COMMISSION IMPLEMENTING REGULATION (EU) 2019/1379

of 28 August 2019

imposing a definitive anti-dumping duty on imports of bicycles originating in the People's Republic of China as extended to imports of bicycles consigned from Indonesia, Malaysia, Sri Lanka, Tunisia, Cambodia, Pakistan and the Philippines, whether declared as originating in these countries or not, following an expiry review pursuant to Article 11(2) of Regulation (EU) No 2016/1036

THE EUROPEAN COMMISSION,

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

Having regard to Council Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 11(2) thereof,

Whereas:

1. PROCEDURE

1.1. Measures in force

(1) By Regulation (EEC) No 2474/93 (2) (‘the original investigation’), the Council imposed a definitive anti-dumping duty of 30,6 % on imports of bicycles originating in the People's Republic of China (‘the PRC’ or ‘the country concerned’). Following an anti-circumvention investigation, this duty was extended by Council Regulation (EC) No 71/97 (3) to imports of certain bicycles parts originating in the PRC. An ‘exemption scheme’ for certain bicycle parts was introduced by Commission Regulation (EC) No 88/97 (4). Several investigations followed since then, amending the initial measures.

(2) The measures currently in force are definitive anti-dumping duties imposed by Council Regulation (EU) No 502/2013 (5). The anti-dumping duties currently in force range from 0 % to 48,5 % (‘the measures in force’). The investigation that led to the imposition of the measures in force will hereinafter be referred to as ‘the previous review investigation’.

(3) The Council, by Implementing Regulation (EU) No 501/2013 (6), also extended the measures on imports of bicycles originating in the PRC to imports of bicycles consigned from Indonesia, Malaysia, Sri Lanka and Tunisia, whether declared as originating in Indonesia, Malaysia, Sri Lanka and Tunisia or not. Several exemptions to genuine exporting producers in these countries were granted in the framework of this investigation.

(4) The Commission, by Implementing Regulation (EU) 2015/776 (7), extended the measures on imports of bicycles originating in the PRC to imports of bicycles consigned from Cambodia, Pakistan and the Philippines, whether declared as originating in Cambodia, Pakistan and the Philippines or not. Several exemptions to genuine exporting producers in these countries were granted in the framework of this investigation.

(5) On 14 December 2017 (8), the Court of Justice of the European Union confirmed the judgment of the General Court of the European Union that annulled the Regulation imposing the anti-dumping measures as far as the applicant, Giant Co. Ltd., was concerned. Therefore Giant Co. Ltd. is outside of the scope of the measures and did not fall within the scope of this investigation.

(6) The Commission, by Implementing Regulation (EU) 2018/49 (9), amended the measures on imports of bicycles originating in the PRC following a new exporter review pursuant to Articles 11(4) and 13(4) of the basic Regulation.

1.2. Initiation of an expiry review

(7) Following the publication of a notice of impending expiry of the definitive anti-dumping measures in force (10), the European Bicycle Manufacturer's Association (‘EBMA’ or ‘the applicant’) lodged a request for the initiation of an expiry review of these measures pursuant to Article 11(2) of the basic Regulation. The request was lodged on 5 March 2018. The applicant acts on behalf of EU bicycle producers representing more than 45 % of the total Union production of bicycles. The request was based on the grounds that the expiry of the measures would be likely to result in a continuation or recurrence of dumping and injury to the Union industry.

(8) On 4 June 2018, the Commission announced, by a notice published in the Official Journal of the European Union (11) (‘the Notice of Initiation’), the initiation of an expiry review of the anti-dumping measures applicable to imports of bicycles originating in the People's Republic of China pursuant to Article 11(2) of the basic Regulation.

1.3. Investigation

1.3.1. Review investigation period and period considered

(9) The investigation of a likelihood of continuation or recurrence of dumping covered the period from 1 April 2017 to 31 March 2018 (‘the review investigation period’ or ‘RIP’). The examination of the trends relevant for the assessment of the likelihood of continuation or recurrence of injury covered the period from 1 January 2014 to the end of the review investigation period (‘the period considered’).

1.3.2. Interested parties

(10) In the Notice of Initiation, the Commission invited all interested parties to participate in the investigation. In addition, the Commission officially informed the following parties of the initiation of the expiry review: the applicant, the known producers in the Union and their relevant associations, the known exporting producers in the PRC, the known unrelated importers in the Union, the suppliers of parts and the association of users in the Union known to be concerned and the authorities in the PRC.

(11) All interested parties were invited to make their views known, submit information and provide supporting evidence within the time limits set out in the Notice of Initiation. Interested parties were also granted the opportunity to request in writing a hearing by the Commission investigation services and/or the Hearing Officer in trade proceedings.

1.3.3. Sampling

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

1.3.3.1. Sampling of Union producers

(13) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers, in accordance with Article 17(1) of the basic Regulation. Prior to the initiation, more than 70 Union producers had provided the information requested for the selection of the sample and expressed their willingness to cooperate with the Commission. On that basis, the Commission had provisionally selected a sample of three producers, which were found to be representative of the Union industry in terms of volume of sales and production of the like product in the Union. The sampled Union producers accounted for 22 % of the estimated total production of the Union industry and for 21 % of the total sales volume of the Union industry to unrelated customers in the Union during the period 1 January 2017 to 31 December 2017. The Commission invited the interested parties to comment on the provisional sample. No comments were received.

(14) Further to the initiation of the case, it appeared that a number of Union producers were sub-contracting partly or fully the production process to third-party companies operating under tolling agreements (‘tollers’). For this reason, the Commission requested additional information from the ten largest Union producers concerning their business models and production volumes. In light of the new information received, the Commission decided to include two more Union producers in the sample in order to cover the various business models applicable in the EU. The final sample covered 27 % of the estimated total production volume and 26 % of the estimated total sales volume to unrelated customers in the Union, during 2017. No further comments were received. The sample was considered representative for the Union industry.

1.3.3.2. Sampling of unrelated importers

(15) In order to enable the Commission to decide whether sampling was necessary and, if so, to select a sample, all unrelated importers were invited to participate in this investigation. They were requested to make themselves known by providing the Commission with the information on their companies listed in the Annex II of the Notice of Initiation.

(16) In addition, 75 importers identified in the review request were contacted by the Commission at the stage of the initiation and were invited to explain their activity and to fill Annex II of the Notice of Initiation. None of them came forward.

1.3.3.3. Sampling of producers in the PRC

(17) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all known producers of the product under review in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People's Republic of China to the European Union to identify and/or contact other producers, if any, that could be interested in participating in the investigation.

(18) Six exporting producers/producers came forward following the initiation of the proceeding, of which one subsequently withdrew its cooperation. Only two of the remaining five cooperating exporting producers/producers exported bicycles to the Union during the review investigation period.

(19) In accordance with Article 17(1) of the basic Regulation, the Commission selected a representative sample of three groups of exporting producers/producers based on the largest declared volume of exports, both to the EU and third countries, and production of the product under review during the review investigation period.

(20) On this basis, the three sampled groups of Chinese exporting producers/producers account for about 89 % of the overall declared production and sales of the five cooperating companies/groups of companies. In overall terms, the three sampled groups account for 18 % of the sales of bicycles from the PRC to the EU and 1 % of the production of bicycles in the PRC during the review investigation period.

(21) Parties were given the opportunity to comment on the proposed sample. The Commission received comments only from the applicant. First, the applicant claimed that the producers that came forward are not Chinese bicycle producers, as they are related to Taiwanese companies. Second, the applicant argued that the sampled companies and the companies that came forward are not typical Chinese bicycle producers, not being located in the three main centres of the Chinese bicycle industry. Third, the applicant argued that the sampled companies and the companies that came forward do not produce entry-level bicycles. Fourth, the applicant argued that two of the sampled companies are subject to an ad valorem anti-dumping duty of zero percent.

(22) The Commission noted that the applicant did not provide any evidence that the location would make a difference in the production types or costs nor that the selected companies do not produce entry-level bicycles. Moreover, the Commission could ascertain that the sampled exporting producers manufactured also entry-level bicycles.

(23) Moreover, in selecting the sample, the Commission was bound by the provisions of Article 17 of the basic Regulation to select a representative sample from the companies that came forward. Within those cooperation companies, the Commission clarified that despite the company ownership, location and product range, all the companies selected for the sample produced bicycles in the PRC during the review investigation period.

(24) The claims on sampling made by EBMA were therefore rejected.

