COMMISSION IMPLEMENTING REGULATION (EU) 2018/1690

of 9 November 2018

imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163

THE EUROPEAN COMMISSION,

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

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

Whereas:

1. PROCEDURE

1.1. Initiation

(1) On 14 October 2017, the European Commission (‘the Commission’) initiated an anti-subsidy investigation with regard to imports into the Union of certain new and retreaded tyres of a kind used on buses or lorries and with a load index exceeding 121, originating in the People's Republic of China (‘the PRC’ or ‘the country concerned’). The initiation was based on Article 10 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (‘Notice of Initiation’) (2).

(2) The Commission initiated the investigation following a complaint lodged on 30 August 2017 by the Coalition against unfair tyres imports (‘the complainant’) on behalf of Union producers representing more than 25 % of the total Union production of certain new and retreaded tyres of a kind used on buses or lorries and with a load index exceeding 121 (‘TBR tyres’). The complaint contained evidence of subsidisation and of a resulting injury that was sufficient to justify the initiation of the investigation.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of China (‘GOC’) (3) that it had received a properly documented complaint, and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. Consultations were held on 10 October 2017, but no mutually agreed solution could be reached.

(4) On 7 May 2018, the Commission imposed a provisional anti-dumping duty on imports of the same product originating in the PRC (4) (‘the provisional anti-dumping Regulation’) in an investigation which had been initiated on 11 August 2017 (5) (‘the parallel anti-dumping investigation’). On 22 October 2018, the Commission imposed a definitive anti-dumping duty on imports of the same product originating in the PRC (6) (‘the definitive anti-dumping Regulation’) in the parallel anti-dumping investigation. The injury, causation and Union interest analyses performed in the present anti-subsidy investigation and the parallel anti-dumping investigation are mutatis mutandis identical, since the definition of the Union industry, the sampled Union producers and the investigation period are the same in both investigations. All the relevant elements pertaining to these aspects have been taken into account also in the present investigation.

1.1.1. Comments concerning initiation

(5) The GOC claimed that the investigation should not be initiated because the complaint did not satisfy the evidentiary requirements of Articles 11(2) and 11(3) of the WTO Agreement on Subsidies and Countervailing Measures and of Article 10(2) of the Basic Regulation. According to the GOC, there was insufficient evidence of countervailable subsidies, injury and a causal link between the subsidised imports and the injury.

(6) The Commission rejected that claim. The evidence submitted in the complaint constituted the information reasonably available to the complainant at that stage. It was sufficient to show, at initiation stage, that the alleged subsidies were countervailable in terms of their existence, amount and nature. The complaint also contained sufficient evidence of the existence of injury to the Union industry, which was caused by the subsidised imports.

(7) Contrary to what was claimed by the GOC, the complaint did not only rely on the tyre industry policy in 2010, but also contained (in particular in points 81 to 92), a number of other policy documents, plans and catalogues with references to the tyre industry. Moreover, the Commission (where appropriate) relied on other available sources to confirm the alleged subsidisation. For example, given that the US authorities had recently made public determinations on some of the measures, the Commission also relied on this material already at this stage. Moreover, the Commission found it useful to include a reference to a new industrial promotion plan of the Hebei province of 2016, which it had on file, but was not mentioned in the complaint. This additional evidence, which is available in the non-confidential file of the case as part of the memorandum on sufficiency of evidence, further confirmed and complemented the allegations made in the complaint as regards the existence and nature of the alleged subsidisation. Insofar as the GOC pointed to any deficiencies with respect to the accuracy and adequacy of the complaint, the Commission examined these allegations during the investigation, and found no reason to question the allegations about the existence and extent of subsidisation when initiating the investigation.

(8) Following final disclosure, Hämmerling claimed that the Commission cannot initiate an investigation with a general reference to CN codes given for information only. According to Hämmerling, although the CN codes are not binding in their interpretation, such a general reference defining product concerned cannot be accepted, as it impairs the legal certainty of all of the interested parties, concerning whether they will fall within the scope of the investigation and constitutes a direct breach of Article 41 of the Charter of Fundamental Rights of the European Union (hereinafter ‘Charter’) and the right to good administration. Moreover, such a reference and unclear language referring to ‘of a kind used’ convey the message that the scope of the investigation was uncertain and could have been further discretionally extended or narrowed, at the later stage of the investigation, which impairs the right to be heard of interested parties.

(9) In regard to this claim, the Commission found that the party did not substantiate its theoretical claim how the use of CN codes impair legal certainty. The Commission is not bound by the CN codes but by the product definition as stated in the Notice of Initiation. The party made no claims that the Commission did not respect the product definition as stated in the Notice of Initiation. Therefore this claim was rejected.

1.2. Registration of imports

(10) The complainant submitted requests for registration of imports of the product concerned originating in the PRC pursuant to Article 14(5) of the basic anti-dumping Regulation and Article 24(5) of the basic Regulation on 19 August 2017 and on 5 October 2017 respectively.

