assessment made for this programme in the Coated Fine
(301) The GOC claimed that this programme was terminated
Paper investigation, duly adjusted if needed as mentioned
by the Notice No 176 [2008] referred to above as from
in recital (252) above.
of 1 January 2009. The Commission requested the GOC
to provide information on the actual termination of
benefits that would have to be allocated over a longer
period of time since this programme is linked to the
purchase of domestically-manufactured assets. The GOC
simply referred to the replies of the sampled producers
for information relating to any benefits that may have
been received pursuant to this programme. The
(298) The subsidy rate thus established for all non-cooperating
Commission refers to its arguments on the request to
companies is set at 0,89 % which is the arithmetical
the GOC to provide full replies (recitals (34) and
average of the rates established for this programme in
following above). The Commission also notes that that
the Coated Fine Paper investigation.
the Notice No 176 provides for a transitional period for
the acquisition of eligible fixed assets and filing of the
application to obtain benefits until 30 June 2009. As the
GOC failed to provide any information on the phasing-
out of benefits and given that such benefits, being linked
to fixed assets, may be allocated over time and continue
into the IP, the Commission issues its findings on this
programme on the basis of the information available
3.3.6.2. VAT refunds to FIEs purchasing domestically
according to Article 28 of the basic Regulation, namely
produced equipment
the findings in the Coated Fine Paper proceeding.
(a) Description
( 74 ) Recitals 148-159 of the Council Implementing Regulation (EU)
(299) This programme provides benefits in the form of VAT
No 452/2011.
refunds for the purchase of domestically produced
( 75 ) Issues and Decision Memorandum for the Final Determination in
the Countervailing Duty Investigation of Coated Free Sheet from the
equipment by FIEs. The equipment must not fall into
People's Republic of China, 17 October 2007; US Federal Register,
the –Non-Exemptible Catalogue and the value of the
C-570-907.

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(d) Findings of the investigation
(b) Legal basis
(302) This programme is considered a subsidy in the form of
(306) The legal bases of this programme are Notice on Ministry
revenue forgone by the GOC within the meaning of
of Finance and State administration of Taxation issuing
Article 3(1)(a)(ii) and thus conferring a benefit to the
the Interim Measures for Expanding the Scope of Offset
recipient companies in the sense of Article 3(2) of the
for Value Added Tax in the Central Region, No. 75,
basic Regulation. The programme is specific within the
2007, Notice of the Ministry of Finance and the State
meaning of Article 4(2)(a) of the basic Regulation given
Administration of Taxation on Several Issues concerning
that the legislation itself pursuant to which the granting
the National Implementation of Value-added Tax reform,
authority operates limits its access to certain enterprises
No 170 [2008] of the Ministry of Finance.
(FIEs) for purchase of equipment not falling into the
Catalogue of non-exemptible equipment. There is no
indication of non-specificity according to Article 4(2)(b)
of the basic Regulation because there are no objective
criteria to limit eligibility for this programme and no
conclusive evidence to conclude that eligibility is auto
matic. In addition, the programme is also specific within
the terms of Article 4(4)(b) of the basic Regulation as the
subsidy is contingent upon the use of domestic over
(c) Non-cooperation
imported goods.
(307) The GOC claimed that this programme was terminated
by the Notice No 170 [2008] since 1 January 2009 and
referred to the replies of the sampled producers for
information relating to any benefits that may have
been received pursuant to this programme. The
Commission refers to its arguments on the request to
(e) Calculation of the subsidy amount
the GOC to provide full replies (recitals (34) and
(303) The amount of countervailable subsidy is calculated in
following above). The Commission notes that the
terms of the benefit conferred on the recipients, which is
Notice No. 170 does state that VAT benefits for
found to exist during the IP. The benefit conferred on the
companies located in the Central Region terminate at
recipients is considered to be the amount of VAT
the end of 2008 and can only be carried forward until
reimbursed on the purchase of domestically produced
January 2009. However, such benefits, being linked to
equipment. In the absence of information for the
fixed assets, may be allocated over time and continue
assessment of this benefit and since this programme
into the IP; in addition, the Notice also seems to
has already been examined in a previous CVD proceeding
contain another preferential VAT system for these enter
by the Union, the most appropriate source of
prises located in the Central Region as from January
information for the assessment of the benefit to the
2009 consisting of half of the applicable VAT rates. In
exporting producers has been the assessment made for
the absence of clarification by the GOC on the phasing-
this programme in the Coated Fine Paper proceeding, duly
out of outstanding benefits under this programme or on
adjusted if needed as mentioned in recital (252) above.
the details of any replacement programme, the
Commission bases its findings on this programme on
the evidence available on the file under Article 28 of
the basic Regulation.
(304) The subsidy rate thus established for all non-cooperating
companies is set at 0,04 % which is the arithmetical
average of the rates established for this programme in
the Coated Fine Paper proceeding.
(d) Findings of the investigation
(308) This programme is considered a subsidy in the form of
revenue forgone by the GOC within the meaning of
3.3.6.3. VAT deduction on fixed assets in the Central
Article 3(1)(a)(ii) and thus conferring a benefit to the
region
recipient companies in the sense of Article 3(2) of the
basic Regulation equal to the amount of VAT savings
(a) Description
generated by the deduction on the purchase of fixed
assets. The programme is specific according to
(305) This programme covers VAT taxpayers mainly active in
Article 4(2)(a) of the basic Regulation given that the
certain listed industries, including the metallurgical
legislation limits access to certain enterprises, i.e.
industry. The programme provides that eligible VAT
industries that operate in the listed sectors. This
taxpayers located in 26 cities of the old industrial bases
programme is also specific under Article 4(3) of the
of the central region that make investments in certain
basic Regulation given that it is limited to certain
fixed assets can deduct the amount of VAT paid on the
designated areas, i.e. the cities of the old industrial
fixed assets from its total VAT payable.
bases of the Central region.

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(e) Calculation of the subsidy amount
Commission based its findings on information
contained in the complaint. In accordance with
(309) The amount of countervailable subsidy is calculated in
Article 7(2) of the basic Regulation, the subsidy
terms of the benefit conferred on the recipients, which is
amount so calculated has been allocated over the total
found to exist during the IP. The benefit conferred on the
turnover of the recipients during the IP as appropriate
recipients is considered to be the amount of VAT savings
denominator, because the subsidy is not contingent upon
generated by the deduction on the purchase of fixed
export performance and was not granted by reference to
assets. In the absence of information for the assessment
the quantities manufactured, produced, exported or trans
of this benefit and since a comparable VAT programme
ported.
has already been examined in this proceeding, the most
appropriate source of information for the assessment of
the benefit to the exporting producers has been the
assessment made in recitals (297) and (298).
(314) The subsidy rate thus established for all non-cooperating
companies amounts to 0,08 %.
(310) The subsidy rate thus established for all non-cooperating
3.3.7. GRANT PROGRAMMES
companies is set at 0,89 %.
(315) The complaint alleged that as from the year 2005 until
recently (including the year 2009) the companies
producing the product concerned received benefits
under several grant programmes and sub-programmes.
3.3.6.4. Other tax privileges of Ma'anshan
It cannot be ruled out that payments under this
programme either are still on-going or have been
(a) Findings of the investigation
effected on a non-recurring basis in connection with
capital investment and thus there are still on-going
(311) The complaint listed miscellaneous tax privileges from
benefits not fully amortised during the chosen 15-year
2008 to 2010 enjoyed by OCS producers located in
amortisation period. The GOC was requested to submit
Ma'anshan and Wuhan, including exemptions from city
information on these programmes but has failed to
maintenance and construction tax, and extra charges on
provide a meaningful reply on any of these programmes.
education funds. The Commission asked the GOC to
Therefore, in the absence of replies by the GOC on all
provide information on these tax benefits. The GOC
these aspects, the Commission is basing its findings on
replied that the requested information were irrelevant
the best evidence available in compliance with Article 28
for the investigation because none of the sampled
of the basic Regulation
exporting producers was located in Ma'anshan. The
Commission refers to its explanation that the GOC was
requested to submit information also with regard to the
subsidy allegations concerning the non-sampled
3.3.7.1. China World Top Brand programme
companies (recitals (34) - (35) above).
(a) Legal basis
(316) The legal bases of this programme as reported in the
complaint are the following:
(312) In the absence of information provided by the GOC, the
Commission concludes that the tax privileges available in
Ma'anshan and Wuhan are to be considered a subsidy in
the form of revenue forgone by the GOC in accordance
— Circular on Carrying out Evaluation of Products to be
with Article 3(1)(a)(ii). They confer a benefit to the
Recognised as China World Top Brand, GZJH [2005]
recipient companies in the meaning of Article 3(2) of
No 95
the basic Regulation in that they provide a tax saving
equal to the difference between the tax paid and the
amount of tax normally payable in the absence of this
programme. The programme is specific within the
— Announcement No 5, 2005 of China Promotion
meaning of Article 4(3) of the basic Regulation given
Committee for Top Brand Strategy, Promulgating the
that it is limited to the enterprises established in
List of China Top Brand Products
certain designated regions or municipalities in Ma'anshan.
— Circular on application of China World Top Brands in
2006, ZJZH [2006] No 11;
(b) Calculation of the subsidy amount
(313) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
— Announcement No 6, 2006 of China Promotion
found to exist during the IP. In the absence of other
Committee for Top Brand Strategy, Promulgating the
information for the assessment of this benefit the
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— Announcement No
6, 2007 of China Promotion
changes or diminution of the subsidy amount, the
Committee for Top Brand Strategy, Promulgating the
original rate from the investigation in question is used
List of China Top Brand Products;
as the amount of subsidy in the present case.
— Circular on application of China World Top Brands in
2008, ZJZH [2008] No 23;
(322) The subsidy rate thus established with regard to this
scheme during the IP for all non-cooperating
companies is set at 0,13 % which is the arithmetical
average rate for similar programmes as established in
— Measures for the Administration of Chinese Top-Brand
the US Decision Memorandum of 6 April 2009 on
Products issued by the GOC
Citric Acid and Certain Citrate Salts (Page No. 6)
(Federal Register Vol. 74, No. 69, page 16836 /
13 April 2009), the US Decision Memorandum of
(b) Eligibility
14 May 2010 on Pre-Stressed Concrete Steel Wire

Strand (Page No. 29) (Federal Register Vol. 75, No. 98,
(317) Only producers granted the designation of "China World
page 28557 / 21 May 2010), the US Decision
Top Brand" are entitled to the benefits of this
Memorandum of 28 May 2010 on Certain Steel
programme. The complaint reports a number of steel
Grating (Page No. 18) (Federal Register Vol. 75, No.
products produced by the steel companies subject to
109, page 32362 / 8 June 2010), the US Decision
this investigation as being granted this designation.
Memorandum of 28 March 2011 on Aluminium
Extrusions (Page No. 19) (Federal Register Vol. 76, No.
64, page 18521 / 4 April 2011) and the US Decision
Memorandum of 11 October 2011 on Multi-layered
(c) Findings of the investigation
Wood Flooring (Page No. 17) (Federal Register Vol. 76,
No. 201, page 64313 / 18 October 2011). With regard
(318) Given the lack of cooperation of the GOC, the findings
to investigations conducted by the US authorities, it is
are based on the information present on the file in
noted that the methodology used for calculating the
accordance with Article 28 of the basic Regulation.
amount of benefit from grant programmes is substan
tially the same as that employed by the Union ( 76 ).
(319) This programme provides financial contributions in the
form of grants, below-market loans and other incentives,
which constitute a direct transfer of funds conferring a
3.3.7.2. Famous Brands programme and sub-
benefit upon the recipients within the meaning of
programmes (Chongqing Famous Brands,
Article 3(1)(a)(i) and Article 3(2) of the basic regulation.
Hubei Province Famous Brands, Ma'anshan
Famous Brands, Shandong Province Top
Brands, Wuhan Famous Brands)
(320) This subsidy is specific within the meaning of
(a) Legal basis
Article 4(2)(a) of the basic Regulation because the legis
lation limits access to certain enterprises only, that is the
(323) The legal bases of this programme as reported in the
enterprises that have received the designation "China
complaint with regard to the Shandong sub-programme
World Top Brand" for their products. Furthermore,
are the following:
there are no objective criteria established by the
granting authority with regard to the eligibility of the
scheme, which is not automatic under Article 4(2)(b) of
the basic Regulation.
— Notice on Printing and Distribution of 2003 Policies for
Encouraging and expanding Foreign Trade Export to
Shandong, LWJMJCZ, [2003] No 180;
(d) Calculation of the subsidy amount
(321) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
— 2004 Policies for Encouraging the Development of Foreign
found to exist during the IP. In the absence of precise
Trade & Economic Cooperation in Shandong, LWJMJCZ,
quantification elsewhere, the most appropriate source of
[2003] No 1037;
information for the assessment of the benefit to the
exporting producers has been comparable decisions by
the US authorities. As mentioned before, when basing
subsidy amounts on findings in other investigations,
— 2005 Policies for Encouraging the Development of Foreign
account is taken throughout this regulation of, inter
Trade & Economic Cooperation in Shandong;
alia, whether there have been any significant changes in
the scheme in question and whether the subsidy amount
may have diminished over time. It is noted that the
( 76 ) The methodology for the calculation of the subsidy amount is
explained on page 18 of the US Decision Memorandum of
amount of recurring subsidies will normally not
28 May 2010 on Certain Steel Grating (Federal Register Vol. 75,
diminish in this way. In the absence of any such
No. 109, page 32362 / 8 June 2010).

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— Notice on Printing and Distribution of 2006 Policies for
this programme is also specific according to
Encouraging the Development of Foreign Trade &
Article 4(4)(a) of the basic Regulation because its
Economic Cooperation in Shandong, LCQ [2006] No 5.
benefits are contingent upon export performance of the
relevant 'famous brand' products.
— Special Award Fund Budget for the Development of Self-
Exporting Brands, Lucaiqizhi, 2008, No 75.
(d) Calculation of the subsidy amount
(328) The amount of countervailable subsidy is calculated in
(b) Eligibility
terms of the benefit conferred on the recipients, which is

found to exist during the IP. In the absence of precise
(324) This programme confers benefits to producers of
quantification elsewhere, the most appropriate source of
products designated as "Famous Brands" and meant for
information for the assessment of the benefit to the
export markets. The complaint refers to a number of
exporting producers has been comparable decisions
producers of the product concerned having benefited
(based on similarity in the nature of the programme)
from this programme until at least 2009.
by the US authorities. As mentioned before, when
basing subsidy amounts on findings in other investi
gations, account is taken throughout this regulation of,
inter alia, whether there have been any significant
changes in the scheme in question and whether the
subsidy amount may have diminished over time. It is
(c) Findings of the investigation
noted that the amount of recurring subsidies will
(325) The complaint asserts that this programme was designed
normally not diminish in this way. In the absence of
to promote domestic advanced industries and encourage
any such changes or diminution of the subsidy
exports of their products to the world markets. The main
amount, the original rate from the investigation in
framework of this programme is set in the central
question is used as the amount of subsidy in the
programme, and provincial and local governments
present case.
develop their own famous brands programmes
consistently with the central programme to promote
the export of local products. The USA have challenged
this grant programme at the WTO (DS 387). In addition,
the US authorities have countervailed this programme in
several proceedings referred to in the complaint. The
Commission has also countervailed the benefits under
(329) The subsidy rate thus established with regard to this
this programme in the Coated fine paper case ( 77 ).
scheme during the IP for all non-cooperating
companies is set at 0,13 % which is the arithmetical
average rate for similar programmes as established in
the US Decision Memorandum of 6 April 2009 on
Citric Acid and Certain Citrate Salts (Page No. 6)
(326) The 'famous brands' programme provides financial
(Federal Register Vol. 74, No. 69, page 16836 /
contributions in the form of subsidised interest loans,
13 April 2009), the US Decision Memorandum of
R&D funding, and cash grant rewards for exporting.
14 May 2010 on Pre-Stressed Concrete Steel Wire
These incentives constitute a direct transfer of funds
Strand (Page No. 29) (Federal Register Vol. 75, No. 98,
conferring a benefit upon the recipients within the
page 28557 / 21 May 2010), the US Decision
meaning of Article 3(1)(a)(i) and Article 3(2) of the
Memorandum of 28 May 2010 on Certain Steel
basic Regulation.
Grating (Page No. 18) (Federal Register Vol. 75, No.
109, page 32362 / 8 June 2010), the US Decision
Memorandum of 28 March 2011 on Aluminium
Extrusions (Page No. 19) (Federal Register Vol. 76, No.
64, page 18521 / 4 April 2011) and the US Decision
Memorandum of 11 October 2011 on Multi-layered
(327) This subsidy is specific under Article 4(2)(a) of the basic
Wood Flooring (Page No. 17) (Federal Register Vol. 76,
Regulation because the legislation limits access only to
No. 201, page 64313 / 18 October 2011). With regard
those enterprises recognised to export products
to investigations conducted by the US authorities, it is
designated as 'famous brands'. Furthermore, given the
noted that the methodology used for calculating the
apparent absence of objective criteria and conditions
amount of benefit from grant programmes is substan
for the application of this programme by the granting
tially the same as that employed by the Union ( 78 ).
authority, specificity is also found under Article 4(2)(b) of
the basic Regulation. The preferential treatment under
( 78 ) The methodology for the calculation of the subsidy amount is
explained on page 18 of the US Decision Memorandum of
( 77 ) Recitals. 172-181 of the Council Implementing Regulation (EU)
28 May 2010 on Certain Steel Grating (Federal Register Vol. 75,
No 452/2011.
No. 109, page 32362 / 8 June 2010).