1.3.3.4. Questionnaires and verification visits

(25) The Commission sent questionnaires to the five sampled Union producers, the three sampled exporting producers, the applicant and the Government of China (‘GOC’). The five sampled Union producers, along with their ten tollers, the three sampled exporting producers and the applicant replied to the questionnaire.

(26) The Commission verified all the information it deemed necessary for a determination of the likelihood of a continuation or recurrence of dumping and injury and of the Union interest. Verification visits were carried out at the premises of the following interested parties: (a) Union producers: — Denver Bike, Italy — Maxcom EOOD, Bulgaria — MFC (Manufacture Française du Cycle), France — RGVS Ibérica Lda, Decathlon group, Portugal — Sprick Rowery Spółka z o.o., Poland (b) Union tollers (sub-contractors) — A. J. Maias SA, Portugal — All Bike's SRL, Italy — Andos Bike SRL, Italy — G.L. Cicli Di Giraudo Lorena, Italy — RTE SA, Portugal (c) Exporting producers and their related companies: — Ideal Bike Co., Ltd., Dongguan (the PRC) — Advanced Sports International-China Ltd., Dongguan (the PRC) — Econotrade Co. Ltd., Taichung (Taiwan) — Top Sport International Co. Ltd., Taichung (Taiwan) — Ideal Bike Corporation Co., Ltd., Taichung (Taiwan) — Oyama Bicycles Co., Ltd., Taicang (the PRC) — Universal Cycle Corporation Co., Ltd., Guangzhou (the PRC) — Universal Cycle Corporation (Taiwan Branch), Taipei (Taiwan)

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

(27) In view of the sufficient evidence available at the initiation of the investigation tending to show the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation, the Commission considered it appropriate to initiate the investigation on the basis of Article 2(6a) of the basic Regulation.

(28) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited producers of the country concerned to provide the information requested in Annex III to the Notice of the Initiation regarding the inputs used for producing the product under review. The same six exporting producers/producers that sent sampling replies also submitted the information requested in Annex III.

(29) In order to obtain the necessary information for its investigation, the Commission also sent a questionnaire to the GOC with regard to the alleged significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The GOC did not reply to the questionnaire.

(30) In the Notice of Initiation, the Commission also invited all interested parties to make their views known, submit information and provide supporting evidence regarding the appropriateness of the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of this Notice in the Official Journal of the European Union. No submissions or additional evidence were received in that respect.

(31) In the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may need to select an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks.

(32) On 4 July 2018, the Commission published a first note for the file (‘the first note on production factors’) seeking the views of the interested parties on the relevant sources that the Commission may use for the determination of the normal value, in accordance with Article 2(6a)(e) second ident of the basic Regulation. In that note, the Commission provided a list of all factors of production such as materials, energy and labour used in the production of the product under review by the exporting producers. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified six possible representative countries: Brazil, Mexico, Russia, Serbia, Thailand and Turkey.

(33) The Commission gave all interested parties the opportunity to comment. The Commission received comments from one exporting producer and one Union producer, as well as the applicant, whereas the authorities of the country concerned did not provide any comments.

(34) The Commission addressed the comments received on the first note on production factors in a second note of 9 August 2018 (‘the second note on production factors’). The Commission also established the list of factors of production and concluded that, at that stage, Serbia was the most appropriate representative country under Article 2(6a)(a), first indent of the basic Regulation. The Commission invited the interested parties to comment. The Commission did not receive any comments.

1.3.5. Subsequent procedure

(35) On 7 June 2019, the Commission made the disclosure of the essential facts and considerations on the basis of which it intended to impose anti-dumping duties (‘final disclosure’). All parties were granted a period within which they could make comments on the disclosure.

(36) The commission received comments from the applicant and from China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘CCCME’).

2. PRODUCT UNDER REVIEW AND LIKE PRODUCT

2.1. Product under review

(37) The product subject to this review is bicycles and other cycles (including delivery tricycles, but excluding unicycles), not motorised, falling under CN codes 8712 00 30 and ex 8712 00 70 (TARIC codes 8712007091, 8712007092 and 8712007099) (‘the product under review’ or ‘bicycles’)

(38) The Commission noticed that there have been changes in the sector since the previous review investigation. There have been numerous technological developments, mainly regarding the used raw materials. Furthermore, the market has changed significantly, and specific categories of bicycles have become more popular and acquired a significant market share. In order to reflect these developments, the Commission decided to adjust the bicycle categories used in the previous review investigation. All interested parties were informed of this decision and invited to comment. No comments were received.

(39) The bicycles were therefore classified under the following main types: — code (A): ATB (all-terrain bicycles including mountain bicycles, above 24″) — code (F): Foldable — code (J): Junior action (BMX) and children's bicycles (24″ and below) — code (R): Road / Race (above 24″) — code (T): Trekking/city/hybrid/touring bicycles (above 24″) — code (O): Other (e.g. delivery, cargo, tricycle)

(40) All types of bicycles as defined above have the same basic physical and technical characteristics. Furthermore, they are sold through similar distribution channels on the Union market, such as retailers, sport chains, mass merchandisers and independent bicycle dealers. The basic application and use of bicycles is identical, so some models from different types can be interchangeable and compete with each other.

(41) On this basis, it was concluded that all the bicycle types form one single product.

2.2. Like product

(42) This expiry review investigation confirmed that bicycles produced and sold on the domestic markets of the PRC and the representative country Serbia, and the product produced and sold in the Union by the Union producers have the same basic physical and technical characteristics and end-uses. They are considered identical products, alike in all respects, within the meaning of Article 1(4) of the basic Regulation.

3. LIKELIHOOD OF CONTINUATION OR RECURRENCE OF DUMPING

3.1. Preliminary remarks

(43) In accordance with Article 11(2) of the basic Regulation, the Commission examined whether the expiry of the measures in force would be likely to lead to a continuation or recurrence of dumping from the PRC.

3.2. Cooperation from the PRC

(44) Six companies/groups of companies provided the reply to the sampling form; one of these companies/groups of companies later withdrew its cooperation. The total declared export volume of bicycles to the Union by the five cooperating companies was [120 000 to 150 000] units in the review investigation period, corresponding to 18 % of the total import volumes of the product under review from the PRC recorded in Eurostat for the same period. The total declared production capacity of the cooperating companies/groups of companies amounted to around one million units, which is roughly 1 % of the total estimated Chinese production capacity (117 million units).

(45) Given the low level of cooperation, the Commission applied Article 18 and based its findings on the Chinese market of bicycles, including production, capacity and spare capacity, on facts available.

(46) In addition, the Ideal Group, one the sampled groups, did not provide the Commission its sales prices for the sales done via a related trader to the first independent customer for both sales to the Union and sales to the rest of the world. Therefore, the Commission applied Article 18 of the basic Regulation and used the best facts available for that part of the export sales of this group.

3.3. Continuation of dumping of imports during the review investigation period

(47) For the review investigation period, the statistical data from Eurostat show that 747 313 bicycles were imported into the Union from the PRC, constituting roughly 4 % of the total Union consumption. Consequently, the Commission concluded that the actual imports in the review investigation period were sufficiently representative to examine whether dumping continued during the review investigation period.

3.3.1. Normal value

(48) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country.’

(49) However, according to Article 2(6a)(a) of the basic Regulation, ‘(i)n case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits.’ As further explained below, the Commission concluded in the present investigation that, based on the evidence available, and in view of the lack of cooperation of the GOC and absence of any claims from the exporting producers, the application of Article 2(6a) of the basic Regulation was appropriate.

3.3.2. Existence of significant distortions

3.3.2.1. Introduction

(50) Article 2(6a)(b) of the basic Regulation defines ‘significant distortions as those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements: — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country; — state presence in firms allowing the state to interfere with respect to prices or costs; — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces; — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws; — wage costs being distorted; — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state.’

(51) According to Article 2(6a)(b) of the basic Regulation, the assessment of the existence of significant distortions within the meaning of Article 2(6a)(a) shall take into account, amongst others, the non-exhaustive list of elements in the former provision. Pursuant to Article 2(6a)(b) of the basic Regulation, in assessing the existence of significant distortions, regard shall be had to the potential impact of one or more of these elements on prices and costs in the exporting country of the product under review. Indeed, as that list is non-cumulative, not all the elements need to be given regard to for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list. However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country's economic and administrative set-up entrust the government with substantive powers to intervene into market forces and which therefore points to the fact that prices and costs are not the result of free market forces.

