COMMISSION IMPLEMENTING REGULATION (EU) 2018/1579

of 18 October 2018

imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1), and in particular Article 9(4) thereof,

Whereas:

1. PROCEDURE

1.1. Provisional measures

(1) On 4 May 2018, the European Commission (‘the Commission’) adopted Commission Regulation (EU) 2018/683 (2) (‘the provisional Regulation’) imposing a provisional anti-dumping duty on imports into the European Union (‘the Union’) of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 (‘the product concerned’) originating in the People's Republic of China (‘PRC’).

(2) The Commission had initiated the investigation on 11 August 2017 by publishing a Notice of Initiation in the Official Journal of the European Union (‘the Notice of Initiation’) following a complaint lodged on 30 June 2017 by the coalition against unfair tyres imports (‘the complainant’) on behalf of producers representing more than 25 % of the total Union production of new and retreaded tyres for buses or lorries.

(3) The Commission made imports of the product concerned originating in the PRC subject to registration by Commission Implementing Regulation (EU) 2018/163 (3). The registration of imports ceased with the entry into force of the provisional measures on 8 May 2018.

1.2. Investigation period and period considered

(4) As stated in recital (10) of the provisional Regulation, the investigation of dumping and injury covered the period from 1 July 2016 to 30 June 2017 (‘the investigation period’) and the examination of trends relevant for the assessment of injury covered the period from 1 January 2014 to the end of the investigation period (‘the period considered’).

1.3. Subsequent procedure

(5) Following the imposition of provisional anti-dumping duties, the complainant, the ‘China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters’ (‘the CCCMC’), the China Rubber Industry Association (‘the CRIA’), five Chinese exporting producers, five unrelated importers, a Union importers association l'Association Française des Importateurs de Pneumatiques (‘AFIP’) and one Union supplier (‘Kraiburg’) made written submissions commenting on the provisional findings.

(6) One interested party, Hämmerling The Tyre Company GmbH (‘Hämmerling’), submitted additional comments on the provisional findings on 2 July 2018, well after the deadline to submit comments on the provisional disclosure. The Commission addressed them together with other comments received on the General Disclosure Document at the definitive stage.

(7) Interested parties who so requested were granted an opportunity to be heard. Hearings took place with the CCCMC and the CRIA; all the sampled exporting producers: the Aeolus Group (4), Pirelli Tyre Co., Ltd (‘Pirelli’) and the related importer Prometeon Tyre Group S.r.l. (‘Prometeon’), the Giti Group (5), the Hankook Group (6), and the Xingyuan Group (7); two unrelated importers and Union producers, associations and Union tread and repairing material suppliers supporting the measures.

(8) The Commission considered the comments submitted by interested parties, analysed them, and, where appropriate, modified the provisional findings.

(9) The Commission continued seeking and verifying all information it deemed necessary for its final findings. In order to verify the questionnaires replies which were not verified at the provisional stage of the procedure, verification visits were carried out at the premises of the following parties: (a) Unrelated importers in the Union: — Heuver Bandengroothandel BV, the Netherlands (‘Heuver’) — Hämmerling The Tyre Company GmbH, Germany; (b) Related importers in the Union: — Hankook Tire Italia S.r.l. — Hankook España SA — Prometeon Tyre Group S.r.l. — Prometeon Tyre Group España y Portugal, S.L.U. — Pneumobil Reifen und KFZ-Technik GmbH — Prometeon Tyre Deutschland GmbH.

(10) Following final disclosure, a verification visit was carried out at the premises of Roline NV, a Union producer in the Netherlands.

(11) The Commission informed all interested parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-dumping duty on imports of certain tyres for buses and lorries (‘the final disclosure’) and to definitively collect the amounts secured by way of provisional duty.

(12) All interested parties were granted a period within which they could make comments on the final disclosure. The complainant, the Chinese exporting producers (Aeolus Group, Giti Group, Hankook Group, Pirelli and its related importer Prometeon), industry associations (the CRIA, the CCCMC, the Associazione Italiana Ricostruttori Pneumatici, the Assoiaçao Nacional de Industriais de Recauchtagem de Pneus, Bipaver, Bundesverband Reifenhandel und Vulkaniseur-Handwerk, the Czech Retread Tire Manufacturers Association, the Retread Manufacturing Association), importers (Hämmerling and Kirkby Tyres Ltd), retreader producer (Rula-BRW) and retreaders raw material suppliers (Vipal, Kraiburg, RemaTipTop) submitted written submissions.

(13) Following final disclosure, hearings were held with the CRIA and the CCCMC, the Aeolus Group, the Giti Group, Prometeon, the complainant and Bipaver.

(14) The Hearing Officer organised hearings at the request of Hankook Group on 16 August 2018 and Hämmerling on 29 August 2018.

(15) On 10 September 2018, the Commission submitted to all interested parties an additional final disclosure limited to the specific issue of the level of the tier 3 target profit.

(16) All interested parties were granted a period of three days within which they could make comments on the additional final disclosure document. The complainant, the Chinese exporting producers (Aeolus Group, Giti Group, Pirelli and its related importer Prometeon, Xingyuan), industry associations (the CRIA, the CCCMC, the Associazione Italiana Ricostruttori Pneumatici, Bipaver, Bundesverband Reifenhandel und Vulkaniseur-Handwerk, the Czech Retread Tire Manufacturers Association, ITMA Europe, the Retread Manufacturing Association), importers (Hämmerling, Heuver and Kirkby Tyres Ltd), a retreader (Rula-BRW), an association of users (Lithuanian National Road Carriers' Association LINAVA) and a raw material supplier to retreaders (Kraiburg) submitted written comments.

(17) Following the additional final disclosure, a hearing was held with Prometeon on 14 September 2018.

(18) The comments submitted by interested parties were considered and taken into account where appropriate.

1.4. Corrigendum

(19) Following the publication of the provisional Regulation, Pirelli pointed out that Pirelli Tyre Co., Ltd was not a subsidiary of the Aeolus Group as incorrectly stated in recital (119) of the provisional Regulation. It explained that Pirelli Tyre Co., Ltd is an autonomous company from Aeolus Tyre Co., Ltd and the Aeolus Group.

(20) Acknowledging its error, the Commission issued a corrigendum on 10 July 2018 (8).

(21) Concerning the reference to the Aeolus Group, the Commission noted that its investigation deals with companies or groups of related companies. The relationship between exporting producers is analysed in accordance with Article 127 of Commission Implementing Regulation (EU) 2015/2447 (9). Therefore, in the context of this investigation, Pirelli Tyre Co., Ltd and Aeolus Tyre Co., Ltd are considered to be related since both had a common shareholder during the investigation period — namely China National Tire & Rubber Co., Ltd (‘CNRC’). The use of shortened form ‘the Aeolus Group’ was for ease of reference to related companies throughout the provisional Regulation. The shortened form ‘the Aeolus Group’ was chosen because Aeolus Tyre Co., Ltd is the biggest producing entity within the related companies. Despite the use of the short form to reference the Aeolus Group in the provisional Regulation, the dumping margin was calculated separately for each related exporting producer and then a single weighted average dumping margin was established for all the related companies.

(22) Following final disclosure, Pirelli claimed that it should not be considered as a related company of CNRC and the Aeolus Group. Pirelli disagreed with the application of Article 127 of Regulation (EU) 2015/2447 for the purpose of calculating a weighted average dumping margin established for the related companies. Pirelli proposed the use of Article 4 of Regulation (EU) 2016/1036 (the ‘basic Regulation’) to establish the relation between companies.

(23) The Commission recalled that Article 4 of the basic Regulation concerns the definition of the Union industry and the relationship of Union producers to exporting producers. In that context, a Union producer is not considered part of the Union industry, if it is controlled by an exporting producer (10). However, Article 2(1) of the basic Regulation explicitly refers to Article 127 of Regulation (EU) 2015/2447 in order to determine whether two parties are associated for the purpose of establishing a dumping margin. Examining whether parties are associated ensures that anti-dumping measures are enforced effectively. In particular, it avoids the risk that exports are channelled through a related company with a lower anti-dumping duty. In addition, the Notice of Initiation (11) clearly referred to Article 127 of Regulation (EU) 2015/2447 at the start of the proceeding.

(24) According to Article 127(d) of Regulation (EU) 2015/2447 two persons are deemed to be related if: a third party directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them. CNRC is the largest shareholder of Pirelli. During the investigation period, CNRC owned 65 % of Pirelli's shares. As of September 2018, it still held 46 % of Pirelli's shares. Therefore, in the context of this investigation, Pirelli and the Aeolus Group are considered to be related through a common parent company (CNRC). Pirelli 's claim that it should not be considered as a related company of CNRC or to the Aeolus Group was thus rejected.

(25) Following final disclosure, Pirelli further claimed that it should be considered only as a cooperating party, and not as exporting producer, since it stopped producing the product concerned in November 2017.

(26) The Commission established that Pirelli was an exporting producer during the period under investigation. The fact that subsequently Pirelli ceased the production does not alter that fact. That claim was therefore rejected.

1.5. Provisional disclosure

(27) Several interested parties claimed that the Commission's provisional disclosure was insufficient, thus affecting their rights of defence and asked the Commission to make further clarifications and disclosure and reiterated the same concerns following final disclosure.

(28) The Commission considered that the open file and the provisional Regulation already contained sufficient information allowing all interested parties to fully exercise their rights of defence. Nevertheless, a note for the file (12) providing clarifications on the provisional Regulation was included in the open file before the definitive disclosure and some additional clarifications concerning the data underlying the individual dumping calculations were provided to two exporting producers.

