COMMISSION IMPLEMENTING REGULATION (EU) 2022/72

of 18 January 2022

imposing definitive countervailing duties on imports of optical fibre cables originating in the People’s Republic of China and amending Implementing Regulation (EU) 2021/2011 imposing a definitive anti-dumping duty on imports of optical fibre cables originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 15 and Article 24(1) thereof,

Whereas:

1. PROCEDURE

1.1. Initiation

(1) On 21 December 2020, the European Commission (‘the Commission’) initiated an anti-subsidy proceeding with regard to imports of optical fibre cables originating in the People’s Republic of China (‘China’, ‘PRC’ or ‘the country concerned’) on the basis of Article 10 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (‘the Notice of Initiation’) (2).

(2) The Commission initiated the investigation following a complaint lodged by Europacable (‘the complainant’) on behalf of Union producers. The complainant represented more than 25 % of the total Union production of optical fibre cables (‘OFC’). The complaint contained evidence of subsidisation and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of China (‘GOC’) (3) that it had received a properly documented complaint, and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. Consultations were held on 16 December 2020 with the GOC. However, no mutually agreed solution could be reached.

(4) On 24 September 2020, the European Commission initiated a separate anti-dumping investigation with regard to the same product originating in the People’s Republic of China (4) (‘the separate anti-dumping investigation’). The injury, causation and Union interest analyses performed in the present anti-subsidy investigation and the separate anti-dumping investigation are mutatis mutandis identical, since the definition of the Union industry, the sampled Union producers, the period considered and the investigation period are the same in both investigations.

1.2. Comments concerning initiation

(5) The Commission received comments on initiation from the GOC, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘CCCME’), one importer (Connect Com), and the complainant.

(6) The GOC claimed that the investigation should not be initiated because the complaint did not satisfy the evidentiary requirements of Articles 11(2) and 11(3) of the WTO Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) and of Article 10(2) of the Basic Regulation. According to the GOC, there was insufficient evidence of countervailable subsidies, injury and a causal link between the subsidised imports and the injury. In response to this claim of the GOC, the complainant argued that the complaint contained information that was reasonably available to and that the complaint provided for more than ample evidence demonstrating the existence of subsidisation, injury and a causal link between the two. The GOC reiterated that the complaint did not contain sufficient evidence to meet the evidentiary standard and regardless of what information might be reasonably available to the complainant, there always needs to be sufficient evidence regarding the existence and nature of a subsidy, material injury and a causal link.

(7) The Commission rejected the claim of the GOC. Indeed, the evidence submitted in the complaint constituted the information reasonably available to the complainant at that stage. As shown in the memorandum on sufficiency of evidence, which contains the Commission’s assessment on all the evidence at the disposal of the Commission concerning the PRC, and on the basis of which the Commission initiated the investigation, there was sufficient evidence at initiation stage that the alleged subsidies were countervailable in terms of their existence, amount and nature. The complaint also contained sufficient evidence of the existence of injury to the Union industry, which was caused by the subsidised imports.

(8) Following final disclosure, the GOC argued that the Commission could not have used facts available to remedy the lack of evidence provided in the complaint. The Commission noted that the GOC misunderstood what the Commission did at initiation stage. As set out in recital (7), the complaint contained sufficient evidence pursuant to Article 10(2) of the basic Regulation to justify the initiation of an investigation. Logically, the complaint could not have included all the necessary information requested from the GOC, as this was part of the detailed assessment done by the Commission during the investigation. Moreover, the Commission examined the complaint in light of all the available information to the Commission as regards the alleged subsidisation, including its past practice. This does not mean that the Commission applies facts available but rather that the Commission uses all the information available to confirm the allegations made in the complaint. Therefore, the claim was rejected.

(9) During the pre-initiation consultations and in its submission following initiation, the GOC alleged more specifically that the complainant used Chinese laws selectively and misinterpreted their connection with respect to the OFC industry and stated that policy documents, such as China’s High-tech Product Catalogue, Broadband China Strategy, the 13th Five-Year Plan, or Made in China 2025, are just guidance documents that are not binding. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘CCCME’) repeated this claim. The GOC also stated that the document ‘Made in China 2025’ does not specifically refer to OFC. The complainant argued that the Commission already established in previous investigations that China’s Five-Year Plans are of a binding nature.

(10) The Commission noted that the GOC does not dispute the existence of such plans, programmes, or recommendations but only the extent to which they are binding for the OFC industry. The Commission further observed that the complainant provided evidence indicating that ‘optical fibre’ is mentioned in several government documents, while ‘fiber optic network’ is mentioned in the Made in China 2025 Strategy. The GOC failed to produce any evidence showing that those statements would not be applicable to the product concerned.

(11) The GOC also stated that State-owned enterprises (SOEs), State-owned banks or the Chinese Export & Credit Insurance Corporation (‘Sinosure’) cannot be qualified as public bodies and that the complainant unjustifiably relied on previous Commission’s findings for entirely unrelated industries. The CCCME repeated the claim that State-owned banks cannot be qualified as public bodies. The complainant argued that the Commission has recognised State-owned banks and Sinosure as public bodies in previous investigations. The GOC claimed that past findings of the Commission for unrelated industries could not constitute sufficient evidence in the complaint that State-owned banks and Sinosure acted as public bodies in the current investigation.

(12) The Commission noted that this claim of the GOC is connected to the claim already evoked above, and that the complaint among others mentioned the Bank Law in China, which the GOC does not dispute to belong to the Chinese legislation. The Commission also highlighted that recent EU anti-subsidy investigations had concluded differently on this matter (5). The fact that these investigations covered industries unrelated to the OFC industry does not cast aside the qualification of the above institutions as public bodies. Moreover, evidence of government ownership may be considered to amount to evidence ‘tending to prove or indicating’ that an entity is a public body capable of conferring a financial contribution (6).

(13) Following initiation, the GOC further argued that the complainant did not establish the conditions for applying an out-of-country benchmark for loans and for land use rights. The Commission found, however, that the allegations contained in the complaint are supported by recent EU anti-subsidy investigations concluding on those matters the need for external benchmarks adjusted to the prevailing conditions in the PRC (7).

(14) Furthermore, the GOC claimed that various subsidy schemes alleged by the complainant could not be considered a subsidy as the complaint did not provide for detailed evidence concerning the existence, amount and nature of these subsidies, or the direct relationship between the subsidy and the product concerned.

(15) The complainant argued that the complaint provided examples of specific direct transfers of funds and specifically referred to annual reports of numerous Chinese exporting producers of OFC which clearly indicated direct transfers of funds received in the form of grants. In addition, the complainant provided a document published by one of the exporting producers identifying the financial support it received from the GOC.

(16) The GOC further claimed, in relation to various subsidies, that the complainant failed to provide evidence of benefit and specificity. The Commission is of the view that the complainant provided sufficient evidence of benefit and specificity as was reasonably available to it. In any event, the Commission examined the evidence in the complaint and provided its own assessment of all relevant elements in the memorandum of sufficiency of evidence, which was put on the open file upon initiation. The GOC reiterated its comments following initiation, but did not provide any further evidence.

(17) Therefore, the Commission concluded that there was sufficient evidence provided in the complaint tending to show the existence of the alleged subsidisation by the GOC.

(18) Following initiation, the GOC and the CCCME argued that the complainant incorrectly set aside the fact that the OFC industry in the Union were granted subsidies very similar to those in the PRC and that the Commission should not apply double standards. The complainant argued that these allegations are irrelevant in the investigation at hand. The GOC disagreed and claimed that the Commission, by investigating alleged subsidies in China, it distorts the market to the detriment of non-Union competitors. Such approach would lead to protectionist measures, ultimately obstructing international trade and development.

(19) This claim concerning subsidies in the EU had no weight on the Commission’s assessment underlying the initiation of this case, as they do not fall within the factors considered for this purpose.

(20) Finally, in its comments following initiation, the GOC claimed that no actual sales information was provided in the undercutting/underselling calculation and that the questionnaire responses of the sampled Union producers did not provide a meaningful summary of sensitive information. The GOC asserted that this had prevented it from properly rebutting the injury claims made by the complainant, and that these questionnaire responses seemed to contradict the complaint with regard to the alleged injury.

(21) The Commission considered that the version open for inspection by interested parties of the complaint and the questionnaire replies contained all the essential evidence and non-confidential summaries of data granted confidential treatment in order for interested parties to exercise their rights of defence throughout the proceeding. It is recalled that Article 29 of the basic Regulation allows for the safeguarding of confidential information in circumstances where disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person has acquired the information. The claims of the GOC in this regard were therefore rejected.

(22) On the substantive requirements for the initiation of the investigation, the GOC and CCCME argued that the complainant failed to provide any comparable data on sales prices and profitability. The GOC and CCCME also claimed that the target profit indicated by the complainants was not justified and that the injury suffered by the complainants could have been caused by other elements including over stocking by one Union producer.