(52) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector.’

(53) Pursuant to this provision, the Commission has issued a country report concerning the PRC ( ‘the Report’) (12). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. In that respect, and in view of the lack of cooperation in this case, the Commission relied on the Report showing the existence of substantial government intervention at many levels of the economy, including specific distortions in key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as aluminum, steel and chemicals). The Report was placed in the investigation file at the initiation stage.

(54) The request also supports allegations on significant distortions in the meaning of Article 2(6a)(b) referred to above, complementing the Report.

(55) Firstly, the applicant refers to the provisions included in the 13th Five Year Plan for Bicycle and Electric Bicycle Industry (‘the 13th Bicycle Plan’). Specific provisions of that plan are provided in Section 5.1 of the request. Furthermore, the applicant refers to the existence of State-owned enterprises (‘SOEs’) in the bicycle industry (Section 5.2 of the request) as well as the heavy pressure exercised on the smaller producers to consolidate as mandated by the 13th Bicycle Plan (section 5.2 of the request).

(56) The Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file, including the evidence contained in the Report, which relies on publicly available sources, notably on Chinese legislation, published official Chinese policy documents, reports published by international organisations and studies/articles by renowned academics, specifically identified in the Report. That analysis covered the examination of the substantial government interventions in its economy in general, but also the specific market situation in the relevant sector including the product under review.

(57) As specified in recitals (29), the GOC did not provide any reply to the questionnaire it received. The exporting producers who replied to the questionnaires, did not comment or provide evidence supporting or rebutting the existing evidence on the case file, including the Report, and the additional evidence provided by the applicant, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

3.3.2.2. Significant distortions affecting the domestic prices and costs in the PRC: general economic context

(58) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of PRC. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’. The State-owned economy is the ‘leading force of the national economy’ and the State has the mandate ‘to ensure its consolidation and growth’ (13). Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation. The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the State with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the State ownership (14).

(59) In addition, under Chinese law, the socialist market economy is developed under the leadership of the Chinese Communist Party (‘CCP’). The structures of the Chinese State and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the State are indistinguishable. Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution. Following the existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People's Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China.’ (15) This illustrates the control of the CCP over the economic system of the PRC. This control is inherent to the Chinese system and goes beyond the situation customary in other countries where the governments exercise broad macroeconomic control within the boundaries of which free market forces are at play.

(60) The Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market (16). The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as at the level of the regulatory environment.

(61) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans cover a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government. Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans contain explicit output targets. Under the plans, individual industrial sectors and/or projects are singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.). The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. Not only because of the binding nature of the plans but also because the relevant Chinese authorities at all level of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also section 3.3.2.5 below) (17).

(62) Second, on the level of allocation of financial resources, the financial system of China is dominated by the State-owned commercial banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government's industrial policy objectives rather than primarily assessing the economic merits of a given project (see also section 3.3.2.9 below) (18). The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Even though of lesser significance than the banking sector, these parts of the financial sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the State and the CCP (19).

(63) Third, on the level of regulatory environment, the interventions by the State into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by State policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies (20). Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both State and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining State control over key sectors or bolstering domestic industry (21).

(64) In sum, the Chinese economic model is based on certain basic axioms which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with free play of market forces, resulting in distorting the effective allocation of resources in line with market principles (22).

3.3.2.3. Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

(65) In the PRC, enterprises operating under the ownership, control and policy supervision or guidance by the State represent an essential part of the economy.

(66) With regard to State ownership, a certain degree of state ownership by the GOC persists in the bicycle sector. Even though the bicycle industry in the PRC is very fragmented with a large number of small producers, the major producers of bicycles including Flying Pidgeon and Phoenix are SOEs, however it is not possible to estimate the precise figures based on the information received from the cooperating exporting producers.

(67) With regard to control by the State, the government and the CCP maintain structures that ensure their continued influence over enterprises. The State (and in many respects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual enterprises, but it also claims its rights to participate in their operational decision making. The elements that point to the existence of government control over enterprises in the steel and iron sector is further developed in section 3.3.2.4 below.

(68) As concerns policy supervision and guidance by the State in the sector, the analysis is set out in sections 3.3.2.4 and 3.3.2.5 below. With the high level of government control and intervention in the bicycle sector as described below, even privately owned producers are prevented from operating under market conditions.

(69) The control, policy supervision and guidance of the sector by the Chinese authorities further transpires from the objectives of the leading sectoral industry association, the China Bicycle Organisation (‘CBA’), which has a strong link with the GOC and the CCP. According to the website of CBA, the association gathers 650 members accounting for 80 % of the industry's total yearly output volume and export volume. The association's purposes are: concentrate the industry's forces, handle the industry's affairs, serve the industry and foster the industry's development (23). The Articles of Association of CBA point to a strong link with GOC and the CCP, including Article 2: ‘The association's purposes are: Following Xi Jinping's theory of socialism with Chinese characteristics for a new era and the spirit of the 19th CPC National Congress, fully implement the national relevant industry policies, support the governmental administration to strengthen the management of the industry […] The association shall abide by the constitution, the law and regulations as well as by national policies, following the socialism's core values’ (24). Furthermore, CBA published the 13th Bicycle Plan and in a recent investigation of the European Commission found that it did so while it had a strong link with the GOC (25).

(70) On the basis of the above, it is concluded that the market for bicycles in the PRC was served to a significant extent by enterprises subject to the ownership, control or policy supervision or guidance by the GOC.

3.3.2.4. Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: State presence in firms allowing the state to interfere with respect to prices or costs

(71) The GOC is in position to interfere with prices and costs through State presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant State authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights, (26) CCP cells in enterprises, state-owned and private alike, represent another channel through which the State can interfere with business decisions. According to China's company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution (27)) and the company is to provide the necessary conditions for the activities of the party organisation. In the past, this requirement appears not to have always been followed or strictly enforced. However, since at least 2016 the CCP has reinforced it claims to control business decision in SOEs as a matter of political principle. The CCP is also reported to exercise pressure on private companies to put ‘patriotism’ first and to follow party discipline (28). In 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have final say over the business decision within their respective companies (29). These rules are of general application throughout the Chinese economy, including the iron and steel sector. Hence, it is determined that these rules also apply to the producers of bicycles and the suppliers of their inputs.

(72) Specifically in the bicycle sector, tight links exist between decision making processes of enterprises active in the sector and the State, in particular the CCP. Party structures personally overlap with the management bodies in a number of Chinese bicycle producers. By way of example, the Chairman of the Shanghai Phoenix Enterprise has also served as Party secretary in this company since 2012 (30). Similarly, Deputy Secretary of Party Committee at Shanghai Zhonglu was at the same time member of if the Surveillance Committee (31).

(73) The State's presence and intervention in the financial markets (see also section 3.3.2.8 below) as well as in the provision of raw materials and inputs further have a distorting effect on the market (32).

(74) Based on all of the above, it is concluded that the State presence in firms in the bicycle sector, as well as in in the financial sector and other input sectors, combined with the framework described in section 3.3.2.3 and in the subsequent sections, allows the GOC to interfere with respect to prices and costs.

3.3.2.5. Significant distortions according to Article 2(6a)(b), third indent of the basic Regulation: public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces

(75) 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 on all levels of government and cover virtually 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 driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (33).

(76) The Light Industry Development Plan (2016-2020), (‘Light Industry Development Plan’), prepared by the GOC to implement the 13th Five Year Plan and Made in China 2025, identifies among others the bicycles as one of the key industries. It also recommends to ‘Promote the bicycle industry to develop in a lightweight, diversified, fashionable and intelligent direction. Speed up the R&D and application of high-strength light material, transmission, drive system, new energy, intelligent sensing technology and Internet of Things technology. Focus on developing diversified bicycles suitable for fashionable and casual purposes, exercise and fitness, long-distance country crossing and high-performance folding […].’