(29) The Commission noted that the CRIA and the CCCMC stated that the Commission failed to disclose detailed information on the undercutting and underselling calculations to them and to the Chinese exporters, thereby depriving them of any possibility to check potential mistakes made by the Commission or to comment on certain aspects of those calculations.

(30) The CRIA, the CCCMC, and the Chinese exporters received all information respecting their procedural rights. The Chinese sampled exporters received the list of the product control numbers (‘PCNs’) sold, the unit sales price and a range (13) of the total sales volume involved. As stated in recitals (45) to (49), the Commission must not reveal any information which is deemed confidential upon good cause being shown without the specific permission from the supplier of such information.

(31) The Aeolus Group claimed that a determination of injury for purposes of Article VI of GATT 1994 should be based on positive evidence and involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like products; and (b) the consequent impact of these imports on domestic producers of such products. It considered that the Commission should not base its decisions on vague elements or on confidential data supplied by the parties but on all the information and objective facts available. The requirement of ‘objective examination’ implies that the domestic industry and the effects of dumped imports must be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties, in the investigation (14). According to the Aeolus Group, most of the data in the proceedings remained confidential, thus hindering the exercise of the right of defence by interested parties. However, the Aeolus Group submitted that the initiation of the investigation was clearly to protect the interests of a specific segment of the Union industry (namely the retreading industry), without taking into consideration that most of the large European tyre manufacturers also import the product concerned from the PRC and resell it on the Union market.

(32) In reply to those comments the Commission noted that Article 19 of the basic Regulation specifically provides that interested parties can supply information on a confidential basis upon good cause being shown. In addition, a meaningful summary of the confidential information was included in the open file for inspection by interested parties. The fact that the identity of certain cooperating Union producers was kept confidential did not prevent the Commission from performing an objective examination of the facts, nor did it hinder interested parties from exercising their rights of defence. Furthermore, the rights of defence of interested parties were safeguarded as explained in recital (37) through the intervention of the Hearing Officer.

1.6. Sampling

(33) The CRIA and the CCCMC claimed that Chinese small and medium-sized (SMEs) producers were discriminated against compared with Union SMEs producers as Union SMEs were entitled to complete a less detailed (and thus less reliable) questionnaire. Those parties claimed that Chinese SME producers may have been discouraged from participating in the investigation because of the significant burden that completing a full questionnaire response entails.

(34) Furthermore, the CRIA and the CCCMC claimed that, given that the Commission was (allegedly erroneously) basing its injury determination predominantly on the data of the small volume of SME' sales, the underrepresentation of Chinese SMEs producers was further aggravated by the fact that Union SMEs producers could provide a less complete and thus less reliable response. A similar claim was reiterated after the final disclosure. Moreover, the CRIA and the CCCMC requested that the Commission disclose the specific data on Union producers sampling, in particular to verify the representativity of the Union industry sample for both new and retreaded tyres. That claim was reiterated after the final disclosure.

(35) The statement that the injury determination was predominantly based on the data of Union SME producers is incorrect as the Commission established a representative sample to accurately analyse the injury situation of the Union producers. The Commission weighted the Union sales to ensure the proper representation of the SMEs' sales on the Union market. Moreover, it is the constant practice of the Commission to send a simplified questionnaire to SME producers in the Union, but this fact has no impact on the correctness of the data provided or thoroughness of the investigation. Therefore, that claim was rejected.

(36) As mentioned in recital (15) of the provisional Regulation, two exporting producers argued that confidentiality hindered them from verifying whether the complainant represents more than 25 % of the total Union production. They also maintained that they could not verify whether the sample for the Union industry was sufficiently representative.

(37) The Commission services requested the intervention of the Hearing Officer in order to guarantee the rights of defence of the interested parties in light of those claims. By note of 12 July 2018, the Hearing Officer added a note to the open file with the following two findings: ‘1. The data in the confidential file support the conclusion that Commission services have correctly reflected the data received in the calculation of the standing requirements. The complainant, including the two Union producers having requested anonymity, represents more than 25 % of total Union production of the product under investigation. 2. The data in the confidential file support the conclusion that the sampling conducted by the Commission services responsible for the investigation has been accurately described in their relevant note for the file of 18 October 2017 on the subject of sampling, which is included in the file for inspection by the interested parties ’ ( 15 ).

(38) Therefore, the Commission considered that the rights of defence of the interested parties were respected.

(39) Finally, some exporting producers alleged that the lack of knowledge of potential links between anonymous complainants and Chinese exporting producers impeded their rights of defence. However, it was not substantiated how knowledge about such a potential link would help them in defending their case. Even if, hypothetically, there were a link between one or several anonymous Union producers and one or several Chinese exporting producers, the analysis for dumping and injury would not be materially affected.

(40) The Giti Group submitted that the Commission should have taken the share of each tier in total Union sales into consideration when selecting the sample of Union producers. Such an approach would have been more objective compared to the current approach where the weight of most injured tier 3 data is inflated in the Giti Group's view.

(41) As explained in recital (24) of the provisional Regulation, the Commission indeed took into account the tiers for the selection of the sample of Union producers. In addition, the provisional Regulation in recitals (157) and (158) and further clarifications in the note for the file mentioned in recital (28) of this Regulation contained a thorough explanation of the methodology used to reflect all tiers appropriately in the microeconomic indicators (see further Section 4.5.1.2 below).

1.7. Access to information

(42) The CRIA and the CCCMC requested that full access should be granted to its legal representatives to the dumping margin, price effects and injury margin calculations carried out by the Commission, including access to any confidential information from other interested parties on which such calculations are based (subject to appropriate non-disclosure commitments). The CRIA and the CCCMC pointed out that the requirements of Article 19 of the basic Regulation should be balanced against the rights of defence, which are guaranteed by Article 41 of the Charter of Fundamental Rights of the European Union.

(43) The CRIA and the CCCMC argued that the lawyers that would be granted the access are registered at a European bar association and are subject to strict bar rules and disclosing confidential information to their clients would result in severe disciplinary actions, including disbarment and potential criminal action. Therefore, the CRIA and the CCCMC argued that the access to the confidential file would not breach the Commission's obligation to protect confidential information whilst allowing an effective exercise of the rights of defence. Moreover, those parties considered that the intervention of the Hearing Officer to access the confidential information and report its conclusion to interested parties cannot be considered as a substitute for the review of these calculations.

(44) At the earing with the Hearing Officer on 16 August 2018 the Hankook Group claimed that the Commission had breached its rights of defence by denying it access to data which the Hankook Group considered as unjustly confidential. The Hankook Group made a general request for a policy change with respect of handling of confidential data and invited the Commission services to change the current practice regarding disclosure of calculations and, in the future, to allow the legal representatives of the interested parties to access the calculations to the fullest extent. In the Hankook's Group view, the protection of confidential data should only apply to an extent that such protection is necessary to prevent possible harm to concerned companies. Such harm would not arise if the legal representatives were to operate under a confidentiality agreement with the Commission services. In respect to the current investigation, the Hankook Group also requested access for their legal representatives to all dumping and injury margins calculations, including the full normal value data.

(45) Article 19 of the basic Regulation stipulates that the Commission must not reveal any information which is by nature confidential, or which is provided on a confidential basis by parties and for which a good cause is shown, without the specific permission from the supplier of such information. It does not envisage that any other party, including lawyers registered at a European bar association, is granted such access. It should also be noted that, on 9 January 2018, the CRIA and the CCCMC submitted power of attorneys signed by cooperating and sampled exporting producers. The Commission found that some of the power of attorneys given by sampled Chinese exporting producers to the CRIA and the CCCMC did not cover access to confidential information but only covered attending hearings, submitting comments and lodging submissions.

(46) Furthermore, the case-law of the Court of Justice stipulates that the protection of rights of the defence must, where necessary, be reconciled with the principle of confidentiality, which is specifically laid down in Article 19 of the basic Regulation. In this particular case, good cause was shown because several interested parties requested that their names be kept confidential for fear that they could face retaliation by customers or competitors. The Commission assessed those claims and deemed them warranted. Therefore, it concluded that the disclosure of such confidential information would have a significant adverse effect for these parties.

(47) That reconciliation permits the receipt of non-confidential summaries of confidential information (provided, for instance, in the form of ranges and/or indexed elements of information) where that non-confidential information would not lead to a disclosure of business secrets. However, full disclosure of the confidential information was not deemed reconcilable with the duty to protect such information. In the same vein, because the Union legislator did not provide for such an exception in the basic Regulation, the Commission considered that the fact that the lawyers registered with a European bar association are subject to strict bar rules and are potentially subject to sanctions in case of breach of these rules does not allow the Commission to grant access to confidential information in breach of the legislation in force. The Commission thus concluded that the access to confidential information could not be granted to lawyers registered at a European bar association. In any event, an additional element for safeguarding the rights of defence of interested parties is the possibility of having recourse to the Hearing Officer in Trade Proceedings under Article 15 of Decision of the President of the European Commission of 29 February 2012 on the function and terms of reference of the Hearing Officer in certain trade proceedings (16). Since the interested parties did not seek the Hearing Officer's opinion on that point, that claim must, accordingly, be rejected.

(48) Furthermore the Commission considered that the open file available to interested parties, including to the CRIA and the CCCMC and the Hankook Group, contained all the relevant case information used in the investigation. If the information was deemed confidential, the open file contained meaningful summaries thereof. All interested parties, including the CRIA and the CCCMC, had access to the open file and could consult it.