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3.3.7.3. The State key technology project fund
promote: technological renovation in key industries,
enterprises and products; facilitation of technology
(a) Non-cooperation by the Government of China
upgrades; improvement of product structure;
improvement of quality; increase of supply; expansion
(330) In its questionnaire reply GOC only stated that this
of domestic demand; continuous and healthy devel
programme has been terminated in 2003 and that
opment of the State economy. According to the
none of the sampled exporters has benefited from it.
complaint, the fund has supported 47 iron and steel
As the GOC has not supplemented this reply with any
enterprises with respect to investments totalling RMB
underlying evidence or further clarification, the
75 billion. The US authorities have countervailed this
Commission analyses this programme on the basis of
programme in at least two proceedings.
facts available pursuant to Article 28 of the basic Regu
lation.
(b) Legal basis
(335) The programme constitutes a subsidy as it provides
financial contributions in the form of grants for the
(331) The legal bases of this programme referred to in the
acquisition of fixed assets in accordance with
complaint are the following:
Article 3(1)(a)(i) of the basic Regulation, which confers
a benefit to the recipient. Since the subsidy is linked to
fixed assets and is allocated over time, it is concluded, on
the basis of facts available, that this benefit continues
— State Circulars: Guojingmao Touzi No 886 of 1999,
into the IP.
Guojingmao Touzi No 122 of 1999, Guojingmao Touzi
No 1038 of 1999, Guojingmao Touzi No 822 of 2000
and
(336) This subsidy is specific in the meaning of Article 4(2)(a)
— Measures for the Administration of National Debt Special
of the basic Regulation as the support is limited to
Fund for National Key Technology Renovation Projects
certain large-sized state-owned enterprises and state-
holding enterprises among 512 key enterprises and
120 pilot enterprise groups. In so far as the project
focuses on companies located in specifically designated
geographical regions of the old industrial base in north-
(c) Eligibility
east, central and west areas, it is also specific within the
meaning of Article 4(3) of the basic Regulation.
(332) According to quotations of the main legal basis
contained in the complaint, enterprises supported under
this programme "shall be mainly selected from large-
sized state holding enterprises among the 512 key enter
prises, 120 pilot enterprise groups and the leading enter
prises of the industry." There is also a geographical pref
(e) Calculation of the subsidy amount
erence for enterprises located in the old industrial bases

in north-east, central and west areas.
(337) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of precise
quantification elsewhere, the most appropriate source of
(d) Findings of the investigation
information for the assessment of the benefit to the
exporting producers has been a similar decision by the
(333) Given the lack of cooperation of the GOC, the
US authorities, namely the US Decision Memorandum of
Commission relies on the elements included in the
10 September 2010 on Certain Seamless Carbon and
complaint and/or on the other sources mentioned in
Alloy Steel Standard, Line, and Pressure Pipe (Page
the complaint ( 79 ).
No 19) (Federal Register Vol. 75, No. 182, page 57444
/ 21 September 2010).
(334) The complaint reports that this programme sought to
provide financial support to eligible enterprises to
(338) The subsidy rate thus established with regard to this
( 79 ) E.g. Conference of the High Tech Industries of the Chinese
scheme during the IP for all non-cooperating
Academy of Sciences, 11 November 2002, Issues and Decision
companies is set at 0,01 % which is the rate for a
Memorandum for the Final Affirmative CVD Determination: OTR
tires from the PRC, 18 April 2011; US Federal Register, C-570-913,
similar scheme as established in the US decision
p. 24.
referred to in the preceding recital.

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3.3.7.4. Programmes to rebate anti-dumping legal fees
basic Regulation in order to cover legal fees in anti-
dumping proceedings and confers a benefit within the
(a) No cooperation by the GOC
meaning of Article 3(2) of the basic Regulation. This
subsidy is specific under Article 4(2)(a) and (c) of the
(339) The complaint referred to various investigations carried
basic Regulation because it is restricted to certain enter
out by the US authorities ( 80 ) and the Commission
prises that are subject to foreign anti-dumping
(Coated Fine Paper proceeding) which found counter
proceedings. Furthermore, this programme is also
vailable several provincial programmes under which
specific within the terms of Article 4(3) of the basic
40 % of the legal fees for a company's participation in
Regulation given that it is limited to certain enterprises
anti-dumping proceeding was refunded by the local
registered in the designated geographical regions
financial bureau. As the GOC decided not to reply to
governed by the relevant provincial authorities imple
questions on this programme, merely stating that the
menting this programme.
sampled exporters had not benefited from it, the
Commission bases its findings on the evidence available
on the file according to Article 28 of the basic Regu
lation.
(e) Calculation of the subsidy amount
(343) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of
(b) Legal basis
information for the assessment of this benefit and since
this programme has already been examined in a previous
(340) According to the complaint and the Commission
anti-subsidy proceeding by the Union institutions, the
decision in Coated Fine Paper (recital 193), the legal
most appropriate source of information for the
basis of this programme is the following:
assessment of the benefit to the exporting producers
has been the assessment made for this programme in
the Coated Fine Paper proceeding, duly adjusted if
needed as mentioned in recital (252) above.
— Rules for the Implementation of the Support Policy
for the Anti-dumping, Anti-subsidy, Safeguard inves
tigation respondent
(344) The subsidy rate thus established for all non-cooperating
companies is set at 0,01 % on the basis of Coated Fine
Paper findings ( 81 ).
(c) Eligibility
(341) This programme is available for companies involved in
3.3.8. PURCHASE OF GOODS BY THE GOVERNMENT FOR
the anti-dumping investigations and working in
HIGHER THAN ADEQUATE REMUNERATION
compliance with the instructions of the Ministry of
Commerce and provincial authorities.
(345) The complaint contained evidence that the GOC
purchased through SOEs steel products manufactured
by OCS producers. The complaint referred to the GOC
purchases of a number of steel outputs, including colour-
coated sheet, hot-rolled sheet coils, cold-rolled sheet,
medium plates, galvanised sheet, and many others. The
complaint showed that the price for the purchase of
(d) Findings of the investigation
these goods by SOEs was set by reference to different
elements and/or benchmarks, and that there were price
(342) This programme constitutes a subsidy as it provides
caps or adjustments depending on the different goods
financial contribution in the form of a direct transfer
and on whether the transaction concerned related parties.
of funds in the meaning of Article 3(1)(a)(i) of the
( 80 ) Issues and Decision Memorandum for the Final Affirmative
Countervailing Duty Determination: Laminated Woven sacks for
the PRC, 16 June 2008; US Federal Register, C-570-917, p. 27;
Issues and Decision Memorandum for the Final Determination in
(346) The GOC replied by reference to its general arguments
the Countervailing Duty Investigation of Circular Welded Carbon
concerning SOEs that it has not been demonstrated that
Quality Steel Line Pipe from the PRC, 23 March 2009, US Federal
purchasers SOEs of these steel products were public
Register, C-570-936, p. 18, Issues and Decision Memorandum for
the Final Determination in the Countervailing Duty Investigation of
Light-Walled Rectangular Pipe and Tube from the PRC, 13 June
( 81 ) Recital 202 of the Council implementing Regulation (EU)
2008, US Federal Register, C-570-915, p. 13.
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bodies within the meaning of the WTO SCM Agreement
3.3.9.1. Subsidies provided in the Tianjin Binhai New
and that it was impossible for the GOC to collect trans
Area and the Tianjin Economic and Tech
action-specific data with regard to unknown entities. The
nological Development Area
GOC also stated that the complaint did not refer to any
purchase of goods involving the sampled exporters. The
(a) Legal basis
Commission refers to its conclusions on purchasers of
OCS and other steel products being SOEs (recitals (49) -
(349) The legal basis of the Accelerated Depreciation scheme is
(73) above) and to the request to the GOC to provide
the Circular of the Ministry of Finance and the State
information also concerning non-sampled exporters (see
Administration of Taxation concerning the Related Pref
recitals (34) and (35) above). Given the lack of further
erential Policies of Enterprise Income Tax for Supporting
information provided by the GOC on this programme,
the Development and Openness of Binhai New Area of
the Commission bases its findings on the information
Tianjin.
available on file according to Article 28 of the basic
Regulation.
(b) Findings of the investigation
(350) The complaint alleged that the programme aims to
promote the construction of science-technology infra
structure in the Tianjin Binhai New Area (TBNA) and
the Tianjin Economic and Technological Development
(347) To the extent that prices are above market prices and a
Area (TETDA) and build a science-technology renovation
benefit is conferred by the State on OCS producers
system and service abilities. According to the complaint,
through its purchasers SOEs, this programme is counter
financial benefits under this programme were granted
vailable according to Article 3(1)(a)(iii) and Article 6(d) of
under the Science and Technology Fund and under the
the basic Regulation. It also needs to be considered that
Accelerated Depreciation Programme. These benefits
the complaint allegation that there is no reliable private
would be limited to enterprises established in the
price in the market because of the predominance of the
TBNA Administrative Committee's jurisdiction,
public sector in the steel market has been confirmed by
including companies producing/exporting the product
the investigation as SOEs have a predominant share in
concerned. The complaint referred to the decision by
the steel market in China at least with regard to hot-
the US authorities in the countervailing proceeding
rolled steel and cold-rolled steel (see recitals (76) to
concerning certain seamless carbon and alloy steel
(79)). This subsidy is also specific under Article 4(2) of
standard, line, and pressure pipe from the People's
the basic Regulation as it is restricted only to selected
Republic of China, which found this programme counter
entities participated by the State in the steel sector.
vailable ( 82 ).
However, the complexity of these transactions and of
the underlying contracts coupled with the lack of the
necessary details on the record did not enable the
Commission to come to a firm conclusion on this
programme. Therefore the Commission has decided not
to assess this programme further.
(351) In the absence of cooperation by the GOC, the
Commission bases its decision on this programme on
the best information available in accordance with
Article 28 of the basic Regulation contained in the
complaint and in the mentioned decision by the US auth
orities.
3.3.9. OTHER REGIONAL PROGRAMMES
(a) Non-cooperation by the GOC
(352) This programme confers a non-recurring benefit to the
recipient companies in the form of grants under the
(348) The Government of China replied that as none of the
Science and Technology Fund in the meaning of
sampled producers was located in the areas of application
Article 3(1)(a)(i) of the basic Regulation (direct transfer
of the regional programmes included in this section, the
of funds) and in the form of revenue forgone under
information requested by the Commission was irrelevant
Article 3(1)(a)(ii) of the basic Regulation as concerns
for the investigation. Given the relevance of this
the Accelerated Depreciation Programme.
information for the investigation (see recitals (34) -
(35) above), in the absence of a reply by the GOC the
Commission is basing its decision on all the regional
( 82 ) Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure
Pipe From the People's Republic of China, Final Affirmative Counter
programmes in this section on the facts available on
vailing Duty Determination, 21 September 2010, US Federal
file in accordance with Article 28 of the basic Regulation.
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(353) The subsidies under the Science and Technology Fund
Northeast Provinces of Liaoning, Jilin and Heilongjiang,
and under the Accelerated Depreciation Programme are
which is the traditional centre of China's steel industry.
specific within the meaning of Article 4(3) of the basic
According to the complaint, the GOC has created a
Regulation as they are limited to certain enterprises
special bank, the Northeast Revitalisation Bank (NRB)
located within designated geographical regions (i.e. the
under the control of the State Council with a mandate
TBNA and/or the TETDA).
to finance the support for the revitalisation of Northeast
old heavy industrial hub.
(c) Calculation of the subsidy amount
(354) The amount of countervailable subsidy is calculated in
(358) The complaint also referred to subsidies provided under
terms of the benefit conferred on the recipients, which is
this programme by the Export-Import Bank of China
found to exist during the IP. In the absence of precise
("ExIm Bank") through its Dalian branch for a total
quantification elsewhere, the most appropriate source of
amount of RMB 5 billion in export credits and other
information for the assessment of the benefit to the
"low-cost credit" worth RMB 150 million in savings for
exporting producers has been a comparable decision by
local enterprises since November 2003. The complaint
the US authorities, namely the US Decision
also reported that loans were also extended to non-credi
Memorandum of 10 September 2010 on Certain
tworthy enterprises to enhance the competitiveness of
Seamless Carbon and Alloy Steel Standard, Line, and
ailing SOEs, which enjoyed a disproportionate access to
Pressure Pipe (Pages Nos 20 and 21) (Federal Register
financial resources despite having the highest share of
Vol. 75, No. 182, page 57444 / 21 September 2010).
non-performing loans in the country.
With regard to investigations conducted by the US auth
orities, it is noted that the methodology used for calcu
lating the amount of benefit from tax and grant
programmes is substantially the same as that employed
by the Union ( 83 ).
(359) In the absence of cooperation by the GOC, the
Commission bases its decision on this programme on
the information contained in the complaint and in the
US Decision Memorandum of 17 November 2008 on
(355) The total subsidy rate thus established during the IP for
all non-cooperating companies is set at 0,61 % which
Circular Welded Carbon Quality Steel Line Pipe (Line
corresponds to the accumulated rate for the schemes
Pipe) (Pages 21 and 22) (Federal Register Vol. 73, No.
concerned as established in the decision referred to in
227, page 70961 / 24 November 2008), duly adjusted if
the preceding recital.
needed as mentioned in recital (252) above.
3.3.9.2. Programmes related to the Northeast Region
(360) This programme confers an advantage to the recipient
The Northeast Revitalization Programme
companies in the form of: (i) grants as export interest
subsidies; (ii) VAT refunds for purchase of fixed assets.
(a) Legal basis
(356) The legal basis is the Circular of the Ministry of Finance
and State Tax Administration on Printing and
Distributing the Regulations on Relevant Issues with
respect to Expansion of VAT Deduction Scope in the
Northeast Areas of 14 September 2004.
(361) With regard to (i) export interest subsidies, the provision
of interest subsidies constitutes a subsidy in the form of
grant within the meaning of Article 3(1)(a)(i) of the basic
Regulation. The US decision refers to this programme as
the "Foreign Trade Development Fund" rather than the
"Northeast Revitalisation Programme", as also mentioned
(b) Findings of the investigation
in the complaint. This programme is managed by the
(357) The complainant affirmed that the GOC established the
Liaoning provincial authorities (namely the Liaoning
Northeast Revitalisation Programme in 2003 to revive
Provincial Bureau of Foreign Trade and Economic
the old industrial base of Dalian City and the three
Cooperation and the Liaoning Department of Finance).
Eligible projects include those undertaken by exporting
enterprises inter alia to improve the competitiveness of
( 83 ) The methodology for the calculation of the subsidy amount is
their export base and to explore international markets.
explained on pages 20 and 21 of the US Decision Memorandum
Because these grants are contingent upon export
of 10 September 2010 on Certain Seamless Carbon and Alloy Steel
Standard, Line, and Pressure Pipe (Federal Register Vol. 75, No. 182,
performance, this programme is specific according to
page 57444 / 21 September 2010).
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(362) With regard to (ii) VAT refunds, for the purchase of fixed
Manufacturing Products Export Financial interest
assets, they constitute a subsidy in the form of revenue
Assistance of Liaoning Province, established on
forgone by the State according to Article 3(1)(a)(ii) of the
16 December 2004.
basic Regulation. This programme provides that VAT
taxpayers of certain industries may deduct VAT for
purchases of fixed assets from the VAT for sales of
finished goods. This VAT deduction is limited to firms
located in the northeast region and is therefore regionally
specific within the meaning of Article 4(3) of the basic
Regulation.
(b) Findings of the investigation
(366) The complaint alleged that this programme provides
assistance to companies to expand the export of high-
tech products and supports the development of enter
prises located in the Liaoning Province. The programme
is managed by the Liaoning Provincial Bureau of Foreign
Trade and Economic Cooperation, the Liaoning
(c) Calculation of the subsidy amount
Department of Finance, and the Economic Commission
of Liaoning province. The US authorities have found this
(363) The amount of countervailable subsidy is calculated in
programme countervailable in the above-mentioned
terms of the benefit conferred on the recipients, which is
decision concerning Line Pipe (see recital (359).
found to exist during the IP. In the absence of precise

quantification elsewhere, the most appropriate source of
information for the assessment of the benefit to the
exporting producers has been a comparable decision
(based on similarity in the nature of the programme)
by the US authorities.
(367) This programme confers a benefit in the form of direct
transfer of funds from the GOC used to pay interest on
bank loans within the meaning of Article 3(1)(a)(i) of the
basic Regulation. Export loans means short-term loans
obtained by enterprises that produce high-tech products
and equipment manufacturing products in the province
(364) The total subsidy rate thus established for the Northeast
from banks and non-bank financial institutions due to
Revitalization Programme during the IP for all non-
the shortage of necessary funds for production and
cooperating companies is set at 0,18
% which
operation between products export declaration and
corresponds to the accumulated rate for the grants and
receipt of payment. Eligible enterprises must have an
VAT refunds received under the Foreign Trade Devel
annual export value above $ 1 million and have
opment Fund Program as established in the US
exported products falling in the scope of the "China
Decision Memorandum of 17 November 2008 on
High-Tech Product Export Catalogue" or the scope of
Circular Welded Carbon Quality Steel Line Pipe (Line
equipment manufacturing products. This programme is
Pipe) (Pages 21 and 22) (Federal Register Vol. 73, No.
therefore specific under Article 4(2) of the basic Regu
227, page 70961 / 24 November 2008). With regard to
lation because it is limited to enterprises fulfilling these
investigations conducted by the US authorities, it is noted
criteria. This programme is also contingent upon export
that the methodology used for calculating the amount of
performance according to Article 4(4)(a) of the basic
benefit from similar programmes is substantially the
Regulation. The programme is also regionally specific
same as that employed by the Union ( 84 ).
within the terms of Article 4(3) as it is limited to enter
prises located within the designated geographical region
in the Northeast of China.
Export interest subsidies
(a) Legal basis
(c) Calculation of the subsidy amount
(365) The legal basis is the Provisional Administration
(368) The amount of countervailable subsidy is calculated in
Measures on High Tech Products and Equipment
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of precise
quantification elsewhere, the most appropriate source of
( 84 ) The methodology for the calculation of the subsidy amount is
information for the assessment of the benefit to the
explained on pages 20 and 21 of the US Decision Memorandum
exporting producers has been a comparable decision
of 17 November 2008 on Circular Welded Carbon Quality Steel
Line Pipe (Line Pipe) (Federal Register Vol. 73, No. 227, page
(based on similarity in the nature of the programme)
70961 / 24 November 2008).
by the US authorities.