(77) The Light Industry Development Plan also lists some concrete policy measures to promote the key industries. The first set of measures concerns the increase of market access reform, mainly through a simplification of the administrative steps (i.e. cancel unnecessary approvals, reduce and standardise the fees and approval process). The second set of measures concerns the increase of finance tax policy support: — ‘Give full play to the leading role of the development fund for medium and small sized enterprises, lead the medium and small sized enterprises to increase the investment on technology innovation, structure adjustment, energy-conservation and emission reduction, implement various preferential policies, perfect service system for medium and small sized enterprises’. — ‘Implement the accelerating depreciation policy for fixed assets, guide enterprises to increase investment on advanced equipment’. — ‘Give play to the role of special funds of cleaning production, guide the application of production technology and promotion of cleaning production technology in key industries’. — ‘Implement preferential policies of relevant tax and fee, reduce enterprises cost of “five social insurance and one housing fund”, reasonably adjust the policy of consumption tax’. — ‘Encourage enterprises to increase the R&D investment of green products, give top priority to the products with green product certificate in governments purchasing’.

(78) The third set of measures concerns the increase of financial policy support, in particular: — ‘Implement the financial policy that supports the development of medium and small sized enterprises, further explore the financial channels of medium and small sized enterprises, perfect the credit guarantee system of medium and small sized enterprises’. — ‘Accelerate the development of financial products and services to support popular entrepreneurship and innovation in light industry field’. — ‘Increase financial support for technology transformation and equipment update of the enterprises’. — ‘Encourage banking financial institutions to develop the loan services using as guarantees also intangible assets, including: their own brands, the special rights to use the trademarks, to support brands construction in the light industry field’. — ‘Further play the role of policy and development finance, support the financial institutions, by the mode of syndicated loan, export credit, project financing, to set up a financial service platform of international R&D, production system, brands promotion for the enterprises’. — ‘Increase the support of export credit insurance to brand enterprises, encourage the commercial banks to actively carry out the financing business of the export credit insurance policy’.

(79) Light Industry Development plans are also developed at local level. It is the case for the Tianjin Municipal Light Industry and Textile Development Plan for the 12th Five-Year (2011-2015), which advocated the creation of four National-level Light industrial bases in the Province: ‘The City of Tianjin shall construct a national-level bicycles production and export base. By taking the “China bicycle kingdom” industrial park in the district of Wuqing, and (electro-) bicycle industrial park in the district of Binhai as the core, we shall intensively develop the manufacturing industries of (electro-) bicycle, spare parts, etc.’.

(80) Similarly, the 13th Five Year Plan of Tianjin for Industry Economic Development sets clear support goals for the bicycle and electric bicycle industries including the parts industries, such as: — ‘Emphatically develop the bicycle industry’; — ‘Accelerate construction of characteristic industrial bases including […] bicycle production, in Jinghai District and Wuqing District’; — ‘Accelerate enterprise transformation and upgrading. Vigorously implement brand strategy, lead enterprises to intensify technological innovation and product popularization, and strengthen and promote the market positions of competitive products including bicycles. Promote annexation and reorganization of enterprises and comprehensively improve innovative capacity and product added value of middle and small-sized enterprises and private enterprises’; — ‘Accelerate the construction of featured parks, including bicycle industrial parks in Quqing and Jinghai’; […] — ‘Expand areas with distinctive advantages. Take lithium-ion battery as core to promote the development of supercapacitor and high-performance power battery’.

(81) Furthermore, the 13th Five Year Plan for Bicycle and Electric Bicycle Industry (‘the 13 th Bicycle Plan’), issued by the CBA includes the bicycles among the ‘emerging industries’: ‘the emerging industries have been promoted to the level of national strategy, such as, new energy, new material, internet, energy conservation and environmental protection, and information technology, so it has become an inevitable trend for traditional industries to enter the mid-end and high-end community. Especially after the Fifth Plenary Session put forward to “promote the low-carbon development of traffic and transportation and encourage the green travel by bicycle”, the bicycle industry will certainly enjoy the new historic opportunities for development.’

(82) The 13th Bicycle Plan sets measurable goals to be attained by the GOC by 2020 in the bicycle industry: ‘the revenue from main businesses of the above-scale enterprises in the whole industry will achieve the annual average growth rate 6 %, and exceed RMB 200 billion by 2020. The export scale of bicycles and spare parts will keep stable and the export of electric bicycles will be dramatically increased. The industry integration will be further strengthened, and the contribution of leading enterprises to the output volume will exceed 50 %. The industry will nurture, jointly construct and improve 3-5 industry clusters and characteristic regions. The proportion of mid-end and high-end bicycle and lithium battery electric bicycle will increase year.’ The 13th Bicycle Plan further envisages to strengthen brand cultivation and make efforts to create international brands.

(83) As demonstrated above, the bicycle industry is closely monitored and supported by the GOC. The implementation of the different goals set out in various plans requires a strong involvement of the GOC into the bicycle industry.

(84) The Commission considered that the above body of evidence concerning the bicycles sector was sufficient to consider that public policies or measures influence free market forces in this sector.

(85) However, the Commission also found that there is significant government intervention into the raw materials used to produce bicycles. Most components used to produce bicycles are made of raw materials with heavy intervention of the GOC (34), including aluminium and steel (which can be used to make frames, forks, handle bars, wheels and spokes, chains, derailleurs, gears, cables, carriers), rubber (to produce wheels) and chemicals (plastic elements and paints).

(86) By the way of example, aluminium is covered by the Non-Ferrous Metal Industry Development Plan 2016-2020 (13th FYP for the Non-Ferrous Metals Industry), which provides strict quantitative and qualitative targets and extensive support measures to the industry aimed at developing the industry. Steel is covered by the Steel Industry Adjustment and Upgrading plan for 2016-2020 (‘13th FYP for Steel’), which covers virtually all aspects of the development of the industry, including production capacity goals, upgrading and ensuring effective supply, industry restructuring, financial support, quantitative targets, geographical location of steel factories. Similarly, the 13th FYP for the Petrochemical and Chemical Industry (2016 - 2020) provides for strict regulation of the chemical sector, covering raw materials used to produce bicycle elements, such as rubber, paints and plastics.

(87) In addition, the steel sector is characterised by large presence of SOEs. A number of the major producers are owned by the State, with some are specifically referred to in the ‘Steel Industry Adjustment and Upgrading plan for 2016-2020’ (35) as examples of the achievements of the 12th five-year planning period (such as Baosteel, Anshan Iron and Steel, Wuhan Iron and Steel, etc.). Steel is closely regulated by numerous plans, directives and other documents focused on steel, which are issued at national, regional and municipal level such as the ‘Steel Industry Adjustment and Upgrading plan for 2016-2020’. This Plan states that the steel industry is ‘an important, fundamental sector of the Chinese economy, a national cornerstone’ (36).

(88) The 13th Five-Year Plan on Economic and Social Development (37) envisages support to enterprises producing high-end steel product types (38). It also focuses on achieving product quality, durability and reliability by supporting companies using technologies related to clean steel production, precision rolling and quality improvement (39).

(89) The ‘Catalogue for Guiding Industry Restructuring (2011 Version) (2013 Amendment)’ (40) (‘the Catalogue’) lists iron and steel as encouraged industries. In particular, the Catalogue encourages the‘[d]evelopment and application of technologies for higher-performance, high-quality, and upgrading steel products, including but not limited to high-strength automobile sheets of not less than 600 MPa, high performance pipeline steel for oil and gas transmission, high-strength wide and thick plates for vessels, marine engineering steel, moderate thickness plates of not less than 420 MPa for buildings, bridges and other structures, steel for high-speed and heavy-haul railways, low-iron loss and high-magnetic induction silicon steel, corrosion- and wear-resistance steel, alloy resource-saving stainless steel (modern ferritic stainless steel, duplex stainless steel, and nitrogen stainless steel), special steel bars and wire rods for high-performance basic parts (high-performance gears, bolts at or above Grade 12.9, high-strength spring, and long service life bearings), and high-quality special steel forged materials (tool and mould steel, stainless steel, and steel for machinery, among others)’. The applicability of the Catalogue was confirmed by the recent anti-subsidy investigation of certain hot-rolled flat products of iron, non-alloy or other alloy steel (‘HRF’) originating in the PRC (41).

(90) Aluminium is also subject to strong state intervention in the PRC. Firstly, the aluminium sector is characterised by the dominance of SOEs. According to estimates, SOEs account for more than 50 % of the total primary aluminium output in the PRC (42). A recent study of the non-ferrous metal industry in the PRC also points in the direction of SOEs accounting for a dominant share of the domestic market (43). While an increase in capacity in recent years is attributed partly to privately-owned companies, such capacity increase would usually also entail various forms of (local) government involvement, such as tolerating illegal capacity expansion (44). Moreover, the aluminium production capacity amongst the main SOEs has also increased, though to a lesser extent (45).