(49) In view of those considerations, the Commission deemed the information provided in the disclosure documents and in the open file sufficient to satisfy the rights of defence of all interested parties. Therefore, that claim was rejected. Nonetheless, after the hearing with the Hearing Officer, the Commission disclosed certain additional data on dumping and injury calculations as set out in recitals (77) and (178).

(50) Hämmerling requested a hearing with the Hearing Officer to raise legal concerns related to the current investigation and certain horizontal issues concerning data protection of confidential and non-confidential information as included in the TRON TDI database and the current practice of granting access to the non-confidential files to interested parties outside the territory of the Union through that database.

(51) The Commission observed that the new General Data Protection Regulation (17) was not applicable to this case. Moreover, Hämmerling confirmed that the personal data protection issue was not directly linked to a possible specific hampering of its rights of defence under trade defence law. The Commission therefore concluded that Hämmerling's individual position in the proceeding and its rights of defence were not affected by the new General Data Protection Regulation.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Claims regarding the segmentation of the Union market for tyres

(52) Several interested parties reiterated their claim that new and retreaded tyres could not be a single product concerned or be part of one single segment. Moreover, several interested parties claimed that the Union market should be divided into at least four tiers: three tiers for new tyres and a fourth, new category for retreaded tyres should be established. Alternatively a new tier for cheap imported tyres should be introduced. The CRIA and the CCCMC also claimed that an additional segmentation should be made for original equipment and replacement tyres.

(53) As mentioned in recitals (72) to (74) of the provisional Regulation, new (retreadable or non-retreadable) and retreaded tyres have no different technical, basic physical and chemical characteristics. After provisional disclosure, no additional evidence was provided by the interested parties to the contrary. Therefore, the Commission rejected the claim of the CRIA and the CCCMC that new and retreaded tyres cannot be the same product concerned. Concerning the request to establish a fourth tier for retreaded tyres, the Commission stressed that new and retreaded tyres share the same basic characteristics and are largely interchangeable. Furthermore, as explained in the recitals (55) to (57) of the provisional Regulation, retreaded tyres mostly fall into tier 3. There is hence no need to create a fourth tier for them. The Commission thus rejected that claim as well.

(54) The Aeolus Group claimed that the Commission should exclude new tyres from the scope of the investigation. It referred to the WTO Appellate Body Report in European Communities — Measures Affecting Asbestos and Products Containing Asbestos (18), according to which the determination of whether two products are alike is fundamentally a determination as to whether the products are in competition with one another. The Aeolus Group claimed that that approach should be taken into consideration by the Commission in determining whether two products may or may not be considered alike.

(55) The Commission considered that there is a competitive relationship between new and retreaded tyres. As will be shown below under Section 4.6 in the analysis of the interconnection between tiers, imported (new) tier 3 tyres are in competition with tyres that are retreaded in the Union and are currently taking over the market share of tier 3 retreaded tyres. That, in turn, has a reverse cascading effect also on tier 2 and tier 1 tyres, and so affected the competitive position of Union tyre producers in tiers 1 and 2. That claim was therefore rejected.

(56) The Hankook Group claimed that its brand Hankook should be classified as tier 2 as all three criteria used by the Commission lead to the same result: (i) brand recognition; (ii) retreadability; and (iii) the sales of tyres directly to manufacturers of buses and lorries, i.e. Original Equipment (‘OE’) sales.

(57) With respect to the first criterion — brand recognition, the Hankook Group maintained that not only ETRMA (in its reports of 2017 and 2018), but also the Global Tire Intelligence report of June 2016 and the US International Trade Commission in March 2016 treated Hankook as a tier 2 brand (19). The Commission accepted that the recognition of Hankook in the four reports pointed to it as a tier 2 brand. At the same time, the Hankook Group markets itself as a ‘premium’ brand on its group website. In addition, as already noted in recital (63) of the provisional Regulation, the company's internal document provided to the Commission during the verification visit indicated that the brand has moved into tier 1. Hence, the Commission found that the market perception and the self-perception of the Hankook Group do not fully coincide.

(58) The Hankook Group also presented confidential internal surveys done in 2017 for Hankook's Global Marketing Strategy Team in the UK, Germany, Spain and Italy on passenger car tyres. According to the company, these documents show that other tier 1 brands have higher brand awareness among customers in these countries. The Commission found that two main conclusions could be distilled from these data. First, the Hankook Group itself acknowledged that the classification of brands into tiers is a dynamic concept for all brands. For example, in the UK, one of its competitors was regarded as a tier 2 brand, while the same competitor ranks among the ‘top players’ or ‘tier 1’ in Germany, Spain and Italy. Second, the Hankook Group seems to be ‘in between’ the two tiers according to customer perceptions on passenger cars: ‘Aided awareness (20)’ for Hankook was generally lower than for tier 1 brands, while ‘unaided awareness (21)’ was — with the exception of the UK — on the same level or even slightly higher than other competitor brands classified by the Commission as falling into tier 1.

(59) The Commission then turned to the second criterion. It recalled that tier 1 tyres are designed to be ‘multi-life’ tyres, further increasing the significantly higher mileage of the original product (up to three retreadings for a normal use), as laid down in recital (55) of the provisional Regulation. In that respect, the Hankook Group submitted that it takes a contractual warranty that Hankook tyres can be retreaded no more than once and that the market share of its own retreaded brand Alphatread is negligible and decreasing. Moreover, the pricing of its casings is below the one for casings of the market leaders.

(60) On the one hand, the Commission took note of Alphatread's position in the market, but found that this fact may be more a question of the company's decision whether or not to operate a vertically integrated retreading business itself. The Commission also accepted that the legal guarantee for Hankook tyres only covers one retreading operation. On the other hand, the retreadability does not only depend on the retreading of Alphatread or a legal warranty issued by the Hankook Group, which is by its nature conservative. Rather, it is more important for the classification how often the tyres are actually retreaded in the market and are thus in competition with other tier 1 tyres on that account.

(61) The Commission hence inquired with the retreading operators in the Union whether Hankook tyres can be retreaded only once, twice or more than twice. The Association of retreaders BIPAVER informed the Commission that all seven consulted retreaders (three from Germany, one from Portugal, one from Spain, one from Italy, and one from the UK) replied that Hankook tyres can be retreaded twice. Moreover, for tyres of a certain dimension, Hankook tyres can also be retreaded more than twice by the consulted retreaders in Portugal, Spain and in the UK which replied to BIPAVER. Another retreader from Italy responded individually that low aspect ratio tyres from Hankook are retreaded only once, but bigger aspect ratios are retreaded twice. A French retreader answered individually that Hankook tyres are retreaded twice or more than twice. Another Spanish retreader informed that the casings of Hankook have the same quality as premium tyres such as Michelin, Continental, Goodyear and Bridgestone. Against this background, the Commission established that Hankook tyres are predominantly retreaded twice in the Union, while the quality of their casings allows even further retreading for certain dimensions.

(62) With respect to the third criterion, the Hankook Group argued that its OE sales in the Union constituted only 1,6 % of all OE sales in 2017. Such a small market share is not sufficient to qualify them into tier 1. The Commission disagreed with this assessment. It noted that the Hankook's trend of OE sales was going upwards. While the Hankook Group had no OE sales contracts in 2014, its OE business has so far grown every year until 2017. Moreover, while the 1,6 % appears small in absolute terms, it includes a more significant share of [7-12] % with one of the European leading lorry manufacturers. The Commission found that the very fact that this important lorry producer trusts in the premium quality of the Hankook brand is significant. At a hearing held on 20 June 2018, the Hankook Group further argued that the tyres for OE sales were delivered from South Korea rather than from the PRC. Hence, the OE sales could not be attributed to the Chinese exported tyres. The Commission did not verify that statement. However, even if it is factually correct, it does not explain why the Hankook Group would be unable to apply its know-how also in the Chinese production facilities and have OE sales of the tyres manufactured in the PRC in the near future. The Commission hence established that the Hankook Group was able to establish OE sales with well-known European lorry makers with a potential to increase this business in the near future.

(63) In light of all three criteria taken into account together, the Commission confirmed its finding at provisional stage that Hankook brand has moved from tier 2 into tier 1. While the predominant market recognition still puts it into tier 2, two elements of the Hankook Group's self-assessment found during the investigation and an analysis of the branding surveys indicate that Hankook tyres belong rather to tier 1. Hence the Hankook Group's perception is ‘in between’ the tiers. However, the responses from retreaders show that Hankook tyres are nowadays retreaded at least twice in the Union and the quality of its tyres have enabled it to develop OE sales with well-known European lorry makers as well. The Commission therefore classified the Hankook Group as a tier 1 producer for the purpose of this investigation.

(64) The Hankook Group also asserted that its brand Aurora should be classified as tier 3. However, as the difference between the brands Aurora and Hankook is not so enormous, and as the Commission confirmed its classification for Hankook as a tier 1 brand, it also maintained its classification for Aurora as tier 2.

(65) The Giti Group claimed that its Primewell brand should be classified as tier 3. The Commission accepted that claim since the brand Primewell fulfilled the tier 3 criteria: it is a lower quality brand with a very limited retreadability and there are no OE sales of this brand.