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(369) The subsidy rate thus established during the IP for all
(b) Calculation of the subsidy amount
non-cooperating companies is set at 0,43 % which
corresponds to the rate for the export interest subsidies
(373) The amount of countervailable subsidy is calculated in
scheme as established in the US Decision Memorandum
terms of the benefit conferred on the recipients, which is
of 17 November 2008 on Circular Welded Carbon
found to exist during the IP. In the absence of precise
Quality Steel Line Pipe (Line Pipe) (Page No 23) (Federal
quantification elsewhere, the most appropriate source of
Register Vol. 73, No. 227, page 70961 / 24 November
information for the assessment of the benefit to the
2008). With regard to investigations conducted by the
exporting producers has been a comparable decision
US authorities, it is noted that the methodology used for
(based on similarity in the nature of the programme)
calculating the amount of benefit from similar
by the US authorities.
programmes is substantially the same as that employed
by the Union ( 85 ).
(374) The subsidy rate thus established during the IP for all
non-cooperating companies is set at 1,05 % which
corresponds to arithmetical average of the rates for the
Export loans
export loans scheme as established in the US Decision
Memorandum of 17 November 2008 on Circular
(a) Findings of the investigation
Welded Carbon Quality Steel Line Pipe (Line Pipe)
(Page No 23) (Federal Register Vol. 73, No. 227, page
(370) The complaint refers to the previous programme of
70961 / 24 November 2008). With regard to investi
export interest subsidies, which is eligible only in
gations conducted by the US authorities, it is noted
connection with outstanding "export loans". The US
that the methodology used for calculating the amount
authorities have found also this programme counter
of benefit from similar programmes is substantially the
vailable in the decision concerning Line Pipe.
same as that employed by the Union ( 86 ).
Liaoning Province Grants- Five Point One Line
(371) The legal basis is the "Provisional Administration
Programme
Measures on High Tech Products and Equipment
Manufacturing Products Export Financial interest
(a) Findings of the investigation
Assistance of Liaoning Province", established on
(375) The complaint states that the "Five Points, One Line
16 December 2004.
Coastal Belt" programme was introduced on 21 January
2006 by the Liaoning Provincial Government. The
Liaoning government provides subsidies for certain enter
prises located in the area. The first priority is given to
enterprises set up in the five key areas as export manu
facture bases. The preferential treatment include a
number of benefits, including a reduced income tax
rate of 15 % for enterprises certified as "high-tech" enter
(372) This programme constitutes a benefit in the form of
direct transfer of funds from the GOC in the meaning
prises; income tax exemption for 'domestically invested'
of Article 3(1)(a)(i) of the basic Regulation. The subsidy
high-tech enterprises; priority to receive interest subsidies;
confers a benefit under Article 3(2) and 6(b) of the basic
economic management privileges; and exemptions from
Regulation equal to the difference between what the
government fees. According to the complaint the China
recipients paid, and the amount they would have paid
Development Bank (CDB), a state-owned policy bank, has
for a comparable commercial loan in the absence of the
provided preferential loans under this programme.
programme. These loans are provided by the government
through its policy banks and its SOCBs (see analysis in
recitals (157) - (180) above). These export loans are
specific under Article 4(4)(a) of the basic Regulation
because they are contingent upon export performance
and also under Article 4(3) as they are limited to enter
(376) The US authorities have found this programme counter
prises located within a designated geographical region in
vailable in the above-mentioned decision concerning Line
China.
Pipe.
( 85 ) The methodology for the calculation of the subsidy amount is
( 86 ) The methodology for the calculation of the subsidy amount is
explained on page 23 of the US Decision Memorandum of
explained on page 23 of the US Decision Memorandum of
17 November 2008 on Circular Welded Carbon Quality Steel
17 November 2008 on Circular Welded Carbon Quality Steel
Line Pipe (Line Pipe) (Federal Register Vol. 73, No. 227, page
Line Pipe (Line Pipe) (Federal Register Vol. 73, No. 227, page
70961 / 24 November 2008).
70961 / 24 November 2008).

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(377) The legal basis of this programme is the "Opinion of
the methodology used for calculating the amount of
Liaoning Provincial Encouraging the Expansion of
benefit from grant programmes is substantially the
Opening-Up in Coastal Key Developing Areas." The
same as that employed by the Union ( 87 ).
Liaoning Development and reform Commission and the
Liaoning Finance Bureau manage the interest subsidies,
and the Huludao Beigang Industrial Park, Industry, and
Commerce Authority administer the fee exemptions
provided under this programme.
3.3.9.3. Grants under the Science and technology
programme of Jiangsu Province
(a) Legal basis
(381) The legal basis of this programme is the Administrative
Measures on Jiangsu Sci-Tech Public Service Platform
(Sukeji (2006) No 102; Sucaijiao (2006) No 22).
(378) This programme provides financial advantages in the
form of direct transfer of funds from the GOC in the
terms of Article 3(1)(a)(i) of the basic Regulation and/or
revenue forgone or not collected in the terms of
Article 3(1)(a)(ii) of the basic Regulation. These
subsidies constitute a benefit under Article 3(2) of the
(b) Findings of the investigation
basic Regulation equal to the amount of the grant and/or

to the tax/fee exemptions. These subsidies are specific
(382) The complaint states that this programme provides,
within the terms of Article 4(3) of the basic Regulation
among others, grants to certain enterprises. The
as they are limited to certain enterprises located within
Government of China stated in its questionnaire reply
the designated jurisdiction of the Liaoning Provincial
that no sampled company used or benefited under this
authority. The first priority for the granting of these
programme. The Commission refers to its arguments that
subsidies is given to enterprises set up in the five key
the GOC was expected to provide complete replies also
areas as export manufacture bases, and therefore they are
to questions concerning non-sampled companies (recitals
also specific according to Article 4(4)(a) of the basic
(34) - (35) above). Furthermore, the Commission notes
regulation insofar as they are contingent upon export
that the complaint lists as potential beneficiaries both
performance.
companies that were sampled and other non-sampled
OCS producers located in the relevant area of appli
cation. The Commission therefore bases its findings on
the facts available on record in accordance with Article 28
of the basic Regulation, and in particular the information
contained in the complaint and the findings by the US
authorities that have countervailed this programme in the
decision concerning Pre-Stressed Concrete Steel Wire
Strand from the People's Republic of China ( 88 ).
(b) Calculation of the subsidy amount
(379) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of precise
quantification elsewhere, the most appropriate source of
information for the assessment of the benefit to the
(383) The financial advantages granted in the form of grants
exporting producers has been a comparable decision
provide a contribution within the meaning of
(based on similarity in the nature of the programme)
Article 3(1)(a)(i) of the basic Regulation. These subsidies
by the US authorities.
are specific within the terms of Article 4(2)(c) of the
basic Regulation because, there seem to be no objective
criteria or conditions governing the eligibility for the
benefits from this scheme (as provided for in
Article 4(2)(b) of the basic Regulation) and, on the
basis of the facts available, discretion does not seem to
be exercised by the Jiangsu Department of Science and
Technology is an objective manner.
(380) The subsidy rate thus established during the IP for all
( 87 ) The methodology for the calculation of the subsidy amount is
non-cooperating companies is set at 0,30 % which
explained on page 23 of the US Decision Memorandum of
corresponds to the rate established for this scheme in
17 November 2008 on Circular Welded Carbon Quality Steel
the US Decision Memorandum of 17 November 2008
Line Pipe (Line Pipe) (Federal Register Vol. 73, No. 227, page
on Circular Welded Carbon Quality Steel Line Pipe (Line
70961 / 24 November 2008).
Pipe) (Page No 23) (Federal Register Vol. 73, No. 227,
( 88 ) Pre-Stressed Concrete Steel Wire Strand from the People's Republic of
China, Preliminary Affirmative Countervailing Duty Determination,
page 70961 / 24 November 2008). With regard to inves
2 November 2009, US Federal Register, document number E9-
tigations conducted by the US authorities, it is noted that
26322, p. 56576-56592.

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(c) Calculation of the subsidy amount
according to Article 4(3) of the basic Regulation as they
are provided only for companies located in the Hebei
(384) The amount of countervailable subsidy is calculated in
province.
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of precise
quantification elsewhere, the most appropriate source of
information for the assessment of the benefit to the
exporting producers has been a comparable decision
(based on similarity in the nature of the programme)
by the US authorities.
(b) Calculation of the subsidy amount
(388) The amount of countervailable subsidy is calculated in
terms of the benefit conferred on the recipients, which is
found to exist during the IP. In the absence of other
information for the assessment of this benefit the
Commission based its findings on information
(385) The subsidy rate thus established during the IP for all
contained in the complaint. In accordance with
non-cooperating companies is set at 0,01 % which
Article 7(2) of the basic Regulation, the subsidy
corresponds to the rate established for this scheme in
amount so calculated has been allocated over the total
the US Decision Memorandum of 14 May 2010 on
turnover of the recipients during the IP as appropriate
Pre-Stressed Concrete Steel Wire Strand (Page No 35)
denominator, because the subsidy is not contingent upon
(Federal Register Vol. 75, No. 98, page 28557 /
export performance and was not granted by reference to
21 May 2010). With regard to investigations conducted
the quantities manufactured, produced, exported or trans
by the US authorities, it is noted that the methodology
ported.
used for calculating the amount of benefit from grant
programmes is substantially the same as that employed
by the Union ( 89 ).
(389) The subsidy rate thus established for all non-cooperating
companies is negligible (less than 0,01 %).
3.3.9.4. Grants under the Science and Technology
programme of Hebei Province
(a) Findings of the investigation
(386) The complaint refers to two grants provided under the
3.3.10. AD HOC SUBSIDIES
Science and Technology programme of Hebei province to
an OCS producer in 2009 under this programme for an
(a) Findings of the investigation
amount of RMB 700.000 and RMB 2.080.000. The
Government of China stated in its questionnaire reply
(390) The complaint listed a number of ad hoc subsidies
that none of the sampled company was established in
allegedly granted to certain OCS producers, both SOEs
Hebei and therefore the requested information was
and private companies. These subsidies were either grants
irrelevant for the investigation. The Commission refers
or other tax exemptions or reductions inter alia in order
to its arguments that the GOC should have provided
to finance particular projects or assets. They were granted
complete replies also to questions concerning non-
in the context of the general strategic policy to upgrade
sampled companies (recitals (34) - (35) above). The
the steel industry.
Commission findings are therefore based on the facts
available on record (in this case the complaint) in
accordance with Article 28 of the basic Regulation.
(391) The Commission asked the GOC to provide information
on these ad hoc subsidies. The GOC replied that the
allegations in the complaint were based on quotations
(387) The financial advantages provided under this programme
from the annual reports and it seemed that none of
in the form of grants constitute subsidies given that they
them concerned sampled companies. Therefore, the
provide a financial contribution in the terms of
GOC concluded that it was not necessary to address
Article 3(1)(a)(i) of the basic Regulation. They constitute
transaction-specific allegations concerning non-sampled
a benefit under Article 3(2) of the basic Regulation equal
companies and provinces. Furthermore, the GOC
to the amount of the grants. These subsidies are specific
restated one of its general comments that the mere
listing of certain transactions as 'subsidies' in a
company's annual report cannot be taken as evidence
( 89 ) The methodology for the calculation of subsidy amount is
sufficient to launch an investigation on them as it "does
explained on page 35 of the US Decision Memorandum of
14 May 2010 on Pre-Stressed Concrete Steel Wire Strand (Federal
not constitute sufficient prima facie evidence according to
Register Vol. 75, No. 98, page 28557 / 21 May 2010).
Article 11.2 of the WTO SCM Agreement".

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(392) The Commission refers to its arguments explaining why
3.4. COMMENTS OF PARTIES AFTER DEFINITIVE
the GOC was required to submit information also with
DISCLOSURE
regard to the subsidy allegations concerning the non-
sampled companies (recitals (34) - (35) above). The
(396) GOC, one sampled exporting producer (Zhejiang
Commission based its findings on these ad hoc
Huadong) and the complainant submitted comments
subsidies on the facts available on file in accordance
on definitive disclosure.
with Article 28 of the basic Regulation.
3.4.1. COMMENTS OF GOC ON DEFINITIVE DISCLOSURE
(393) The ad hoc subsidies listed in the complaint constitute a
(397) In view of the numerous and very detailed arguments
subsidy in the meaning of Article 3(1)(a)(i) of the basic
submitted by the GOC and that fact that it would be
Regulation in the form of a direct transfer of funds with
impracticable (also due to the presence of some
regard to the grants and similar transfers of resources,
confidential information) to include all of them in this
and in the meaning of Article 3(1)(a)(ii) of the basic
regulation, the Commission has bilaterally explained in
Regulation in the form of revenue forgone for the
writing to the GOC all the legal and factual elements
various exemptions or reductions of taxes and/or fees
underlining the rejection of these claims.
at central, provincial, or municipal level otherwise due.
The Commission notes that the annual reports of the
various OCS producers themselves refer to these
financial contributions as 'subsidies'. On the face of it,
a number of these subsidies appear to be specific in law
or in fact, within the terms of Article 4(2) of the basic
Regulation because, in the absence of cooperation from
3.4.1.1. Procedural issues
the GOC, they are deemed to be granted to a limited
number of steel companies in the encouraged steel
(398) In a number of its arguments on the initiation of the
sector, and/or because of the manner in which discretion
investigation, the GOC seemed to consider the GOES
of the granting authorities has been exercised for their
panel report ( 90 ) to be controlling in interpreting certain
granting. Furthermore, some of these subsidies appear
provisions of the SCM Agreement and the EU Basic
also specific pursuant to Article 4(3) of the basic Regu
Regulation. For instance, the GOC talks about doubts
lation since their access was limited to certain enterprises
being "removed" by the GOES panel ( 91 ). While the
located in designated geographical regions in the territory
Commission took note of the findings of the panel in
of a certain province.
this and does not disagree with a number of its
conclusions, these findings do not amend the relevant
Treaty or legislative language, notably Articles 11.2 and
11.3 of the WTO Subsidies Agreement or Articles 9(2)
and 9(3) of the basic CVD Regulation which are relevant
and binding for the Commission in all AS proceedings.
(b) Calculation of the subsidy amount
(394) The Commission has carefully studied the information
available on the record concerning each of these ad
hoc subsidies for the various producers of OCS. The
Commission found that some of these subsidies are
(399) The GOC claimed that the Commission is in breach of
Article 11.2 of the SCM Agreement (ASCM) because it
non-trade distortive and/or confer relatively small
initiated this investigation on the basis of a complaint
amounts to OCS producers. By contrast, there are also
which did not contain any evidence of the "existence,
a number of specific subsidies that appear to confer
degree and effect of any (/each) alleged subsidy" and
significant amounts of subsidies to the OCS producers.
therefore the Commission had violated its obligation
In view of this and of the information present on file, the
under Article 11.3 to review the accuracy and the
Commission considers it appropriate to calculate the
adequacy of the evidence.
applicable countervailing duty by reference to the
simple average resulting from the grants and the tax
programmes countervailed in this proceeding despite
the non-cooperation by the GOC and the relevant OCS
producers.
This claim had to be rejected. The GOC's reference to
"existence, degree and effect" of the subsidy is a quote
from Article 11.1 of the ASCM and describes the
( 90 ) Panel report on China – Countervailing and Anti-Dumping Duties
(395) The subsidy rate thus established for all non-cooperating
on Grain Oriented Flat-rolled Electrical Steel from the United States.
companies is set at 0,5 %.
( 91 ) ibid.

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purpose of an investigation. In Commission's view it is
(402) The GOC claimed that the Notice of Initiation is in
unrelated to Article 11.2 of ASCM, which requires that
violation of Article 22.2 (iii) of the ASCM, arguing that
the complainant shall provide "sufficient evidence of the
it cannot be considered that the simple repetition of the
existence of a subsidy and, if possible, its amount" and
names assigned to the various programs constitutes a
the complaint shall include "such information as is "rea
"description" thereof. The Commission considers that
sonably available" to the complainant. The Commission
subsidy practices to be investigated have been adequately
has analysed the evidence submitted by the complainant,
described in the Notice of Initiation by specifying the
which was substantial, as it appears clearly from the
schemes concerned and therefore the Notice does not
version open for inspection by interested parties of the
violate Article 22.2(iii) of ASCM.
complaint. The Commission services only proposed the
initiation of an investigation after having duly analysed
the accuracy and adequacy of the evidence which they
consider sufficient prima facie.
(403) The GOC argued that the Commission has wrongly
initiated on a number of subsidy programmes because
it has looked at the complaint "holistically" or "in its
(400) The GOC suggested that each element (financial
totality" rather than examining each programme; GOC
contribution, benefit and specificity) of each subsidy
also stated that the findings of other investigating auth
scheme has to be determined individually. The
orities on various programmes are not by themselves
Commission agrees with the GOC that subsidy alle
sufficient evidence for initiation. As explained above
gations have to be examined individually. However, it is
(recital (400), the Commission services have examined
not the case that the evidence presented with regard to
each programme. The extent, to which findings of
each element of each subsidy programme has to be
other authorities on a particular programme can
examined in isolation. For instance, evidence of the
constitute sufficient evidence for initiation, is a case by
existence of specificity for one programme could be
case issue and depends to some extent on what other
highly relevant for the determination of specificity with
information is reasonably available to the complainant.
regard to another programme, inter alia, depending on
how much information is publicly available on the
programmes in question, as well as the extent to which
the programmes are closely connected and depend upon
the same legislation.
(404) The GOC (quoting a US submission in the GOES
case ( 92 )) claimed that the "encouraged" status of OCS
producers in government planning documents may
have been used in "blanket fashion" to show specificity.
(401) The GOC argued that there must be evidence of the
This does not represent reality. The legislation classifying
(above de minimis) amount of subsidy during the IP for
OCS producers as "encouraged" ( 93 ) (and the
each programme and that there must be sufficient
consequences which flow from this) is not (as GOC
evidence of current subsidization for each subsidy, not
submits) "general information about government policy,
of "potential" or "likely" benefits. On this point, the
with no direct connection to the programme at issue".
Commission does not agree with the GOC, since there
Given that it explicitly limits access to programmes to
is no requirement in the basic Regulation or WTO SCM
certain enterprises (or gives preferential benefits), such
Agreement to show that subsidies for a particular
legislation obviously has a very direct connection to
programme are above de minimis. There is no dispute
the programme in question.
that a subsidy must confer a benefit during the IP in
order to be countervailed and that the complainants
should endeavour to produce such evidence. However,
Article 11.2 of ASCM requires "sufficient evidence" of
subsidization on the basis of information "reasonably
available" to the complainant. Since much information
on subsidy benefits (e.g. tax exemptions, grants,
(405) The GOC claimed that there must be evidence of a
provision of goods) is not publicly available, it is often
current benefit from a subsidy programme and that the
impossible for complainants to establish with certainty
fact that programmes were countervailed in other cases is
that the subsidy has conferred a benefit to producers of
insufficient, as such findings relate to a different IP. There
the product concerned. In such situations, the
is no dispute that a subsidy must confer a benefit during
complainant is required to provide the best available
the IP in order to be countervailed and that the
evidence showing that, for example, producers of the
product concerned are eligible for the subsidy and that
the programme is still in force or providing benefits. The
( 92 ) Panel report on China – Countervailing and Anti-Dumping Duties
level of evidence required will depend on the facts of the
on Grain Oriented Flat-rolled Electrical Steel from the United States.
( 93 ) Decision No. 40 of the State Council on Promulgating and Imple
case in question and on how much information is
menting the Temporary Provisions on Promoting Industrial
reasonably available to the complainant.
Structure Adjustments.