(11) On 4 October 2017, the China Rubber Industry Association (‘CRIA’) and the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (‘CCCMC’) submitted comments on the request for registration. They claimed that the request had failed to satisfy the applicable evidentiary standard as there was no evidence of a history of dumping/subsidy, a substantial rise in imports and that the imports are likely to seriously undermine the remedial effects of the duty. On 19 October 2017, the Commission held a hearing at the request of CRIA during which it reiterated its earlier comments.

(12) On 2 February 2018, the Commission published Implementing Regulation (EU) 2018/163 (‘the registration Regulation’) (7) making imports of the product concerned originating in the PRC subject to registration as of 3 February 2018 onwards. The Commission took into account comments by interested parties when assessing the validity of the request for registration.

(13) After the registration entered into force Hankook Group (8) claimed that its rights of defence were violated as no information regarding the Commission's intention to make imports of the product concerned subject to registration had been communicated to it before the entry into force of the registration Regulation. For that reason the Hankook Group claimed that there was a breach of Article 41 of the Charter of Fundamental Rights of the European Union.

(14) The Commission observed that prior disclosure is mandatory under Article 30(2) of the basic Regulation before the imposition of definitive measures. The same does not apply to a registration Regulation under Article 24(5) of the basic Regulation. That Article only provides for the prior information to Member States in due time. Moreover, the right to be heard under Article 41(2)(a) of the Charter of Fundamental Rights of the European Union only applies to individual adverse measures. In this case, the Commission directed the Union customs authorities to register imports. The registration Regulation is not an individual measure affecting the Hankook Group adversely. It was neither addressed to the Hankook Group nor did it produce individual negative effects for that group. In this respect, it should also be recalled that the registration of imports is an appropriate step in order to allow for the subsequent imposition of duties against registered imports and duly informs operators about the potential liability attached to those imports which may be incurred in case of definitive measures. Therefore, neither the rights of defence of the Hankook Group nor Article 41 of the Charter of Fundamental Rights of the European Union were violated by failing to inform the Hankook Group in advance of the registration decision.

1.3. Investigation period and period considered

(15) The investigation of subsidisation and injury covered the period from 1 July 2016 to 30 June 2017 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2014 to end of June 2017 (‘the period considered’).

1.4. Interested parties

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

(17) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(18) Two Union producers, represented by the complainant, took this opportunity to request the Commission to keep their names confidential for fear that they could face retaliation by customers or competitors concerned by this investigation, in accordance with Article 29(1) of the basic Regulation. Moreover, two other cooperating Union producers requested the same status subsequently.

(19) The Commission individually examined the merits of each confidentiality request. It established that there was indeed evidence of a significant possibility of retaliation in each case and accepted that the names of those companies should not be disclosed.

(20) Two exporting producers, the Giti Group (9) and the China National Tire Group (10), claimed that the anonymity of two Union producers represented by the complainant could seriously affect the parties' right of defence as it is not possible to verify that the complainant effectively represents more than 25 % of total Union production. In addition, the anonymity does not allow interested parties to know in which tier (11) the complainant is active and thus, to meaningfully comment on the material injury that it could suffer due to Chinese exports of the product concerned to the Union. Moreover, the Giti Group claimed that, according to the complainant, tier 3 Union production represented only 16 % of total Union production. Finally, the Giti Group and the China National Tire Group argued that confidentiality hinders interested parties from knowing whether sampled Union producers are related to Chinese exporting producers.

(21) In light of these comments, the Commission re-assessed the non-confidential version of the complaint but came to the conclusion that the version available for inspection by interested parties sufficiently permitted interested parties to assess the standing requirements underlying this investigation. In any case, the Commission noted that whether a complainant belongs to a particular market tier is not determinative of the finding of standing since standing is assessed on the basis of the total production (regardless of any tier segmentation) of the product concerned. Finally, the Commission observed that there was insufficient evidence or explanation provided how the alleged lack of knowledge of potential links between anonymous complainants and Chinese exporting producers would impede the rights of defence of interested parties. The Commission invited interested parties to provide such evidence or explanations, but no further evidence was provided. The claims levied against granting of confidentiality were therefore rejected.

(22) Article 29 of the basic Regulation stipulates that the Commission must not reveal any information which is deemed confidential upon good cause being shown without specific permission from the supplier of such information. The Commission considered that the open version of the complaint permitted interested parties to assess the standing requirements. Moreover, whether the complainant belongs to a particular market tier is irrelevant since standing is assessed on the basis of the total production (regardless of any tier segmentation). Finally, the Commission was not convinced by the argument that the lack of knowledge of potential links between anonymous complainants and Chinese exporting producers should impede the rights of defence of interested parties. The claims levied against granting of confidentiality were therefore rejected.

1.5. Sampling

(23) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

1.5.1. Union producers

(24) In the Notice of Initiation, the Commission stated that it had preliminarily selected a sample of Union producers on the basis of the highest representative production and sales volumes whilst ensuring a geographical spread. It invited interested parties to comment on the provisional sample.

(25) Four interested parties submitted comments on the provisional sample (the China National Tire Group; the Giti Group; the CRIA and the CCCMC). In particular, they considered that the market segmentation into three tiers was not duly reflected in the provisional sample and that the sample should mirror as close as possible the percentage of tier 1, tier 2 and tier 3 production and sales out of the total Union production and sales.