(91) The 13th FYP for the Non-Ferrous Metals Industry aims at upgrading the range of product types produced by the Chinese aluminium industry, inter alia, through supporting innovation. It calls for swift development of the mixed ownership system and a boost to SOEs' vitality. It further provides for the possibility of stock-piling non-ferrous metals, improving the security of resources, including aluminium and sets specific quantitative targets for reducing power consumption, increasing the ratio of recycled aluminium in production and increasing capacity utilisation (46).

(92) The Plan further provides for structural adjustments with stricter control on new smelting facilities and elimination of outdated capacity. It provides for geographical distribution of processing plants, focuses on projects to increase bauxite and alumina resource exploitation and covers electricity supply and pricing policy (47).

(93) Other policy documents targeting the aluminium sector are the Standard Conditions applicable to the Aluminium Industry issued by the Ministry of Industry and Information Technology (‘MIIT’); Entry Conditions Applicable to the Aluminium Industry, issued by the National Development and Reform Commission (‘NDRC’) and Guidelines for Accelerating the Restructuring of the Aluminium Industry (48), issued by the NDRC.

(94) Thus, the numerous plans, directives and other documents pertaining to aluminium, issued at the national, regional and municipal level, clearly show the high degree of intervention of the GOC in the aluminium sector (49).

(95) It is therefore established that the GOC has a number of public policies in place influencing free market forces concerning the production of bicycles, including the raw materials used in that sector. Such measures impede market forces from operating normally.

3.3.2.6. Significant distortions according to Article 2(6a)(b), fourth indent of the basic Regulation: the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws

(96) According to the information on file, the Chinese bankruptcy system appears inadequate to deliver on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on similar principles as corresponding laws in other countries, the Chinese system is characterised by systematic under-enforcement. The number of bankruptcies remains notoriously low in relation to the size of the country's economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the State in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings (50).

(97) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in the PRC (51). All land is owned by the Chinese State (collectively owned rural land and State-owned urban land). Its allocation remains solely dependent on the State. There are legal provisions that aim at allocating land-use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates (52). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (53).

(98) Therefore, the Chinese bankruptcy and property laws do not appear to properly work, resulting in distortions when maintaining insolvent firms afloat and in relation to the land provision and acquisition in the PRC. These laws also apply with respect to the bicycle, including the exporting producers of the product under review. In particular, the Commission has established in a previous investigation that electric bicycles producers, a sector governed to a large extent by the same policy instruments as bicycles (for example the 13th Five Year Plan for Bicycle and Electric Bicycle Industry), benefited from the provision of land-use rights for less than adequate remuneration (54). Recent investigations into other sectors also confirmed provision of land-use rights for less than adequate remuneration (55).

(99) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the bicycle sector, including with respect to the product under review.

3.3.2.7. Significant distortions according to Article 2(6a)(b), fifth indent of the basic Regulation: wage costs being distorted

(100) A system of market-based wages cannot fully develop in the PRC as workers and employers are impeded in their rights to collective organisation. the PRC has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining (56). Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers' rights remains rudimentary (57). Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area. This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration (58). Those findings lead to the distortion of wages costs in the PRC.

(101) Nothing in the file of this investigation has revealed that the bicycle sector is not subject to the Chinese labour law system described. In fact, the bicycle sector appears to be equally affected by the distortions of wage costs both directly (when making the product under review) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in the PRC).

(102) On the basis of the above, the Commission concluded that wage costs were distorted in the bicycle sector, including with respect to the product under review.

3.3.2.8. Significant distortions according to Article 2(6a)(b), sixth indent of the basic Regulation: access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the State

(103) Access to capital for corporate actors in the PRC is subject to various distortions.

(104) Firstly, the Chinese financial system is characterised by strong position of State-owned banks (59), which, when granting access to finance, take into consideration criteria other than economic viability of a project. Similarly to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of the large State-owned financial institutions are ultimately appointed by the CCP) (60) and, again just like non-financial SOEs, the banks regularly implement public policies designed by the government. In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State (61). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (62).

(105) While it is acknowledged that there might be various legal instruments referring to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the relevant evidence shows that these provisions play only a secondary role in the application of the various legal instruments (63). Findings made in previous trade defence investigations also reached the same conclusion (64).

(106) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm's strategic importance to the GOC and the strength of any implicit guarantee by the government. Estimates strongly suggest that Chinese credit ratings systematically correspond to lower international ratings (65).

(107) This results in a bias for lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

(108) Secondly, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the recent growth in corporate leverage in the state sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

(109) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces, but are influenced by government induced distortions. Indeed, the share of lending at or below the benchmark rate still represents 45 % of all lending and recourse to targeted credit appears to have been stepped up, since this share has increased markedly since 2015 in spite of worsening economic conditions. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(110) Overall credit growth in the PRC indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly in recent years. Faced with a situation of increasing debt-at-risk, the GOC has opted to avoid defaults. Consequently, bad debt issues have been handled by rolling over debt, thus creating so called ‘zombie’ companies, or by transferring the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

(111) In essence, despite the recent steps that have been taken to liberalize the market, the corporate credit system in the PRC is affected by significant systemic issues and distortions resulting from the continuing pervasive role of the state in the capital markets.

(112) Nothing in the file of this investigation has revealed that bicycles producers and/or the suppliers of raw materials and other inputs do not benefit from this financial system. In fact, the recent investigation into producers of electric bicycles, covered by the same policy instruments as bicycle producers (see recitals (80)-(81)) showed they benefited from preferential lending (66), preferential financing and insurance (export credit insurance) (67), exemption from tax of dividend income between qualified resident enterprises (68) and grant programmes (69). Furthermore, the evidence of the file in the current investigation shows that some of the cooperating producers received loans during the investigation period. Therefore, the latter support and the general substantial government intervention in the financial system described above leads to the market conditions being severely affected at all levels.

(113) In light of the above, the Commission concluded that the producers of bicycles had access to finance granted by institutions which implement public policy objectives or otherwise not acting independently from the state.

3.3.2.9. Systemic nature of the distortions described

(114) The Commission noted that the distortions described in the Report are not limited to any particular industry sector. On the contrary, the evidence available shows that the facts and features of the Chinese system as described above in Sections 3.3.2.1-3.3.2.5 as well as in Part A of the Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above in Sections 3.3.2.6-3.3.2.8 above and in Part B of the Report.

(115) In order to produce bicycles, a broad range of inputs is needed. When the bicycle producers purchase/contract these inputs the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system which applies across all levels of government and sectors.

(116) As a consequence, not only the domestic sales prices of bicycles cannot be used but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also tainted because their price formation is affected by substantial government intervention, as described in Parts A and B of the Report. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout the PRC. This means, for instance, that an input that in itself was produced in the PRC by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth.

3.3.2.10. Conclusion

(117) The analysis laid out in sections 3.3.2.2 to 3.3.2.9, which includes an examination of all the available evidence relating to the PRC's intervention in its economy in general as well as in the bicycles sector (including the product under review) showed that prices or costs, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation. On that basis, and in the absence of any cooperation from the GOC and the limited information on these issues provided by the exporting producers in the PRC, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

(118) Consequently, the Commission proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as discussed in the following section. The Commission recalled that no claim was presented that some domestic costs would be undistorted under the third indent of Article 2(6a)(a) of the basic Regulation.

3.3.2.11. CCCME comments on existence of significant distortions

(119) In their comments on the final disclosure, CCCME argued that the Commission's analysis on significant distortions was macroscopic and general. First, the CCCME considered that a socialist market economy is in nature a market economy with characteristics of common market economy, giving enterprises full autonomy to make operational decisions, including pricing. CCCME further argued that the GOC implements macro-control to ensure a stable national economy, however this macro-control should not be misread as government's intervention in individual enterprises and it has no influence on the costs or prices of their products.

(120) Secondly, the CCCME did not agree that there is heavy intervention of the GOC in the market of aluminium, steel, rubber and chemicals. Even if there are distortions in those markets, they are not present in the market of bicycle components, as they involve several stages of processing of those raw materials and their price is influenced by other factors such as specific technical features of the bicycles and the demand of individual consumers. Therefore, any distortion in the markets of aluminium, steel, rubber and chemicals would not have an influence on the prices of bicycle components.