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complainants should endeavour to produce such
provide the requested information. The GOC was also
evidence. However, for the purposes of initiation,
offered the opportunity to provide missing information
evidence of use of a programme in a reasonably recent
until the time of the verification visit. The Commission
period can be highly relevant, for instance if there is no
also notes that 'reasonable period' must be seen in the
publicly available information that the programme has
procedural context whereby the Commission is mandated
been terminated or modified. The reference of the
by the basic anti-subsidy Regulation to conclude the
GOES panel ( 94 ) by GOC (to Paragraph 7.72 of the
investigation within a period of 13 months. Granting
panel report) is inconclusive, because this refers to situ
even longer deadlines as requested by the GOC would
ations where it is "clear" that there is no present subsidiz
inevitably have negatively affected the possibility for the
ation, which is not the case here.
Commission to proceed expeditiously in order to comply
with the relevant legal deadlines.
(406) The GOC claimed that there must be evidence that some
producers of the product concerned have actually
received a benefit from a programme, in order for
(408) The GOC also referred to its request for assistance to the
initiation to take place. This claim could not be
Commission in preparing the questionnaire reply, which
accepted. There is no requirement in the basic Regulation
in the GOC view was denied by the Commission. This
nor it is a requirement of Article 11.2 of the ASCM,
does not correspond to reality because the GOC request
which requires "sufficient evidence of the existence of a
for assistance was so broad and open-ended (i.e. it
subsidy…", or explicit evidence of actual utilisation by
covered each question in the questionnaire and the
certain producers. Since much information on subsidy
appendices) that the Commission was only able to
benefits (e.g. tax exemptions, grants, provision of
offer the GOC assistance with respect to the specific
goods) is not publicly available, it is often impossible
problems the GOC was encountering in the replies,
for complainants to establish with certainty that the
rather than the individual questions. The GOC decided
subsidy has conferred a benefit to producers of the
not to take up this offer for assistance further. The
product concerned. In such situations, the complainant
Commission also notes that Article 12.11 ASCM states
is required to provide the best available evidence showing
that the assistance requested must be "practicable", which
that, for example, producers of the product concerned
is not the case with respect to broad, open-ended
are eligible for the subsidy and that the programme is
requests imposing an impossibly high burden on the
still in force or providing benefits. The level of
investigating authority, particular when the questionnaire
evidence required will depend on the facts of the case
is self-explanatory. The Commission notes that the GOC
in question and on how much information is reasonably
is highly experienced in anti-subsidy investigation and
available to the complainant. Imposing such a
uses the services of outside lawyers.
requirement on complainants would effectively favour
non-transparent systems over more transparent ones
granting the same type of subsidy.
(409) With respect to the subsidy programmes contained in the
complaint that were not used by the sample exporters,
the GOC argued that it would be unable to provide the
(407) The GOC argued that the Commission did not provide a
requested information on all these programmes in the
"reasonable period" for the GOC to submit the necessary
time allotted by the Commission because of the frag
information under Article 12.7 of the SCM Agreement.
mentation of the steel industry. The GOC also claimed
The GOC also claimed that the Commission did not
that it did not understand from the Commission until
grant to the GOC "ample opportunity" to present in
late in the proceeding the potential consequences from
writing all relevant evidence concerning the investigation
the failure to provide the requested information on these
in accordance with Article 12.1 of the SCM Agreement.
programmes given that they concerned non-sampled
These arguments must be rejected as the Commission
companies. The Commission at the outset notes an
granted a reasonable period and ample opportunity for
inconsistency in the position of the GOC, as its claim
the GOC to submit the relevant information in
that it did not have sufficient time to provide replies in
accordance with the relevant provisions of the WTO
the time allotted appears to conflict with its deliberate
and of the basic Regulation. The Commission notes
choice of not replying to all the programmes not used by
that it granted exceptionally generous extensions to the
the sampled exporters because it allegedly did not
deadline for the original questionnaire reply, bringing the
understand the purpose of the Commission's request
total period for the reply from 37 days to almost 2
and the consequences for the refusal to provide the
months. Considering also the deficiency process, the
requested information. In any event, as specified above
GOC had more than 3 months since the initiation to
(recital (407)) the Commission granted several deadline
extensions to the GOC in order to enable it to submit
( 94 ) Panel report on China – Countervailing and Anti-Dumping Duties
the requested information concerning on all of the
on Grain Oriented Flat-rolled Electrical Steel from the United States.
programmes. Therefore the total time allotted (i.e. more

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than 3 months considering the deficiency process) was
view could not have been exhaustive given short duration
more than sufficient to provide the requested
of the visit. With respect to this latter argument, the
information. The GOC itself explicitly acknowledges in
Commission rejects the GOC argument as there is no
its comments that it is true that it took this position that
legal basis in either the WTO ASCM or the EU basic
it should not have been required to submit the
anti-subsidy Regulation granting a purported right to
information on these other programmes, and this is
this narrowing-down of the scope of the visit. Nor is
also shown by the fact that it did not even try to
there any ruling by the WTO even suggesting that such
submit a partial or incomplete reply to show its will
an entitlement would have to be interpreted as to exist.
ingness to cooperate but simply did not submit any
information at all in this respect.
(410) The Commission also cannot accept the GOC argument
that it did not understand the consequences for failure to
With regard to the other GOC arguments, the
provide the requested information on the programmes
Commission notes that it sent a detailed pre-verification
not used by the sampled exporters. As a matter of fact,
letter on 7 June 2012 clearly indicating (i) a proposed
the Commission clarified these consequences in several
schedule previously agreed informally with the GOC, (ii)
instances since the beginning of the proceeding. More
the purpose of the verification visit, (iii) the scope,
specifically, the consequences for non-cooperation are
content and object of the visit, and (iv) the possible
explicitly indicated with reference to the relevant
resort to facts available for the programmes not used
provisions of the basic Regulation in the Notice of
by the sampled exporters (see above). In order to limit
Initiation and in the cover page of the questionnaire.
the need for the presence of the relevant GOC officials, it
The Commission also replied extensively on the
also indicated on which day each programme would be
purpose of sampling and on the need for the GOC to
addressed. The Commission went even further than that
provide the requested information given the high level of
in order to accommodate the requests for further details
non-cooperation and the possible examinations of the
on the verification visits by the GOC in the spirit of full
requests for individual treatment in its letters of
cooperation, as it met the representatives of the GOC at a
19 March, 11 April, 4 May (deficiency letter), 7 June
very short notice to provide the requested clarifications
(pre-verification visit letter), and 14 August 2012.
on the details of the verification visits. The Commission
Therefore, the GOC could not possibly have been
then followed-up in writing to this meeting by answering
unaware or have misunderstood the consequences of its
further requests for clarifications by the GOC in a
lack of cooperation on these programmes not used by
number of emails exchanged with the GOC. Therefore
the sampled exporting producers. Fundamentally, the
the Commission did everything it possibly could to
GOC appears to have ignored that, as the grantor of
ensure a successful verification visit, but nevertheless
the alleged subsidy schemes, it was required to
the GOC seems to have ignored all these efforts.
cooperate and provide information with respect to all
subsidy schemes alleged to be available for the product
under investigation.
(411) The GOC also made a number of arguments with regard
3.4.1.2. Provision of HRS and CRS for less than
to the verification process and the verification visit itself.
adequate remuneration
The GOC objected that from the Commission's pre-verifi
cation letter it could not discern the extent of the verifi
(412) GOC claimed that the Commission should have made a
cation of the relevant information and complains about
"threshold" determination of the existence f a public
an alleged refusal by the Commission to provide a more
body before requesting transaction-specific information
specific outline for the verification. The GOC added that
in Appendix B to the GOC questionnaire. This claim
it was entitled at a minimum to some "narrowing down"
could not be accepted as it would be impractical to
of the possible scope of the verification (e.g. by means of
separate the investigation into two stages in this way,
an advance written list of all questions that the
as the Commission would have to make two separate
Commission officials would ask) (
requests for information and carry out two separate

95 ) which in the GOC
verification visits to China. In addition to the resource
implications, this would in practice make it virtually
( 95 ) From the Commission's understanding, such a list would be
impossible to complete the investigation within the dead
exhaustive and would therefore remove any flexibility from the
lines. In any event, the totality of the evidence (including
verification and preclude the asking of follow-up questions or
questions arising from arguments or facts raised during the verifi
the transaction-specific data on prices and quantities)
cation.
may be relevant to the public body determination.

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(413) GOC claimed that its failure to provide responses to
public body determination of the HRS/CRS producers
Appendix B intended for the SOEs supplying HRS and
and that the public body determination should have
CRS to the OCS producers should not lead to the appli
been made specifically to the entities supplying
cation of Article 28 of the Basic regulation and the fact
HRS/CRS to the two sampled groups of exporting
that the Commission applied facts available is in breach it
producers and not only to all SOEs producing
Article 12.7 of the ASCM agreement. GOC further
HRS/CRS in China in general. According to the GOC,
claimed that the Commission required that the
if the Commission does not have information on these
Appendix B be completed by many companies irrelevant
entities, it cannot make a determination; otherwise, it
to the investigation. This claim must be rejected. The
would be drawing an impermissible adverse inference.
Commission constructed Appendix B in a way to verify
The Commission does not agree with this claim. The
the allegations in the complaint and did so in line with
existence of the market distortion is a relevant,
the findings of WTO Appellate Body in DS379 which set
although not determining, factor in the analysis. The
out certain guidelines for the determination of public
"public body "finding of the Commission in the
body. The claim of the GOC that "it is not only SOEs
context of this proceeding concerns all the HRS/CRS
to which appendix B pertained" does not represent
producers which are fully or partly state-owned,
reality. It is true that initially the Commission asked all
because it was made on the basis of evidence relating
producers of HRS/CRS to fill in Appendix B, but
to broad policy and industry-wide factors and was not a
following the GOC reply to the questionnaire the
company-specific determination. The state-owned entities
Commission, in order to facilitate the work of the
supplying HRS/CRS to the two sampled exporting
GOC in replying to Appendix B, scaled down the
producers clearly fall within the scope of the public
request only to SOEs concerned ( 96 ). Despite this effort
body finding and therefore it was not considered
from the Commission the GOC and the SOEs concerned
necessary to do make a specific determination limited
did not reply to the Appendix B although it is clear
to them. In any event, the GOC provided no information
(notably from the complaint) that SOEs providing
which may serve for such a company-specific deter
HRS/CRS to the exporting producers of OCS are
mination in response to the Commission's questionnaire.
concerned by this investigation.
(414) Taking the above into account the Commission had no
alternative but to apply Article 28 (1) of the basic Regu
lation and did so fully in compliance with Article 12.7 of
The GOC argument that the Commission cannot make a
the ASCM.
determination in the absence of "actual facts" on the
specific SOEs concerned would mean that the GOC
would actually benefit from non-cooperation (as it had
refused to supply the "facts") and would thus obtain a
"more favourable" result than if it had cooperated, which
is the opposite to an adverse inference.
(415) The GOC claimed that the facts available used by the
Commission do not support the conclusion that the
cited steel industry "guidelines" are legally binding. The
main steel industry planning document on the basis of
which the Commission based its findings concerning the
existence of a public body is the Order No. 35 of the
NDRC – Policies of the Development of Iron and Steel
Industry. The Commission asked a direct question
concerning the legal status of orders of the NDRC and
it was confirmed that orders in Chinese legislation are
(417) GOC objected that it was notified by the Commission of
legally binding as they fall into the one of the four
the "entrustment and direction" analyses only at the stage
categories of law in China. Therefore this claim is in
of final disclosure and therefore its rights of defence were
contradiction with the relevant information on the file.
breached. However, the Commission could not know
that it would come to this conclusion at the earlier
stage of the investigation. This finding is a result of all
the information and data collected throughout the
proceeding and was disclosed as soon as the final deter
mination was made, i.e. at the time when the definitive
disclosure was made. The complaint alleged subsidies
related to the government provision of goods by SOEs.
(416) The GOC claimed that the market distortion found by
The investigation showed that the government policy in
the Commission in the steel sector is irrelevant for the
question, which initially concerned SOEs, also applied to
private entities, leading to a conclusion of entrustment or
( 96 ) Question 5.12 of the deficiency letter to the GOC.
direction by government.

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(418) The GOC claimed that the facts discussed by the
producers are public bodies, the extended arm of the
Commission in no way justify the conclusion that any
GOC and it is clear that they provide HRS/CRS to the
private body in the steel sector is entrusted and directed
OCS exporting producers. It was also established that the
by the state to provide the subsidies countervailed. This
prices of these inputs do not reflect the market values.
claim had to be rejected. In its analyses concerning
Therefore it is concluded that through these SOEs the
entrustment and direction the Commission referred to
GOC exercises a policy of provision of cheap HRS and
number of government plans and policy documents
CRS.
and cited sections from these documents which show a
direct link between the government and the conduct of
the private steel companies and supported this finding by
examples of actions by these private operators.
(421) GOC claimed that the Commission has erroneously
(419) The GOC claimed that the Commission failed to
concluded that there is pervasive government control
distinguish between the consequences of government
of the steel sector generally and that the steel industry
action and the intention of government action when
complies with certain guidelines, but it has not concluded
doing the entrustment and direction analysis. This
that the provision of steel to the OCS sector at below
claim is also rejected. The Commission established the
market prices is a goal of that policy. This claim had to
existence of a government policy to support the steel
be rejected. As explained in recital (419) above, the
industry and to provide HRS/CRS through public
Commission has found that the government policy
bodies (SOEs) at below-market prices. It was further
involves an intention to direct private suppliers to
established that this policy (by means of the
follow the below-market provision practices of SOEs.
predominance of SOEs and the dissuasion of exports of

HRS/CRS) effectively forced private producers to supply
the domestic OCS industry at the same below-market
prices charged by SOEs. Indeed, there is evidence that
the prices of private suppliers are explicitly linked to
those of SOEs. Therefore, the Commission established
that the one of the aims of the policy was to direct
and entrust private bodies to follow the same practices
as the SOEs. This is a classic case of the government, by
itself and through SOEs, "exercising its authority" over
private suppliers. The policy has all the required elements
for entrustment and direction i.e. a "government action",
"addressed to a particular party", "the objective of which
is a particular task or duty." As an illustration of
government intentions, certain provisions of the Order
(422) GOC claimed that the Commission did not make a
No 35 penalise the companies which do not act in line
finding that there is a specific intent by the GOC to
with policies described therein. This shows that the GOC
provide actual financial contribution at issue in the case
has an intention to lead the whole steel industry in a
of provision of HRS and CRS as prescribed by the AB
certain direction and that should there be companies
report in US –Countervailing Duty Investigation on DRAMS
which do not follow this intention there will be
from Korea ( 97 ). This claim had to be rejected. The govern
consequence for them.
mental actions in question are based on a government
policy intended to direct private suppliers to follow the
below-market provision practices of SOEs. This is not a
"consequence" or "by product" of government inter
vention; it is the purpose of it. It is clear that in this
case private suppliers of HRS/CRS are not exercising "free
choice" in the market because the market is distorted by
the predominance of SOEs and the export of HRS/CRS is
discouraged.
( 97 ) AB in the US-Countervailing Duty Investigation on DRAMS from
(420) The GOC also claimed that the Commission did not
Korea: the entrustment and direction do not cover "the situation in
establish that the GOC has a policy to provide HRS
which the government intervenes in the market in some way,
and CRS to the OCS sector and that the Commission
which may or may not have a particular result simply based on
did not draw a conclusion to that effect. This claim had
the given factual circumstances and the exercise of free choice by
the actors in that market. This, government "entrustment" or
to be rejected. As shown in the analysis in recitals (49) -
"direction" cannot be inadvertent or a mere by-product of govern
(72) above, the SOEs providing HRS/CRS to the OCS
mental regulation.".

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(423) The GOC claims that the Commission made no findings
HRS/CRS for less than adequate remuneration on
on the actual private bodies which supplied HRS/CRS to
anything other than the tautological statement made by
the sampled companies. This claim had to be rejected. As
the complainants in the complaint and this is not
in the case of public bodies, the Commission made a
sufficient to fulfil the requirements of the ASCM. This
sector-wide determination of entrustment and direction
claim had to be rejected. Both HRS and CRS are used as
which applies to all private suppliers. Since the
inputs only by a limited number of companies, since
government policy in question applies to all such
companies in many sectors will have no use for these
entities, there is no need to make a company-specific
products. The GOC itself in its reply to the questionnaire
determination.
confirmed that the HRS and CRS are used only by
limited number of industries. The GOC did not dispute
this fact in the comments to definitive disclosure.
Therefore it is confirmed that this subsidy is specific
within the meaning of Article 4(2)(c) of the basic Regu
lation which is a reproduction of Article 2.1.(c) of the
ASCM.
(424) The GOC claimed that the Commission rejected the
GOC's evidence concerning the proportion of Chinese
production of HRS and CRS which comes from SOEs.
The table provided by the GOC in this respect cannot be
considered evidence. The GOC refused to provide source
data before and during the verification for this table and
therefore it cannot be considered to be reliable
information. For this reason the Commission used
information from the World Steel Capacity Book,
which is generally accepted by the world steel industry.
3.4.1.3. Preferential Loans and Interest Rates to the
OCS industry
(426) The GOC claimed that the banks are not required to
follow the industrial guidelines, do not have individual
business decisions dictated to them by the government,
and the banking sector is not predominated by the
government. This claim cannot be accepted. Articles 24
(425) The GOC claimed that the Commission did not explain
and 25 of the Order No 35 limit the provision of loans
why the world market prices of HRS and CRS are the
only to those companies which comply with national
most appropriate benchmark and referred to the AB
development policies for the iron and steel industry,
ruling in the US-Softwood Lumber IV that the out-of-
therefore the claim of the GOC are not required to
country benchmark "must relate or refer to, to be
follow the industrial policies is in contradiction to this
connected with, the prevailing market conditions in the
evidence. Clearly, these provisions restrict which
country of provision and must reflect price, quality, avail
companies the banks can finance and which not. Also
ability, marketability, transportation and other conditions
the claim that the banking sector is not dominated by
for purchase or sale". GOC also claims that the "gov
the Government must be disregarded. In this respect it is
ernment predominance" cannot lead to relaxation of
noted that the GOC provided only very limited
this jurisprudence, because if it were the option to use
information on the ownership structure in the banking
an out-of-country benchmark would not be available at
sector, claiming it does not possess such information,
all. GOC claim that the Commission has not complied
although according to Article 24 of the Commercial
with the requirements of Article 14 of the ASCM. The
Banking Law all banks are obliged to report such
Commission disagrees with this claim. The prevailing
information to the China Banking Regulatory
market conditions in China are distorted as found by
Commission, a state agency authorised by the State
the Commission and explained in recitals (49) - (97)
Council. The other information on the files cited in
above. Since steel is produced worldwide by similar
this regulation led to the conclusion that the banking
processes and is traded worldwide, the most reasonable
sector in China is indeed dominated by the government
external benchmark is world price, since should China be
(see recitals (166)-(169) above).
in a normal non-distorted market situation, it is likely
that the prices would align with the world prices. GOC
provided very little information on the steel market in
China even though it was specifically requested by the
Commission. Also China did not propose any other
benchmark except the in-country benchmark which
was not suitable because of market distortions found.
In addition to the sources referred to in this regulation,
the IMF Country Report No 11/321 on China from
November 2011 states that the state is also directly
and indirectly involved in the financial sector and
GOC claimed that the Commission did not base the
recommends the re-orientation in the role and responsi
specificity finding in respect to the provision of
bilities of the government in the financial sector away