(26) Further to that comment, on 25 September 2017, the Commission requested Union producers to provide additional information on the tiers with a view to establishing a revised sample of Union producers.

(27) Cooperating Union producers that responded to the sample questionnaire include large and Small and Medium Size Enterprises (‘SMEs’) (12) and represent more than 50 % of the total estimated Union production and sales.

(28) In order to establish the definitive sample, the Commission took into consideration the fragmentation of the tyres sector among different tiers, ensuring that all three tiers were covered by the sampled companies. In addition, to ensure that the situation of the SMEs was properly reflected in the injury analysis given that they represent around 15 % of the total Union sales volumes of Union producers, the Commission considered that SMEs should also be represented in the sample.

(29) Eleven Union producers were sampled on the basis of: — the overall representativity in terms of size of the production and sales volume of the product concerned in the year 2016; — the representativity of tiers in terms of size of the production volume of the product concerned in the year 2016; — the geographical spread; and — the representativity of the Union producers in terms of size, namely between SMEs and larger companies.

(30) The sampled Union producers comprise both large companies and SMEs. The selected Union producers were based in six Member States which together accounted for more than 36 % of Union production and sales reported by the cooperating Union producers.

(31) On 22 December 2017, one of the sampled Union producers, the Polish producer, Geyer & Hosaja, informed the Commission that it had decided to stop cooperating with the investigation. The percentages mentioned in recital (30) above are not impacted by the withdrawal of this producer as its production represents less than 0,1 % of the total Union production. The Commission therefore concluded that the final sample remains representative of the Union industry.

(32) Finally, the Giti Group submitted that the Commission should have terminated this investigation immediately because of the procedurally erroneous pre-selection of the sample of Union producers. The Commission recalled that the provisional selection of a sample of Union producers is legally possible and conducive to an effective investigation within tight deadlines. As demonstrated in recitals (26) to (30), the provisional sample was changed further to comments from interested parties. Consequently, the claim was rejected.

1.5.2. Importers

(33) In order to decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation. Five importers came forward importing around 430 000 units of imports from the PRC. Two companies were sampled accounting for [70 % - 90 %] of the importers that submitted a sampling form.

1.5.3. Exporting producers

(34) In order to decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC to provide the information specified in the Notice of Initiation. In addition, it requested the authorities of the PRC to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(35) 44 exporting producers/group(s) of exporting producers in the country concerned provided the requested information and agreed to be included in the sample. In accordance with Article 27(1)(b) of the basic Regulation, the Commission selected the following sample of four groups of exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available: — China National Tire Group, China; — Giti Group, China; — Hankook Group, China; — Xingyuan Group, China.

(36) The sampled groups of exporting producers represented more than 50 % of the total imports of the product concerned to the Union.

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

(38) Comments on the proposed sample were received from the European Retreading Association (‘BIPAVER’), which claimed that the finally selected sample could lead to a strong imbalance in the product mix between tier 2 and tier 3 tyres. In their view, the average import prices might not accurately reflect the part of import volumes that are most harmful to the Union industry. Therefore, they urged the Commission to reassess and amend the sample.

(39) The Commission assessed whether it would be practically feasible to further enlarge the sample. It pointed out that the groups of exporting producers selected in the sample consisted of: (1) 13 legal entities that were involved in the production and domestic sales of the product concerned; (2) two related exporters located outside of the Union; and (3) more than ten related importers located in the Union. The data provided by each of these entities needed to be processed and verified. Therefore, the Commission considered that more exporting producers could not be reasonably investigated within the time available.

(40) BIPAVER also considered that two of the sampled companies were not representative recipients of countervailable subsidies because they have their headquarters and some production facilities outside of the PRC.

(41) The Commission noted that the fact that an individual company might not have received directly a specific type of alleged subsidy did not render the sample non-representative, as the purpose of the sample was to represent the overall tyres industry in the PRC with regard to eligibility for all types of alleged subsidies. The four sampled groups of exporting producers were representative in terms of eligibility for the subsidies alleged in the complaint. Hence, the Commission considered that the selected sample represents a proper basis to examine the existence and the extent of the alleged subsidisation.

(42) The proposed sample hence complies with Article 27(1)(b) of the basic Regulation. The Commission therefore decided to retain the proposed sample as the final sample.

(43) In addition to the four sampled exporting producers, six exporting producers declared that, in the event that they are not selected to be in the sample, they would like to receive a questionnaire and other claim forms in order to claim an individual examination under Article 27(3) of the basic Regulation. As requested, the Commission sent questionnaires to these six exporting producers. However, none of them replied to the questionnaire.

1.6. Questionnaire replies and verification visits

(44) The Commission sent questionnaires to the four sampled Chinese exporting producers; the non-sampled exporting producers as well as the sampled Union producers.

(45) Questionnaire replies were received from the four sampled Chinese exporting producers and from ten sampled Union producers. None of the non-sampled exporting producers sent a reply to the questionnaires.