(23) Connect Com supported the arguments of the GOC on initiation. In particular, Connect Com claimed that an anti-dumping and a parallel anti-subsidy investigations would possibly result in a double remedy for the EU industry and could lead to an abuse of countervailing measures. Connect Com argued that the allegations in the complaint on the existence of a subsidy, on injury and on a causal link between the subsidy and injury were not supported by sufficient evidence. Concerning the lack of evidence on a causal link, Connect Com claimed that there were number of alternative reasons for a decrease in the EU industry’s market share such as the increase of imports from other third countries during the period considered and that there was an overcapacity in the EU. In addition, Connect Com claimed that the complaint was a mere copy of the complaint of the anti-dumping investigation and that the complainant should have differentiated the alleged injury due to dumping from the alleged injury due to subsidy.

(24) Moreover, the GOC and the CCCME claimed that there was no injury shown in the complaint, since the Union industry increased its production and the slight decrease in production capacity deriving from the inability of the Union Industry of supplying all newly developed consumption in Europe was not in itself an indicator of material injury. Sales volumes increased as well, while the Union industry retained a market share of almost 80 % and the profitability trend was unclear and did not show injury. In this respect, the complainant submitted that the increase in the Union consumption benefitted Chinese imports, the remaining market share did not bear relevance for the assessment of the injury, and the effects of tenders won by Chinese producers would materialise after a certain time lag. The CCCME responded that consumption, production and production capacity data showed that the Union industry was able to supply most of the increase in EU consumption, while expanding its business.

(25) In addition, the GOC and the CCCME claimed that the complaint contained no evidence of a causal link between subsidized imports and injury. Firstly, the GOC and the CCCME argued that there was no correlation between imports from China and the development of the Union industry. By way of example, they submitted that amidst the strongest increase in import volume from China in 2017-2018, the Union industry had the most significant increase in profitability. Secondly, third-country imports increased between 2018 and 2019, contrary to imports from China, and their effect could not therefore be attributable to China, and, if there is injury, this was a self-inflicted injury due to the Union industry’s slow reaction to market movements.

(26) The complainant reacted to this claim, stating that a causal link could be established, since the injury happened at the same time as the increase in imports from China, and that third-country imports could not be considered as a cause of injury because they were either de minimis or showed no evidence of injurious pricing.

(27) The CCCME responded recalling that, amidst the strongest increase in import volume from China in 2017-2018, the Union industry had the most significant increase in profitability and that there was no correlation between the increase of imports from China and the decreasing sales volumes of the Union industry. Instead, as regards third-country imports, the CCCME noted that in total third-country imports increased, while imports from China decreased between 2018 and 2019. Finally, the CCCME observed that the complainant did not challenge the arguments that virtually all injury indicators in the complaint displayed positive trends and that the alleged injury was at least to a certain degree self-inflicted. Moreover, the CCCME claimed that the effects of the Covid-19 pandemic and allegations on the existence of a power-cable cartel should also be taken into account in evaluating the impact of subsidized imports on the situation of the Union industry. Furthermore, the GOC and the CCCME stated that import data presented by the complainant were not reliable because they were outdated and based on assumptions in terms of weight of the product concerned and its proportion in the CN code 8544 70 00. In addition, according to the GOC and the CCCME, undercutting calculations in the complaint were flawed because they referred only to one exporter in one specific tender.

(28) The complainant referred to its reply in the parallel anti-dumping investigation, that a longer period should be considered to see the increase in volume of imports, not denied by the CCCME and confirmed by third-party data from market intelligence (CRU), and that calculations were not flawed because the complainant was bound to provide only reasonably available information, which included information from several producers in the Union and in China.

(29) The CCCME responded that it was the duty of the complainant to substantiate its claims and provide proof in respect of import data and that market intelligence (CRU) data referred to optical fibres and not to optical fibre cables. As regards undercutting and underselling calculations, the CCCME reiterated that they did not meet the standard to constitute sufficient evidence and that for significant calculations the complainant referred only to the prices of one Chinese producer (e.g., the free circulation export price used for the calculation of the injury margin for H1 2019 and the export price used for the costs of production for the underselling margin for H2 2019).

(30) The Commission considered that none of the allegations on initiation disproved the conclusion that there was sufficient evidence for the initiation of an anti-subsidy proceeding. Indeed, the complaint contained sufficient evidence that subsidized imports had materially injured the Union industry. The specific injury analysis of the complaint showed increased penetration of the EU market (both in absolute and relative terms) by imports from China made at prices which substantially undercut the Union industry’s prices. This suggested that the alleged subsidised imports had materially injured the Union industry, shown for example by decreases in sales and market share or by a deterioration of financial results.

(31) The evidence provided in the complaint contained separate undercutting and underselling calculations for each representative product type. The Commission was satisfied with the level of evidence of undercutting and underselling brought forward by the complainant and considered that the complaint met the sufficient evidence standard required for the initiation of the investigation.

(32) In reply to the claim that the complainant failed to provide reliable/comparable data on sales prices, the Commission considered that the version open for inspection by interested parties of the complaint contained all the essential evidence and non-confidential summaries of data provided under confidential cover in order for interested parties to exercise their right of defence throughout the proceeding.

(33) Article 29 of the basic Regulation (as well as Article 12(4) of the SCM Agreement) allow for the safeguarding of confidential information in circumstances where disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person has acquired the information.

(34) In relation to sufficient evidence of a causal link, the following should be noted. Firstly, the complaint showed that the situation of the Union industry deteriorated at the same time as the increase in subsidized imports at prices which significantly undercut those of the Union industry. This already tended to show the existence of a causal link. Secondly, concerning other factors such as third-country imports and other elements mentioned by the GOC and the CCCME , their impact was not as such as to cause deterioration of the Union industry, whereas, the analysis did not reveal self-inflicted injury. Moreover, concerning the allegation that the subsidy investigation would result in a double imposition, the Commission, as reported at recital (765), made sure that the imposition of a cumulated duty reflecting the level of subsidisation and the full level of dumping would not result in offsetting the effects of subsidisation twice. Finally, concerning import volumes, the complainant provided data based on reasonable assumptions such as the weight of the product concerned produced and sold by the Union industry, and used market intelligence to complete the analysis where public information was not available. Concerning the time period of the measuring of imports in the complaint, the alleged injury has been caused by both dumping and subsidies practices, and therefore a different investigation period would have been unreasonably burden on the complaining industry.

1.3. Registration of imports

(35) On 24 August 2021, in accordance with Article 29a(2) of the basic Regulation, the Commission informed the interested parties of its intention not to impose provisional countervailing measures and to continue the investigation.

(36) Since no provisional countervailing measures were imposed, no registration of imports was performed.

1.4. Investigation period and period considered

(37) The investigation of subsidisation and injury covered the period from 1 July 2019 to 30 June 2020 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2017 to the end of the investigation period (‘the period considered’).

(38) Both the current anti-subsidy investigation and the separate anti-dumping investigation mentioned in recital (4) have the same investigation period and the same period considered.

1.5. Interested parties

(39) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, the GOC, other known Union producers, the known exporting producers, known importers and users about the initiation of the investigation and invited them to participate.

(40) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. No one requested an intervention.

1.6. Sampling

1.6.1. Sampling of Union producers

(41) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the volume of production and sales of the like product in the Union during the investigation period. This sample consisted of three Union producers. The sampled Union producers accounted for 52 % of Union production in the investigation period and was considered representative of the Union industry. The Commission invited interested parties to comment on the provisional sample. No comments were received and therefore the sample was confirmed.

1.6.2 Sampling of importers

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

(43) Five unrelated importers provided the requested information and agreed to be included in the sample. After analysing the sampling information supplied by the importers, the Commission decided that sampling was not necessary and asked all cooperating importers to submit their replies to the questionnaire.

1.6.3. Sampling of exporting producers in China

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

(45) Twenty five exporting producers in the country concerned provided the requested information and agreed to be included in the sample. In accordance with Article 27(1) of the basic Regulation, the Commission selected a sample of two groups of exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. The sampled groups of exporting producers represented more than 40 % of the exports reported by cooperating exporting producers of optical fibre cables from China to the Union during the investigation period.

(46) In accordance with Article 27(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the country concerned, were consulted on the selection of the sample.

(47) Comments on the selection of the sample were received from one non-sampled exporting producer, Yangtze Optical Fibre and Cable Joint Stock Limited Company (‘YOFC’), which wanted to be included in the sample.

(48) YOFC argued that considering the large number of cooperating exporting producers, the two sampled companies accounted for a relatively low proportion of export volume to the Union that was not representative for the Chinese exporters and that the Commission’s practice in previous anti-dumping investigations was to sampled at least three companies. Furthermore, YOFC claimed that a sample of three companies could better avoid the situation that, due to changes to the sampled companies, the sample could be reduced to one company. Finally, YOFC argued that certain subsidy programmes are regional, so to have a more comprehensive overview of the subsidy schemes in the China the geographical spread should be considered when selecting a sample.