2.2. Product exclusion requests

(66) Several interested parties claimed that the competition cases referred to in recitals (68) to (83) of the provisional Regulation and investigations carried out by third countries should not be dismissed and reiterated the same concerns following final disclosure. Rather than dismissing those decisions on procedural grounds, the Commission should have analysed their findings on the substance. Those parties reiterated that the investigations carried-out by the US, India, the Eurasian Economic Commission and Egypt should be considered and also that the competition proceeding initiated in May 1996 was relevant for the current proceeding (22). Moreover, the CRIA and the CCCMC claimed that the Commission cannot simply dismiss the Commission's findings in a merger case (23) that low-budget new replacement tyres are not substitutes for retreaded tyres. Those parties considered that those findings were highly relevant for the Commission's segmentation and more generally, for the injury analysis.

(67) With respect to those claims, the Commission reiterated that competition and anti-dumping investigations differ substantially with respect to how the relevant product concerned is defined. Furthermore, under the WTO Anti-dumping Agreement members enjoy a wide discretion when defining the product concerned and the like product. Therefore, neither the competition cases nor other anti-dumping cases in third countries are directly applicable to the investigation at hand. Accordingly, those claims were rejected.

(68) Several interested parties claimed that there are differences in terms of essential physical, chemical and technical characteristics, applications and sales channels between new and retreaded tyres and reiterated a similar claim following the final disclosure. Those parties claimed that the raw materials for the production of new tyres differ significantly from those needed to manufacture retreaded tyres. Retreadable or multi-life tyres should therefore be excluded from the definition of the product concerned

(69) As mentioned in recital (72) of the provisional Regulation, the new and retreaded tyres have the same technical characteristics, components, and the structure of a new tyre. A new tyre provides the casing used by the retreading industry. The tread is similar to a new tyre. Therefore, the Commission rejected that claim.

(70) Moreover, the CRIA and the CCCMC claimed that retreaded and new tyres do not have the same applications because the retreaded tyres' safety performance is significantly worse than that of new tyres and reiterated the same concerns following final disclosure. They provided as evidence a quote from US law (24). Moreover, they claimed that the Union institutions also consider retreaded tyres to be separate from new tyres in other spheres. Indeed, Regulation (EC) No 1222/2009 of the European Parliament and of the Council (25). They would thus not subject to the same legislation, contrary to the suggestion in recital (75) of the provisional Regulation.

(71) The Commission rejected that claim. In recital (73) of the provisional Regulation, the Commission addressed how tyres were perceived in terms of safety performance and concluded that exactly the same technical, quality and safety perception differences arise between two new tyres from different tiers. In addition, Council Decision of 13 March 2006 amending Decisions 2001/507/EC and 2001/509/EC with a view to making United Nations Economic Commission for Europe (UN/ECE) Regulation Nos 109 and 108 on retreaded tyres compulsory (26) lays down that the provisions of UN/ECE Regulations 108 and 109 are to apply as a compulsory condition for the placing on the market of retreaded tyres on the Union market, to ensure that retreaded tyres fulfil similar safety and quality control requirements as new tyres (27).

(72) Following final disclosure, the CRIA and the CCCMC claimed that the new tyres production process is essentially different from the process for retreaded tyres. While the Commission agrees with those parties that the production process is different, the use of new and retreaded tyres is the same — they are mounted on the wheels of either buses or lorries to form a soft contact with the road. Therefore, that claim was rejected.

2.3. Like product

(73) All the Chinese sampled exporting producers, the CRIA and the CCCMC requested the Commission to disclose more information on the tyre types that were used for comparison purposes. They claimed that it was highly likely that certain differences were not reflected in the PCN/product types and adjustments should be made. The Chinese exporters and the CRIA and the CCCMC claimed that they were unable to identify such differences as they did not have information on the products sold by the sampled Union producers. Those parties reiterated similar claims following final disclosure.

(74) The Commission found that the open file already contained sufficient information regarding the definition of the PCN/product types. The product type definition is rather complex involving seven characteristics (including the section width, the aspect ratio, construction type, the rim\wheel diameter, tyre position, winter tyre (yes or no), tubeless tyre (yes or no)). The Commission, accordingly, concluded that the PCN characteristics were detailed enough to take account of all product characteristics found on the Union market. Indeed, no other interested party claimed that the PCNs would not reflect all the differences between the different product types, and that the same product type produced in the Union differed from the same product type produced in the PRC. Nor did any interested party provide any information as to which other characteristics would be necessary to ensure an even more complete or greater comparison between imported and domestic types of the product concerned. Therefore, the Commission maintained its finding that the characteristics of the PCNs were detailed enough to capture all relevant differences between the different product types, allowing a fair product (and price) comparison. Therefore, the Commission rejected that claim.

(75) The CRIA and the CCCMC claimed that it was unclear whether the notions of product types and PCNs differ and requested the Commission to clarify that issue. For the purpose of this proceeding, the Commission confirmed that the two notions are interchangeable.

3. DUMPING

(76) The CRIA and the CCCMC, the Aeolus Group and Pirelli, the Hankook Group and the Giti Group objected to the fact that not only the identity of the analogue country producer has been kept confidential but also the detailed normal value calculations. They claimed that made it impossible for them to exercise their due process rights and meaningfully comment on the calculation of the normal value. The Giti Group and the Hankook Group reiterated this claim following final disclosure.

(77) The Commission reminded that the analogue country producer requested the confidential treatment of its identity and provided a justification for it. The Commission examined the merits of the anonymity request and established that there was evidence of a significant possibility of retaliation, and accepted that the name of the company should not be disclosed. In addition, the analogue country producer provided evidence that on the basis of its sales and costs data, in particular its sales by tier, its competitors could assess its identity and so threaten retaliation in case of continued cooperation. Therefore, the Commission agreed with the producer that the detailed normal value calculations had to be kept either confidential or in ranges. Following the hearing with the Hearing Officer mentioned in recital (14) the Commission disclosed additional information on the analogue country producer's Cost of Manufacturing (‘COM’) and General and Administrative expenses (‘SG&A’).

3.1. Normal value

3.1.1. Market economy treatment (‘MET’)

(78) Following provisional disclosure, the Giti Group, the CRIA and the CCCMC claimed that the Commission's approach of continuing to apply Article 2(7) of the basic Regulation (prior to the amendment adopted on 19 December 2017 (28)) constituted a violation of the Union's commitments made in China's WTO Accession Protocol and was therefore illegal. In this context, the Giti Group disagreed with the Commission's claim that the burden of proof is on the Giti Group and noted as a final point that there was nothing legally precluding the Commission from determining normal value on the basis of the Giti Group's own costs and (domestic) sales data.

(79) As noted in recital (88) of the provisional Regulation, the Commission followed in its investigation the applicable law at the time of the investigation, including Articles 2(7)(b) and 2(7)(c) of the basic Regulation. In this respect, the claim that the burden of proof is not on the Giti Group is not reconcilable with the applicable Article 2(7)(c) of the basic Regulation which provides that ‘A claim under point (b) must be made in writing and contain sufficient evidence that the producer operates under market-economy conditions …’. Moreover, for determining normal value, Article 2(7)(a) of the basic Regulation provides that the normal value can be determined ‘on the basis of the price or constructed value in a market economy third country, or the price from such a third country to other countries, including the Union …’.

(80) Following provisional disclosure, the Giti Group also alleged that the Commission had violated its rights of defence in two ways by rejecting its MET claim: (a) the Giti Group had been given insufficient time to meaningfully comment on the MET disclosure as the deadline to submit comments on the MET disclosure had been inadequate and unreasonable; and (b) the Commission only disclosed its report on the MET verification (on 3 May 2018), or about one month after the final MET decision was made (on 9 April 2018).

(81) The Commission disagreed with those allegations for the following reasons: (a) The Commission had shared its MET assessment on 15 March 2018 with a deadline to comment by 27 March 2018 close of business. Such a deadline of 12 days is reasonable and allowed the Giti Group to properly defend its interest. (b) The MET disclosure document of 15 March 2018 contained not only the essential facts, but also the results of the on-the-spot investigation. In this specific document, the Commission services detailed in a transparent way all relevant elements thus allowing the Giti Group to defend its interests with respect to the MET assessment. Moreover, verification visits at the Giti Group took place during a time span of three weeks during which at least one legal counsel representing the Giti Group was present. During the verification visits, the Commission services kept the representatives of the company informed, both orally and by e-mails, of the information which had been successfully verified and which still had to be verified or provided. An identical list of all exhibits collected during the verification process had been provided to the legal counsel of the Giti Group at the end of each verification visit. Hence, even without a mission report, which only takes stock of the factual findings which had already been disclosed in the MET disclosure document, the Giti Group had ample opportunity to comment on the essential considerations for the MET assessment.

(82) In conclusion, following provisional disclosure, the comments on the MET did not put into question the factual findings and were not such as to alter the Commission's findings on MET. In accordance with Article 2(7)(c) of the basic Regulation, the Commission has made its determination whether the Giti Group met the MET criteria — within seven months of, but in any event not later than eight months — after the initiation of the investigation, after the Union industry has been given an opportunity to comment. Consequently, the Commission considered that the rights of defence of the Giti Group have been fully respected with regards to its findings on MET.

3.1.2. Analogue country

(83) In the provisional Regulation, the Commission selected Brazil as the analogue country in accordance with Article 2(7) of the basic Regulation.

(84) Following provisional disclosure, the Giti Group claimed that Brazil did not constitute an appropriate analogue country because: (1) there are less favourable conditions of access to raw materials in Brazil, as China is a bigger producer of natural rubber and is closer to the main sources of production in South-East Asia; (2) Brazil has anti-dumping duties in place against several countries; (3) Brazil has high regular import duties of 16 % on certain bus and lorry tyres.