(46) A questionnaire was also sent to the GOC. It included specific questionnaires for the China Development Bank (‘CDB’), Export Import Bank of China (‘EXIM’), Agricultural Bank of China (‘ABC’), Bank of China (‘BOC’), and the Chinese Export & Credit Insurance Corporation (‘Sinosure’). Those financial institutions had been specifically referred to in the complaint as public bodies or bodies directed and entrusted granting subsidies. In addition, the GOC was asked to forward the specific questionnaire for financial institutions to any other financial institution that provided loans or export credits to the sampled companies, or to the buyers of the sampled companies. The GOC was also asked to gather any responses provided by these financial institutions and to send them directly to the Commission.

(47) Furthermore, the questionnaire for the GOC included specific questionnaires for those producers of natural rubber, synthetic rubber, carbon black and nylon cord which, according to the complaint, provided inputs at less than adequate remuneration to the sampled companies, i.e. Sinopec, Sinopec Baling Co., Chemchina, Shandong Haohua, Jiangxi Blackcat Carbon Black Co., Ltd, Hangzhou Zhongce Qingquan Industrial Co., Ltd and Suqian Junma Tyre Cord Company Limited. In addition, the GOC was asked to forward that specific questionnaire to all other producers and distributors of the raw materials in question which had provided inputs to the sampled companies. The GOC was also asked to gather any responses provided by these producers and to send them directly to the Commission.

(48) The Commission received questionnaire replies from the GOC, which included replies to the specific questionnaire from EXIM, BOC, ABC and Sinosure.

(49) The Commission sought and verified all information deemed necessary for the determination of subsidy, injury and Union interest. A verification visit took place at the premises of the Chinese Ministry of Commerce, during which officials from other relevant ministries also participated. Moreover, representatives from the following financial institutions were present during this verification visit; — Export Import Bank of China, Beijing, China; — Agricultural Bank of China, Beijing, China; — Bank of China, Beijing, China; — Sinosure, Beijing, China.

(50) Moreover, verification visits pursuant to Article 26 of the basic Regulation were carried out at the premises of the following companies: Sampled Union producers — Good Year Firma Oponiarska, Poland; — Wetest, Czech Republic; — B.R.P. Pneumatici, Italy; — Banden plant, the Netherlands; — Marangoni SpA Ltd Italy; — Roline N.V., the Netherlands; — four Union producers which requested confidentiality. Sampled unrelated importers in the Union — Heuver Bandengroothandel B.V, the Netherlands; — Hämmerling The Tyre Company GmbH, Germany. Sampled producers in the PRC China National Tire Group: — Aeolus Tyre Co. Ltd, Jiaozuo, PRC; — Beijing Rubber Research and Design Institute, Beijing, PRC; — Chemchina Corporation, Beijing, PRC; — Chemchina Finance, Beijing, PRC; — China National Tire & Rubber Co. Ltd, Beijing, PRC; — Aeolus Tyre (Taiyuan) Co. Ltd (13), Taiyuan, PRC; — Chonche Auto Repair Group Co. Ltd, Beijing, PRC; — Henan Tyre Group Co. Ltd, Jiaozuo, PRC; — Yanzhou Ruiyuan Rubber Plastic Co. Ltd:, Jining, PRC; — Yinhe Power Plant Co. Ltd, Jining, PRC; — QingdaoYellow Sea (Rubber) Group Co. Ltd, Qingdao, PRC; — Qingdao Yellow Sea Rubber Co. Ltd, Qingdao, PRC; — Pirelli Tyre Co. Ltd, Jining, PRC (14). Giti Group: — Giti Tire (China) Investment Co., Shanghai, PRC; — Giti Tire (Anhui) Co. Ltd, Hefei, PRC; — GITI Radial Tire (Anhui) Ltd, Hefei, PRC; — Anhui Prime Cord Fabrics Company Ltd, Hefei, PRC; — Giti Tire (Hualin) Co. Ltd, Hualin, PRC; — Giti Tire (Fujian) Co. Ltd, Fujian, PRC; — GITI Tire (Yinchuan) Co. Ltd, Yinchuan, PRC; — GITI Greatwall Tire (Yinchuan) Co. Ltd, Yinchuan, PRC; — GITI Tyre (Chongqing) Company Ltd, Chongqing, PRC; — GITI Steel Cord (Hubei) Company Ltd, Hubei, PRC; — 3S Engineering Shanghai Company Ltd, Shanghai, PRC; — Seyen Machinery (Shanghai) Company Ltd, Shanghai, PRC. Hankook Group: — Shanghai Hankook Tire Sales Co. Ltd, Shanghai, PRC; — Chongqing Hankook Tire Co. Ltd, Chongqing, PRC; — Jiangsu Hankook Tire Co. Ltd, Jiangsu, PRC; Xingyuan Group: — Xingyuan Tyre Co. Ltd, Dongying, PRC; — Guangrao Xinhongyuan Tyre Co. Ltd, Dongying, PRC; — Xingyuan International Tyre Co. Ltd, Dongying, PRC; — Guangda Tyre Co Ltd, Dongying, PRC.