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from using the banking system to carry out broad
contradict the information provided by the GOC, since
government policy goals and to allow lending decisions
these were based on information pertaining to a different
to be based on commercial goals ( 98 ) ( 99 ).
time period altogether.
Concerning the extracts provided from the PBOC and
website and the testimony of the PBOC official, these
(427) The GOC claimed that its failure to comply with the
could not have been verified without the source docu
demands of Appendix A to the GOC questionnaire
ments, i.e. the Circulars themselves. The Commission fails
could not trigger a valid resort to facts available,
to understand why on the one hand the GOC considers
because the Commission should not have held the
these to be confidential internal documentation and on
GOC responsible to provide internal, sensitive, trans
the other the summary of the contents is allegedly
action-specific data concerning banks many of which
published on the website of PBOC. The Coated Fine
were not in any way owned by the government. As
Paper findings are highly relevant to the present case.
explained in the recital (426) above the GOC had
The fact that the information pertained to a different
access at least to some of the requested information
time period is of limited relevance, as the facts on the
but refused to provide any answers to questions in
record (including the complaint) demonstrate that the
Appendix A. In this respect it is also noted that since
practices in question have not changed since then. As
the GOC refused to provide any ownership data the
regards GOC's allegation that the Commission is
Commission, in the case of many banks, did not know
reversing the burden of proof, it is noted that the
which banks are and which are not state-owned.
Coated Fine Paper findings are part of the totality of
the evidence taken into account but that the GOC is
not required to "disprove" them. Co-operation in such
investigations is two-way process and all parties may
offer evidence or arguments to rebut other evidence on
the record.
(428) In relation to certain Circulars of the PBOC the GOC
claims that the publicly available summaries of the
contents of the relevant circulars together with the testi
(429) The GOC argues that the Commission has not found that
monies of the PBOC officials are sufficient to replace the
the GOC benchmark rates reflect a non-commercial
actual Circulars of the PBOC and no facts available
distortion (thereby conceding that the Chinese market
should be applied due to the GOC's failure to provide
interest rates generally reflect adequate remuneration)
these. The GOC also claimed that the Commission has
and that the fact that there is only a lower limit on
rejected information provided in good faith, i.e. the
the interest rates for commercial loans works to the
testimony of the PBOC official combined with the
detriment of the exporting producers making use of
abstract of the circulars at issue and referred to the
such loans rather than benefit. Without the PBOC-
Article 28 of the Basic Regulation which says that only
imposed floor, those rates may well have been
the information which is false or misleading may be
considerably lower. This argument is misplaced. The
disregarded. In addition GOC claimed that the
fact that the GOC (PBOC) sets the benchmark rates arbit
Commission did not base its findings on actual facts
rarily points to non-commercial behaviour at the first
available or the the information provided, but rather
place. This is also confirmed by the IMF Country
made it incumbent upon the GOC to prove that the
Report No 11/321 ( 100 ) on China from November 2011
state of affairs examined during the Coated Fine Paper
which refers to interest regulation.
case was no longer current. In this case, according to the
GOC, the Coated Fine Paper findings do not even
( 98 ) "Banks large exposures to state-owned enterprises, guaranteed
margins provided by interest regulations, still limited liability and
willingness to differentiate loan rates, coupled with the implicit
guidance on the pace and direction of new lending, undermine
(430) The GOC claimed that the Commission failed to assess
development of effective credit risk management of the banks. It
the creditworthiness of the actual parties investigated as it
is important that banks have tools and incentives to make lending
decisions based upon purely commercial goals.
did in the Coated Fine Paper case. In reply, the creditwor
( 99 ) A large share of the banking sector is state owned as is much of the
thiness of the sampled exporting producers was not
banks' corporate client base. As the principal shareholder, the state
assessed as it is in any event influenced by the industrial
appoints senior management in all major banks. In the absence of
policies and by state support and intervention. As it was
an explicit deposit insurance system and resolution framework, the
state also implicitly insures all deposits. The heavy involvement by
the state in many aspects of the financial system reduces market
( 100 ) 2011 International Monetary Fund, November 2011, IMF Country
discipline, weakens corporate governance, and is likely to create soft
Report No 11/321, People's Republic of China: Financial System
budget constraints.
Stability Assessment.

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found that the financial system in China is distorted this
arbitrarily set is referred to in recitals (114) - (116)
would be a pointless exercise. There was no such credi
above, i.e. information on actual transactions submitted
tworthiness assessment in Coated Fine Paper case.
by the sampled exporting producers, Urban Land
Evaluation System and Order No 35.
(431) The GOC also objects the BB rating determination
because it alleges to be "purely punitive" and "in any
(433) According to the GOC the Commission did not
event the Commission's reasons for this selection have
determine specificity under Articles 2.1 and 2.2 of the
not been disclosed in a manner capable of scrutiny." For
ASCM, nor did it clearly substantiate its determinations
the GOC, if the Commission finds that the Chinese
of specificity on the basis of positive evidence, as
benchmark plus the BB risk premium would be that
required by Article 2.4 of the ASCM. In addition, it did
rate, then it must explain its reasoning in that regard
not substantiate the need to base the benefit amount on
and on a producer and loan specific basis. This claim
an out-of-country benchmark nor did it construct the
had to be rejected. Given the distortions and the lack
benchmark selected in the manner consistent with
of proper creditworthiness or risk assessment of the
Article 14 (d) of the ASCM. These claims had to be
OCS producers by the lending banks the Commission
rejected. The basis for Commission's specificity findings
could not have taken the credit rating (if they had any
is the fact that all companies which do not comply with
at all) of the individual exporting producers at its face
industrial policies set by the state are excluded from the
value. The BB rating is in this case not unfavourable for
provision of LUR, prices are often arbitrarily set by the
the exporting producers because it is the best non-
authorities and government practices are unclear and
investment rating on the market.
non-transparent The need for the out-of-country
benchmark was explained and justified in recitals (109),
(118) and (120)-(121) above. As it was found that the
LUR market in China is distorted it was not possible to
apply in-country benchmark as proposed by the GOC.
The Commission does not agree with the claim that the
benchmark was constructed in a manner inconsistent
3.4.1.4. Provision of LURs for less than adequate
with Article 14(d) of the ASCM. The Taiwan
remuneration
benchmark is considered a best proxy available to the
(432) The GOC claimed that the Commission recognised that
Commission and is consistent with the recommendations
the GOC's claims that the LURs are provided with
of the AB in DS 379.
reference to competition are such that they would
obviate the need for an external benchmark. GOC also
claimed that throughout its explanation of why the GOC
claims were rejected the Commission focuses solely on
the GOC evidence rather than the facts actually available.
The GOC requests that the Commission disclose the
actual factual basis it has determined that the prices set
(434) The GOC claims that it suggested that any possible
by the local authorities were arbitrary, i.e. that they did
benchmark should be in-country and be based on the
not refer or relate to the supply and demand for
prices that "not favoured" Chinese industries were paying;
industrial land.
according to GOC, this is precisely because there is no
distinction in the first place, and that therefore the
subsidy amount would rightly be zero. The Commission
does not agree with this claim and in any event the GOC
did not provide any information for the "non-favoured"
industries LUR prices which could, in theory, be used for
the benchmark construction.
The GOC's understanding of this issue is not correct. The
Commission did not find that that the LURs are provided
with reference to competition. The Commission found
that out of the 13 LUR transactions only 6 were to be
subject to bidding or auction process. With regard to
these 6 the evidence submitted in this respect showed
that the tenders were not competitive as there was only
(435) GOC also claims that the complainant provided no indi
one offer/bid and the price was set by the authorities.
cation or evidence that LURs were granted in particular
The Commission did not understand the GOC's requests
to any subset of limited enterprises and the Union has
for the facts available used in respect to the lack of a
not made the crucial finding that the provision of LURs
market for LUR to be disclosed when no facts available
is explicitly limited to certain/encouraged enterprises. The
were used to reject GOC claims in this matter and the
Commission has made the finding that the provision of
analysis was done on the basis of information submitted
LUR is limited to companies which comply with the
by the GOC and exporting producers in this respect. The
industrial policies set by the GOC in the Order No 35
factual basis for the determination that the prices are
of the NDRC (recital (116) above).

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(436) The GOC claimed that the Commission did not perform
(437) GOC also claims that the Commission in its calculation
a rigorous examination in order to find a benchmark that
used depreciation period of 50 years while not all of the
refers or relates to the situation in China and that the
relevant land use right contracts were based on the 50
Commission did not do its best to identify a benchmark
years terms. This was not correct. All the LUR, the
that approximates the market conditions that would
provision of which was countervailed in this investi
prevail in the absence of the distortion, or if it did it
gation, were based on the 50 years terms.
has not explained how this is so. This claim had to be
rejected. The Commission indeed looked in detail in the
various indicators and compared Taiwan and PRC as a
whole as well as individual Chinese provinces concerned.
After such analyses the Commission considers
Taiwan ( 101 ) as an appropriate benchmark because of
the totality of the information on the file i.e. (i) the
level of economic development and economic structure
prevailing in Taiwan and the relevant Chinese provinces
and city ( 102 ) where the co-operating exporting producers
3.4.1.5. Programme consisting of provision of elec
are established, (ii) the physical proximity of these two
tricity for less than adequate remuneration
Chinese provinces with Taiwan, (iii) the high degree of
infrastructure that both Taiwan and these two Chinese
(438) GOC claimed that the conclusion concerning specificity
provinces have, (iv) the strong economic ties and cross
is "wholly artificial" on the grounds that the range of
border trade between Taiwan and the PRC, (v) the similar
economic activity paying the non-penalised rate
density of population in the Chinese provinces concerned
encompasses the vast majority of the Chinese economy.
and in Taiwan, (vi) the similarity between the type of
The GOC also questioned the Commission's finding on
land and transactions used for constructing the relevant
'regional' specificity and in particular the conclusion that
benchmark in Taiwan with those in the PRC and (vii) the
this subsidy is only available in the geographical areas
common demographic, linguistic and cultural character
where the exporting producer is located. According to
istics in both Taiwan and the PRC. Furthermore, Jiangsu
the GOC the penalty applies across the board in all
and Zhejiang provinces together with Chongqing City are
geographical areas in which all exporting producers are
considered top manufacturing provinces in the PRC.
located and therefore there is no regional specificity. This
Although the GDP per capita of Taiwan and the
claims had to be rejected. The Commission notes that the
Chinese provinces and Chongqing City is not identical,
GOC seems to base its comments exclusively on the
the GDP of these Chinese provinces and Chongqing City
differential pricing system for the categories of 'encour
has grown rapidly in recent years i.e. they are catching
aged', 'restricted', 'prohibited', and 'allowed' enterprises
up with Taiwan.
according to decision No. 40. However, the Commission
based its findings on the special electricity pricing system
available in the broader Chongqing municipality area
where one of the sampled cooperating exporters has a
production plant. This exporter benefits from a lower
electricity rate specifically applying only to a sub-set of
companies belonging to certain sectors (namely
ferroalloy electronic furnace and fertilizer companies)
within the same category of large industrial users.
Therefore, the Commission has concluded that the
In addition, recent data suggest that the both PRC as a
lower electricity rate only applying to this very restricted
whole, the two provinces and Chongqing City have much
sub-set of companies belonging only to those specific
higher GDP growth rate than Taiwan ( 103 ), i.e. they are
eligible sectors is de jure specific.
catching up very fast. However, it is important to note
that the exact comparison made between the GDP of a
non-market economy (the PRC) and the GDP of a well-
established market economy (Taiwan) is not a decisive
fact because it is normal for a non-market economy to
lag behind a functioning market economy in terms of
GDP. In addition, many other factors e.g. planning rules,
environmental policy may affect the supply and demand
of industrial land. The real issue is what would be the
'prevailing market conditions' with regard to LUR in the
With regard to 'regional' specificity, recital (149) does not
PRC if it was a functioning market economy and on the
refer to any penalty system as the GOC indicates in its
basis of all evidence they would be very similar to those
comments. This recital clarifies that this beneficial elec
of Taiwan.
tricity rate applying to the restricted sub-set of companies
including the producer of the product concerned is
( 101 ) Information retrieved from http://www.taiwanembassy.org/be/ct.
limited to a designated geographical area (i.e. the
asp?xItem=306196&CtNode=3382&mp=102&xp1= and http://en.
broader Chongqing municipality) which is part of the
wikipedia.org/wiki/Taiwan
China's Vast Western Region encouraged according to
( 102 ) Information retrieved from http://en.wikipedia.org/wiki/Jiangsu; http://
the law referred to in the same recital and further
en.wikipedia.org/wiki/Zhejiang#Economy and http://en.wikipedia.org/
explained in recital (233) above. As further stated in
wiki/Chongqing#Economy
( 103 ) Information retrieved from https://www.cia.gov/library/publications/
recital (149), this legislation refers to electricity pricing
the-world-factbook/rankorder
as one of the tools to achieve the main policy objective

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to foster the development of this region. The
grantor of the alleged subsidisation, always fall under the
Commission finding that this subsidy is also regionally
scope of the CVD investigation, regardless of the use of a
specific is hereby confirmed.
sample of exporting producers.
(441) As regards the GOC comment that the recourse is to
"sample more companies", the Commission notes that
(439) The GOC questioned the conclusions in recital (146)
above concerning specificity on the basis of the differ
this is exactly what it did in this case. Further to the
ential pricing system between the categories of 'encour
withdrawal of cooperation by one of the exporters that
aged', 'restricted', 'prohibited', and 'allowed' enterprises.
had originally agreed to cooperate, the Commission
The GOC explains again that the difference in electricity
decided to include another exporter in the sample.
price paid between the specifically discouraged project
However, shortly after this company was informed of
and everyone else operates as a penalty, or surcharge,
its inclusion in the sample, it notified to the Commission
to discourage specific projects rather than a "discount"
that it no longer intended to cooperate in the investi
paid to encouraged projects. The GOC concludes that the
gation. The Commission was consequently forced to limit
Commission must make a finding of what remuneration
the sample to the two remaining exporters originally
would be considered adequate and in this case the
sampled that had not withdrawn cooperation in order
Commission has assumed that the penalty price would
to avoid any further delay that would put in jeopardy
be adequate remuneration. This claim had to be rejected.
the expeditious completion of the investigation within
As explained at length above, the Commission's finding
the prescribed legal deadlines. The Commission notes
of financial contribution refers to the lower electricity
that this unsuccessful attempt undermined solely by the
rate that this company is entitled to as part of the
exporters' behaviour shows precisely that this GOC claim
restricted sub-set of companies within the larger
is without merit in that does not address the problem of
industrial user category. The GOC arguments are
companies which do not come forward for sampling in
therefore not relevant with respect to the findings by
the first place or which withdraw if selected for sampling.
the Commission.
(442) With respect to the application of facts available, the
GOC referred to Article 12.7 ASCM and quoted WTO
jurisprudence holding that facts on the record can only
3.4.1.6. Other income and tax programmes not used by
be used to replace missing information, and that non-
the sampled producers countervailed for the
cooperation does not justify determinations devoid of
purposes of the "residual rate"
factual foundations. The Commission does not
understand the logic of this claim, given that in its deter
(440) The GOC argued that the Commission had not applied
mination it has used the facts on the record as allowed
consistently the relevant WTO rules concerning sampling
under the WTO provision and the basic Regulation in
contained in the WTO Anti-dumping Agreement (i.e.
full compliance with the relevant WTO jurisprudence. As
Articles 6.10, 9.2 and 9.3), because the purpose of
the GOC has also recognised, the findings in Coated Fine
sampling would be to limit the scope of the investi
Paper and in the various US DOC decisions constitute the
gation. This argument was linked to Article 19.4 WTO
best facts available to the Commission and are used
ASCM, which limits the amount of countervailing duty
precisely to replace the information gaps caused by the
to the amount of subsidy "found to exist". The GOC
GOC lack of cooperation.
concluded that if the Commission did not consider the
extent of subsidisation sufficiently captured by the
sample selected, the solution would have been to
sample more companies. In the first place, the Commission
notes that the analogy between sampling in anti-
dumping and anti-subsidy investigations has certain
limits, because unlike anti-dumping investigations in
CVD investigations there is no general rule that each
The GOC also questioned the use of these facts as they
exporter receives an individual duty and so-called
would not reflect a present subsidization and are also not
'aggregate' cases are explicitly permitted. Moreover,
specifically linked to the product concerned. The
unlike in anti-dumping cases, the government is a
Commission notes in this respect that most of these
required participant and respondent in a CVD case and
subsidy programmes concern non-recurring subsidies
the government is therefore implicitly included in the
(e.g. grants, tax advantages linked to investment in
scope of any "sample" for the purposes of a CVD deter
assets) which are normally amortised over several years
mination. In other words, the government' actions as the
and therefore their benefits continue well in the future

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and thus even beyond the IP in this case. Where
subsidies to companies other than those actually alleged
recurring subsidies are involved, there is no evidence
to have received them is a violation of Article 12.7 of the
that these programmes have changed since the investi
ASCM.
gation in question. As for the link between these
programmes and the product concerned, the
Commission recalls that all of these programmes cover
the steel sector (they are not product-specific), or apply
in the region where the OCS exporters have located their
factories. In the absence of evidence to the contrary in
the file, the Commission has decided that it is reasonable
to conclude that the benefits of these programmes still
It is noted that the GOC did not reply to a single
reflect the best proxy for present subsidization for
question in the questionnaire or in the deficiency letter
producers of the product concerned. It is stressed that
concerning these schemes. Therefore the statement of the
the GOC had ample opportunity to submit evidence to
GOC that "the Commission knows for a fact that the
the contrary on all these programmes but it deliberately
companies subject to the residual duty not only did
decided not to submit it and as a result the Commission
not receive, but could not have received given their ad-
has to resort to the facts available on record as prescribed
hoc nature" these subsidies, does not represent reality. To
by the basic Regulation and the WTO ASCM.
the contrary, the complaint listed several companies
benefiting from these equity schemes and did not
allege this list to be exhaustive. Since the GOC did not
provide any information on the nature or eligibility of
these schemes the Commission has no other option but
to apply facts available.
3.4.1.7. Equity programmes
(443) The GOC claimed that all these programmes (unpaid
dividends, debt-for equity swaps and equity infusions)
were not initiated in accordance with requirements
with Articles 11.2 and 11.3 of the ASCM.
3.4.2. COMMENTS OF ZHEJIANG HUADONG
3.4.2.1. Provision of LURs for less than adequate
remuneration
(445) Zhejiang Huadong claimed that it provided the
Commission with all relevant legislations governing the
This claim had to be refused. As already explained in the
mechanics and value-setting of sales of LURs in China
section concerning the reply to the GOC's comments on
and referred to the Provisions on the Assignment of State-
initiation (recitals (399) - (406) above) the Commission
Owned Construction LUR through bid invitation, auction and
services have analysed the evidence submitted by the
quotation to demonstrate that there is a well-functioning
complainant, which was substantial, as it appears
real estate market in China, where quotes and prices paid
clearly from the version open for inspection by interested
are made public. It further claimed that the real estate
parties of the complaint. The Commission services only
market that exists today in China, and the exhaustive
proposed the initiation of an investigation on specific
official statistics on LUR prices available, form the best
schemes after having duly analysed the accuracy and
evidence for assessing the price of the LURs at the time
adequacy of the evidence which they consider sufficient
this exporting producer bought them.
on a prima facie basis.
This claim had to be rejected. The Commission explains
(444) In the view of the GOC the equity programmes are
the findings in respect to Zhejiang Huadong's LURs in
unique ad-hoc subsidies, to the extent they exist, in
recital (115) above. These findings were not disputed in
that that they apply only to one particular recipient
its comments to definitive disclosure. Evidence at hand
and not pursuant to any particular legislation and since
shows that the LUR market in China is distorted as the
"the Commission knows for a fact that the companies
tenders investigated on-the-spot by the Commission were
subject to the residual duty not only did not receive, but
not competitive and the prices were arbitrarily set by the
could not have received given their ad-hoc nature" these
authorities. The factual basis for the determination that
subsidies, they should not be countervailed. In addition
the prices are arbitrarily set is referred to in recitals (114)
the GOC claimed that to the extent that facts available
- (116) above, i.e. information on actual transactions
determinations are made, they must be based on actual
submitted by the sampled exporting producers, Urban
facts. For this reason the countervailing of ad hoc
Land Evaluation System and Order of the NDRC No 35.