(121) Thirdly, the CCCME considered that the existence of a subsidy should not be used as evidence of the existence of a market distortion, because subsidies are present in many other countries considered as wholly market economy countries. The CCCME also notes that findings on subsidies in the electric bicycles case (70) are unreasonable.

(122) In their submission, CCCME furthermore argued that both the markets of bicycles and bicycle parts are free markets with no state intervention, since many producers of bicycles and bicycle parts are privately owned or foreign-invested companies. CCCME further added that even if there are some companies owned or invested by the State, there is no difference between them and other companies, that may have influence on prices of bicycles or bicycle parts, as all economic operators have to abide by the same rules and regulations including VAT payments, health and retirement payments etc.

(123) At the outset, the Commission observed that the CCCME did not support its claims with any evidence whatsoever to rebut the evidence contained in this section proving the existence of significant distortions in the PRC in general and specifically in the bicycle sector and in the sectors of its supplier industries. Therefore, the CCCME's claims could be outright entirely dismissed as unsubstantiated.

(124) In any event, the Commission recalled that, pursuant to Article 2(6a)(b) of the basic Regulation, in assessing the existence of significant distortions, regard shall be had to the potential impact of one or more of the elements mentioned therein on prices and costs in the exporting country of the product concerned. Any conclusion on significant distortions within the meaning of Article 2(6a)(a) must be made on the basis of all the evidence at hand showing that those elements have a potential impact on prices and costs.. The Commission noted that the CCCME itself acknowledged that the GOC exercises control to ensure a stable national economy. As explained in detail in sections 3.3.2.1 to 3.3.2.9, the interventionist nature of the GOC has a direct and indirect impact on the cost structure of enterprises and on final prices. It is clear from the extent of the GOC's interventions into the bicycle sector that there was at a very minimum at least a potential impact on the market of bicycles and/or its components.

(125) With regard to the distortions on raw materials, the Commission provided multiple examples of specific state interventions into those markets demonstrating the existence of significant distortions in section 3.3.2.5. Again, the Commission noted that the CCCME did not provide any evidence pointing to the contrary. Furthermore, the Commission pointed out that the existence of price distorting elements in the markets for aluminium, steel, rubber and chemicals leads to at least a potential carry-over of those price distortions into the provision of processed bicycle components made of those raw materials and thus does affect the prices or costs of bicycles. Other than an allegation that the undisputed distortions in the raw materials do not have any effects on the downstream industry, the CCCME has failed to show any evidence that the bicycle industry is not affected by these distortions.

(126) With regard to the CCCME's claim concerning subsidies, the Commission underlined that subsidies are one of a number of indicators of price and cost distortions in an economy, as they have a direct or indirect, actual or potential impact on such costs and prices, which normally decrease for the recipient enterprises and/or their customers. Subsidies such as provision of land-use rights for less than adequate remuneration or availability of preferential lending and financing in a given sector lower the costs of the producer and therefore affect the cost of production and/or the prices of their products (71). The Commission also noted that the fact that the findings in the electric bicycles case are considered unreasonable by CCCME bears limited relevance, as the existence of subsidies in the granting of land-use rights and preferential lending was consistently confirmed in a number of recent investigations, not only limited to electric bicycles but applying throughout the Chinese economy (see recital (98)). CCCME's argument that enterprises in other economies might also benefit from subsidies is irrelevant in the context of this investigation, which deals with the situation of the product under review in the PRC and not in abstract with the subsidy situation in other countries.

(127) Finally, with regard to the argument that a large number of bicycle producers are privately owned and all companies in the PRC are subject to free market conditions and the same rules are applicable for both privately owned enterprises and SOEs, the Commission observed that one of the elements of Article 2(6a)(b) of the basic Regulation, which are indicator of significant distortions in an economy, is the fact that ‘the market in question is being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country’. As explained in recital (66), it was impossible to establish the exact ratio of SOEs and privately owned bicycle producers in the PRC due to lack of sufficient market data. However, even if there is no predominance of SOEs in a given sector, state ownership is only one of the indicators of significant distortions. State control and policy supervision or guidance are other indicators listed in Article 2(6a)(b) and since they are largely present in the bicycle sector (see section 3.3.2.3), the Commission established that the entire bicycle sector in the PRC is subject to significant distortions. Secondly, the fact that both state-owned and privately-owned enterprises are subject to the same rules and regulations such as VAT payments, health and retirement payments etc. does not preclude that all those enterprises operate in an environment characterised by significant distortions, which affect the costs and prices of those enterprises.

(128) On the basis of the above, the claims by CCCME with regard to the existence of significant distortions were dismissed.

3.3.3. Representative country

3.3.3.1. General remarks

(129) The choice of the representative country was based on the following criteria: — A level of economic development similar to the PRC. For this purpose, the Commission used countries with a gross national income similar to the PRC on the basis of the database of the World Bank (72); — Production of the product under review in that country (73); — Availability of relevant public data in that country; — Where there is more than one possible representative country, preference was given, where appropriate, to the country with an adequate level of social and environmental protection.

(130) In the first note on production factors, the Commission informed interested parties that it had identified six possible representative countries: Brazil, Mexico, Russia, Serbia, Thailand and Turkey and invited interested parties to comment and suggest other countries. In the second note on production factors, the Commission informed interested parties that Serbia was the appropriate representative country.

3.3.3.2. A level of economic development similar to the PRC

(131) Brazil, Mexico, Russia, Serbia, Thailand and Turkey are regarded by the World Bank as countries with a similar level of economic development as the PRC, i.e. they are all classified as ‘upper-middle income’ countries on a gross national income basis.

(132) In their comments on the first note on production factors, the applicant warned that the severe economic crisis experienced by Brazil in the recent past may impact the imports of bicycle components and worsened the performance of bicycles producers in their domestic market.

(133) The Commission noted that the applicant did not provide evidence that imports into Brazil were impacted nor that the worsening of domestic performance of Brazilian producers was systematic. Although the Commission recognised that the only known company producing bicycles having publicly available data had negative operating profit, it could not extrapolate this finding to the country as a whole.

3.3.3.3. Production of the product under review in the representative country

(134) In all the six countries identified in section 3.3.3.2 the Commission identified several producers producing output under NACE code 3092 (Nomenclature of economic activities of the Union) related to the manufacturing of bicycles (74).

(135) In their comments on the first note on production factors, the applicant pointed out that subsidies for energy are in place in Russia and that these could impact the production of energy-intensive material, such as aluminium, that is used in the manufacture of bicycles.

(136) The Commission noted that the applicant did not provide evidence on these subsidies nor on their material impact on the production of bicycles. The claim was therefore rejected.

(137) The applicant asserted that Serbian producers source bicycles parts from the Union (approximately 30 %), the PRC (approximately 30 %), other Asian countries (approximately 30 %), and domestically (approximately 10 %) and that Turkish producers source bicycles parts from the Union (approximately 15 %), the PRC (approximately 30 %), other Asian countries (approximately 30 %), domestically (approximately 20 %) and from other countries (approximately 5 %).

(138) The Commission verified and confirmed this information on the Global Trade Atlas database (75) and considered this as an indication of open markets with diversified supply sources.

(139) The applicant noted that the Union increased customs duties on imports of bicycles from Thailand (by withdrawing the GSP preferences in 2015 (76)), leading to a drop of Thai exports of bicycles to the Union. The applicant claimed that this severely impacted the performance of Thai producers, which are mostly exporting to the Union. The applicant also claimed that the Thai producers became lossmaking. However, it did not provide data on profitability of Thai producers nor on their magnitude of exports.

(140) The Commission found that the profitability of the two Thai producers listed in the Note of 4 July was positive in 2016. The Commission also investigated companies in Thailand producing bicycles as secondary business (namely, secondary NACE code 3092) and found that out of 93 companies for profit and loss statements in 2017 or 2016 were available in the Orbis database, 76 were profitable (77). The claim above was therefore rejected.

3.3.3.4. Availability of the relevant public data in the representative country

(141) For all six countries identified in recital (130) the availability of public data (and in particular public financial data from the producers of the product under review) was further verified by the Commission.

(142) The Commission looked for bicycle producers with publicly available financial data that could be used to establish undistorted and reasonable amounts for selling, general and administrative expenses (‘SG&A’) and profit. As mentioned in the first and second notes on production factors, the Commission relied on the Orbis database (78) as source of data and selected companies with NACE primary code 3092, to limit the analysis to producers having bicycles as core business. Moreover, the Commission restricted the search to companies with publicly available profit and loss statements for the most recent period (2016 and 2017). This narrowed the search down to one company in Brazil, twenty-nine in Russia and six in Serbia. The Commission then selected profitable companies. This led to the exclusion of the one company in Brazil and of ten companies in Russia, which had a negative profitability in 2016 and 2017.