1.7. Non-imposition of provisional measures and subsequent procedure

(51) Given that it had imposed provisional measures in the parallel anti-dumping case in May 2018, the Commission decided not to impose provisional measures in the present case. On 13 July 2018, all interested parties received an Information Document describing the Commission's preliminary findings on the alleged subsidy schemes and the Commission's preliminary conclusions as far as injury, causation and Union interest were concerned, as set out in the provisional anti-dumping Regulation.

(52) Several interested parties made written submissions on the information document. The parties who so requested were granted an opportunity to be heard.

(53) Following the disclosure of the Information Document, Pirelli Tyre Co. Ltd claimed that it should not be considered as a related company of China National Tire & Rubber Co. Ltd (‘CNRC’). In this sense, Pirelli Tyre Co. Ltd disagreed with the application of Article 127 of the Union Customs Code Implementing Act (EU) 2015/2447 (the ‘Union Customs Code’) for the purpose of calculating a weighted average amount of subsidisation for related companies. Instead, Pirelli Tyre Co. Ltd referred to the definition of Article 16 of the ASCM Agreement, which requires control of one company over another, in order to establish the relation between companies. Pirelli Tyre Co. Ltd then argued that Pirelli Tyre Co. Ltd would not qualify as a related company under this standard, as it was allegedly not controlled by CNRC. In addition, Pirelli Tyre Co. Ltd noted that the basic Regulation did not make any reference to the Union Customs Code.

(54) The Commission recalled that Article 16 of the ASCM Agreement is mirrored in Article 9(2) of the basic Regulation. However, both articles refer only to the definition of the Union industry and the relationship of Union producers to exporting producers. In that context, a Union producer may be taken from the definition of the Union industry if it is controlled by an exporting producer. In contrast, both the ASCM Agreement and the basic Regulation are silent about the method how to assess the relationship between exporting producers for the purpose of establishing the amount of subsidisation. In order to ensure that measures can be enforced effectively, particularly to avoid channelling exports through a related company with the lowest duty, it is the Commission's practice to establish the relationship between exporting producers through the criteria laid down in Article 127 of the Union Customs Code Implementing Act (EU) 2015/2447 of 24 November 2015. This was clearly communicated to all parties in the Notice of initiation at the start of the proceeding. In addition, reference to Article 127 of the Union Customs Code Implementation Act is explicitly contained in Article 2(1) of the basic Anti-dumping Regulation (15) and the Commission should have the same treatment of parties in both anti-dumping and anti-subsidy cases (16).

(55) Article 127 (d) of the Customs Code establishes that two persons shall be deemed to be related if: a third party directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them. CNRC is the largest shareholder of Pirelli Tyre Co. Ltd During the investigation period, it owned 65 % of the shares. As of today, it still holds 46 % of the shares. Therefore, in the context of this investigation, Pirelli Tyre Co. Ltd and CNRC are considered to be related. The claim was thus rejected.

(56) Pirelli Tyre Co. Ltd also commented that it should be considered only as a cooperating party, and not as an exporting producer, since the company stopped the production of the product concerned in November 2017.

(57) The Commission established that Pirelli Tyre Co. Ltd was an exporting producer during the entire investigation period. The fact that subsequently the company ceased the production does not alter the result of the investigation. The claim was therefore rejected.

(58) Following final disclosure Pirelli reiterated its claim that it functions independently from the China National Tire Group. However, none of the claims was substantiated with additional evidence. In particular, Pirelli did not contest the ownership structure described by the Commission in annex 2 of its final disclosure. Therefore the Commission rejected this claim.

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

(60) Given that the injury period and the investigation period are the same as in the parallel anti-dumping investigation, the Commission informed, on 1 June 2018, interested parties that the information and comments submitted concerning injury in the framework of the anti-dumping investigation were also going to be taken into account for this investigation. None of the parties opposed to this approach.

(61) In the parallel anti-dumping investigation parties received, on 24 July 2018, final disclosure of the essential facts and considerations on the basis of which it intended to impose a definitive anti-dumping duty on imports of the product concerned into the Union. Furthermore interested parties received an additional disclosure on 10 September 2018. As described in recital (60) above the comments submitted in the framework of those disclosures were in so far they concerned injury, causation and Union interest fully considered in this investigation and, where appropriate, taken into account and reflected in the findings of this investigation.

1.8. Final disclosure

(62) On 28 September 2018, the Commission informed all parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-subsidy duty on imports of the product concerned into the Union.

(63) All parties were granted a period within which they could make comments on the final disclosure (i.e. 8 October 2018). Several interested parties requested an extension of the deadline. The Commission granted until 10 October 2018 10AM for submitting comments to those parties.

(64) The CCCMC, the CRIA, three out of the four sampled Chinese exporting producers, two unrelated importers made written submissions commenting on the final disclosure.

(65) Following final disclosure, the China National Tire Group claimed its rights of defence have been breached by the Commission when it rejected its request for further extension of the deadline provided for submission of comments on the final disclosure. According to it, the Commission should not view the ten-day period as a fixed time limit. Furthermore, when setting out the deadline, the Commission should consider the peculiarities of the case at hand and allow sufficient time for both written and oral submissions. In respect of these claims, the Commission noted that it had fully complied with the minimum deadline of 10 days set in Article 30(5) of the basic Regulation for comments on final disclosure. Furthermore, it also granted an extension to all interested parties in the proceeding who requested so taking into account the urgency of the matter in accordance with the same Article.