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(446) Zhejiang Huadong claimed that according to Article 14(d)
adjustment for inflation of the benchmark. The
of the WTO SCM Agreement adequate benchmark prices
Commission took this claim into account and revised
should relate or refer to prevailing market conditions in
the calculation concerned.
the country of provision in the first instance or in the
absence of such conditions, any out-of-country
benchmark should be adjusted appropriately so as to
avoid the countervailing of comparative advantages. It
(449) Zhejiang Huadong claimed that there is no specificity in
further claimed that on the basis of paragraph 15(b) of
its acquisition of LURs since all companies in China are
the China – WTO Accession Protocol, when prevailing
treated the same way under the legislation. Zhejiang
terms and conditions in China are not available as appro
Huadong claimed also that the Commission did not
priate benchmarks, the importing WTO Member should
adequately address the specificity issue and that there
adjust such prevailing terms and conditions, where prac
was no reasoning in the definitive disclosure regarding
ticable, before considering the use of terms and
the grounds on which the price paid by Zhejiang
conditions prevailing outside China. Whilst the
Huadong results in a benefit.
Commission agrees with much of the legal theory
behind this claim, it also concluded that there is no
functioning market for land in China and for this
reason external benchmark for land prices was used.
The need for an out-of-country benchmark was
This claim had to be rejected. The basis for the Commis
explained and justified in recitals (109), (118) and
sion's specificity findings is the fact that all companies
(120)-(121) above. As it was found that the LUR
which do not comply with industrial policies set by the
market in China is distorted it was not possible to
state are excluded from the provision of LUR, prices are
apply an in-country benchmark as suggested by the
often arbitrarily set by the authorities and government
Zhejiang Huadong and there is no basis on which to
practices are unclear and non-transparent The
adjust such an benchmark. In addition, from the
Commission has made the finding that the provision of
information submitted in relation to the benchmark
LUR is limited to companies which comply with the
suggested by the Zhejiang Huadong (Xiaoshan of
industrial policies set by the GOC in the Order No 35
Zhejiang Province) it is unclear and not verifiable
of the NDRC (recital (116) above).
whether the price information suggested is limited to
allegedly "non-favoured" industries' LUR prices.
3.4.2.2. Provision of CRS for less than adequate
remuneration
(450) Zhejiang Huadong claimed that for the sake of reason
(447) Zhejiang Huadong claimed that the choice of Taiwan as a
ability and objectiveness and for reasons of consistency
benchmark is not reasonable and objective for the
the Commission should have retrieved steel price data
following reasons: 1) Zhejiang Province was not a
from the same data source (i.e. Steel Business Bulletin
developed-high GDP region similar to Taiwan at the
(SBB) for all the regions represented in the benchmark
time the LURs were bought; 2) the Commission's
basket when constructing the benchmark. It claimed also
selection of actual land prices in Taiwan was based on
that SBB provides a variety of markets for CRS prices
offers for sale of industrial land and not on the basis of
other than those selected by the Commission and
actual prices for leasehold for industrial use which is
suggested to add Mexico and Argentina as these
similar to LUR assigned to Zhejiang Huadong.
countries represent the emerging market of steel in the
American continent. This claim had to be rejected as in
its construction of the benchmark the Commission used
price data that reflect the actual market situation in each
country or region as accurately as possible. As for the
prices of Europe (the majority of which are Member
This claim has to be rejected. With regard to 1) as stated
States of the Union) the Commission considered that it
above in recital (436) the Commission looked in detail in
had more detailed pricing data available from MEPS. If it
the various indicators and compared Taiwan and the PRC
had possessed MEPS data for the other countries selected,
as a whole as well as individual Chinese provinces
it would have used them. Concerning the inclusion of
concerned. After such analyses the Commission
prices in Mexico and Argentina, it is noted that these are
considers Taiwan as an appropriate benchmark
relatively small markets in comparison with China as
consistent with the basic Regulation and the WTO
well as with the other countries/regions in the
rules. With regard to 2) it is noted that the Commission
benchmark basket used by the Commission.
had used the best information which was reasonably
available to it.
The Commission revised its subsidy margin calculation
for this scheme following a correction to the constructed
benchmark prices for HRS and CRS. The correction
concerned the steel prices for Brazil used in the
(448) Zhejiang Huadong pointed to an arithmetical mistake in
benchmark construction which erroneously included
the calculation of the inflation rates used in the
taxes in the calculations disclosed to parties.

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(451) Zhejiang Huadong also claimed that the Commission's
3.5. AMOUNT OF COUNTERVAILABLE SUBSIDIES
conclusion on specificity is unsubstantiated (no positive
evidence) and unfounded, hence the alleged subsidy by
(454) The amounts of countervailable subsidies in accordance
provision of CRS for LTAR is not countervailable.
with the provisions of the basic Regulation, expressed ad
Zhejiang Huadong submitted that the benefit, if exists,
valorem, for the investigated companies are set out in the
of provision of HRS and CRS for LTAR is not limited to
table below:
certain enterprises or sectors, but universally conferred to
all potential buyers and consumers from all economic
sectors.
DEFINITIVE
This claim had to be rejected. GOC made the same
Exporting producer
SUBSIDY
MARGIN (%)
comment and the Commission addresses it in recital
(415) above. The "potential" buyers are by definition
HUADONG GROUP 23,8
limited to certain enterprises.
PANHUA GROUP 29,7
UNION STEEL CHINA 26,8
3.4.3.
COOPERATING COMPANIES NOT SAMPLED 26,8
COMMENTS OF THE COMPLAINANT
3.4.3.1. Provision of water and electricity for less than
ALL OTHER COMPANIES 44,7
adequate remuneration
(452) Complainant claimed that, because of the distortions and
(455) In accordance with Article 15(3) of the basic Regulation,
state influence in the Chinese water and electricity
the total subsidy margin for the cooperating companies
markets, the Commission should have used international
not included in the sample is calculated on the basis of
benchmarks and calculate the benefits for these schemes
the total weighted average subsidy margin established for
in accordance with Article 6(d)(ii) of the basic Regulation.
the cooperating companies in the sample, i.e. 26,8 %.
This claim had to be rejected. In this particular case, the
evidence on the record did not enable the Commission
to find that water and electricity markets are distorted to
(456) With regard to all other exporters in the People's
an extent which would justify recourse to an out-of-
Republic of China, the Commission first established the
country benchmark.
level of cooperation. The comparison between Eurostat
import data and the volume of exports to the Union of
the product concerned reported for the investigation
period by the cooperating companies shows that
cooperation of exporting producers in the People's
3.4.3.2. Certain Tax programmes concerning Foreign
Republic of China was low, namely 58 %. Given this
invested enterprises (FIEs)
low level of cooperation, the total subsidy rate for all

non-cooperating companies is set at the level of the
(453) The complainant claimed that the Commission should
total of the subsidy rates as established for all non-
have quantified the amount of subsidy for two tax
cooperating companies for all schemes investigated, i.e.
programmes related to FIEs, i.e. Income tax credit for
44,7 %.
the purchase of domestically produced equipment and
Two free, Three half-tax exemption for the productive
FIEs, given the lack of cooperation from the GOC and
the fact that GOC should have provided evidence that no
benefits for these programmes were granted to OCS
producers in the IP.
4. INJURY
4.1. UNION PRODUCTION AND UNION INDUSTRY
(457) All available information concerning Union producers,
This claim had to be rejected. As already explained in
including information provided in the complaint, data
recitals 282 above, for the purpose of reducing the
collected from Union producers before and after the
administrative burden for all the parties concerned and
initiation of the investigation, and the verified ques
taking in consideration the particular situation in relation
tionnaire responses of the sampled Union producers,
to the pending termination of these schemes, the
was used in order to establish the total Union production
Commission has decided not to countervail them.
for the period considered.

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(458) During the IP, OCS was manufactured by 22 producers
(465) In calculating the apparent Union consumption of OCS,
in the Union. On the basis referred to in the previous
the institutions added the volume of total imports of
recital, the total Union production was estimated to be
OCS into the Union as reported by Eurostat and the
around 4 018 310 tonnes during the IP. The Union
volume of sales and captive use of the like product in
producers accounting for the total Union production
the Union produced by the Union industry as reported in
constitute the Union industry within the meaning of
the complaint and as verified during the verification visits
Article 9(1) of the basic Regulation and will be
for the sampled Union producers.
hereafter referred to as the 'Union industry'.
(466) Eurostat import data is however based on full CN codes,
4.2. DETERMINATION OF THE RELEVANT UNION MARKET
and it is clear that for a part of these CN codes the
import is not the product concerned.
(459) It was found during the investigation that a substantial
part of the sampled Union producers' production was
destined for captive use, i.e. often simply transferred
(without invoice) and/or delivered at transfer prices
within the same company or group of companies for
further downstream processing.
(467) On this basis, the total Union consumption developed as

follows:
(460) In order to establish whether or not the Union industry
suffered injury and to determine consumption and the
2008 2009 2010 IP
various economic indicators related to the situation of
the Union industry, it was examined whether and to
Consumption 5 197 716 3 879 380 4 548 528 4 811 310
what extent the subsequent use of the Union industry's
(in tonnes)
production of the like product had to be taken into
account in the analysis.
Index
100 75 88 93
(2008=100)
(468) Total consumption on the Union market shrunk by 7 %
(461) In order to provide as complete a picture as possible of
over the period considered. Between 2008 and 2009
the situation of the Union industry, data have been
there was a decrease of about 25 % mainly as a result
obtained and analysed for the entire OCS activity and
of the global negative effects of the economic crisis,
it was subsequently determined whether the production
especially on the construction industry. After that the
was destined for captive use or for the free market.
consumption started to recover and increased in total
by 24 % from 2009 to the IP but it was still below
the initial level of 2008.
(462) For sales volume and sales prices on the Union market
and market share, it was found that a meaningful analysis
and evaluation of these indicators had to focus on the
situation prevailing on the free market.
4.4. IMPORTS FROM THE COUNTRY CONCERNED AND
MARKET SHARE
(469) Imports into the Union from the PRC developed as
follows during the period considered:
(463) However the other economic indicators could only
reasonably be examined by referring to the whole
activity, thereby including captive use and sales.
Production, capacity, capacity utilisation, investments,
stocks, employment, productivity, wages and ability to
2008 2009 2010 IP
raise capital depend upon the whole activity, whether
the production is captive or sold on the free market.
Volume of imports 472 988 150
497 464
582 702
452
from the PRC
(tonnes)
Index (2008=100) 100 32 98 149
4.3. UNION CONSUMPTION
Market share (%) 9,1 3,9 10,2 14,6
(464) The like product is sold by the Union industry to
unrelated customers as well as sold/transferred to
Index (2008=100) 100 43 112 160
related companies for further downstream processing,
Source: Eurostat
e.g. in steel service centres.

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(470) Despite the fall in consumption, the volume of imports
imports from the cooperating Chinese producers to the
from the PRC increased significantly by 49 % over the
first independent customer on the Union market, estab
period considered. Due to the negative effects of the
lished on a CIF basis, with appropriate adjustments for
economic crisis, the volume of imports from the PRC
post-importation costs.
sharply decreased in 2009. However, the imports from
the PRC started to recover at an extremely fast pace, so
that the increase from 2009 to the IP was a staggering
367 %.
(475) The post importation costs referred to in the recital
above were calculated based on verified data from two
unrelated importers of the product concerned.
(471) Similarly, the market share held by those imports
increased by 60
% over the period considered.
(476) The price comparison was made on a type-by-type basis
Although it dropped from 2008 to 2009 by more
for transactions at the same level of trade, duly adjusted
than half, it showed an impressive increasing trend
where necessary, and after deduction of rebates and
from 2009 to the IP and rose by 275 %.
discounts. The result of the comparison, when
expressed as a percentage of the sampled Union
producers' turnover during the IP, showed weighted
average undercutting margins of up to 20,2 % by the
cooperating Chinese exporting producers.
4.4.1. PRICES OF IMPORTS AND PRICE UNDERCUTTING
Imports from the PRC 2008 2009 2010 IP
(477) Following disclosure one exporting producer requested
Average price in EUR/
875 728 768 801
further information on the calculation of the price under
tonne
cutting, where there was no exact match between the
product type exported from the PRC and the product
Index (2008=100) 100 83 88 91
type sold on the Union market by the Union industry.
Source: Eurostat
They also requested information as to whether an
adjustment had been made for physical differences
where no exact match had been found.
(472) The average import price from the PRC decreased by 9 %
during the period considered. Between 2008 and 2009, it
decreased significantly by 17 %, then it increased by five
percentage points between 2009 and 2010 and by
(478) Where no exact match existed between the exported
further three percentage points in the IP.
product type and the product type sold by the Union
industry, the Commission compared the exported
product type to the closest resembling product type
sold by the Union industry. In these cases a comparison
was made to the closely resembling product type where
the only difference was the substrate thickness.
(473) The import prices from the PRC consistently remained
below the sales prices of the Union industry during the
whole period considered. As highlighted in the table
above, while in 2009 during the height of the
economic crisis, even the price cut of 17 % could not
(479) Where there was more than one closely resembling
help the Chinese imports to keep the market share in a
product type, the Commission compared the exported
situation of suddenly shrinking consumption and
product type to the cheaper product type sold on the
significant market slowdown, continuous undercutting
Union market, regardless of whether this cheaper product
in the subsequent years explains the steady impressive
type had a thicker, or thinner, substrate.Therefore, no
increase in the market share held by the imports from
adjustment for physical differences was deemed
the PRC between 2009 and the IP.
necessary.
5. ECONOMIC SITUATION OF THE UNION INDUSTRY
(474) In order to determine price undercutting during the IP,
5.1. PRELIMINARY REMARKS
the weighted average sales prices per product type of the
sampled Union producers charged to unrelated
(480) Pursuant to Article 8(4) of the basic Regulation, the
customers on the Union market, adjusted to an ex-
institutions examined all relevant economic factors and
works level, were compared to the corresponding
indices having a bearing on the state of the Union
weighted average prices per product type of the
industry.

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(481) The data provided by the complainant for all producers
decrease in demand, production decreased sharply in
of OCS in the Union, as cross-checked with other
2009, after which it partially recovered in 2010. Even
available sources and verified data of the sampled
though consumption increased in the IP, production
Union producers, was used to establish macroeconomic
volume remained more or less at the same level as in
indicators such as Union industry production, production
2010.
capacity, capacity utilisation, sales volume, market share,
growth, captive sales, employment and productivity.
(485) Production capacity remained stable over the period
considered. Capacity utilisation followed the trend of
production and declined by 8 % during the period
(482) The data provided and verified of the six sampled Union
considered.
producers was used in order to establish microeconomic
indicators such as unit sales price, unit cost of
production, profitability, cash flow, investments, return
on investments, ability to raise capital, stocks and
labour costs.
5.2.2. SALES VOLUME, MARKET SHARE AND GROWTH
2008 2009 2010 IP
Sales volume
2 951 468 2 280 304 2 643 923 2 592 540
5.2. DATA RELATING TO THE UNION INDUSTRY AS A
(tonnes)
WHOLE
Index
100 77 90 88
5.2.1.
(2008=100)
PRODUCTION, PRODUCTION CAPACITY AND
CAPACITY UTILISATION
Market share 56,8 58,8 58,1 53,9
(%)
(483) All available information concerning the Union industry,
including information provided in the complaint, data
Index
100 104 102 95
collected from Union producers before and after the
(2008=100)
initiation of the investigation, and the verified ques
tionnaire responses of the sampled Union producers,
Source: Complaint, questionnaire replies
was used in order to establish the total Union production
for the period considered.
(486) In 2009 the Union industry sales volume to unrelated
customers decreased sharply by 23 %. In 2010, sales
volume increased by thirteen percentage points, but
then dropped by two percentage points in the IP.
2008 2009 2010 IP
Production
4 447 780 3 514 965 3 992 209 4 018 310
volume (tonnes)
Index
100 79 90 90
(487) The Union industry's market share decreased by 2.9
(2008=100)
percentage points over the period considered. After an
Production
6 007 536 6 128 301 6 099 587 5 923 311
initial increase in market share in 2009, the Union
capacity
industry saw its share decrease in 2010 and the IP
(tonnes)
with the result that its share of the market was 5
percentage points less in the IP than in 2009. This
Index
100 102 102 99
occurred against the background of an increase of
(2008=100)
more than 24 % in consumption from 2009 to the
end of the IP. It was thus unable to benefit from the
Capacity utili
74 57 65 68
growing consumption and to regain the sales volumes
sation (%)
and some of the market share previously lost.
Index
100 77 88 92
(2008=100)
Source: Complaint, questionnaire replies
(488) While Union consumption declined by 7 % during the
period considered and the Union industry sales volume
to unrelated parties decreased by 12 %, the market share
(484) The table above shows that production decreased by
of the Union industry decreased by 2,9 percentage points
10 % over the period considered. In line with a
from 56,8 % in 2008 to 53,9 % in the IP.