(49) Pursuant Article 27(1) of the basic Regulation the selection of the sample should be based on the largest representative volume of production, sales or exports which can reasonably be investigated within the time available. As stated in recital (45), the sampled groups of exporting producers accounted for more than 40 % of the reported exports from China to the Union during the investigation period, a representative level. The Commission considered that the sample as selected contained the largest quantity of imports that could be reasonably investigated within the time available. In this context, the two sampled exporting producer groups contain a large number of entities (four exporting producers, seven sales entities, and more than 20 related companies providing inputs or financing). Furthermore, whether a sampled company will indeed cooperate or not after being sampled is a necessary but not sufficient condition for an exporting producer to be considered for the selection of a sample under Article 27(1) of the basic Regulation. The Commission also considered the geographical spread of the companies selected in the sampled, covering two provinces in China with the two exporting producer groups and many more provinces with all the related companies providing inputs or financing. As all requirements in Article 27(1) of the basic Regulation were hence met there was no obligation to sample a third company.

(50) YOFC also claimed that it should be included in the sample as it is an experienced producer that exports high quality optical fibre cables to the Union, and its manufacturing process is different from other Chinese producers (it is vertically integrated, uses European technology to produce optical fibre cables, has advanced technologies, is the sole National Intelligent Manufacturing Demonstration Unit in China, and has achieved high automatization in the production of optical fibres). It further claimed that its export volume to the Union during the investigation period was relatively large. Moreover, YOFC submitted that one of the sampled Union producers indirectly holds shares of YOFC and two of the related companies concerned of YOFC and, therefore, including YOFC in the sample would enable the Commission to have a more comprehensive knowledge of the structure of the industry. YOFC also claimed that there are five exporting producers in the group, which are located in Hubei Province, Guangdong Province, Sichuan Province, Jiangsu Province and Shanghai City, so by including YOFC in the sample, the Commission would obtain information on subsidy programmes in more provinces.

(51) As explained above, the sample of exporting producers was selected on the basis of the largest percentage of the volume of exports from the country in question which could reasonably be investigated within the time available, having a good geographical spread within China. YOFC was not among the largest exporting producers and therefore was not sampled. At any rate, the two sampled groups of exporting producers are large experienced groups of companies as well that manufacture and sell high quality optical fibre cables to the Union, including also vertically integrated entities. Furthermore, there is no information in the file indicating that the technology used by the sampled exporting producers would be less advanced than other Chinese exporting producers. YOFC has not presented any evidence that would contradict this fact. Moreover, the fact that one sampled Union producer holds shares in an exporting producer is not relevant for the selection of the sample of the exporting producers. Therefore, these claims were rejected.

1.7. Individual examination

(52) Six of the non-sampled Chinese exporting producers that returned the sampling form informed the Commission of their intention to request individual examination under Article 27(3) of the basic Regulation. The Commission made the questionnaire available online on the day of initiation. Moreover, the Commission informed the non-sampled exporting producers that they were required to provide a questionnaire reply if they wished to be examined individually. Two companies provided a questionnaire reply.

(53) One of the companies who provided a questionnaire reply, requested to be individually examined for the same reasons as in its request to be included in the sample, as set out in recitals (48) and (50) above.

(54) The other company who provided a questionnaire reply, requested to be individually examined because it was related to a Union importer and it claimed to not have received any of the alleged subsidies.

(55) Due to the complexity of the investigation and the complex structure of the sampled exporting producers, the Commission decided not to grant individual examination as it would have been unduly burdensome and could have impeded the Commission to complete the investigation within the statutory deadlines.

1.8. Questionnaire replies and verification visits

(56) The Commission sent a questionnaire to the complainant and the questionnaires for the Union producers, importers, users, and exporting producers in China were made available online on the day of initiation (8).

(57) The Commission also sent a questionnaire to the GOC, which included specific questionnaires for Sinosure, the banks and other financial institutions that provided financing or export credits to the sampled exporting producers, and the top 10 producers and distributors of the input materials used by the sampled exporting producers. The GOC was also asked for administrative convenience to gather any responses provided by these financial institutions and to send them directly to the Commission.

(58) The Commission received a questionnaire reply from the GOC, which included a questionnaire reply from the Export-Import Bank of China (‘EXIM bank’). However, no reply was received from Sinosure, any of the other banks or financial institutions, or from the main producers and distributors of the input materials.

(59) Without prejudice to the application of Article 28 of the basic Regulation, the Commission sought and crosschecked all the information deemed necessary for the determination of subsidy, resulting injury and Union interest. Due to the outbreak of the COVID-19 pandemic and the consequent measures taken to deal with the outbreak (‘the COVID-19 Notice’) (9), the Commission was unable to carry out verification visits at the premises of the GOC, the sampled companies and the cooperating importers and users. Instead, the Commission performed a remote crosscheck (‘RCC’) of the information provided by the GOC, during which officials from the relevant ministries and other government authorities participated. The Commission furthermore carried out RCCs of the following companies via videoconference: Union producers: — Acome S. A. (France), — Corning Optical Communications Sp. z o.o., and its related companies (Poland, Denmark, France, Germany, Italy, Spain), — Prysmian S.p.A., and its related companies (Denmark, Finland, France, Germany, Italy, Netherlands, Romania, Slovakia, Spain, Sweden) Importers: — Cable 77 Danmark ApS (Denmark), — Connect Com GmbH (Germany), — Eku Kabel GmbH (Germany), — Har&Ca S.r.l. (Italy), — Infraconcepts B.V. (Netherlands) Users: — Deutsche Telekom GmbH (Germany) Exporting producers in China: FTT Group: — FiberHome Telecommunication Technologies Co., Ltd, Wuhan, — Nanjing Wasin Fujikura Optical Communication Ltd, Nanjing, — Fiberhome Technologies Group Co., Ltd, Wuhan, — China Information Communication Technologies Group Corporation, Wuhan, — Jiangsu Telecom Industrial Co., Ltd, Nanjing ZTT Group: — Jiangsu Zhongtian Technology Co., Ltd, Nantong, — Zhongtian Power Optical Cable Co., Ltd, Nantong.

1.9. Non-imposition of provisional measures and subsequent procedure

(60) On 10 May 2021, the Commission sent an additional request for information to the cooperating non-sampled exporting producers, to the sampled exporting producers and to the sampled Union producers including but not limited to sales data on the basis of groups of product control numbers (‘PCNs’), investments and tenders. The replies were checked by the Commission during the RCCs.

(61) On 24 August 2021, pursuant to Article 29a(2) of the basic Regulation, the Commission informed interested parties that it intended not to impose provisional measures and to continue with the investigation.

(62) The Commission continued seeking and checking all information it deemed necessary for its definitive findings.

1.10. Final disclosure

(63) On 14 September 2021, the Commission informed all parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-subsidy duty on imports of the product concerned (‘final disclosure’).

(64) All parties were granted a 20 days period within which they could make comments on the definitive disclosure. Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(65) Comments were received from the complainant, the GOC, the CCCME, the two sampled exporting producers, and one unrelated importer, namely Connect Com GmbH (‘Connect Com’). Two cooperating non-sampled exporting producers provided clarifications on clerical errors made by the Commission on their cooperating status and exact name, which were corrected accordingly.

(66) Following final disclosure, interested parties were granted an opportunity to be heard according to the provisions stipulated under point 5.7 of the Notice of initiation. A hearing took place with CCCME.

(67) The Commission addressed in this regulation comments submitted during the anti-subsidy procedure. Comments submitted in the context of the separate anti-dumping investigation were not addressed in this regulation unless the parties explicitly indicated that the comments submitted covered both procedures.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(68) The product concerned is single mode optical fibre cables, made up of one or more individually sheathed fibres, with protective casing, whether or not containing electric conductors, originating in China, currently falling under CN code ex 8544 70 00 (TARIC code 8544700010) (‘the product concerned’).

(69) The following products are excluded: (i) cables in which all the optical fibres are individually fitted with operational connectors at one or both extremities; and (ii) cables for submarine use. Cables for submarine use are plastic insulated optical fibre cables, containing a copper or aluminium conductor, in which fibres are contained in metal module(s).

(70) The optical fibre cables (‘OFC’) are used as an optical transmission medium in telecommunication networks in long haul, metro and access networks.

2.2. Like product

(71) The investigation showed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses: — the product concerned; — the product produced and sold on the domestic market of the country concerned; and — the product produced and sold in the Union by the Union industry.

(72) The Commission decided at this stage that those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

2.3. Claims regarding product scope

(73) The ZTT Group requested the exclusion from the investigation of optical ground wire (‘OPGW’) and optical phase conductor (‘OPPC’) cables. It argued that although these cables fell under the product definition, they had different physical characteristics and use (i.e. power transmission), were subject to different technical standards, were manufactured using different raw materials and according to different production processes, and were sold in separate markets. Furthermore, it was claimed that OPGW and OPPC cables represented only a small portion of sales to Union. The ZTT Group also requested that in case the Commission considered that OPGW and OPPC cables fell within the product scope of the investigation, the specific features, end-use or market segment factors of these products be taken into account in the investigation.