(85) The Commission recalled that Brazil is a competitive market where five large producers are active in production of bus and lorry tyres. It is a large market in terms of consumption and it has significant imports and exports, in spite of the anti-dumping duties and the regular customs duties in place. The Commission also recalled that it did not have any other viable alternative. The only Thai producer that had been willing to cooperate was active only in tube type tyres, which made it unsuitable as more than 95 % of the exports to the Union are tubeless type tyres. Finally, South Africa was much smaller in terms of production and consumption and had even higher regular anti-dumping duties, which made it less suitable than Brazil. Therefore, the Commission confirmed that Brazil was the most appropriate analogue country among the proposed alternatives.

(86) The Commission also looked in-depth at the cost of natural rubber in the analogue country producer's COM. The cost of natural rubber per kilo of bus and lorry tyres produced by the analogue country producer was [4,1-4,5] RMB, which was in line with the cost of the Chinese exporting producers reported in their questionnaire reply. Overall, the analogue country producer's COM/kg of output is higher than the COM/kg of the Chinese exporting producers. However the main difference in the level of COM in Brazil stems from higher labour cost, direct depreciation cost and other direct and indirect manufacturing costs. Therefore, the claim to make an adjustment for the difference in price of the raw materials in the analogue country and in the PRC was rejected.

(87) Following provisional disclosure, the Giti Group, the Hankook Group, the Aeolus Group and Pirelli asserted that the normal value had to be constructed for most of their sales volume to the Union and claimed that this cast serious doubt on the comparability of the product types sold on the analogue country domestic market. Following final disclosure the Giti Group reiterated that claim.

(88) The product concerned includes a large range of product types with many different sizes and other characteristics. The fact that certain sizes and tyre types were not produced in Brazil does not mean that the Brazilian product types were not comparable. Indeed, the product types produced by the Brazilian producer belong to the same product group and could to a certain extent be matched with those exported by the sampled Chinese exporting producers to the Union. The Commission thus dismissed this argument.

(89) In the absence of any further comments regarding the suitability of the analogue country, the Commission's provisional conclusion to use Brazil as analogue country, as set out in recital (112) of the provisional Regulation is confirmed.

3.1.3. Normal value

(90) The details for the calculation of the normal value are set out in recitals (113) to (115) of the provisional Regulation.

(91) All sampled exporting producers claimed that the method for constructing the normal value, which the Commission applied at the provisional stage resulted in extraordinarily high dumping margins and produced results that did not appear to correspond to reality, that is the normal value did not go down for tier 2 and tier 3, although in reality tier 2 and 3 tyres are always cheaper. The exporting producers urged the Commission to make adjustments to the normal value, which would reflect the decreasing cost of production of tier 2 and 3. The Giti Group also requested an adjustment which would reflect a decreasing COM of tyres with a larger section width.

(92) The Commission accepted the claim that the method it provisionally used for constructing the normal value for non-matching PCNs might have not sufficiently accounted for the tier segmentation. The Commission analysed the product types, which the analogue country producer manufactured in all three tiers and observed that tier 2 COM/item was on average [83-87] % of the tier 1 COM/item and the tier 3 COM/item was on average [77-82] % of the tier 1 COM/item. The Commission, therefore, decided to refine the method for constructing the normal value in order to take into account these differences in COM/item for each tier as follows. First, it calculated the average COM/kg for all tier 1 tyres produced by the analogue country producer: [19-21] RMB per kg. Second, it reduced the tier 2's COM/kg used in the construction of the normal value by the average difference of COM/item between tier 1 and tier 2 namely [83-87] %, which gave tier 2's COM/kg: [16-18] RMB/kg; the tier 3 COM/kg was reduced by the average difference in COM/item between tier 1 and tier 3 namely [77-82] %, which gave [15-17] RMB/item. The product types, which the analogue country producer manufactured in all three tiers, accounted for [70-80] % of the analogue country's production in volume and was therefore considered representative to be used as a basis for the adjustment.

(93) The Commission constructed the normal value of each non-matching product type exported by the Chinese producers by multiplying its weight by the respective COM/kg for each tier. The Commission then added a reasonable amount of SG&A and a reasonable amount of profit to each product type.

(94) On the basis of the above adjustments, the Commission constructed the normal value for the non-matching product types (‘PCNs’) taking into account the differences identified in the costs of manufacturing between the three tiers.

(95) Following the claims that the analogue country producer's SG&A is unreasonably high, the Commission re-investigated in detail the producer's SG&A expenses and noticed that the domestic transport expense was double-counted at the provisional stage. The Commission, therefore, removed this expense from the normal value calculations, which resulted in reducing the SG&A used for the construction of normal value from [35-45] % of the analogue country producer's COM to [20-30] % of its COM. This revision has no impact on the provisional duty levels, as it did not decrease the provisional dumping margin below the level of the injury margin. The revised SG&A is in line with the Union Industry's average SG&A for all the sampled producers in all three tiers. Therefore, the Commission considered this revised level of SG&A reasonable.

(96) Following final disclosure, the Giti Group claimed that the Commission did not make adjustments for the fact that tier 1 producers typically have much higher marketing expenses (when establishing the SG&A) and that the profitability of tier 1 producers is much higher than for tier 2 and tier 3 producers (when establishing the profit). It therefore submitted that when constructing the normal value, the Commission should use a lower profit margin for tier 2 tyres than for tier 1 tyres and an even lower profit margin for tier 3 tyres.

(97) The Commission recalled that it had revised its methodology after provisional stage to take into account the differences between tiers when constructing the normal value (see recital (92)). The data from the analogue country producer did not warrant any further adjustment. Therefore, that claim was rejected.

(98) As regards the request to adjust the normal value for the decreasing COM of larger tyres, the Commission noted that the Giti Group did not provide any detailed analysis quantifying to what extent larger tyres are less expensive to produce and if there is any clear pattern of decrease in the COM. Finally, the Giti Group did not put forward any potential methodology to make such an adjustment. Following final disclosure the Giti Group claimed that it had not received sufficient data to be able to put forward any potential methodology for tyre size adjustments. The Commission considered that Giti Group could use its own data to demonstrate that there are significant differences in the COM for larger and smaller tyre sizes and on this basis suggest a methodology for adjustment. However, no such submission was made. Those claims were therefore rejected.

(99) The Giti Group also pointed out that during the investigation period, the interest rates published by the Central Bank of Brazil ranged between 14,25 % and 11,25 % whereas, during the same period, the interest rate published by the People's Bank of China was 4,35 %. The Giti Group claimed that, if a large part of the SG&A expenses were related to financial expenses, these expenses should be adjusted downward to reflect the higher interest rates on lending in Brazil compared to the PRC.

(100) The Commission recalled that it had to use the analogue country's costs because of the presence of important competitive distortions linked to high state intervention in the PRC. As the access of Chinese companies to bank financing is one of those competitive distortions, the Commission considered that it was appropriate to use the analogue country's interest rate. Therefore, that claim was rejected.

(101) Following final disclosure, the Giti Group reiterated its claim that the Commission should make an adjustment for the difference in financing costs in the PRC and Brazil, namely between the interest rates applied by the People's Bank of China and the Central Bank of Brazil. The Giti Group also made a request to make downward adjustments to the analogue country producer's COM to compensate its higher overhead expenses and SG&A to compensate other costs and higher taxes.

(102) The Commission recalled that, pursuant to Article 2(7)(a) and (b) of the basic Regulation, in the case of the PRC, the normal value is to be determined on the basis of the price or constructed normal value in a market economy third country. As mentioned in recital (100) there are important competitive distortions in the PRC having an effect on Chinese financing costs. Therefore, the fact that there might be differences in the financing cost between the PRC and the analogue country does not justify the requested adjustment. With regard to the additional claim that the analogue country producer's COM should be adjusted downwards to compensate for higher overhead costs and taxes in Brazil, the Commission recalled that it had rejected the MET request by the Giti group. One reason for this rejection was that its accounting records had not properly reflected the full SG&A expenses. Accordingly, the Commission could not rely on the Giti group's company specific cost data and had neither used, nor verified them. It follows that it could not make a comparison with the allegedly higher overhead and taxation costs in Brazil. Since accepting the requested adjustment would have had the effect of reintroducing such unreliable Chinese data, the Commission rejected this claim as well.

3.2. Export price

(103) The details for the calculation of the export price are set out in recitals (116) to (119) of the provisional Regulation.

(104) The Hankook Group claimed that it should be treated as a single economic entity and consequently no adjustments under Article 2(9) of the basic Regulation are needed or otherwise warranted. It submitted that the elimination of the SG&A expenses and profit of the related companies in the Union under Article 2(9) of the basic Regulation had the effect of removing from the export price all costs and expenses incurred by an export sales department, and a share of the profit. Following final disclosure, the Hankook Group reiterated its claim that it is a single economic entity and, in their view, the Commission should neither adjust the SG&A expenses nor the profit of the related traders in the Union. Instead the Commission should use the actual price to the first independent customer in the Union, as in its view, this price is reliable.

(105) Concerning the construction of the export price under Article 2(9) of the basic Regulation, it is settled case law that the existence of a single economic entity does not preclude the Commission from constructing the export price under Article 2(9) (29). Pursuant to Article 2(9) first and second subparagraph of the basic Regulation, the Commission is entitled to construct the export price where it appears that the export price is unreliable because of an association between the exporter and the importer. In such a case adjustments for all costs, including duties and taxes, incurred between the importation and resale, and for profits accruing are made to establish a reliable export price, at the Union frontier level. Pursuant to Article 2(9) third subparagraph of the basic Regulation the items for which adjustments are to be made include those normally borne by an importer but paid by any party, including a reasonable margin for SG&A costs and profit. In this case, the Commission established that this association exists since the exporting producers and the importers belong to the same group of companies i.e. the Hankook Group. Therefore, the Commission is entitled to make adjustments to SG&A costs incurred by and profits of the related importers of the Hankook Group. The Commission also considered that the verified profits made by cooperating unrelated importers constitute a reasonable basis for the construction of the export price. Therefore, that claim was rejected.