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

(67) The Commission observed that the EU institutions are not legally bound by the General Data Protection Regulation (17) but by Regulation (EC) No 45/2001 (18). Moreover, Hämmerling confirmed that the personal data protection issue was not directly linked to a possible specific hampering of its rights of defence under trade defence law. The Commission therefore concluded that Hämmerling's status as interested party in the proceeding and its rights of defence were not directly affected.

(68) After final disclosure, Hämmerling reiterated its claim that ‘the right to personal data protection is an independent right, where threshold for its violation does not require an actual example, but the mere possibility of being misused in inappropriate manner, such as making it available to unverified users of database in third-countries with no adequate assessment of their observance of data protection law’.

(69) In relation to this claim, the Commission referred to Article 9(6) of Regulation (EC) No 45/2001 that allows the Commission to transfer personal data if the transfer is necessary or legally required for the defence of legal claims, and the fact that all data subjects have to sign the TRON terms of use (that stipulates amongst other that there can be no unauthorized release of any information from TRON) when entering into TRON for the first time when they were granted interested party access to a case. It considered therefore that the use of TRON is compliant with the applicable data protection rules.

(70) Following final disclosure the Giti Group requested a hearing with Hearing Officer claiming that its rights of defence have been breached by the Commission as it included the duty drawback scheme very late in the proceeding and it arrived to wrong conclusions. The Hearing Officer took the view that the Notice of Initiation allowed for covering the scheme under discussion. Furthermore, the Giti Group should have been aware that this scheme is covered by the proceeding and had sufficient time to present all their comments to the Commission. The Hearing Officer concluded that the rights of defence of the Giti Group were respected.

(71) Several other interested parties reiterated the same concerns as expressed after the information document and asked the Commission to make further clarifications.

(72) The Commission considered that the open file, the Information Document and the Final Disclosure contained sufficient information allowing all interested parties to fully exercise their rights of defence. Moreover, a note for the file (19) providing clarifications on the Information Document was included in the open file before final disclosure. It therefore rejected the request to provide further clarifications.

(73) Finally, the parties claimed that their rights of defence were seriously affected as the period for commenting on the final disclosure was too short even with the extension and did not take into consideration the peculiarities of this investigation.

(74) Regarding the set deadline the Commission reiterated that it had complied with the legal deadline under Article 30(5) of the basic Regulation, as further explained in recital (65) above. It added that the parties had received an extensive disclosure by means of the Information Document in July 2018 which already set out the main considerations and conclusions for all subsidies with the exception of excess remission of natural rubber and electricity provided for less than adequate remuneration. At that stage parties were granted a deadline of 25 days to submit comments. As most of the issues were therefore known to all parties, the comments received upon final disclosure were also substantial, ranging from 8 to 63 pages.

(75) With respect to the injury aspect of this investigation, the Commission noted that parties received a final disclosure and an additional final disclosure document also in the context of the parallel anti-dumping investigation. The present investigation addressed the comments received following the two disclosures. Therefore, the Commission considered that the open file and the disclosures already contained sufficient information allowing all interested parties to fully exercise their rights of defence within the deadline as set out in the definitive disclosure document. For these reasons, the Commission took the view that the rights of defence of all interested parties were fully observed during this proceeding.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(76) The product concerned is certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the PRC, currently falling within CN codes 4011 20 90 and ex 4012 12 00 (TARIC code 4012120010). These CN and TARIC codes are given for information only.

(77) The product concerned covers both new and retreaded pneumatic tyres for buses or lorries which share the same essential physical, chemical and technical characteristics.

(78) Both types of the product concerned are made of the same input (even if the technology involved may differ) and have a similar structure. The variance in raw materials and structure impart different performance characteristics.

2.1.1. Manufacturing process

2.1.1.1. New tyres

(79) The manufacturing process of the new lorry and bus tyres involves: (1) compounding and mixing rubber; (2) tyre components preparation; (3) (green) tyre building; (4) curing (vulcanisation); and (5) final inspection. All lorry and bus tyres are made from the same basic raw materials, namely natural rubber, synthetic rubber, steel, carbon black, other chemicals and oils as well as fabric and have the same components, namely tread belt, sidewall, inner casing, bead wires, steel belts, casing cords, even if a certain variance is found between the various producers of this product.

(80) The manufacturing process of the new lorry and bus tyres was also found to involve varying technologies, which, however, did not impact on the overall findings of interchangeability.

2.1.1.2. Retreaded tyres

(81) Retreading is essentially a recycling process whereby worn tyres are refurbished through a replacement of the tread on an old casing. Casings are main elements of the retreading process, and, as such a substantial part of the retreader activity is the selection and acquisition of casings suitable for retreading. Casings are thereby the main input of the production process and constitute — depending of their quality — either a real ‘semi-finished’ product or a waste.