(74) OPGW and OPPC cables are used for data transmission and share the basic characteristics of other OFC, including: (i) they include optical fibres; (ii) the coated optical fibre diameter is the same range; (iii) the number of fibres is also in the same range; (iv) the number of fibres per module is equally the same; and (v) the construction of the cable core is the same. The fact that OPGW and OPPC cables have an additional use (power transmission) and certain features (such as electrical features, no flame resistance requirement, high tensile strength requirement, etc.) does not detract from this fact.

(75) Furthermore, all cable types are subject to a certain extent to different technical specifications and standards. Regarding the raw materials, the fact that one material used for one component of the OFC may differ from one type of cable to another is irrelevant: all types of OFC are manufactured using optical fibres. Regarding the manufacturing processes, the investigation revealed that certain specially protected designs of standard optical cables had a layer of steel wire around their jacket, and these cables were made on the same machines as OPGW machines. Furthermore, the manufacturing of the armouring of OPGW and OPPC cables only applied to one stage of the construction of these cables, and this did not justify their exclusion from the product scope of the investigation. Furthermore, the fact that the sales of OPGW and OPPC cables represented a smaller portion of sales to the Union during the investigation period is irrelevant for the assessment of the claim. Finally, the Union industry is producing OPGW and OPPC cables as well and therefore is in direct competition with the Chinese exporters for these cables as well.

(76) Based on the foregoing, the Commission concluded that OPGW and OPPC are OFC that have the same basic physical, technical and chemical characteristics as the other OFC that are covered by the definition of the product concerned and therefore no separate analysis for these products was needed. In fact, the product control numbers used by the Commission for the calculation of dumping and injury margins properly identifies OPGW and OPPC cables and adequately enables the Commission to conduct a fair price comparison between Union and Chinese producers. Therefore, the claim was rejected.

(77) The ZTT Group also suggested four methods to address and avoid any possible issues of circumvention in the event that OPGW and OPPC cables were excluded from the product scope of the investigation such as (i) visual inspection and documentary check by customs officials, (ii) system of certification, (iii) end-use control customs procedure and (iv) system of monitoring. As it was concluded that OPGW and OPPC are covered by the investigation, it was not needed to address the suggested methods for preventing circumvention.

3. SUBSIDISATION

3.1. Introduction: Government plans, projects and other documents

(78) Before analysing the alleged subsidisation in the form of subsidies or subsidy programmes, the Commission assessed government plans, projects, and other documents, which were relevant for the sector of the product concerned and/or its inputs and hence represented integral context for the substantive findings. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC’s central planning to encourage the OFC industry for the following reasons.

(79) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist at all levels of government and cover all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in the PRC results in resources being allocated to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (10).

(80) The OFC equipment is regarded as a key product by the GOC, as found in public policy documents and lists (11). Such categorisation is of significant importance as it qualifies given sectors for coverage by a variety of specific policies and support measures designed to spur development in each sector (12). OFC being a key component of internet networks infrastructure, it plays a paramount role in the roll-out of optical fibre networks and broadband internet. The development of the latter in the PRC is guided and managed by numerous plans, directives and other documents, which are issued at national, regional and municipal level, and are mutually interlinked. Examples of such key policy documents include the following plans, projects and other documents.

(81) The 13th Five-Year Plan for National Economic and Social Development of the PRC (‘the 13th Five-Year Plan’), which covers the period 2016-2020, highlights the strategic vision of the GOC for improvement and promotion of key industries. The 13th Five-Year Plan emphasised the GOC’s intention to strengthen the development of strategic high technologies, among which information technology is included in Chapter 6. Chapter 23 further stipulated that information networks, under which OFC fall, are considered a ‘strategic emerging industry’. In this respect, the 13th Five-Year Plan states that the GOC will ‘help ensure rapid development of the production and innovation chains of emerging industries to accelerate industry clustering according to their specific characteristics’ and ‘encourage Chinese enterprises to allocate innovation resources globally’.

(82) Following final disclosure, the GOC claimed that there is no reference to OFC in the 13th Five-Year Plan and that the Commission simply assumed that OFC falls under the categorisation of ‘information networks’. According to the GOC, Chapter 6 of the 13th Five-Year Plan clearly mentions that its focus will be ‘general-purpose’ technologies and Chapter 23 makes no mention of the OFC industry and the term ‘information network’ in Chapter 23 makes it clear that it does not concern OFC or specific products but rather general infrastructure. Likewise, Chapter 25 speaks of ‘optic networks’ and not about specific products, such as OFC.

(83) Chapter 4 ‘The Development Philosophy’ of the 13th Five-Year Plan lists ‘information technology adoption’ among the development priorities. This Chapter defines the focus and priorities in order to achieve the objectives of the 13th Five-Year Plan and the items listed therein are of a strategic importance. Therefore, ‘information technology’ is considered as a key component of the country’s development for the period covered by the 13th Five-Year Plan. Furthermore, the 13th Five-Year Plan refers to ‘information technology’ in numerous Chapters concerning diverse sectors of the economy and society.

(84) Section 2 ‘Strategic Industries’ of Chapter 23 ‘Develop Strategic Emerging Industries’ in the 13th Five-Year Plan provides that ‘we will foster strategic industries in the fields of aerospace, oceanography, information networks, the life sciences, and nuclear technology’ Furthermore, Chapter 25 ‘Build Ubiquitous, Efficient Information Network’ provides that ‘We will accelerate the construction of high-speed, mobile, secure, and ubiquitous next generation information infrastructure and spread the use of information network technology’ which includes ‘new generation high-speed fibre-optic networks’, ‘an advanced and ubiquitous wireless broadband network’, and ‘new information network technology’. In addition, Box 9 provides a list of information technology projects among which is the National Broadband Agenda with a focus to ‘establish a high-speed, high-capacity optical telecommunications system’.

(85) The 13th Five-Year Plan is the key policy document which sets the priorities for national economic and social development of the PRC and as such it underlines the focus areas without necessarily providing all the details for the concrete achievement of the priorities. Therefore, the fact that OFC as such is not mentioned in the 13th Five-Year Plan does not mean that it is not concerned as a key and indispensable component for the achievement of the more general strategic goal of development of information technology and information network infrastructure.

(86) The ‘new generation of information technology industry’, which includes OFC as information and communication device, is also an encouraged industry under the Made in China 2025 initiative (13). In this initiative, the promoted ‘information communication equipment’ is also defined as ‘super high speed and large capacity intelligent optical transmission technology’ and further under ‘Strategic Tasks and Priorities’, priority is given to acceleration of the deployment and construction of ‘fiber optic network’.

(87) By being an encouraged industry in the Made in China 2025 strategy, the OFC industry is eligible to benefit from considerable State funding. A number of funds had been created to support the Made in China 2025 initiative (14) and hence indirectly the OFC industry, such as the National Integrated Circuit fund (15), the Advanced Manufacturing Fund (16) and the Emerging Industries Investment Fund (17).

(88) By including the construction of fibre optic network as one objective in the Made in China 2025 strategy, or in any other strategic planning document, products which are essential to achieve the enhanced and improved expansion of the construction of those networks, such as the optical fibre cables used for transmission, fall under the scope of those strategic plans and are thus beneficiary of the corresponding preferential measures.

(89) Furthermore, OFC is often included under the umbrella of ‘New generation of Information Technology Industry’ and in particular as ‘Information and communication equipment’. The Made in China 2025 Roadmap (18) gives 10 strategic sectors, which are the key industries for the GOC. It describes in Sector 1 ‘New generation of information technology industry’/ 1.2 Information and communication equipment the product categories ‘high-speed and large-capacity optical transmission equipment (400G/1Tbps)’ and ‘high-speed optical access equipment (10G/100Gbps)’ as products that fall under the development priorities of this sector. The new generation of information technology thus benefits from the advantages stemming from the support mechanisms listed in the document, including, among others, financial support policies, fiscal and taxation policy, and State council oversight and support (19).

(90) Furthermore, OFC is related to the category ‘new materials’. In the Made in China 2025 Roadmap in Section 9 ‘new materials’ and its subcategories, including key strategic materials (point 9.2), high performance fibres and composite materials are listed. As can be seen in the Catalogue of High and New Technology Products (2006) in No 6020004 and 6020005, optical fibre products, especially those linked to optical fibre preform, which is a main input material for the production of OFC, are considered to constitute ‘new materials’.

(91) Following final disclosure, the GOC claimed that the Commission did not explain on what basis it considered OFC as ‘new materials’. It stressed that Section 9.2.3 of the roadmap document only refers to ‘high-performance fibres and composite materials’ and that only the main input material for the production of OFC is considered to constitute ‘new materials’ and not OFC as such.