(106) The Hankook Group submitted that, if the Commission rejected its claim against adjustments under Article 2(9) of the basic Regulation to the Hankook Group's export price, it should have adjusted the analogue country producer's normal value by deducting the sales costs and reasonable profit in accordance with Article 2(10)(d) of the basic Regulation. In its view, including the sales expenses and profit margin made by the analogue country producer creates an asymmetry affecting price comparability, which must be adjusted. Following additional disclosure, the Hankook Group quantified the adjustments that, in its view, needed to be made to the analogue country producer's SG&A and profit to remove the asymmetry affecting price comparability.

(107) The Commission clarified that the purpose of the adjustments made pursuant to Article 2(9) of the basic Regulation is to establish a reliable export price unaffected by the association between the exporter and the importer in the Union as recalled in recital (105). At the same time, the Court held that determination of the normal value and determination of the export price are governed by separate rules and therefore SG&A expenses need not necessarily be treated in the same way in both cases (30). The Commission reaffirmed its position that the analogue country producer's final sales price was brought down to the same ex-works level of trade by adjusting it with duly verified allowances reported in its transaction by transaction table. Accordingly, that claim was rejected.

3.3. Comparison

(108) Recitals (120) and (121) of the provisional Regulation explain how the comparison between the normal value and the export price was made.

(109) In their comments on the provisional and definitive findings, the Giti Group, the Hankook Group and the CCCMC and the CRIA contested the methodology for the VAT adjustment on several grounds as detailed in recitals (110) to (117).

(110) Those parties considered that, having rejected Chinese prices and costs for the determination of the normal value, the Commission subsequently reintroduced the Chinese VAT tax rates in the calculation of the normal value. In addition, those parties claimed the methodology inflated the dumping margin upwards, in particular due to the fact that adjustment is made to the normal value, instead of the export price.

(111) The Commission rejected those claims. The purpose of adjustments made under Article 2(10) of the basic Regulation is to ensure that the dumping margin is established on the basis of a fair comparison between the normal value and the export price. That requirement applies irrespective of the basis on which the normal value is established, including when the normal value is established in an analogue country in situations where companies are not granted MET. In relation to the VAT adjustment made pursuant to Article 2(10)(b), the Commission ensured that the normal value and the export price were compared at the same level of taxation, as further explained in recitals (115) and (116) in accordance with settled case-law (31).

(112) The Giti Group claimed that, in their view, the situation in the case law quoted by the Commission i.e. Dashiqiao judgment (32) was different than the Giti Group's situation as the company concerned by that judgment had obtained MET and no adjustment was made pursuant to Article 2(10)(b) of the basic Regulation.

(113) The Commission acknowledged that the circumstances in the investigation examined in the Dashiqiao judgment were different. In that case, export sales were subject to a VAT liability at the full rate of 17 % during the investigation period and hence no adjustment was necessary to the normal value to ensure a fair comparison with a normal value reflecting the same rate of VAT. By contrast, in the current investigation, export sales were liable to a reduced VAT liability and an adjustment was therefore necessary to bring the normal value price inclusive of VAT down to the same level of taxation as that affecting export sales. As set out in recital (111), it is not relevant whether a Chinese exporting producer is granted MET or not. What is relevant is whether the export price and the normal value are compared at the same level of taxation in order to ensure a fair price comparison.

(114) The Giti Group also claimed that the burden of proof for the need of an adjustment falls on the Commission. The Hankook Group stressed that no VAT was levied on export sales at all according to Chinese legislation and that therefore no adjustment was warranted. Alternatively, the Hankook Group claimed that even if an adjustment for VAT liability was necessary, the adjustment ought to be done on the export price and not on the normal value. The Giti Group also claimed that any adjustment for VAT liability should rather be made to offset any difference in VAT eventually paid by the Group after offsetting the VAT or other taxes paid on purchases of raw materials and other input against the VAT liability on export sales and domestic sales respectively. In other words, Giti argued that any VAT adjustment should reflect the difference in costs between exported and domestically sold materials.

(115) The arguments submitted by the Giti Group and the Hankook Group are based on a misunderstanding of the rationale underpinning the adjustment made for VAT liability. First, as to the merits of an adjustment, both parties do not contest the fact that export sales of the product concerned trigger a VAT liability for the exporting producer. Indeed, the parties submitted that the adjustment should either be made to the export price or that the adjustment should be made to offset the difference in costs between domestic and export sales (i.e. the costs resulting from the inability to recuperate all VAT paid on the purchase of raw materials or other input because of the VAT liability triggered by export sales of the product concerned). While the Commission disagreed with those arguments for the reasons developed in recitals (116) and (117), it notes that those arguments confirm that export sales lead to VAT liability (contrary to what the Hankook Group also argued) equivalent to the so-called ‘non-refundable rate’ on exports which is a flat rate applied to the FOB export price of the product concerned. Second, as to the adjustment itself, the Commission reiterated that the purpose of the adjustment is to ensure that the normal value and the export price are compared at the same level of VAT rate.

(116) On that basis, the Commission first established a normal value on a VAT inclusive basis at a rate of 17 %, which is the normal rate of VAT for domestic sales in the PRC. Subsequently, the Commission adjusted that normal value downwards to match the lower rate of VAT liability observed for export sales of the product concerned (i.e. the so-called non-refundable rate). That ensured the required symmetry between the normal value and the export price for the level of indirect taxation. In response to the arguments made by the Hankook Group that the adjustment should be made to the export price, the Commission noted that Article 2(10)(b) of the basic Regulation makes it clear that any difference in the level of indirect taxation is a matter to be addressed in the normal value, not in the export price.

(117) In relation to the argument that the adjustment should be made to neutralise any difference in costs of raw materials or inputs between export and domestic sales resulting from residual VAT liability on such cost items, the Commission recalled that the purpose of the adjustment performed in this context is not meant to deal with any alleged difference in costs of raw materials or other inputs. Rather, the adjustment ensures that prices used in the comparison are at the same level of taxation. Lastly, as to the Giti Group's argument on the burden of proof, the Commission recalled that the fact that export sales of the product concerned trigger a VAT liability was established as a matter of fact in the investigation and is, in reality, not contested by either Group which rather offer a different approach to address this fact (adjustment to the export price or adjustments for differences in costs). These claims were therefore rejected.

(118) Following final disclosure, the Hankook Group reiterated that it is a single economic entity and therefore the Commission should not make adjustments for the commissions under Article 2(10)(i) of the basic Regulation.

(119) The Commission reaffirmed its position that under Article 2(10)(i) of the basic Regulation it is entitled to make adjustments for commissions paid in respect of the sales under consideration. In this case, the Commission established that the commissions were provided for in a contract between the parties and de facto paid by the exporting producers to the related parties. The payments were reported, acknowledged by the exporting producer and verified during the investigation. They have been found to affect the price comparison. The Commission was therefore required to make adjustments for the commissions irrespective whether the companies formed a single economic entity or not. The Commission also recalled that the concept of single economic entity in the context of adjustments under Article 2(10) of the basic Regulation was developed in the Court's case law (33) on ‘notional commissions’ including the mark-up received by a trader as referred to in the second subparagraph of Article 2(10)(i) and not for situations were actual commissions are clearly defined and de facto paid. Therefore, that claim was rejected.

(120) Following final disclosure, the Hankook Group reiterated its claim that the royalties paid to the Korean headquarters for the use of Hankook's technology and brand should not be deducted from the export price. The Commission re-examined the claim, found that it was warranted and re-calculated the dumping margin accordingly.

3.4. Dumping margin

(121) As set out in Sections 3.1 to 3.3, the Commission took into account a number of comments from interested parties received after provisional disclosure and recalculated the dumping margins of all the sampled exporting producers. This led to the decrease of the provisionally established dumping margins. This change also had an impact on the dumping margin of all other cooperating and non-cooperating companies since these margins are based on the margins of the sampled companies.

(122) The definitive dumping margins expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows: Table 1 Definitive Dumping Margins Company Definitive dumping margin Xingyuan Group 106,7 % Giti Group 56,8 % Aeolus Group and Pirelli 85 % Hankook Group 60,1 % Other Cooperating Companies 71,5 % All other companies 106,7 %

4. INJURY

4.1. Definition of the Union industry

(123) As described in the provisional Regulation in recitals (127) to (129), the like product was manufactured by more than 380 producers in the Union, producing both new and retreaded tyres. Together, they were defined as the Union industry.

(124) Following final disclosure, the CRIA and the CCCMC claimed that the retreaders operating or not under tolling arrangements cannot form part of the Union industry. They considered that retreading is an after service market which cannot be protected by anti-dumping measures as the retreaders take an existing tyre that is part-worn and reprocess it so it can be used. Moreover, retreaders operating on a tolling basis cannot own the casing. Customers retain ownership of the casing while the casing is serviced and a new tread applied to a worn tyre before it is returned to the owner.