(143) The Commission finally noted that the six Serbian companies had publicly available data for 2017, whereas the nineteen remaining Russian companies had publicly available data only until 2016. Since the review investigation period consists of the three last quarters of 2017 and the first quarter of 2018, the Commission considered that Serbia was an appropriate representative country.

(144) Consequently, the Commission announced its intention to all interested parties in the second note on production factors to use Serbia as an appropriate representative country should it conclude that all the conditions to apply the methodology foreseen in Article 2(6a)(a) of the basic Regulation would be met. Taking into account all the above elements and the comments by the parties, the Commission decided that the final choice of an appropriate representative country was Serbia and selected the following six companies with publicly available financial data that could be used to establish undistorted and reasonable amounts for SG&A and profits in accordance with the last paragraph of Article 2(6a)(a) of the basic Regulation: — Capriolo d.o.o backa topola; — Planet bike co. D.o.o., Beograd; — Venera bike; — Kripton company d.o.o backa topola; — Crossbike; — Cassini wheels d.o.o;

3.3.3.5. Level of social and environmental protection

(145) Having established that Serbia was an appropriate representative country on the basis of these elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

3.3.3.6. Conclusion

(146) In view of the above analysis, Serbia met all the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country. In particular, Serbia has a substantial production of the product under review and a complete set of data available for all factors of production, SG&A and profit.

3.3.4. Manufacturing overhead costs, SG&A and profits

(147) For the construction of the normal value the Commission followed the methodology explained in the second note on production facts and included SG&A costs and profits from the six companies in Serbia as mentioned in Recital (144), in accordance with Article 2(6a)(a), fourth paragraph of the basic Regulation.

(148) In addition, the Commission included a value for manufacturing overhead costs in order to cover costs not included in the factors of production referred to above. This was estimated using the ratio of manufacturing overhead over the cost of manufacturing reported by the cooperating exporting producers to the respective undistorted costs of manufacturing (covering the consumption of materials, labour, energy and water) determined according to the methodology described in section 3.3.8.

3.3.5. Sources used to establish undistorted costs

(149) In the second note on production factors, the Commission stated that, in order to construct the normal value in accordance with Article 2(6a)(a) of the basic Regulation, it would use Global Trade Atlas (‘GTA’) to establish the undistorted cost of most of the factors of production. However, after the second note on production factors the Commission noted that for the review investigation period the information reported by GTA on the import of bicycles parts into Serbia was incomplete. Therefore, the Commission used Eurostat to establish the cost of material (79), electricity and natural gas (80), Bloomberg data extraction from Statistical Office of the Republic of Serbia for the cost of water (81), and the financial data from the six Serbian companies listed in recital (144) to establish SG&A costs, profits.

(150) As explained in recital 3.3.5, the manufacturing overheads were added to SG&A and profit and based on the ratio of manufacturing overhead over the cost of manufacturing reported by the cooperating exporting producers to the respective undistorted costs of manufacturing.

3.3.6. Factors of production

(151) Through the first and second note on production factors, the Commission sought to establish an initial list of factors of production and sources intended to be used for all factors of production such as materials, energy and labour used in the production of the product under review by the producers in the PRC.

(152) The Commission relied on the data provided by the applicant and on the replies to Annex III of the Notice of Initiation provided by the six original cooperating producers in the PRC (82) in order to establish a complete list of factors of production of bicycles.

(153) For comparability purposes between the Chinese and Serbian nomenclature the Commission identified, for each factor of production, the corresponding 6-digit Harmonised System (‘HS’) code at HS subheading (six digits) level, based on the information provided by both the applicant and the cooperating producers in the PRC. The PRC, Serbia and the Union all use the Harmonised System so the tariff codes of all three match.

(154) Considering all the information submitted by the applicant and the cooperating producers in the PRC, the following factors of production and HS codes, where applicable, have been identified: Table 1 Factor of Production HS Code Unit import value Full frame 8714 91 65,63 EUR/piece Crown for frame head tube 8714 91 7,63 EUR/kg Gusset for frame 8714 91 7,63 EUR/kg Hanger for frame 8714 91 7,63 EUR/kg Parts to assemble on frame head tube 8714 91 7,63 EUR/kg York for frame 8714 91 7,63 EUR/kg Frame triangle 8714 91 7,63 EUR/kg Frame accessory 8714 91 7,63 EUR/kg Frame bridge 8714 91 7,63 EUR/kg Accessory box 8714 99 9,15 EUR/kg Alloy badge 8310 00 11,02 EUR/kg Alloyed aluminium tube 7608 20 4,78 EUR/kg Axle peg 8714 99 9,15 EUR/kg B.B. parts 8714 99 9,15 EUR/kg B.B. set 8714 99 9,15 EUR/kg B.B. shell 8714 99 9,15 EUR/kg B.B. axle 8714 99 9,15 EUR/kg Bag 3923 21 2,20 EUR/kg Bar end 8714 99 9,15 EUR/kg Basket 8714 99 9,15 EUR/kg Basket bracket 8714 99 9,15 EUR/kg Battery 8714 99 9,15 EUR/kg Bell 8306 10 12,47 EUR/kg Brake 8714 94 7,48 EUR/kg Brake cable 8714 94 7,48 EUR/kg Brake cable housing 8714 99 9,15 EUR/kg Brake inner wire 8714 94 7,48 EUR/kg Brake lever 8714 94 7,48 EUR/kg Brake pivot 8714 94 7,48 EUR/kg Brake cable 8714 94 7,48 EUR/kg Bridge 8714 99 9,15 EUR/kg Cable guide 8714 99 9,15 EUR/kg Cable stopper 8714 99 9,15 EUR/kg Carbon fork blade 8714 91 7,63 EUR/kg Carrier fixing nut 7318 16 5,55 EUR/kg Carton 4819 10 1,11 EUR/kg Chain 7315 11 or 8714 99 14,23 EUR/kg 9,15 EUR/kg Chain adjuster 8714 99 9,15 EUR/kg Chain cover bracket 8714 99 9,15 EUR/kg Chain guard 8714 99 9,15 EUR/kg Chain cover 3926 90 8,93 EUR/kg Chaincover bracket 8714 99 9,15 EUR/kg Chainwheel 8714 96 7,41 EUR/kg CKD set 8714 99 9,15 EUR/kg Corrugated board 4808 10 0,77 EUR/kg Crank set 8714 99 9,15 EUR/kg Decal 4821 10 7,77 EUR/kg Derailleur cable 8714 99 9,15 EUR/kg Derailleur protector cage 8714 99 9,15 EUR/kg Disc for owner's manual 8523 49 335,30 EUR/kg Disc mount bracket 8714 94 7,48 EUR/kg Disk brake 8714 94 7,48 EUR/kg Electric accessory 8714 99 9,15 EUR/kg End cap for grip 8714 99 9,15 EUR/kg Fender 8714 99 9,15 EUR/kg Fork 8714 91 7,63 EUR/kg Rear fork ends 8714 91 7,63 EUR/kg Shifter / derailleur (front/rear) 8714 99 9,15 EUR/kg Grip 8714 99 9,15 EUR/kg Handle bar 8714 99 9,15 EUR/kg Handlebar stem 8714 99 9,15 EUR/kg Head set 8714 91 or 8714 99 7,63 EUR/kg 9,15 EUR/kg Head tube 7608 20 4,78 EUR/kg Hi-ten tubes 7304 51 1,97 EUR/kg Hub 8714 93 15,53 EUR/kg Hub cap 8714 99 9,15 EUR/kg Inner tube 4013 20 0,93 EUR/piece Joint 8714 99 9,15 EUR/kg Kick-stand 8714 99 9,15 EUR/kg Kickstand plate 8714 99 9,15 EUR/kg Lights 8512 10 3,20 EUR/kg Lock 8301 40 14,33 EUR/kg Manual 4911 10 1,95 EUR/kg Other accessories 8714 99 9,15 EUR/kg Outer casing cap 8714 94 7,48 EUR/kg Outer casing cap for brake 8714 94 7,48 EUR/kg Packaging materials 3923 90 3,17 EUR/kg Packing accessories 8714 99 9,15 EUR/kg Paint 3208 20 or 3208 90 4,35 EUR/kg 3,81 EUR/kg Paint bottle 7010 90 0,45 EUR/kg Pedal 8714 96 8,93 pairs Quick release 8714 99 9,15 EUR/kg Rear carrier 8714 99 9,15 EUR/kg Reflector bracket 8714 99 9,15 EUR/kg Reflector 3926 90 8,93 EUR/kg Rim 8714 92 3,01 EUR/kg Rim set w/o tire & tube 8714 92 3,01 EUR/kg Rim tape 4012 90 3,22 EUR/kg Rivet 7318 16 5,55 EUR/kg Rotor 8714 94 7,48 EUR/kg Rotor/accessory parts for basket/accessory parts for fender 8714 99 9,15 EUR/kg Saddle 8714 95 6,15 EUR/kg Screw 7318 15 3,69 EUR/kg Screw/bolt 7318 16 5,55 EUR/kg Seat clamp 8714 99 9,15 EUR/kg Seat collar 8714 99 9,15 EUR/kg Seat post 8714 99 9,15 EUR/kg Seat stay bridge 8714 99 9,15 EUR/kg Shift lever 8714 99 9,15 EUR/kg Shifter inner wire 8714 99 9,15 EUR/kg Shifter outer cable 8714 99 9,15 EUR/kg Spoke 8714 92 3,01 EUR/kg Spoke protector 8714 99 9,15 EUR/kg Sticker 3919 90 5,60 EUR/kg Suspension 8714 99 9,15 EUR/kg Suspension accessories 8714 99 9,15 EUR/kg Tire 4011 50 2,75 EUR/piece Tools 8714 99 9,15 EUR/kg Tube 7608 20 4,78 EUR/kg Valve 8714 99 9,15 EUR/kg V-shape stay for fender 8714 99 9,15 EUR/kg Water bottle fixing nut (boss) 7318 16 5,55 EUR/kg Freewheel 8714 93 15,53 EUR/kg Wheel sets 8714 93 15,53 EUR/kg Training wheel 8714 99 9,15 EUR/kg Wire 8714 94 or 8714 99 7,48 EUR/kg 9,15 EUR/kg Labour Labour wages in manufacturing sector [N/A] 1,49 EUR/hour or 3 396,84 EUR/year Energy Electricity [N/A] 0,06 EUR/kWh Gas [N/A] 0,33 EUR/m3 Water [N/A] 2,28 EUR/m3