(92) In this respect, the Commission reiterated that in the Catalogue of High and New Technology Products (2006) optical fibre products, including notably optical fibre preform, are considered to constitute ‘new materials’. Optical fibre preform is a key input material with high added value for the production of OFC, representing a substantial part of the cost of production. Therefore, the Commission concluded that since optical fibre preform, which is a semi-finished product of OFC is listed as ‘new material’, there is a direct link between OFC and the category of ‘new materials’.

(93) Additionally, further to the Made in China 2025 Roadmap, in November 2016, the list of 10 strategic sectors was refined into a Catalogue of Four Essentials (20) published by the National Manufacturing Strategy Advisory Committee (NMSAC), an advisory group to the National Leading Small Group on Building a National Manufacturing Power. This group was established by the GOC to develop plans, policies, projects, and work arrangements to promote the development of the manufacturing industry and to coordinate matters across regions and departments (21). In this catalogue, each of the 10 strategic sectors is split into four chapters: (i) core essential spare parts, (ii) key essential materials, (iii) advanced essential processes/technologies and (iv) industry technology platforms. Optical fibre cables can be found under sector 1: new generation information technology, point (i) core basic spare parts, sub-point 38 Ultra-low-loss optical fibre based on 400G bandwidth (mains network) and under point (ii) key basic materials, sub-point 22 New-generation fibre optic materials.

(94) Following final disclosure, the GOC reiterated its position that the 13th Five-Year Plan and the Made in China 2025 initiative are not mandatory or legally binding documents.

(95) In this respect, the Commission pointed out that rather than making only general statements of encouragement, the 13th Five-Year plan uses language which points to its binding nature. In any case, as stated in recital (85), the 13th Five-Year Plan is the key policy document which sets the priorities for national economic and social development and is the basis for various binding legal acts that the authorities need to take into account and implement when adopting new rules or when distributing public resources.

(96) Regarding the Made in China 2025 initiative, it needs to be read in conjunction with the Made in China 2025 Roadmap and considering the funds that had been created to support the Made in China 2025 initiative. Although the Made in China 2025 initiative mainly sets general principles to be followed, its implementation through the disbursement of State funding to certain encouraged industries is binding and makes it specifically targeting such encouraged industries and not generally applicable. In addition, the Made in China 2025 strategy uses wording that implies objectives and targets to be met such as ‘we will speed up the deployment and construction of fiber optic networks’ and ‘we will vigorously promote breakthrough development in key areas’ when referring to ‘a new generation of information technology industry’ including ‘information and communication devices’.

(97) Therefore, the Commission rejected the claims of the GOC.

(98) The OFC industry is also covered by the Intelligent Manufacturing Development Plan (2016-2020) published by the Chinese Ministry of Industry and Information Technology (‘MIIT’) (22), which aims at implementing the 13th Five-Year Plan and has set up 10 key tasks that aim at shortening the product development cycle, improving production efficiency, product quality, reducing operating cost, resources and energy consumption, and accelerating the development of intelligent manufacturing. In 2018, the State Council announced China’s plans to expand its programme for smart manufacturing by adding about 100 pilot projects that same year and according to publicly available information, two companies related to sampled exporting producers, Zhongtian technology precision materials Ltd and Fiberhome Communication Technology, were included on the List of Smart Manufacturing Pilot Demonstration Projects by the MIIT, the first in 2017 (23) and the latter in 2018 (24). Furthermore, one of the cooperating exporting producers, Yangtze Optical Fibre and Cable, was listed as ‘National First Batch Smart Manufacturing Pilot Enterprise’ (25).

(99) There are clear indications that being mentioned on one of these lists, which are related to the Made in China 2025 strategy, is not only a laudatory remark, but that there are financial benefits associated with it. In the document called ‘MOF Notice concerning the transferred amounts for 2017 local industry transformation and upgrade programmes’, there is a corresponding entry in line 151 stating that Fiberhome Communication Technology under the programme ‘New Manufacturing mode of 5G communication network core equipment’ received a subsidy in the amount of 12 million RMB.

(100) Numerous additional documents support the finding that the GOC has created a broad framework of support of internet technology infrastructure and broadband networks that cover inter alia the OFC industry. Already in 2009 in the Plan for the Adjustment and Revitalization of the Electronic Information Industry (26), the GOC explicitly expressed its objective to ‘guide and promote the construction of […] the broadband fiber-optic access network’.

(101) In the Broadband China Strategy of 2013 (27) the GOC formulated the aim to promote ‘access networks […] in accordance with the ideas of high-speed access’ and that ‘in urban areas, access network construction and renovation will be carried out using technical methods such as fibre-to-the-home and fibre-to-the-building’. Also, according to this strategy, the ‘extension of optical fibre to the user side’ shall be promoted and ‘a fixed broadband access network with optical fibre as the main source’ shall be gradually build.

(102) In the chapter in the Broadband China Strategy addressing the policy instruments, the GOC describes the instruments that are used to achieve the goals of this strategy, i.e. making ‘full use of various special funds from the central government to guide relevant local funds to invest in broadband network research and development and industrialization’ and of providing ‘subsidised interest support for loans to eligible broadband construction projects in national development zones in the western region’ and finally of strengthening ‘tax concession support’ and of ‘support [for] the construction of broadband networks’. As set out in recital (80), the Commission considered OFC to be a key component of internet networks infrastructure and indispensable for the set-up of broadband systems.

(103) The Broadband China Strategy does not merely state non-binding objectives with regard to the development of the internet infrastructure. When viewed together with other documents it is clear that financial contributions from the GOC are an essential element used to achieve the objectives of this strategy. In the Opinions on Promoting the Construction of Fiber Optic Broadband Networks (28), it is stated that ‘local governments at all levels are encouraged to provide financial subsidies for the use of fiber-optic broadband in public service institutions’ and that ‘investment and policy support in research and development of core chips, devices, system equipment and applications for fiber-optic broadband communications’ shall be increased and ‘technological innovation in fiber-optic communications’ shall be encouraged.

(104) Following final disclosure, the GOC claimed that the Broadband China Strategy is only a guidance document concerning broadband infrastructure. In this regard, the GOC noted that the Panel in ‘China – GOES’ found that ‘general information about governmental policy, with no direct connection to [a] program at issue, in not “sufficient evidence” of specificity’.

(105) In this respect, the Commission recalled that as stated in recital (102), in the chapter in the Broadband China Strategy addressing the policy instruments, the GOC describes the instruments that are used to achieve the goals of this strategy such as the use of various special funds, subsidised interest support, tax concession support etc. Therefore, the Commission considered in recital (103) that when viewed together with other documents, it is clear that financial contributions from the GOC are an essential element used to achieve the objectives of this strategy. Therefore, even though Broadband China Strategy is claimed to be of a guidance nature, its implementation through the disbursement of State funding to certain encouraged industries only makes it binding and specifically targeting such encouraged industries and not generally applicable. In any event, the reference to the Panel Report in ‘China – GOES’ is not decisive as concerns specificity, because in this case the numerous plans and policy documents issued by GOC covered in this section provide specific guidance and support for the product concerned. Therefore, the claim was rejected.

(106) In the Guiding Opinions of the State Council on Actively Promoting the ‘Internet Plus’ (29) from 2015, a clear objective is formulated by stating that this document shall help to ‘accelerate the implementation of the “Broadband China” strategy, organize and implement the national new generation information infrastructure construction project [and] promote the transformation of fiber optic broadband network.’ And the way to achieve this goal is described under ‘(6) Strengthen guidance and support’ where it is elaborated that fiscal and taxation support shall be increased and tasks are specified such as ‘actively invest in the research and development and application demonstration of qualified “Internet +” integrated innovation key technologies. Coordinate the use of existing financial special funds to support the construction of “Internet +” related platforms and application demonstrations.’

(107) In 2015, the GOC furthermore outlined the plan for financial investments foreseen to ‘speed up infrastructure construction’ in the ‘Guidance from the General Office of the State Council on Speeding up the Construction of High-Speed Broadband Networks and Promoting the Speed Reduction of Network Speed-up Fees’ (30). In this document it is stated that the GOC, in order to achieve this objective ‘will accelerate the construction of all-fiber network cities and fourth-generation mobile communications (4G) networks, with more than 430 bil yuan invested in network construction in 2015 and no less than 700 bil yuan in 2016-2017’ and ‘promote the fiber-to-the-home process, complete the fiber-optic transformation of 45 000 copper cable access zones in 2015, and [to] build more than 80 million new fiber-to-the-home households.’