(125) The Commission noted the retreading industry provides a second life (or more as the same casing can be retreaded several times) to a casing originating from a worn-tyre. A worn-tyre is no longer safe to be used on public road and cannot be put back into circulation. Without the retreading process, the fate of a worn-tyre is to end in a scrap heap; though part of the worn tyre can be pyrolysed to produce tyre-derived fuel. As described in recital (49) of the provisional Regulation, retreading is a recycling process whereby a worn tyre is refurbished through a replacement of the tread on an old casing. Therefore, retreading is not merely a service, but a production process. Irrespective of ownership arrangements, the retreaders are Union producers whose production process starts from a casing and who are producing a tyre.

(126) In addition, the life cycle of worn tyres ends in one of two way: they are either discarded as a waste or used as a good casing to be retreaded. If considered waste, the owner of the worn tyre may have pay a fee to dump the worn tyre. In the second scenario, the worn tyre becomes a source of revenue. Retreaders may purchase the worn tyre from a service garage or retread a worn tyre under a tolling agreement. All verified retreaders use two sources of supply (namely either stock casing or tolling agreement) produce tyres. The purchase price of a worn tyre was around 10 % in average of the overall cost of production of a retreaded tyre. The Commission considered that the difference in costs of production or in the added-value between the two ways of retreading casings, was not significant, and regarded those as two different business models of retreading. Therefore, the Commission concluded that the retreaders were part of the Union industry.

(127) As a result, data provided by the retreaders and verified by the Commission (including actual costs and sales prices) were used for the establishment of the injury indicators and the injury margin calculation.

4.2. Injury segmented analysis

(128) As explained in recital (162) of the provisional Regulation, the economic situation of the Union industry was analysed on an aggregated basis and, in certain microeconomic indicators at the level of tiers given the Union market segmentation. Certain interested parties reiterated the same concerns following the final disclosure that the injury analysis by segment should consider all injury indicators and causation indicators. They referred to the Appellate Body Report in United States — Hot Rolled Steel Products from Japan (34). Moreover, these parties requested that the Commission should also distinguish between new and retreaded tyres, original equipment and replacement tyres as the original equipment market was shielded from Chinese competition, again by reference to the Appellate Body report in United States — Hot Rolled Steel Products from Japan (35). The CRIA and the CCCMC reiterated the same concerns following the final disclosure.

(129) The jurisprudence mentioned above indicates that the investigating authorities who undertake an examination of one part of a domestic industry ‘should, in principle, examine, in like manner, all of the other parts that make up the industry, as well as examine the industry as a whole’ (36). However, the Appellate Body Report does not impose on the investigating authorities an obligation to provide all injury indicators by segment.

(130) Moreover, the facts in that case were different. In the Appellate Body report in United States — Hot Rolled Steel Products from Japan, a significant part of the domestic production in the United States — captive production — was shielded by the structure of the domestic market from direct competition from subject imports. In that specific situation, the Appellate Body took issue with ‘comparative examination’ of each part of the domestic market — which ‘juxtaposed’ the merchant market and captive market. For the Appellate Body, this ‘enhanced’ the ability of the investigating authorities to make an appropriate determination about the state of the domestic industry as a whole. In the present case, though, there is no protection of the tier 1 and 2 segments of the Union market. The Chinese imports' sales are concentrated mainly in the replacement market; this is a factual situation which is not imposed by the structure of the Union market. Moreover, the product concerned was also sold to original equipment manufacturers. Therefore, the claim that Union original equipment market was shielded from the Chinese competition and should thus be analysed separately was rejected.

(131) Moreover, as noted in recital (160) of the provisional Regulation, case-law also confirms that, when examining whether there is injury for the Union industry as a whole, such analysis may focus on the segment most affected by dumped imports. In the present case, around 65 % of Chinese imports of tyres relate to tier 3. Therefore, a proper injury analysis cannot disregard the impact of the dumped imports especially in a market situation where tier 3 tyre sales are continuously growing, and where all tiers that make up the Union tyre market are interrelated.

(132) For these reasons, the Commission resolved to have conducted a proper examination of the industry as a whole.

4.3. Union consumption

(133) As mentioned in the recital (9), the Commission carried out verification visits at the premises of two unrelated importers. It was found that the imports of the product concerned were also declared during the period considered under the CN codes 4011 90 00 and 4011 99 00. These imports concerned tier 3 tyres. However, it was not possible to establish whether there was a systemic problem with the declaration of the product concerned, or whether the issue was limited to this particular importer.

(134) In addition, the total volume reported by the cooperating Chinese exporting producers in the investigation period exceeded the total of imports originating from the People's Republic of China provided by Eurostat Comext. However, as there is no data reported by these exporting producers concerning the preceding years the Commission decided to follow a conservative approach and not to revise the import volumes from the PRC.

(135) Following the provisional disclosure, it was found that the sales of tread suppliers not members of ETRMA Europool had been omitted when establishing the Union consumption. Therefore, the Commission revised the Union consumption for the period considered.

(136) During the period considered the Union consumption (37) developed as follows: Table 2 Union consumption (in items) 2014 2015 2016 Investigation period Total Union consumption 20 499 603 20 962 782 21 600 223 21 748 781 Index 2014 = 100 100 102,3 105,4 106,1 Source: ETRMA and tread suppliers not members of ETRMA Europool.

(137) Accordingly, the Union consumption increased over the period considered. Overall over the period considered the consumption increased by 6,1 % from around 20,5 million tyres to around 21,7 million tyres in the investigation period.

4.4. Interconnection between new and retreaded tyres

(138) A number of interested parties challenged the provisional findings on the interconnection between new and retreaded tyres and among tiers and reiterated the same concerns following the final disclosure. The Commission compiled all information on this matter in a note for the file on interconnection (38).

(139) Regarding recital (140) of the provisional Regulation, the CRIA and the CCCMC claimed that there was no value attribution to tiers 1 and 2 tyres from the existence of the retreading industry.

(140) Information regarding the importance of the retreading business is well spread out and publicly available. As mentioned in recital (58) of the provisional Regulation, the producers of new tyres are also producing retreaded tyres. Some Chinese exporting producers have their own brands for retreaded tyres such as Hankook Alphatread or Giti Genesis. As explained in the note for the file on interconnection, the Commission found that the main tyre producers including Chinese exporting producers were engaged in the retreading business. Hankook Group relies on Union retreaders such as Vacu-Lug in the United Kingdom or B.R.P. Pneumatici in Italy for its retreading activity. Giti Genesis previously known as GT Ree Tread relies on Vacu-Lug in the United Kingdom.

(141) Moreover, Pirelli Italy declared in 2009 concerning a contract signed with Marangoni (a Union provider of retread solutions) that this project, which is part of the strategy of strengthening and enlarging the supply of services by Pirelli Truck, aims to add value in particular to the new products in the 88 Series and the 01 Series, launched on the European market in 2009, characterised, among other qualities, by their high suitability for retreading (39). Other producers are also marketing that their tyres are retreadable, for instance Athos brand importer providing that Athos tyres are regroovable and suitable for cold and hot retreading as well as the Aeolus brand (40) (reported both as tier 3). This shows that retreadability is a significant value factor both in the European Union and in the country concerned. Indeed, the Commission's investigation has shown that ‘upper tier’ producers rely heavily on the existence and availability of a retreading industry to not only create high value market perception, but also for their consumer and business continuity strategies. As the note for the file on interconnection in addition shows, retreadability is viewed by the production industry in the Union and the country concerned as more than a mere marketing asset, but a real value driver for the upper tiers. Accordingly, the value and sales price of the upper tiers are indissolubly linked to a healthy retreading industry ‘downstream’. It is for those reasons that the Commission, at recital (140) of the provisional Regulation, stated that ‘a large value attributed to tiers 1 and tier 2 tyres originate, in fact, from the existence of a retreading industry in tier 3’.

(142) On that basis, the Commission confirmed its initial findings on the interconnection between new and retreaded tyres and among tiers.

(143) Regarding recital (141) of the provisional Regulation, the CRIA and the CCCMC considered that the Commission did not disclose the source of the high interchangeability of retreaded tyres that in turn, established price as a determining factor in the customer's decision to purchase a retreaded or tier 3 new tyres.

(144) The Commission accepted that claim. Accordingly, in its note for the file on interconnection, it showed examples of tyres of different tiers having common sales channels.

4.5. Imports from the country concerned

4.5.1. Volume and market share of the imports from the country concerned

(145) The Aeolus Group and Pirelli claimed that the Commission should have considered for its analysis the increase in the Union consumption and should have provided a separate analysis for the three tiers. The parties claimed that, with reference to tier 1 and tier 2, Chinese imports decreased by 2,7 % and 2 % respectively, whereas tier 3 imports increased by 3,9 % from 2015 and 2016. In conclusion, they claimed that any alleged rise in imports (in absolute or relative terms) during the investigation period was not substantial and did not injure the Union industry.

(146) As explained in recitals (128) and (132), the economic situation of the Union industry was analysed on an aggregated basis, and this included the analysis of imports. It was only in certain key microeconomic indicators that the additional analysis at the level of tiers was performed, given the Union market segmentation. The import volumes of the product concerned from the PRC increased. On the basis of the import statistics from Eurostat Comext (which as explained in recitals (133) and (134) could be underestimated), such increase in the volume of imports from the PRC was substantial, both in absolute and relative terms.

4.5.2. Prices of the imports from the country concerned

(147) The Aeolus Group and Pirelli claimed that the Commission's analysis lacks any reference to the market segmentation and reports only Eurostat figures, without any reference to import figures collected from the sampled exporting producers.