3.3.6.1. Materials

(155) In order to establish undistorted price of materials as delivered at the gate of the producer's factory as provided by Article 2(6a)(a), first indent, the Commission used the import prices in the representative country, of each material used by the cooperating producers in the PRC.

(156) In order to establish the normal value, according to the Commission's methodology the import duties of the factors of production and the materials imported into Serbia, as well as the domestic transport costs should be added to these import prices. This would result in a higher normal value since the import duties would further increase the import prices of bicycle parts. Consequently, an even higher dumping margin. Considering the finding in recital (178) as well as the nature of this expiry review investigation, which is focused on finding whether dumping continued during the review investigation period rather than finding its exact magnitude, the Commission decided that adjustments for import duties and domestic transport were unnecessary.

3.3.6.2. Labour

(157) The ILO statistics provided information on monthly wages in the manufacturing sector and weekly hours worked in Serbia for the review investigation period. For Ideal, that reported the total staff wage for the review investigation period, the Commission extrapolated the individual average monthly wage and replaced it with the ILO average monthly wage. For Oyama, that reported wages for person-hours, the Commission first extrapolated the monthly working hours from the ILO data on working hours per week then divided the average monthly wage by the average working hours, thus obtaining the average wage per hour which was finally used to replace the information provided by the company.

3.3.6.3. Electricity and natural gas

(158) The prices of electricity and natural gas for non-household consumers and in particular for medium-sized industry were readily available on Eurostat for Serbia (83), for the year 2017. The electricity price was reported in Euro per kWh and the gas price in Euro per gigajoule. The latter has a fixed conversion rate with cubic meters, which was the measure used by the cooperating producers in the PRC to report their gas consumption.

3.3.6.4. Water

(159) The data used for determination of water price was extracted from the Bloomberg database in series of Serbia CPI (Consumer Prices) Water Supply Index, reporting an amount of 269,1 RSD for January 2019.

3.3.7. Calculations

(160) In order to establish the constructed normal value, the Commission followed the following two steps.

(161) First, the Commission established the undistorted manufacturing costs. This was done by multiplying the usage factor of each production factor by their undistorted cost per unit. The usage factors for materials, labour, energy and water were provided by the cooperating exporting producers. The undistorted costs per unit where those observed in the representative country.

(162) Second, the Commission established the manufacturing overheads costs. These were computed by applying the ratio of manufacturing overhead over the cost of manufacturing reported by the cooperating exporting producers, to the respective undistorted costs of manufacturing (covering the consumption of materials, labour, energy and water) determined according to the methodology described in section 3.3.6.

(163) Third, to the manufacturing costs identified above the Commission applied the average SG&A costs and profits from six companies in Serbia (Capriolo, Planet bike, Venera bike, Kripton, Crossbike and Cassini Wheels). They were identified on the basis of publicly available information on these companies annual accounts of 2017 (84) and were expressed as the following percentages: — SG&A (85) of 6,62 % applied to the sum of costs of manufacturing and manufacturing overheads; and — A profit (86) of 10,05 % applied to the sum of costs of manufacturing and manufacturing overheads.

(164) On that basis, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation. A different normal value was established for each exporting producer.

(165) In their comments on the final disclosure, the CCCME argued that the Commission did not use any data provided by the cooperating exporting producers when establishing the undistorted normal value. CCCME argued that, since the PRC is no longer considered as a non-market economy, factors such as energy costs, manufacturing overhead costs, SG&A and profits should not be replaced by benchmarks. CCCME also argued that other factors of production such as frames made of carbon, should not be replaced as carbon used in these frames was not mentioned as material subject to significant distortions in the PRC.

(166) The Commission noted that the statement that it did not use any data provided by the cooperating exporting producers when establishing the undistorted normal value is factually inaccurate. As mentioned in recitals (150) and (161), the Commission used, the usage factors for materials, labour, energy and water, as well as the ratio of manufacturing overheads, all reported by the cooperating exporting producers and verified by the Commission.

(167) The Commission further noted that CCCME's argument that the PRC is no longer considered as a non-market economy is also irrelevant. The Commission recalls that in recital (2) of the new anti-dumping legislation it is clearly stated that ‘[t]his Regulation is without prejudice to establishing whether or not any WTO Member is a market economy or to the terms and conditions set out in protocols and other instruments in accordance with which countries have acceded to the Marrakesh Agreement Establishing the World Trade Organization done on 15 April 1994.’ (87) As the new anti-dumping legislation no longer distinguishes between market economies and non-market economies, this argument by CCCME lacks any legal basis applicable to this investigation. The application of Article 2(6a) of the basic Regulation is made on a case by case basis, having regard to all the evidence available with respect to the exporting country.

(168) Furthermore, the Commission noted that Article 2(6a)(a) of the basic Regulation establishes that the existence of significant market distortions render the use of domestic costs and prices inappropriate, and thus the normal value must be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks. It also provides that the normal value must include an undistorted and reasonable amount for SG&A and for profits. The use of domestic costs in that context is only available to the extent that such costs are positively established not to be distorted, on the basis of accurate and appropriate evidence, in particular on the basis of evidence provided by interested parties in accordance with Article 2(6a)(c). CCCME did not adduce any evidence to that effect.

(169) Finally, the Commission also noted that none of the three cooperating sampled producers in the PRC claimed that any of the factors of production have been purchased at undistorted values.

(170) This claim was therefore rejected.

3.3.8. Export price

(171) Out of the two sampled producers/groups of producers in the PRC selling the product under review to the Union during the review investigation period, one was selling directly to independent customers and the other was selling via related traders.

(172) The exporting producers exported the product under review either directly to independent customers in the Union of via a trader. The export price was therefore established based on prices actually paid or payable for the product under review when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(173) As mentioned in recital (46), one of the sampled exporting producers group did not provide the Commission its sales prices for the sales done via a related trader to the first independent customer for both sales to the Union as well as sales to the rest of the world. Therefore, using best facts available in accordance with Article 18 of the basic Regulation, the Commission used only transactions for which the price to independent customer could be identified to establish the exp