(108) The approach of the GOC to define encouraged industries and products in catalogues in order to allocate resources accordingly, based on their strategic or political importance as attributed by the GOC, and to implement and supervise the plans at each administrative level can be further observed by examining the Catalogue of Strategic and Emerging Products and Services of the National Development and Reform Commission (NDRC) from 2016 (31). Again, the establishment of a new generation of IT industry is envisaged, including a new generation of information network industry. To achieve this objective, certain products are included in the catalogue of strategic and emerging products. OFC clearly is one of the products as the reference to ‘Optical communication equipment. Including fiber’ is unequivocal. The enumeration of technological specificities of the equipment concerned, such as ‘G.657 fiber for FTTx, large effective area G.655 fiber, G.656 fiber, low-loss and ultra-low-loss light that meets G.652 standards Fiber, […] Optical transmission equipment, single channel line rate 10Gbit/s, 40Gbit/s, 100Gbit/s, 200Gbit/s, 400Gbit/s’ show not only that OFC is considered a strategic and emerging product by the GOC but also the degree of detailed planning by the GOC that extends to the level of certain technological products.

(109) The same approach – to define objectives in plans and further implementing them by defining technical details in catalogues – is used in the Catalogue of High and new Technology Products (32), where OFC are covered as communication product in No 1020011, which includes ‘SDH optical fiber transmission system with single-mode fiber transmission medium, high-speed data transmission channel, the transmission rate of 10Gbit / s and 40Gbit / s, for communication lines and metro backbone network’. Already in 2003, OFC was listed in the Catalogue of Encouraged Hi-Tech Products for Foreign investment in the category Communication Equipment and Products (33) under number 42 as ‘10Gb/s and above SDH fiber communication equipment’.

(110) Following final disclosure, the GOC and Connect Com claimed that the Commission did not demonstrate that the various documents mentioned in Section 3.1 ‘specifically’ support or encourage the OFC industry although Article 4(2)(a) of the basic Regulation requires the Commission to demonstrate that a GOC document ‘explicitly limits access’ to certain enterprises and that such a requirement under Article 2.1(a) of the SCM Agreement entails the demonstration of a limitation that is ‘express…unambiguous and clear’ (34). Connect Com further referred to Article 4(5) of the basic Regulation which requires that specificity must be clearly justified on the basis of positive evidence and claimed that the Commission did not meet this requirement. The GOC further argued that the Commission bases itself on the incorrect assumption that if network infrastructure is supposedly encouraged, everything that makes up that network is encouraged. The GOC stated that numerous documents mentioned by the Commission, such as the 13th Five-Year plan, the Made in China 2025 initiative, the Intelligent Manufacturing Development plan (2016-2020), the 2009 Plan for Adjustment and Revitalization of the Electronic Information industry and the Broadband China Strategy of 2013, do not concern the product OFC or the OFC industry but rather downstream networks or the deployment of broadband, i.e. general infrastructure. According to the GOC, given that building networks requires many inputs and products, the Commission should clearly explain exactly which products and services making the infrastructure it considers to be encouraged. Additionally, the GOC claimed that the ‘roll-out’ of the network or broadband is not related to goods but rather to infrastructure development and services, since such roll-out concerns the improvement of general telecommunication services.

(111) The Commission disagreed. As explained in recital (80), OFC is a key component of internet networks infrastructure and it plays a paramount role in the roll-out of optical fibre networks and broadband internet. The broadband infrastructure refers to networks of deployed telecommunications equipment and technologies necessary to provide high-speed internet access and other advanced telecommunication services (35) and OFC is a main part of the transmission equipment. Therefore, the building of the broadband infrastructure and networks requires the use of products necessary to the transmission of data and does not consists mainly in the provision of services as the GOC seems to imply. Actually, the provision of services would be the result of the existence of such infrastructure once built. Therefore, if the building of the broadband infrastructure is encouraged by the GOC, key products which are indispensable for the building of such infrastructure and which form an integral part of it are also encouraged by the GOC. The Commission is of the opinion that the normative framework resulting from the implementation of the various documents mentioned in Section 3.1 ‘explicitly limits access’ to a preferential treatment to certain enterprises in encouraged industries, such as the OFC industry which is part of the information technology and broadband networks. Consequently, the various documents that were mentioned in Section 3.1 constituted sufficient positive evidence to conclude the specificity of the support and encouragement of the OFC industry by the GOC. Therefore, the claims of the GOC and Connect Com were rejected.

(112) Furthermore, according to the GOC, internet access networks and broadband infrastructure are general infrastructure. The GOC made reference to the interpretation of ‘general infrastructure’ by the Panel in ‘EC and certain Member States – Large Civil Aircraft’as ‘infrastructure that is not provided to or for the advantage of only a single entity or limited group of entities, but rather is available to all or nearly all entities’. The GOC further argued that the Appellate Body in ‘US – Softwood Lumber IV’ confirmed that ‘only explicit exception to the general principle that the provision of “goods” by a government will result in a financial contribution is when those goods are provided in the form of “general infrastructure.”‘

(113) In this respect, the Commission pointed out that the interpretation of ‘general infrastructure’ to which the GOC referred relates to the definition of provision of goods by a government in the form of general infrastructure. This interpretation does not relate to the specificity analysis of a subsidy programme. Moreover, the object of this investigation is not the provision of optical fiber cable by a government, which GOC claimed to be ‘general infrastructure’, but rather all the countervailing subsidies granted to the exporting producers of OFC, which in turn export this OFC to telecom operators in the Union. Therefore, the Commission considered the claim as unfounded and irrelevant for the assessment of the encouragement of the OFC industry by the GOC and therefore rejected it.

(114) Following final disclosure, Connect Com claimed that the general funding for the expansion of the fibre optical network does not represent a specific subsidy for OFC and referred to recital (749) below according to which, OFC do not make up more than 5 % of the total volume of optical fibre network.

(115) In this respect, the Commission stressed that recital (749) reads as follows: ‘the investigation established that OFC represents only a minor share of the total rollout cost of digital networks projects - in the case of 5G being much less than 5 %’. First, this statement refers to the cost of production and not to the volume. Second, the fact that OFC might represent a minor share of the total rollout of the network does not invalidate the fact that OFC is a key and indispensable product for the deployment of such network. As explained at recitals (80) and (111), OFC is an integral component of the last-generation high-speed broadband networks based on this technology, which therefore would not be able to function without it. Subsidies to this key component are thus by definition specific and instrumental for the successful functioning of the whole optical fibre network. Therefore, the claim was rejected.

(116) Furthermore, the Temporary Provisions on Promoting Industrial Structure Adjustment (Decision No 40 from 2005 of the State Council) (‘Decision No 40’), Chapter III refers to ‘The Guiding Catalogue for Industry Restructuring’ which is composed of three kinds of contents, namely encouraged project contents, limited projects content and eliminated projects content. According to Article XVII of the Decision, if ‘the investment project belongs to the encouragement content it shall be examined and approved and put on records according to the relevant national regulations on investment; all financial institutions shall provide credit support according to the credit principles; the self-using equipment imported in the total amount of investment, with the exception of commodities in the Non-exempt Imported Commodities Content of Domestic Invested Projects (amended in 2000) issued by the Ministry of Finance, can be exempt from import duty and import links value-added tax, unless there are new regulations on the non-exempt investment projects content. Other favorite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations’.

(117) Consequently, Decision No 40 read together with the Guiding Catalogue for Industry Restructuring provides for specific treatment of certain projects within certain encouraged industries.

(118) The Guiding Catalogue for Industry Restructuring (2011 Version)(2013 Amendment) (36) and the Guiding Catalogue for Industry Restructuring (2019 Version) (37) approved by Decree of the National Development and Reform Commission of the People’s Republic of China No 29 of 27 August 2019, which entered into force on 1 January 2020, list under ‘Category I Encouragement’: ‘XXVIII. Information Industry […] 13. Equipment manufacture of wavelength division multiplexing (WDM) optical fiber transmission systems with a speed of 32 waves or more; 14. Equipment manufacture of digital synchronization series optical fiber communication systems with a speed of 10GB/S or more; […] 28. Manufacture of new (non-dispersive) single-mode fiber and optical fiber preforms ’

(119) Therefore, the Guiding Catalogue for Industry Restructuring includes under ‘information industry’ specific projects related to the OFC industry as encouraged.

(120) The GOC claimed that Decision No 40 is not mandatory or legally binding, but instead is merely a guidance document. In addition, according to the GOC, Article V of Decision No 40, which refers to ‘[s]trengthen the construction of information infrastructure including broadband communication’, clearly concerns only the improvement of infrastructure and does not mention OFC. Thus, the GOC argued that this document could not have provided support or encouragement to the OFC industry.

(121) First, the Commission disagreed that Decision No 40 has no mandatory effect. Indeed, Decision No 40 lays down the temporary regulations promoting the industrial restructuring and it refers to ‘The Guiding Catalogue for Industry Restructuring’, which defines three kinds of content: encouraged projects content, limited projects content and eliminated projects content. Article XVII of Decision No 40 establishes the treatment of investment projects belonging to the encouraged content in a mandatory manner, e.g. ‘all financial institutions shall provide credit support according to the credit principles’ and ‘other favourite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations’. Furthermore, Article XXI sets that ‘the relevant preferential policies implemented according to The Content of Industries, Products and Technologies Currently Especially Encouraged by the State (amended in 2000) shall be adjusted to be implemented according to the encouragement content of The Guiding Catalogue for Industry Restructuring’. Therefore, Decision No 40 has a mandatory effect in this respect.