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5.2.3. EMPLOYMENT AND PRODUCTIVITY
(493) The investigation found that there was no material
difference between captive use and captive sales in
2008 2009 2010 IP
terms of end use of the product. Captive use was
reported by companies where the downstream
Employment (in FTE) 7
088 6
470 6
097 6
046
production was taking place in the same legal entity,
however, captive sales were the sales to other related
Index (2008=100) 100 91 86 85
legal entities with an invoice. Furthermore, the pricing
method in both captive use and sales to related parties
Productivity
627 543 655 665
was similar, i.e. a fair value ("cost plus" method) of the
(tonnes/FTE)
product was charged to both the related companies as
Index (2008=100) 100 87 104 106
well as to internal downstream production units of the
sampled companies.
Source: Complaint, questionnaire replies, Eurofer
(489) Employment in the Union industry followed a
(494) The average value per tonne remained stable during the
progressively declining trend. Thus, the total number of
period considered and was 3 % lower than the sales price
employees measured in full time equivalents (FTE) in the
to unrelated customers in the IP of the sampled Union
industry decreased by 15 % over the period considered
producers. This price difference was not considered
and reached its lowest level in the IP. However, the
significant and the trend in the price of captive sales
productivity increased by 6 % over the period considered,
follows the trend in the price to unrelated customers.
which shows that the industry was trying to rationalise
their production costs.
5.2.4. CAPTIVE USE AND CAPTIVE SALES
2008 2009 2010 IP
2008 2009 2010 IP
Captive use and captive
962 802 901 965
sales (EUR/tonne)
Captive use and
1 135 987 914 412 986 386 970
757
captive sales (tonnes)
Index (2008=100) 100 83 94 100
Index (2008=100) 100 80 87 85
Source: Verified questionnaire replies of the sampled producers
Market share (%) 22 24 22 20
Index (2008=100) 100 108 99 92
(495) Considering that most of the captive sales and captive
use were destined for the downstream construction
Source: Complaint and verified questionnaire replies of the sampled
producers
material business of the Union producers, those sales
and captive use were also indirectly exposed to
competition from other market players including the
subsidised imports from the PRC. The internal demand
of the downstream production depended on the chance
(490) As indicated in recital (459), there is a significant market
to sell the downstream products on the free market
for OCS in the Union that is formed by the downstream
which was not affected by subsidised imports of OCS.
use of OCS by the Union industry.
Thus, it can be concluded that the shrinking volumes and
market share during the period considered were due to
competition from subsidised imports from the PRC.
(491) It was found that the captive use and captive sales were
destined for further transformation by the companies
themselves or their related companies dealing mainly
with construction material business, i.e. being end-users
of OCS.
5.3. DATA RELATING TO THE SAMPLED UNION
PRODUCERS
5.3.1. AVERAGE UNIT SALES PRICES IN THE UNION AND
(492) On the basis identified above, it was established that the
COST OF PRODUCTION
captive use and captive sales of the Union industry
constituted 24 % of the total production volume in the
2008 2009 2010 IP
IP. Over the period considered, the captive use and
related sales volumes decreased by 15 % and their
Unit price in Unionto unrelated 1 023 805 911 994
customers (EUR/tonne)
market share dropped by 8 %.

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2008 2009 2010 IP
(497) In parallel, the average costs to produce and sell the like
product increased by 6 % over the period considered
Index (2008=100) 100 79 89 97
which was caused by an increase of the raw material
cost.
Unit cost of production (EUR/ 925 884 893 978
tonne)
Index (2008=100) 100 95 97 106
Source: Verified questionnaire replies of the sampled producers
(498) After the drop in unit price to unrelated customers by
(496) The average sales prices of the sampled Union producers
21 % in 2009, the unit price started to increase. In 2010
to unrelated customers in the Union decreased by 3 %
and during the IP, compared to 2009, the Union industry
over the period considered. The biggest drop of 21 %
experienced an increase in costs and could only
occurred in 2009 in line with the decrease in
moderately increase the prices to cover them, enough
consumption In the period from 2009 to the IP, in
just to keep the profitability on the same low level for
line with an increasing consumption and sales volumes,
2010 and the IP. However, this resulted in a further loss
prices recovered by 23 % but did not reach the level of
in market share since the Chinese imports prices were
2008.
constantly undercutting the Union industry prices.
5.3.2. PROFITABILITY, CASH FLOW, INVESTMENTS, RETURN ON INVESTMENT AND ABILITY TO RAISE CAPITAL
2008 2009 2010 IP
Profitability of sales in the Union to unrelated
6,7 –
9,3 2,8 2,6
customers (% of sales turnover)
Index (2008=100) 100
– 138 41 39
Cash flow (EUR) 328
190
880 211
298
356
152 030 083
204 650 414
Index (2008=100) 100 64 46 62
Investments (EUR) 55
717
957 4
537
128 12
530
132 15
302
264
Index (2008=100) 100
8 22 27
Return on investments 13,8 –
13,9 5,9
6
Index (2008=100) 100
– 101 43 44
Source: Verified questionnaire replies of the sampled producers
(499) The profitability of the Union industry was established by
(501) The evolution of profitability, cash flow and return on
expressing the pre-tax net profit of the sales of the like
investment during the period considered limited the
product to unrelated customers as a percentage of the
ability of the Union industry to invest in its activities
turnover of these sales. In 2009 the profitability of the
and undermined its development. The Union industry
Union industry decreased dramatically and resulted in a
managed to make substantial investment in the
loss of 9,3 %. From 2010 it started to recover but the
beginning of the period considered, however, thereafter
increasing costs of production prevented from achieving
the investments dropped sharply in 2009 and overall
the level considered healthy and sustainable for the
decreased by 73 % over the period considered.
industry (6,7 %). Over the whole period considered,
profitability dropped by 61 %.
(502) Given the nature of the Union industry, which is to some
(500) The trend in cash flow followed to some extent the
extent made up of large multinational integrated steel
negative trend in profitability. The lowest level was
companies, the ability of these companies to raise
achieved in 2010. Similarly, the return on investment
capital was not affected by the poor financial
decreased by 56 % from 13,8 % in 2008 to 6 % in the IP.
performance of the OCS sector.

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5.3.3. STOCKS
imports from the PRC the impact on the Union market
of the actual margin of subsidy cannot be considered
2008 2009 2010 IP
negligible.
Closing stocks 116 852 97
533 124
848 130
593
(tonnes)
Index
100 83 107 112
(2008=100)
5.5. CONCLUSION ON INJURY
Source: Verified questionnaire replies of the sampled producers
(507) The investigation showed that all injury indicators (except
productivity) deteriorated or did not develop in line with
consumption during the period considered.
(503) For the six sampled Union producers, stocks represented
around 8 % of the production volume in the IP. The
closing stock level increased by 12 % during the period
considered. Although, it should be noted that stocks are
(508) Over the period considered, in the context of decreasing
not an important indicator for the industry as the
consumption, the volume of imports from the PRC
production mainly takes place on order, the main
increased significantly. At the same time, the Union
increase in stocks took place from 2009 to the IP and
industry sales volume decreased overall by 12 % and its
coincided with the surge in the subsidised imports from
market share dropped from 56,8 % in 2008 to 53,9 % in
the PRC.
the IP. Although consumption recovered by 24 %, from
2009 to the IP, after the year of economic crisis affecting
demand, the Union industry market share was
decreasing. The Union industry was unable to regain
the lost market share in view of the significant
expansion of the subsidised imports from the PRC in
the Union market. The low-priced subsidised imports
5.3.4. EMPLOYMENT, WAGES AND PRODUCTIVITY
increased over the period considered, constantly under
cutting the prices of the Union industry.
Average labour costs per 60,959 57,892 58,637 62,347
employee (EUR, sampled
Union producers)
Index (2008=100) 100 95 96 102
(509) Furthermore, the injury indicators related to the financial
performance of the Union industry, such as cash flow
and profitability were seriously affected. This means that
the ability of the Union industry to raise capital and to
(504) The average labour costs of the sampled Union producers
rose by only 2 % over the period considered which is
invest was undermined.
lower than the inflation rate. The investigation showed
that the sampled producers made significant cuts,
especially in general and administrative costs, and
therefore made efforts to be more efficient.
(510) In the light of the foregoing, it was concluded that the
Union industry suffered material injury within the
meaning of Article 8(5) of the basic Regulation.
5.3.5. EFFECTS OF PAST DUMPING OR SUBSIDISATION
(505) Since this is the first anti-subsidy proceeding regarding
the product concerned, no data are available to assess
6. CAUSATION
effects of possible past dumping or subsidisation.
6.1. INTRODUCTION
(511) In accordance with Article 8(5) and 8(6) of the basic
Regulation, it was examined whether the subsidised
imports originating in the PRC have caused injury to
the Union industry to a degree that enables it to be
5.4. MAGNITUDE OF THE ACTUAL SUBSIDY MARGIN
classified as material. Known factors other than the
subsidised imports, which could at the same time have
(506) All margins established and specified above in the
injured the Union industry, were examined to ensure that
subsidy section are significantly above the de minimis
any injury caused by those other factors was not
level. Given the volume and the prices of subsidised
attributed to the subsidised imports.

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6.2. EFFECT OF THE SUBSIDISED IMPORTS
from 2009 to the IP, the Union industry could raise
their sales volumes to unrelated parties by only 13 %
(512) The investigation showed that the Union consumption
but lost a market share of 8 % thus benefiting to a
decreased by 7 % over the period considered, while the
limited extent from the increased consumption. Chinese
volume of subsidised imports from the PRC increased by
imports benefited most from the recovering consumption
about 49 %, their market share also increased by 60 %
leaving other market players far behind.
from 9,1 % in 2008 to 14,6 % in the IP. At the same
time, the sales volume of the Union industry to unrelated
parties decreased by 12 % and market share of those
sales dropped by 2,9 % from 56,8 % in 2008 to
53,9 % in the IP.
(515) The average import prices from the PRC dropped by 9 %
over the period considered. Although on a rising trend
after the sharp drop in 2009, from 2009 to the IP, they
remained constantly below the levels charged by the
(513) While the imports from the PRC were also affected by
Union industry. The unit price to unrelated customers
the economic crisis and dropped by 68 % from 2008 to
in the Union decreased by only 3 %, showing some
2009, they recovered from 2009 to the IP at a very fast
resistance to price pressure exerted by the Chinese
pace increasing by 367 % at the end of the IP, even
imports. However, these prices were obviously
though Union consumption only increased by 24 %
sustained at a cost of lower sales volumes and
during this period. By lowering the unit price by 9 %
decreased profitability on those sales as profitability
compared to 2008 and undercutting the Union
dropped by 61 % from 6,7 % in 2008 to 2,6 % in the IP.
industry by up to 20,2 % during the IP, Chinese
imports increased their market share from 2008 to the
IP by 60 % up to 14,6 %.
(516) Based on the above, it is concluded that the surge of
subsidised imports from the PRC at prices constantly
undercutting those of the Union industry have had a
(514) At the same time, from 2008 to the IP the Union
determining role in the material injury suffered by the
producers' sales volumes to unrelated parties overall
Union industry, which has prevented the Union industry
dropped by 12 %. At the time of market recovery,
to fully benefit from the recovering Union consumption.
6.3. EFFECT OF OTHER FACTORS
6.3.1. IMPORTS FROM THIRD COUNTRIES
Country 2008 2009 2010 IP
South Korea Volume
(tonnes) 228
123 226
568 173
935 237
164
Index (2008=100) 100 99 76 104
Market share (%) 4,4 5,8 3,8 4,9
Index (2008=100) 100 133 87 112
Av. price 901 727 846 903
Index (2008=100) 100 81 94 100
India Volume
(tonnes) 159
999 149
138 155
384 141
391
Index (2008=100) 100 93 97 88
Market share (%) 3,1 3,8 3,4 2,9
Index (2008=100) 100 125 111 95
Av. price 932 667 773 824
Index (2008=100) 100 72 83 88
Other countries Volume
(tonnes) 249
151 158
461 124
319 167
007

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Country 2008 2009 2010 IP
Index (2008=100) 100 64 50 67
Market share (%) 4,8 4,1 2,7 3,5
Index (2008=100) 100 85 57 72
Av. price 951 809 924 955
Index (2008=100) 100 85 97 100
Total of all third countries Volume (tonnes) 637
274 534
167 453
637 545
562
except the PRC
Index (2008=100) 100 84 71 86
Market share (%) 12,3 13,8 10,0 11,3
Index (2008=100) 100 112 81 92
Av. price 929 735 842 898
Index (2008=100) 100 79 91 97
Source: Eurostat
(517) While imports from the PRC constituted 56 % of all
6.3.2. EXPORT PERFORMANCE OF THE UNION INDUSTRY
imports in the Union during the IP, other important
sources of imports were from the Republic of India
2008 2009 2010 IP
('India') (11 %) and South Korea (19 %). Unlike imports
from the PRC, imports from India, although their average
Exports,
669 790 612
204 580
477 605
760
price dropped sharply by 12 %, overall decreased by
Eurostat
12 % over the period considered and lost market share
(tonnes)
by 5 %. Imports from South Korea increased by only 4 %
with the average price remaining on the same level as in
Index
100 91 87 90
2008. The market share of imports from India was 2.9 %
(2008=100)
in the IP, while imports from South Korea held a share of
Average price
1 068 937 995 1
092
4.9 %.
(EUR/tonne)
Index
100 88 93 102
(2008=100)
(518) Other imports, representing 14 % of the total imports,
decreased by 33 % and their average price stayed at the
Exports by
53 542 46
516 48
102 46
228
same level as in 2008.
sampled Union
producers
Index
100 87 90 86
(2008=100)
(519) Although the average price of all other imports was
below the price level of the Union industry, the effect
Average selling
1 086 826 984 1
132
of these imports, if any, can possibly be only marginal.
price (EUR/
Firstly, is the Commission received no evidence that the
tonne)
imports from other sources were unfairly traded.
Secondly, in contrast to the Chinese imports, the
Index
100 76 91 104
overall price level from main sources of other imports
(2008=100)
was more stable over the whole period considered, and
Source: Eurostat and verified questionnaire replies
thus shows that the Union industry can successfully
compete in the market segments with those imports.
Thirdly, the imports from other countries have
(520) The total exports of OCS by the Union industry to third
generally declined over the period considered and still
countries according to Eurostat decreased by 10 % over
remain at a low level, both overall and for main
the period considered. However, the average price has
exporting countries individually. Moreover, the
been relatively high and increased by 2 % over the
dropping market share of other imports confirms that
period considered. Exports represented 15 % of the
those imports could not have caused injury to the
total Union production and as such helped the Union
Union industry.
industry to achieve economies of scales and reduce

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overall costs of production. Hence, it can be concluded
(524) As shown above, the average value of captive use and
that the export activity of the Union industry could not
captive sales per tonne was only 3 % lower than the sales
be a potential cause of the material injury.
price to unrelated customers in the IP. The investigation
showed that the captive use and captive sales were most
likely themselves indirectly affected by the unfair
competition from subsidised imports. Should there have
been any advantage for the downstream business as
alleged, it would have been reflected in the comparison
between captive sales prices and unrelated sales prices.
Therefore, this argument is rejected.
(521) This general picture is mirrored by the situation in
exports to unrelated customers in third countries by
the sampled Union producers. They decreased by 14 %
over the period considered, however, the export price per
unit has been constantly higher (on average by 2 to 14 %
depending on year) than the price in the Union.
(525) Following the final disclosure CISA again claimed that
the Union industry was making OCS available to its
related downstream businesses at a "subsidised" price,
thereby undercutting their competitors in the down
stream segment. However, no evidence was provided to
change the Commission's conclusion in recital (524), i.e.
that the price difference between related and unrelated
sales was small (2 %) and that this was not a case of self-
6.3.3. IMPORTS FROM THE PRC BY THE COMPLAINANTS
inflicted injury.
(522) During the investigation and following the final
disclosure, it was claimed that the complainants
(through their related companies) were engaged in
importing the product concerned from the PRC them
selves and that those imports allegedly constituted 20 to
(526) CISA also challenged the data on the cost of production
40 % of the total imports from the PRC. However, no
of OCS and, in extension, the price of OCS to related
evidence was provided to support this allegation. Having
parties. Given the sales price of hot-dipped galvanised
investigated these allegations, by examining the verified
coils, a raw material in the manufacture of OCS, they
data from the sampled Union producers, it was found
allege that the cost of production of OCS in the investi
that they imported only about 10 000 tonnes during the
gation period could not exceed 900 EUR/tonne.
IP, which was largely in line with the data in the
complaint. About a similar volume, not disclosed in
accordance with Article 29 of the basic Regulation, was
found to be imported by related companies of the
sampled Union producers. These imports together
accounted for only about 2-3 % of total imports from
(527) Firstly, it was not clear to which extend all costs such as
the PRC. Consequently, it cannot be concluded that the
SG&A and finance costs were included in the total cost
complainants were importing from the PRC in such
to which CISA was refering to. Secondly, The
quantities and in such a pattern as to put in question
Commission verified the cost of production of OCS in
their own status as Union producers according to
all of the sampled Union producers and is satisfied that
Article 9(1)(a) of the basic Regulation, or to cause
the full cost of production included raw materials,
injury to themselves. Therefore, the argument is rejected.
processing, coating, SG&A, finance costs etc.
(528) CISA then claimed that the sale of OCS to related parties
is made at a loss and is therefore a cause of injury to the
6.3.4. CAPTIVE USE AND CAPTIVE SALES
Union industry. This is based on a comparison of the
total cost of production (978 EUR/tonne) versus the
(523) It has been alleged by some interested parties that the
average price of related sale (965 EUR/tonne).
injury to the Union industry was caused from its
engagement in the downstream business of producing
construction materials (e.g. sandwich panels, trapezoidal
sheets etc.) either directly or through related companies
within the groups. Specifically, it was claimed that the
Union industry made OCS available to its own down
(529) Whereas it is correct that a simple mathematical
stream business at lower prices than to unrelated
comparison would suggest that related sales were made
companies, thus "subsidising" them within the group
at a loss, this would assume that the Union industry
and enabling them to undercut their competitors in the
would incur the same level of SG&A and other sales
downstream segment.
overheads on their captive sales as on their unrelated