(148) As explained in recitals (128) and (132), the economic situation of the Union industry was analysed on an aggregated basis and, in certain key microeconomic indicators, was also analysed at the level of tiers given the Union market segmentation. However, in the undercutting calculations the prices from the sampled exporting producers were indeed compared to the prices of the Union producers taking into account the specific tier where they belonged.

(149) The Aeolus Group and Pirelli further claimed that import prices were significantly affected by currency rate fluctuations. The Commission failed to see the relevance of the currency exchange rate as all prices used for the comparison purposes in the injury margin calculation are denominated in euros. Hence, the fluctuation between USD and EUR did not play a role in determining either the undercutting or level of the measures. Therefore, that claim was rejected.

(150) Some interested parties (Pirelli, the Giti Group) claimed that according to Eurostat Chinese import prices (mainly related to tier 3 tyres) have decreased over the past three years only due to declining raw material prices (by EUR 15,6 per item). The parties stated that the prices of raw materials (natural rubber and oil) significantly decreased, with a consistent impact on import prices during the period of investigation.

(151) The evolution of the average price of imports into in the Union from the country concerned with the evolution of main raw materials prices developed as follows: Table 3 Evolution of import and main raw materials prices 2014 2015 2016 Investigation period PRC import price (EUR/item) 144,4 144,3 127,7 128,8 Index 2014 = 100 100 100 88 89 Natural Rubber: SGX RSS3 USD/tonne 1 957 1 560 1 641 2 050 Index 2014 = 100 100 80 84 105 SGX TSR20 USD/tonne 1 710 1 370 1 378 1 660 Index 2014 = 100 100 80 81 97 Butadiene US cents per lb 59,0 34,0 37,2 62,5 Index 2014 = 100 100 58 63 106 Brent indicator USD per barrel 99,7 53,4 43,6 49,6 Index 2014 = 100 100 54 44 50 Source: Eurostat Comext and the Complaint

(152) Over the period considered, the Chinese import prices have not reflected the evolution of raw material prices. While the Chinese import prices remained stable between 2014 and 2015, the price of main raw materials have decreased significantly by 20 % for natural rubber and by around 45 % of butadiene and Brent indicators. While the Chinese import prices decreased by 12 % between 2015 and 2016, the raw material prices remained rather stable. Finally, for the period 2016 and the investigation period where most of raw material prices have significantly increased as from the second quarter 2016 until first quarter 2017, the Chinese import prices remained stable. The Commission concluded that the Chinese import prices were disconnected from the evolution of raw material prices. Therefore, that claim was rejected.

4.5.3. Price undercutting

(153) Several interested parties claimed that the price undercutting calculations should be established by analogy with the methodology used for the calculation of the dumping margin on the basis of a comparison of a weighted average sales prices per product type and segment of the sampled Union producers charged to unrelated customers with a weighted average of prices of all comparable export transactions. Moreover, the CRIA and the CCCMC claimed that the Commission should adjust the Chinese prices upwards or the Union prices for retreaded tyres downwards to ensure that the prices compared reflect a similar mileage and for after sales and warranty services provided by the Union producers selling retreaded tyres, in particular for tier 3 as the Chinese producers did not provide such services. The parties reiterated similar claims after the final disclosure.

(154) As explained in recitals (149) and (150) of the provisional Regulation, the methodology of the price undercutting comparison considered the average sales price per product type (PCN) and per segment. The price undercutting was calculated on the basis of comparable transactions by reference to the product type or type-by-type. As within each tier, the tyres are considered similar in terms of mileage, no overall adjustment is thus needed. The same is true for warranty services, with the exception of tier 3, whereby by contrast to the Chinese producers, the Union may indeed provide after sales and warranty services. Consequently, the Commission adjusted the prices of the sampled Union producers for after sales and warranty services for tier 3 when necessary. The undercutting and the underselling margins were established without any weighting. Therefore, that claim was rejected.

(155) Regarding the claim on the analogy between dumping and injury calculations, the Commission noted that the dumping calculations indeed require to take ‘all comparable export transactions’ into account when calculating dumping margins for the like product as a whole (41). By contrast, ‘an investigating authority is not required […] to establish the existence of price undercutting for each of the product types under investigation, or with respect to the entire range of goods making up the domestic like product. That said, an investigating authority is under an obligation to examine objectively the effect of the dumped imports on domestic prices’ (42). In the case at hand, the Commission was satisfied with the very high level of matching between the Union producers' and the exporting producers' product types sold on the Union market (the overall matching is ranging between 80 % and 90 %). Therefore, that claim was rejected.

(156) The CRIA and the CCCMC claimed that the Commission should disclose further information about the physical characteristics of the tyre types that were used for comparison purposes as it is highly likely that there are differences, which are not reflected in the PCNs that merit an adjustment, but the Chinese exporters and the CRIA and the CCCMC are simply unable to identify such differences as they have no information about the products sold by the sampled Union producers. The parties claimed that the WTO Appellate Body Report in EC — Fasteners (43) supports this approach. The parties reiterated similar claims after the final disclosure.

(157) The Commission did not accept this argument. It pointed out that the Appellate Body Report mentioned above is about a failure to provide the necessary information regarding the characteristics of a given product which was used in determining the normal value. This led to a situation in which the producers were not in a position to decide about the necessity to request level of trade adjustments or not in order to ensure a fair comparison under Article 2(10) of the basic Regulation in the context of dumping calculations. However, the Panel report in the same case stated that ‘while it is clear that the general requirements of objective examination and positive evidence of Article 3(2) of the basic Regulation limit an investigating authority's discretion in the conduct of a price undercutting analysis, this does not mean that the requirements of Article 2(10) of the basic Regulation with respect to due allowance for differences affecting price comparability are applicable’ (44). Therefore, this jurisprudence cannot be relied upon in the present case where the CRIA and the CCCMC make speculations about the absence of disclosure of information about ‘any other relevant characteristics’ and differences not reflected in the PCNs for the purpose of undercutting and injury calculations. Furthermore, the Commission carried out the undercutting calculation in line with its usual practice to ensure a fair comparison whereby PCNs sufficiently reflect physical and all other differences between the product types sold by the Union producers and the exporting producers. Moreover, should the exporting producers consider that their products have specific features which are normally different to the characteristics of the Union products and which, in their view, are not captured by the PCN, they should have raised them in due course. Therefore, that claim was rejected.

(158) Certain interested parties claimed the Commission did not establish undercutting for the whole period considered. A detailed undercutting calculation was only made for the investigation period. While average Chinese import prices in previous periods can be compared with sales prices by the Union industry, such a comparison is essentially meaningless as (1) no separate data are available for Chinese import prices by tier; and (2) these average prices do not take into account the possibility that the product mix may have changed during the period.

(159) The WTO Appellate Body Report in China — HP-SSST (EU) (45) requested that an investigating authority has to assess the significance of the price undercutting by the dumped imports in relation to the proportion of domestic production for which no price undercutting was found. The parties considered that the Commission did not carry out such assessment. The parties reiterated similar claims after the final disclosure.

(160) As stated in recital (149) of the provisional Regulation, the Commission performed in accordance with the applicable jurisprudence the customary calculations on the basis of the verified data for the investigation period, per PCN and tiers. All relevant calculations were disclosed to the interested parties respecting their procedural rights. The overall level of price undercutting during the investigation period was around 21 %, which the Commission considers significant. Therefore, that claim was rejected.

(161) The CRIA and the CCCMC, however, considered that it is likely that the Commission only found undercutting for a small subset of sales by the sampled Union producers. In their view, the Commission has to assess the price pressure, if any, that could be exercised by the Chinese imports on the remaining Union industry sales for which it did not find undercutting.

(162) That claim was rejected because the volume of sales of the sampled Union producers that matched the imports of the Chinese exporting producers is significant (between 80 % and 90 %). Moreover, the weighted average undercutting margin in the three tiers was found to be significant, between 18 % and 24 %.

(163) The Aeolus Group and Heuver requested that the Aeolus' CIF prices should be revised in order to reflect Heuver's post-importation costs. Pirelli claimed that the Commission must take its additional costs into account when comparing the Pirelli tyres to other tyres produced and sold by the Union industry and to the (independent) retailers.

(164) The Commission found that Heuver was not related to the Aeolus Group. Therefore, no adjustment was warranted. Regarding Pirelli, the CIF weighted average price was established in accordance with Article 2(9) of the basic Regulation as described in recital (118) of the provisional Regulation. Therefore, that claim was rejected.

(165) Several parties claimed that the Commission cannot rely on constructed export prices when making the price undercutting analysis and the determination of the injury level and that the methodology used is contrary of Article 3(2)(a) and Article 3(3) of the basic Regulation. Moreover, Hankook Group claimed that it should be treated as a single economic entity for both the dumping and the injury margin calculations.

(166) Firstly, Article 3(2) of the basic Regulation refers to the effect of dumped imports that may cause injury to the Union producers and not to the resale price of a company (related importer) within the Union to another customer.

(167) Secondly, as far as undercutting is concerned, the basic Regulation does not provide any specific methodology of that concept. The institutions therefore enjoy a wide margin of discretion in assessing this injury factor. That discretion is limited by the need to base conclusions on positive evidence and to make an objective examination, as requested by Article 3(2) of the basic Regulation.

(168) When it comes to the elements taken into account for calculation of undercutting (in particular the export price), the Commission has to identify the first point at which competition takes (or may take) place with Union producers in the Union market. This point is in fact the purchasing price of the first unrelated importer because that company has in principle the choice to source either from the Un