(122) Second, Article V of Decision No 40, which belongs to Chapter II ‘Orientation and Priorities of Industrial Restructuring’, sets as priority to strengthen the ‘construction of information infrastructure including broadband communication’ and as demonstrated in recital (80) and further explained in recital (111), OFC is a key and indispensable component of such infrastructure. As concluded by the Commission in recital (111), if the building of the broadband infrastructure is encouraged by the GOC, key products which are indispensable for the building of such infrastructure and form an integral part of it are also considered encouraged by the GOC. Furthermore, Article XIV of Decision No 40, which belongs to Chapter III ‘The Guiding Catalogue of the Industrial Restructuring’, states that: ‘the encouragement content mainly includes the key technologies, equipment and products that may promote the social and economic development, that are beneficial for saving the resources, protecting the environment and optimizing and upgrading the industrial structure and that need to be encouraged and supported by relevant policies and measures’. As already pointed out in recital (118), information industry and in particular key input materials for the production of OFC such as single-mode fibre and optical fibre preforms as well as upstream products such as optical fibre transmission systems and optical fibre communication systems are listed as encouraged content. Furthermore, OFC is key equipment for the deployment of ‘information infrastructure including broadband communication’, which is encouraged by the GOC. Therefore, the combined reading of the above provisions shows that OFC is an encouraged product, on the one side because it is an indispensable component of an encouraged infrastructure and on the other side, because its core input materials, which determine the added value of OFC, are also encouraged by the GOC. Therefore, the claim was rejected.

(123) Not only plans and strategies on national level target at supporting the OFC industry. On provincial level so called National High Tech Industry Development Zones were established. One of them is the East Lake New Technology Industry Development Zone. Those zones are intended to, as set out in Section I.2 of the 13th Five Year Plan on National High Tech Industry Development Zones, provide a regional platform in order to implement in-depth national strategies such as ‘Internet +’ and ‘Made in China 2025’ (38). Companies and enterprises that are located in one of those zones and qualify as an entity conducting business that falls under the scope of the respective strategies enjoy beneficial treatments. As can be seen in the document concerning ‘Preferential policies of the National High-tech Industrial Development Zone’ (39), a general exemption for income tax is awarded within two years from the date of establishment and also afterwards preferential treatments continue with granting a reduced corporate income tax rate, an exemption from export tariffs and other tax benefits.

(124) The benefits granted for companies operating in high-tech industry located in the National High-tech Industrial Development Zone are not limited to tax benefits but also include direct financial support. As can be seen in the cited document that sets out the preferential policies of the National High-tech Industrial Development Zones it is up to the State to ‘arrange[…] a certain amount of capital construction loans and investment scale each year, and can issue a certain amount of long-term bonds to raise funds from the society’ (40). A more precise description is provided in this document when it states that ‘[t]he financial support of the Chinese government for the high-tech industrial development zone is mainly to give certain start-up funds to the national-level development zones, and to implement some national-level planned projects to enterprises in the development zones. In most development zones in China, the local government mainly supports the development zone by renting land at low prices’.

(125) Furthermore, the ‘Preferential policies for the national development zones’ refer to the Catalogue of Key High Tech Fields Supported by the State from 2016 that lists the supported key high technology fields. This catalogue clearly mentions under ‘I. Electronic Information’, point 4. ‘Communication technology’‘optical transmission network’ and ‘optical transmission system technology’, which cover optical fibre cables, as high technology fields supported by the State. One of the sampled exporting producers of OFC is located in Wuhan Province and most of the companies in the group are located in the East Lake New Technology Industry Development Zone. Therefore, these companies qualify for beneficial treatments that are granted under the scheme of National High Tech Industry Development Zones.

(126) This GOC-backed special industry development zone in Wuhan - the East Lake New Technology Industry Development Zone - served as a major production base for OFC. As one of the State Council-approved ‘National High-tech Industry Development Zones’ and a ‘National Indigenous Innovation Demonstration Zone’, it became the PRC’s first optoelectronics industry base (also called ‘China Optics Valley’). OFC producers active in the zone have been benefitting from various forms of incentives and State support.

(127) With regard to inputs used in the production of OFC, the Commission found that aramid, a chemically obtained synthetic fibre and input in the production of OFC, is categorised as a key product by the GOC in the Guiding Catalogue of key products and services in strategic emerging industries (41). This qualification has put the latter raw material in focus of various GOC policies.

(128) More broadly, chemical fibres are subject to State regulation and market-management policies not only centrally but also under sub-central planning documents, such as the Zhejiang Province’s Action Plan for Comprehensive Transformation and Upgrade of Traditional Manufacturing industries - where chemical fibres feature as one of the 10 key industries subject to specific policy management (42), or the 13th Five-Year Plan for the Development of the Chemical Industry in Jiangsu Province (2016 – 2020). In the provisions of the latter concerning new chemical materials, the focus is placed notably on supporting the development and industrialisation of high-value added downstream applications such as ‘high performance fibres’, which encompasses fibres used in the production of OFC.

(129) Following final disclosure, the GOC claimed that various documents cited by the Commission such as the ‘Catalogue of Four Essentials’, the ‘Catalogue of Strategic and Emerging Products and Services of the National Development and Reform Commission 2016’ and the ‘Guiding Catalogue for Industry Restructuring’ do not mention OFC as such but rather refer to input materials. The GOC further stated that the Commission did not carry out a pass-through or pass-back analysis to demonstrate that alleged subsided received by upstream or downstream industries have been passed to the OFC industry.

(130) With regard to upstream industries, the Commission noted that the sampled exporting producers were vertically integrated and therefore subsidies received by their related suppliers were considered to be passed-through to the exporting producers of OFC. Furthermore, the documents mentioned by the GOC as covering the input materials of OFC, even assuming that they do not also cover at least indirectly or implicitly OFC, quod non, are in any event relevant in together with all other preferential policies and documents by the GOC covered in this section. All the documents in this section cover either optical fibre networks in which OFC is a key component, or its main inputs, hence showing how the OFC sector as a whole is encouraged starting from the upstream production until the downstream output of the product concerned. These documents are also relevant to show specificity of the various subsidy programmes. A pass-through analysis is needed only for subsidies actually granted to raw materials supplied at less than adequate remuneration and used by the exporting producers for the production of the product concerned, and only if the seller and the buyer of these input materials are unrelated. As explained below in Section 3.8.2, raw materials sourced by unrelated suppliers at less than adequate remuneration have not been countervailed in this investigation. Furthermore, as stated above in this recital, the cooperating exporting producers are mainly integrated.

(131) Considering the above-mentioned plans and programmes, the OFC industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective. OFC stands out as a product of paramount importance for the GOC in the building of networks and infrastructure serving entire strata of key connectivity and digital policy areas developed and overseen by the State. On the basis of the policy documents referred to in this section, the Commission concluded that the GOC intervenes in the OFC industry to implement the related policies and interferes with the free play of market forces in the OFC sector, notably by promoting and supporting the sector through various means.

3.2. Partial non-cooperation and use of facts available

(132) Following final disclosure, the GOC made some general remarks concerning the Commission’s decision to apply the provisions of Article 28(1) of the basic Regulation with regard to preferential lending, export credit insurance, and input materials.

(133) The GOC claimed that all of the Commission’s requests for information to which the GOC could not provide responses, were unreasonable, since these requests assumed the existence of legal powers which the GOC did not possess.

(134) Furthermore, the GOC argued that the Commission did not properly evaluate the facts before it and did not provide a proper explanation of why the facts available reasonably replaced any necessary information that was missing.

(135) As set out below in recitals (146), (160) and (168), the Commission was of the opinion that the GOC did have the legal power to obtain the requested information, as shareholder or responsible authority of the entities for which the Commission requested the information. The Commission did set out in its communication to the GOC, repeated in sections 3.2.1 to 3.2.3 below, why it had to rely on facts available. The Commission considered publicly available information to be a reasonable replacement for the information that was not provided by the GOC. The Commission therefore rejected the claims of the GOC.

3.2.1. The application of the provisions of Article 28(1) of the basic Regulation in relation to preferential lending

(136) For administrative convenience, the Commission requested the GOC to forward specific questionnaires to any financial institution that provided loans or export credits to the sampled companies.

(137) At first, only a reply from EXIM bank was received. The GOC did not respond to the Commission’s request to provide questionnaire replies of all financial institutions that provided loans or export credits to the sampled companies. In the deficiency letter, the Commission therefore repeated its request with regard to the financial institutions with a view to maximising the possibilities to engage them in the investigation by providing the necessary information for the Commission to make findings on the existence and extent of the alleged subsidisation.