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ones. As stated in recital (493), sales to related parties
imports from the PRC but that it was due to structural
were made on a 'cost plus' basis and therefore the Union
problems of the Union steel industry such as over
Industry was recovering their costs on these sales.
capacity. It was also argued that the consolidation of
the steel industry that took place before the period
considered had led to overcapacity and that any injury
suffered was a consequence of too many production
facilities.
6.3.5. ECONOMIC CRISIS
(530) The economic crisis and its effect on the construction
business at least partially explain the contraction of
demand and price pressure during the period considered.
(535) It is the case that production of the OCS is capital
As mentioned above, in 2009 the consumption shrunk
intensive and the industry has relatively high fixed
by 25 %. However, as of 2010, the market started
costs. The consolidation of the steel industry - that
recovering and, between 2009 and the end of the IP,
took place before the start of the period considered –
consumption increased by 24 %.
however did not result in overcapacity. After a small
increase in installed capacity in 2009, the industry
slightly decreased its capacity in 2010 and again in the
IP. Installed capacity during the IP was lower than total
Union consumption and if demand in the IP had
recovered to the level of 2008 and the Union industry
(531) However, the injury and causality analysis has separated
the market breakdown of 2009 and the subsequent
had been able to take advantage of that increased
recovery from 2009 to the IP. It has been clearly demon
demand, capacity utilisation would have been around
strated in the injury and causality analysis that the
74 %.
imports from the PRC took full advantage of the
recovering consumption and in addition constantly
undercut the Union industry's prices, and thus turning
the possibility of equal chance to all players to recover
from the drop, into a continuous battle for survival.
(536) The negative effect of overcapacity can only be attributed
to a minimal extent to the Union producers of OCS.
First, the investigation showed that the Union industry
has obviously been taking steps to sustain its efficiency,
as productivity increased by 6 % for the whole industry.
Second, continued investment in the production lines
(532) After the deadline for comments to the final disclosure
and flexibility in their use for producing other products
an interested party noted the announced closure of a
helped to achieve economies of scale and reduced fixed
plant in Belgium, and that force majeure was causing
costs. Thus, with capacity utilisation of the sampled
difficulties to normal production and shipment from
companies going down by 18 % over the period
other facilities in Belgium. The interested party alleged
considered, the average costs of production increased
that this shows the lack of security of supply of OCS
by only 6 %, and that including the increase of raw
in the Union and was a reason to allow importers and
material costs. Thus, it cannot be concluded that the
users to freely source their OCS from the Union and
overcapacity would break the causal link. This
from China.
argument is therefore rejected.
(533) These arguments are rejected. Given that capacity utili
6.4. CONCLUSION ON CAUSATION
sation in the Union is low, the issue is not one of
problem of supply as the Union industry has adequate
(537) It has been demonstrated that there was a substantial
available capacity. In any case the facilities being closed
increase in the volume and market share of the
in Belgium did not manufacture OCS. Security of supply
subsidised imports originating in the PRC in the period
is of course important, but the proposed duties in this
considered, especially from 2009 to the IP. It was also
case are not designed to stop supply of OCS from China,
found that these imports were constantly undercutting
merely to prevent that supply being dumped onto the
the prices charged by the Union industry on the Union
Union market.
market and in particular during the IP.
6.3.6. STRUCTURAL OVERCAPACITY
(538) This increase in volume and market share of the low
priced subsidised imports from the PRC coincided with
(534) It has been claimed by some interested parties that the
the negative development in the economic situation of
cause of injury to the Union industry, which mostly are
the Union industry. This situation worsened in the IP,
vertically integrated steel producers, has not been the
when, despite recovering consumption, the Union

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industry was unable to regain its lost market share and
profitability and return on investments, were seriously
profitability. Other financial indicators such as return on
affected. In the absence of measures, a further deterio
investments stagnated at the level of 2010, and
ration in the Union industry's economic situation appears
employment reached its lowest level.
very likely.
(539) The examination of the other known factors which could
(545) It is expected that the imposition of countervailing duties
have caused injury to the Union industry revealed that
will restore fair trade conditions on the Union market,
these factors are not such as to break the causal link
allowing the Union industry to align the prices of OCS to
established between the subsidised imports from the
reflect the costs of the various components and the
PRC and the injury suffered by the Union industry.
market conditions. It can also be expected that the
imposition of countervailing measures would enable the
Union industry to regain at least part of the market share
lost during the period considered, with a positive impact
(540) Based on the above analysis, which has properly distin
on its profitability and overall financial situation.
guished and separated the effects of all known factors on
the situation of the Union industry from the injurious
effects of the subsidised exports, it was concluded that
the subsidised imports from the PRC have caused
material injury to the Union industry within the
(546) Should measures not be imposed, further losses in
meaning of Article 8(6) of the basic Regulation.
market share could be expected and the Union industry's
profitability would deteriorate. This would be unsus
tainable in the medium to long-term. It is also likely
that some individual producers would have to close
down their production facilities, as they have been loss
7. UNION INTEREST
making over the period considered. In view of the losses
incurred and the high level of investment in production
7.1. PRELIMINARY REMARKS
made at the beginning of the period considered, it can be
expected that most Union producers would be unable to
(541) In accordance with Article 31 of the basic Regulation,
recover their investments, should measures not be
the institutions examined whether, despite the above
imposed.
findings, compelling reasons existed for concluding that
it is not in the Union interest to adopt countervailing
measures. The analysis of the Union interest was based
on an appreciation of all the various interests involved,
including those of the Union industry, importers, and
(547) It is therefore concluded that the imposition of counter
users of the product concerned.
vailing duties would be in the interest of the Union
industry.
7.2. INTEREST OF UNION INDUSTRY
(542) The Union industry as a whole is composed of 22
7.3. INTEREST OF USERS AND IMPORTERS
known producers representing all of the Union OCS
production. The producers are located in different
(548) As mentioned above in recital (14) five importers came
Member States of the Union, employing directly over
forward but only two replied to the questionnaire. Out of
5 400 people in relation to the like product.
about 100 users listed in the complaint, 19 came

forward expressing interest in the proceeding.
Subsequently, ten companies provided questionnaire
replies.
(543) None of the producers opposed the initiation of the
investigation. As shown above in the macroeconomic
indicators, the whole Union industry experienced a
deterioration of their situation and was negatively
(549) The most active users and importers have made joint
affected by the subsidised imports.
written submissions and several hearings were held in
the course of the investigation. Their main arguments
regarding imposition of measures are analysed below.
(544) The Union industry has suffered material injury caused
by the subsidised imports from the PRC. All injury indi
cators showed a negative trend during the period
(550) Following the final disclosure, comments were received
considered. In particular, injury indicators related to the
from importers and other interested parties. However, no
financial performance of the Union producers, such as
new elements other than the ones below were provided.

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7.3.1. COMPETITION ON THE UNION MARKET
for cooperating users, i.e. that no price increase could be
passed on and they would be bound to import from the
(551) Users and importers alleged that the Union market of
PRC in the same volumes as in the IP, the impact of the
OCS was not sufficiently competitive and that imports
duty level on their cost of production would be an
from the PRC were necessary to give more bargaining
increase between 1 to 5 % and a decrease by 1 to 2,8
power to companies importing and using OCS. They also
percentage points in profitability for most of the imports
suggested that the Union industry was engaged in oligop
and by about 4 percentage points for importing under
olistic arrangements to control the market. The Union
residual duty. However, the more likely scenario is an
producers were competing on the same markets and
impact significantly less than this. Imports from the
often selling to the same customers, or to the
PRC represent a rather small part of the users' business
construction companies of each other. Considering that
and it can be expected that the cost increase from the
no evidence beyond anecdotal complaints about
countervailing measures will be relatively easily passed
difficulties in price negotiations was provided and that
on. Furthermore, given that in addition to the many
apart from the five groups of complaining Union
Union producers alternative significant import sources,
producers, 11 other producers of OCS operate in
not subject to measures, are available e.g. India and
theUnion, among which some are very large, and that
South Korea, it is expected that prices in the market,
there is a variety of other import sources, these claims
following the imposition of measures will take into
were rejected.
account these factors as well.
7.3.2. SHORTAGE OF SUPPLY
(552) Users and importers also alleged that imposition of
measures on Chinese imports would create a shortage
(556) The two cooperating importers represented around 6 %
of total imports from the PRC during the IP, the exact
of OCS on the Union market. However, considering
amount could not disclosed in accordance with Article 29
the wide variety of supply sources described above, as
of the basic Regulation. Similarly as for the users, the
well as the free production capacity of the Union
importers also maintained different sources of supply
industry, it is not considered likely that such shortage
besides the PRC. Furthermore, it was established that
could take place. Therefore, the argument is rejected.
the profitability of the importers would be possibly
more affected by the measures than that of the users, if
they were to maintain the importing pattern practiced
during the IP. However, in practice importers as traders
7.3.3. CONCLUSION ON THE INTERESTS OF USERS AND
tend to be even more flexible than users, and they would
IMPORTERS
most likely be first to turn to the alternative sources of
supply.
(553) The ten cooperating users represented 7 % of total
imports from the PRC during the IP. The investigation
showed that all users maintain various sources of supply.
On average, purchases from the PRC constituted around
15 % of their total purchases of the OCS products;
moreover, the largest volumes were found to be
sourced from the Unionproducers (73 %) and 12 %
(557) Part of the benefit from Chinese imports on the user and
were imported from other third countries. Indeed, as
importer side is effectively drawn from and made
the product concerned is highly standardised, the
possible by the unfair price discrimination practiced by
importance of customer binding is rather relative, and
the Chinese exporters, and not from a natural
both users and importers can quite easily change the
competitive advantage. Thus, reinstating the level
sources of supply as far as the product quality is
playing field on the Unionmarket by correcting the
concerned.
trade distortion coming from subsidised imports, will
actually enable the OCS market to return to healthy,
market-economy-driven dynamics and price devel
opment, while at the same time not disadvantaging
other players (users, producers, end-consumers) who are
(554) The investigation showed that all cooperating users,
not immediately able to benefit from subsidised imports.
except one, were profitable in the sector which uses
the product concerned and their profitability during the
IP ranged from 1 % to 13 %, depending on the company.
The profitability of those companies did not significantly
depend on imports of the product concerned from the
PRC.
7.4. CONCLUSION ON UNION INTEREST
(558) In view of the above, it is concluded that based on the
information available concerning the Union interest,
(555) On the basis of questionnaire replies from the users, the
there are no compelling reasons against the imposition
likely effect of the proposed measures was estimated.
of measures on imports of the product concerned orig
Thus, even assuming the unlikely worst-case scenario
inating in the PRC.

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8. DEFINITIVE COUNTERVAILING MEASURES
no evidence as to what the profit of the Union industry
would have been in 2008 in the absence of the financial
8.1. INJURY ELIMINATION LEVEL
crisis was provided.
(559) In view of the conclusions reached with regard to
subsidisation, injury, causation and Union interest,
countervailing measures should be imposed in order to
prevent further injury being caused to the Union industry
(565) Interested parties also pointed to the fact that import
by the subsidised imports.
volumes from the PRC were at their lowest in 2009
rather than in 2008. However, given that the Union
industry was not profitable in 2009, it is impossible to
use 2009 data to set a target profit for the Union
(560) For the purpose of determining the level of these
industry.
measures, account was taken of the subsidy margins
found and the amount of duty necessary to eliminate
the injury sustained by the Union industry.
(566) CISA have further alleged that the profit to unrelated
customers in 2008 cannot be used as the target profit
because that year shows the largest price difference
(561) When calculating the amount of duty necessary to
between related and unrelated sales. This argument was
remove the effects of the injurious subsidisation, it was
rejected, as this price difference is not relevant to the
considered that any measures should allow the Union
calculation of the profit of sales to unrelated customers.
industry to cover its costs of production and to obtain
a profit before tax that could be reasonably achieved by
an industry of this type in the sector under normal
conditions of competition, i.e. in the absence of
subsidised imports, on sales of the like product in the
(567) CISA then proposed that the target profit for sales of
Union. It is considered that the profit that could be
OCS to unrelated parties in the Union be based on the
achieved in the absence of subsidised imports should
average overall profit for the multinational corporation
be based on the year 2008 when Chinese imports were
ArcelorMittal for the years 2010 and 2011. This was
less present on the Union market. It is thus considered
rejected as a reliable source for the profit on OCS in
that a profit margin of 6.7 % of turnover could be
the Union in the absence of dumped imports, because
regarded as an appropriate minimum which the Union
taking the profit of the entire worldwide ArcelorMittal
industry could have expected to obtain in the absence of
group is clearly not representative of profit on sales of
injurious subsidisation.
OCS in the Union.
(562) On this basis, a non-injurious price was calculated for the
(568) One interested party challenged the Commission's
Union industry for the like product. The non-injurious
methodology for the calculation of the underselling
price was obtained by adding the above-mentioned profit
margin. However, this challenge was based on the
margin of 6,7 % to the cost of production.
erroneous assumption that the Commission had
calculated the underselling margin by removing the
average profit of the Union industry in the IP (2,6 %)
from the market price to get to the 'break-even point'
(563) The necessary price increase was then determined on the
(i.e. a price that would result in zero profit) and then
basis of a comparison of the weighted average import
adding the target profit onto this 'break-even point'.
price of the cooperating exporting producers in the PRC,
duly adjusted for importation costs and customs duties
with the non-injurious price of the Union industry on
the Union market during the IP. Any difference resulting
from this comparison was then expressed as a percentage
(569) The Commission calculated the underselling margin by
of the average CIF import value of the compared types.
adding the target profit to the cost of production of each
product type. The methodology suggested by this
interested party is flawed, because the average profit of
2,6 % was not automatically achieved on each sale of
each model by all companies from which the data was
(564) Following final disclosure interested parties challenged
used.
the use of 6,7 % as the target profit of the Union
industry and the description of 2008 as a representative
year for profitability. However, their argument that the
profit made by the Union industry in 2008 was affected
by the financial crisis, making 2008 an exceptional year,
(570) One interested party also challenged the Commission's
would seem to point to an argument that the profit
injury calculations. Given that that party did not have
realised in 2008 is lower than the industry would
full access to the data used by the Commission to
expect in a normal year. This argument is rejected as
calculate the injury margin, it attempted to calculate it

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on its own, based on its understanding of the price
investigation with respect to these companies. These
difference on the market between aluminium zinc
duty rates (as opposed to the countrywide duty
coated and zinc coated substrate, which it had calculated
applicable to 'all other companies') are thus exclusively
at USD 50 per MT. This 'recalculation', based on
applicable to imports of products originating in the
incomplete data, resulted in a lower injury margin than
country concerned and produced by the companies and
that which the Commission had calculated and disclosed.
thus by the specific legal entities mentioned. Imported
products produced by any other company not specifically
mentioned in Article 1 with its name and address,
including entities related to those specifically mentioned,
cannot benefit from these rates and shall be subject to
the duty rate applicable to 'all other companies'.
(571) Their arguments were rejected because the analysis of the
full data from both the exporting producers and the
Union industry, the alleged price difference could not
be found. Consequently, it should be underlined that
the data which the interested party was using was
(574) Any claim requesting the application of an individual
incomplete and thus could not be relied upon to
company countervailing duty rate (e.g. following a
reproduce the Commission's injury calculations.
change in the name of the entity or following the
setting-up of new production or sales entities) should
be addressed to the Commission ( 104 ) forthwith with all
relevant information, in particular any modification in
the company's activities linked to production, domestic
and export sales associated with, for example, that name
8.2. DEFINITIVE MEASURES
change or that change in the production and sales
entities. If appropriate, the Regulation will then be
(572) In view of the conclusions reached with regard to
amended accordingly by updating the list of companies
subsidisation, injury, causation and Union interest, and
benefiting from individual duty rates.
in accordance with Article 15 of the basic Regulation, a
definitive countervailing duty should be imposed on
imports of OCS originating in the PRC at the level of
the lower of the subsidy or injury margins found, in
accordance with the lesser duty rule. In this case, the
(575) In order to ensure proper enforcement of the counter
duty rate should accordingly be set at the level of the
vailing duty, the residual duty level should not only apply
subsidy margins found. On the basis of the above, the
to the non-cooperating exporting producers but also to
rates at which such duties will be imposed are set as
those producers which did not have any exports to the
follows:
Union during the IP,
HAS ADOPTED THIS REGULATION:
Subsidy
Injury
Counter
Company Name
margin
margin
vailing
(%)
(%)
duty (%)
Zhangjiagang Panhua Steel Strip 29,7 55,8 29,7
Article 1
Co., Ltd.; Chongqing Wanda Steel
Strip Co., Ltd.; Zhangjiagang Free
1. A
definitive
countervailing
duty
is
hereby
imposed
on
Trade Zone Jiaxinda International
imports of certain organic coated steel products, i.e. flat-rolled
Trade Co., Ltd.
products of non-alloy and alloy steel (not including stainless
Zhejiang Huadong Light Steel 23,8 29,7 23,8
steel) which are painted, varnished or coated with plastics on
Building Material Co. Ltd.;
at least one side, excluding so-called 'sandwich panels' of a kind
Hangzhou P.R.P.T. Metal Material
used for building applications and consisting of two outer metal
Co., Ltd.
sheets with a stabilising core of insulation material sandwiched
between them, excluding those products with a final coating of
Union Steel China 26,8 13,7 13,7
zinc-dust (a zinc-rich paint, containing by weight 70 % or more
of zinc), and excluding those products with a substrate with a
Other cooperating companies 26,8 43,0 26,8
metallic coating of chromium or tin, currently falling within CN
codes
ex 7210 70 80,
ex 7212 40 80,
ex 7225 99 00,
Residual duty 44,7 58,3 44,7
ex 7226 99 70 (TARIC codes 7210 70 80 11, 7210 70 80 91,
7212 40 80 01,
7212 40 80 21,
7212 40 80 91,
7225 99 00 11,
7225 99 00 91,
7226 99 70 11
and
7226 99 70 91), and originating in the People's Republic of
(573) The individual company countervailing duty rates
China.
specified in this Regulation were established on the
basis of the findings of the present investigation.
( 104 ) European Commission, Directorate-General for Trade, Directorate
Therefore, they reflect the situation found during that
H, B-1049 Brussels.

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2. The
rate
of
the
definitive
countervailing
duty
applicable
to
TARIC
the net, free-at-Union-frontier price, before duty, of the products
Company Duty
(%) additional
described in paragraph 1 and manufactured by the companies
code
listed below shall be as follows:
Maanshan Iron & Steel Company Limited 26,8 B325
Qingdao Hangang Color Coated Sheet Co., Ltd. 26,8 B326
TARIC
Company Duty
(%) additional
Shandong Guanzhou Co., Ltd. 26,8 B327
code
Shenzen Sino Master Steel Sheet Co.,Ltd. 26,8 B328
Union Steel China 13,7 B311
Tangshan Iron & Steel Group Co., Ltd. 26,8 B329
Zhangjiagang Panhua Steel Strip Co., Ltd.; 29,7 B312
Chongqing Wanda Steel Strip Co., Ltd.; Zhang
Tianjin Xinyu Color Plate Co., Ltd. 26,8 B330
jiagang Free Trade Zone Jiaxinda International
Trade Co., Ltd.
Wuhan Iron and Steel Company Limited 26,8 B331
Zhejiang Huadong Light Steel Building Material 23,8 B313
Co. Ltd.; Hangzhou P.R.P.T. Metal Material Co.,
Zhejiang Tiannu Color Steel Co., Ltd. 26,8 B334
Ltd.
All other companies 44,7 B999
Angang Steel Company Ltd. 26,8 B314
Baoutou City Jialong Metal Works Co., Ltd. 26,8 B317
3. Unless
otherwise
specified,
the
provisions
in
force
Changshu Everbright Material Technology Co., 26,8 B318
concerning customs duties shall apply.
Ltd.
Changzhou Changsong Metal Composite Material
26,8 B319
Co., Ltd.
Inner Mongolia Baotou Steel Union Co., Ltd. 26,8 B321
Article 2
Jigang Group Co., Ltd. 26,8 B324
This Regulation shall enter into force on the day following that
of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 11 March 2013.
For the Council
The President
E. GILMORE

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