(82) Again, this process can involve varying technologies without impact on the Commission's interchangeability findings.

2.1.2. Uses and types of tyres

(83) Lorry and bus tyres are produced in a large variety of types and sizes found on a wide range of commercial vehicles, from local delivery lorries and buses in urban or regional settings to the long haul lorries and buses according to their size and load index specifications. They are neither suitable for use on passenger vehicles or on other light commercial vehicles nor for fully off-the-road vehicles such as agricultural tractors.

(84) Tyres for lorries or buses are sold in two types and four categories. Tube type tyre is a more traditional option; it has an inner tube, which has its own valve, placed inside the tyre. In a tubeless tire, the tire and the rim of the wheel form an airtight seal, with the valve being directly mounted on the rim. An overwhelming majority of tyres for lorries or buses sold in the Union are tubeless tyres. The four categories of tyres for lorries or buses are: steer, drive, trailer and multi-position. Steer tyres are designed to be used on the front axle to aid with steering, but can be used in all positions on the lorries or bus depending on the vehicle's use. Drive tyres are designed for the drive train and provide better traction. Trailer tyres are designed to be mounted on trailers, while multi- position tyres are designed to be used in all in all positions on a vehicle depending on its use.

(85) Tyres, new or retreaded, are subject to the same safety requirements in the Union market as set out in Directive 2007/46/EC of the European Parliament and of the Council (20).

2.2. Segmentation into three tiers of the Union market for tyres

(86) Information collected and received by the Commission indicates that the Union market for bus and lorry tyres is segmented in three tiers or segments. While there are no clear dividing lines among tiers, there is a general agreement among interested parties and the findings of the Commission on the following categorisation.

(87) Tier 1 tyres cover premium new tyres with the flagship brand of main manufacturers. Brand recognition is a key factor for tyres in this tier and justifies significantly higher prices for expected high performances as well particularly strong marketing investments. Original equipment for lorries or buses manufacturers (‘OE1’) tyres are primarily included in that tier. The quality of tier 1 tyres ensures a high level of retreadability of the tyres which are designed to be ‘multi-life’ tyres further increasing the significantly higher mileage of the original product (up to three retreading for a normal use). Tier 1 tyres are also associated with a higher level of safety and are often accompanied with a good level of after-sale services.

(88) Tier 2 tyres cover most non-premium tyres, both new and retreaded tyres, with prices ranging between approximately 65 % and 80 % of the price of tier 1 tyres. Original equipment for trailers manufacturers (‘OE2’) tyres may be included in that tier. Brand recognition remains important in this tier and brands are usually well-known from purchasers which are also able to identify the tyre manufacturers. They are generally retreadable at least once and, although more limited than tier 1 tyres, deliver good performances in terms of mileage.

(89) Tier 3 tyres cover both new and retreaded tyres with lower mileage performances and very limited retreadability, if any. They are typically priced at less than 65 % of the price and mileage performance of tier 1 tyres. In that tier, brand recognition is almost non-existent and price becomes the determining factor in the customer's decision to purchase. They are usually not provided with after-sale services.

(90) Retreaded tyres can be classified under tier 2 or tier 3. While some Chinese tyres are retreadable, there is very little retreading performed in China. Retreading is, however, quite widespread in the Union and in other markets, for example in Brazil. The retreading activity in the Union consists of: — integrated retreaders acting under the name, brand or mandate of a producer of new tyres. They are seen as the continuation of the brands selling the new tyres. This corresponds to tier 2 tyres, — independent retreaders which usually cover much smaller geographical markets and volumes. They sell tyres under their own name or brand and rely on their own expertise. Most of them are SMEs (at least 380 companies in the Union). This corresponds to tier 3 tyres.

(91) The Commission issued the mapping of new and retreaded tyres by brand on the basis of information provided by the complainant, which was made available to all the interested parties on 27 October 2017.

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

(92) As noted in recital (86), interested parties generally accepted the principle of the market segmentation into three tiers.

(93) The market mapping of tyre brands as laid down in the note to the file of 27 October 2017 by tiers was generally endorsed by the interested parties, except for the following claims from interested parties to reclassify certain brands into different tiers. More specifically, China National Tire Group considered its Aeolus brand as tier 3 (instead of tier 2); two importers importing the brand Double Coin claimed it should be classified into tier 2 (instead of tier 3); the Hankook Group considered that its brand Aurora belonged to tier 2 (instead of tier 3); the Giti Group considered in its questionnaire reply that its brand Primewell and GT Radial belonged to tier 2 (instead of tier 3) and an independent importer claimed that the brand Sailun should be classified into tier 2 (instead of tier 3).

(94) The Commission reviewed the claims on the basis of evidence submitted by the interested parties and information collected ex officio during the investigation. In line with the characteristics identified in recital (81), it analysed in how far the tyres from the specific brands are (1) retreadable; (2) used for original equipment for buses and lorries; and (3) marketed in a certain tier according to each company's own assessment.