(138) Following the deficiency letter, the GOC indicated that questionnaire responses from the financial institutions that provided loans were not relevant to the investigation, since none of the loans and export credits were granted in accordance with the government plans and projects as alleged in the complaint and set out in the questionnaire.

(139) The Commission disagreed with this view. First, it is the Commission’s understanding that the information requested from State-owned entities is available to the GOC for all entities where the GOC is the main or major shareholder. In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority.

(140) In the end, the Commission only received information on corporate structure, governance and ownership from one State-owned bank but not from any of the other financial institutions which had provided loans to the sampled companies. Moreover, the Commission did not receive any verifiable company-specific information from the banks, other than the EXIM Bank.

(141) Furthermore, although EXIM Bank provided some general explanations on the functioning of their loan approval and risk management systems, it did not provide specific information concerning the assessment of the loans provided to the sampled companies. It argued that it was not in a position to disclose these documents, as they were considered internal and business confidential.

(142) Therefore, the Commission asked the sampled groups of exporting producers to grant access to company-specific information held by all banks, State-owned and private, from which they received loans. Although the sampled companies gave their agreement to provide access to the bank data pertaining to them, the partially cooperating bank refused to provide the required detailed information.

(143) Since it has received no information in relation to most of the banks that provided loans to the sampled companies, the Commission considered that it has not received crucial information relevant to this aspect of the investigation.

(144) Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

(145) In the reply to the Commission’s letter, the GOC objected to the application of Article 28(1) of the basic Regulation. It argued that the GOC is not obliged to provide the requested information and that the requested information does not constitute necessary information.

(146) The Commission maintained its position that as the regulatory body, the GOC is the authority to provide answers to the specific questions asked to the financial institutions that provided financing to the sampled exporting producers. As set out in the Commission’s letter, the information requested from State-owned entities is available to the GOC for all entities where the GOC is the main or major shareholder and the GOC has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority.

(147) Furthermore, the Commission considered the requested information to be crucial to assess the control of the GOC over the conduct of the financial institutions with respect to its lending policies and assessment of risk, where they provided loans to the OFC industry.

(148) Following final disclosure, the GOC claimed that the information by the Commission with regard to information from financial institutions providing loans or export credits to the sampled companies was not necessary, or even relevant, for the Commission to complete its analysis, since none of the loans at issue were granted pursuant to government plans or other GOC documents.

(149) The missing information concerned two aspects. First, the information on the ownership and governance structure of the non-cooperating banks was necessary for the Commission to determine whether these banks are public bodies or not. Second, company-specific information from the partially cooperating bank, EXIM Bank, such as the loan approval process and the creditworthiness assessment by the bank for the loans provided to the sampled exporting producers, were necessary in order to determine whether loans were provided at preferential rates to these producers. Such internal documents could only have been provided by the banks and the GOC, since the sampled exporting producers would not have access to them.

(150) The GOC also argued that the requested information was not available to it. The GOC asserted that it was legally impossible to obtain the requested information, because there is no basis in Chinese law for the GOC to compel financial institutions to divulge such confidential information. By requesting this information, the Commission placed an unreasonable burden on the GOC.

(151) The Commission noted that consent was requested separately from each company for the loan transactions of each specific bank. The Commission considered that such a specific consent should be sufficient as such to grant access to the records related to the sampled companies. In addition, the partially cooperating bank actually provided an overview of their outstanding loans with the companies, thus showing that they were not restricted in providing information as such on specific transactions. However, none of the banks provided any information related to their own internal assessment of the transactions that had been disclosed.

(152) Finally, the Commission did not consider that it had imposed an unreasonable burden on the GOC by asking the information on preferential lending. From the start, the Commission had limited its investigation to those financial institutions that had provided loans to the sampled companies. The Commission did identify these financial institutions and the request to forward the questionnaires was provided to the GOC together with the questionnaire to be filled in by the GOC at an early stage of the investigation. This provided ample time for the GOC to comply with the request of the Commission. Therefore, the Commission considered that it had done its utmost best to facilitate its request to the GOC.

(153) The Commission thus maintained that it had to rely partially on facts available when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

(154) Following final disclosure, the complainant argued that the Commission did not receive crucial information from the GOC in relation to preferential lending, which has resulted in subsidy margins that likely under-represent the true benefit from preferential loans conferred on the exporting producers.

(155) The sampled exporting producers did cooperate in the investigation and provided detailed information on the loans they received from the banks. Since the benefit was calculated on the basis of the difference between this information and a benchmark interest rate, the subsidy margin was considered to represent the true benefit conferred on the sampled exporting producers. Therefore, the claim had to be rejected.

3.2.2. The application of the provisions of Article 28(1) of the basic Regulation in relation to export credit insurance

(156) For administrative convenience, the Commission requested the GOC to forward a specific questionnaire to Sinosure.

(157) In its initial questionnaire reply, the GOC claimed that Sinosure did not provide subsidies to the OFC industry and it considered that the specific questionnaire intended for Sinosure was not relevant. The GOC only provided the annual report of Sinosure.

(158) Following the deficiency letter, the GOC reiterated its view that Sinosure did not provide subsidies specific to the sampled exporting producers or the OFC industry, although it provided a partial reply to the specific questionnaire. However, neither the GOC nor Sinosure gave any of the supporting documentation requested concerning Sinosure’s corporate governance, such as its Articles of Association, and provided a complete and correct list of the export credits provided to the sampled exporting producers. Furthermore, no specific information about the export credit insurance provided to the OFC industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business were received from the GOC or Sinosure.

(159) In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

(160) It is the Commission’s understanding that the information requested from State-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. This is also the case for Sinosure, which is a fully State-owned entity. Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through export credit insurance.

(161) In the reply to the Commission’s letter, the GOC maintained its position that Sinosure did not provide subsidies specific to the OFC industry and that it follows the market-oriented principle to carry out relevant insurance business and has no specific preferential treatment concerning the OFC industry as requested by any policy documents.

(162) The information that the GOC provided with regard to Sinosure was incomplete and did not allow the Commission to draw conclusions on crucial parts of the investigation regarding export credit insurance, specifically whether Sinosure is a public body and whether the premiums charged to the sampled companies were market conform.

(163) Following final disclosure, the GOC argued that all necessary information was submitted to the Commission and, since Sinosure did not provide subsidies that are specific to the OFC industry, the information requested was not relevant in the current investigation.

(164) As set out in recital (162), the Commission did not receive information from Sinosure to assess the correctness of the claim by the GOC that Sinosure was not a public body and whether the premiums charged by Sinosure were market conform. This information was considered necessary to allow the Commission to draw a conclusion whether the export credit insurance provided by Sinosure established a countervailable subsidy that conferred a benefit to the sampled exporting producers.

(165) The Commission thus concluded that it had to rely partially on facts available for its findings concerning export credit insurance.

(166) Following final disclosure, the complainant argued that the Commission did receive incomplete information from the GOC in relation to Sinosure, not allowing to draw conclusions on crucial parts of the investigation regarding export credit insurance. As a result, the subsidy rate calculated for each sampled exporting producer could very likely under-represent the true benefit from export credit insurance conferred on the exporting producers. The complainant considered that the Commission should apply the highest rate found for one exporting producer automatically to the other exporting producer.

(167) The sampled exporting producers did cooperate in the investigation and provided detailed information on the export credit insurance they received from Sinosure. Since the benefit was calculated on the basis of the difference between this information and an appropriate external benchmark, the subsidy amount was considered to represent the actual benefit conferred on the sampled exporting producers. Therefore, the claim had to be rejected.

3.2.3. Use of facts available in relation to input materials

(168) The Commission requested the GOC to forward a specific questionnaire to the top 10 producers and distributors of the input materials used in the production of OFC, as well as to any other suppliers of the materials in question, which have provided inputs to the sampled companies. In its reply to the questionnaire, the GOC claimed that it does not have control over the input materials suppliers to request that they provide the confidential information requested in the questionnaire and that it would be an unreasonable burden for the GOC to coordinate with a very significant number of input materials suppliers of the sampled companies. The Commission found on the basis of publicly available data, however, that the main germanium producers are (partially) State-owned, as set out in Section 3.8.2. Thus, the GOC was in a position to provide the requested information.

(169) Upon request by the Commission, the GOC provided government plans and notices issued by the Yunnan Province Government affecting the germanium industry. Yet, the GOC refused to comply with the Commission’s request to forward the questionnaire to input suppliers in order to get more detailed information on the ownership structure of the enterprises manufacturing and supplying the input materials in question. Therefore, because of the only partial cooperation of the GOC in respect to input materials used in the production of OFC, the Commission did not obtain the necessary information about the input suppliers.

(170) Following final disclosure, the GOC claimed that the Commission illegally used facts available with respect to information from input material producers and distributors, arguing that it is unreasonable to expect the GOC to coordinate with uncountable input producers.

(171) The Commission exceptionally only asked further questions in its deficiency letter to the