(95) With respect to the Hankook Group, the Commission accepted to classify the brand Aurora into tier 2 as requested. However, it also found that Hankook brand should be classified into tier 1. For its Hankook brand, there is a legal guarantee that its tyres can be retreaded at least once. Moreover, it acts as an OE1 supplier for European companies such as Scania, MAN and Mercedes-Benz. The website of the Hankook group markets its Hankook brand as ‘premium’, and an internal document from a related importer handed over during verification indicated that the brand has moved into tier 1.

(96) With respect to the Giti Group, the Commission accepted to classify the brands Primewell and GT Radial into tier 2 as requested. The Commission also found that Giti tyres are retreadable. However, the original equipment activities of the Giti Group do not extend to lorries and buses, but relate to passenger car tyres. In addition, the Giti Group considers its brands as tier 2. Therefore, the brands of the group were classified into tier 2.

(97) For the China National Tire Group, the Commission preliminarily accepted to classify its Aeolus brand into tier 3 as requested by the company, based on the claims that its tyres are generally not retreadable and they are not sold in the OE market.

(98) The importers making the claims on the brands Double Coin and Sailun were not sampled companies, so the Commission could not verify their claims at this stage. As they were not sampled, their classification into tier 2 or 3 does not affect the outcome of the investigation. Therefore, while not calling into question the evidence submitted by the importers on their experience of their customers with the tyres from such brands, the Commission did not take any position on their claims at this stage.

(99) Several interested parties submitted that the tier mapping by brand is applicable only to the Union and in other markets the tier mapping may be very different. In particular the Union tier mapping cannot be transposed to the Chinese market. The Commission underlined that the mapping by brand was used in this investigation for the purpose of analysing the situation in the Union market and had no legal significance for other markets.

2.3.1. Product exclusion requests

(100) CRIA and CCCMC as well as China National Tire Group claimed that either new tyres or retreaded tyres should be excluded from the definition of the product concerned, because: — new tyres and retreaded tyres have different essential physical, technical and chemical characteristics, — retreaded tyres have a shorter lifespan than new tyres, — new tyres and retreaded tyres have different uses, sales channels, applications and consumer perception. In particular, retreaded tyres are not used in the original equipment market, and they are not generally fitted on the steering axle and onto lorries carrying dangerous goods, — new and retreaded tyres have different CN codes.

(101) After the final disclosure, Pirelli reiterated a similar claim.

(102) Those parties also observed that the Commission and the European Court of Justice (‘ECJ’) in several competition cases concluded that new tyres and retreaded ones constitute two different relevant markets in terms of price, structure of supply, structure of demand, supply channels and substitutability (21). The CRIA and the CCCMC also pointed out that other anti-dumping investigating authorities treated new and retreaded tyres separately (22). After the final disclosure, Hämmerling reiterated a similar claim.

(103) The CRIA and the CCCMC submitted that the Commission erred in its assessment with regard to the factors of relevance, by not treating new and retreaded tyres separately.

(104) The Giti Group claimed that retreadable or multi-life tyres should be excluded from the definition of the product concerned as retreadable tyres are more sophisticated than non-retreadable tyres with distinctive technical features.

(105) The Commission found that the retreading process preserves the main characteristics, the components, and the structure of the tyre resulting from the initial manufacturing process. In particular, the key technical specifications of the tyre, namely size, load index and speed rating of the tyre are not modified at the retreading stage. New tyres (retreadable or non-retreadable) and retreaded tyres are made of the same raw materials, of the same components, and have a similar structure.

(106) The main difference in technical characteristics between a newly produced tyre and a retreaded tyre built on its casing is that a retreaded tyre may indeed have a shorter lifespan and the retreaded tyre may be perceived as a less safe option. However, exactly the same technical, quality and safety perception differences arise between two new tyres from different tiers. In particular, lower tier tyres have also lower mileage and they will not be a preferred option for vehicles that need to comply to very high safety standards namely the ones carrying dangerous goods.

(107) Therefore, the Commission rejected the claim that new (retreadable or non-retreadable) and retreaded tyres have different basic physical, chemical and technical characteristics.

(108) The Commission further found that both new and retreaded tyres are used by owners of lorries or buses, mainly active in the sector of short to long haul transportation of persons or goods. Therefore, the essential end use of new and retreaded tyres is the same. The Commission also found that new and retreaded tyres have the same four main types of application namely steer, drive, trailer and all-position and are subject to the same safety requirements on the Union market as set in the relevant legislation.

(109) Therefore the claim that new and retreaded tyres have different applications was rejected.

(110) The Commission agreed that retreaded tyres differ from tier 1 new tyres to the extent that they are not sold on the original equipment market. The Commission also found that exactly the same is true for tier 3 tyres and to a large extent to tier 2 brands which are not sold on the original equipment market either.

(111) Therefore, the Commission rejected the claim that new and retreaded tyres have different sales channels.

(112) Regarding the Commission's competition decisions and the ECJ judgment (23) in which retreaded tyres were found to be a separate product market, this is in fact irrelevant for the product definition in trade defence investigations. The market definition in a merger case focuses on demand-side and supply-side substitution (24). In an anti-dumping investigation, the market is defined by the physical, technical and chemical characteristics of the product concerned. Therefore, the Commission rejected this claim.

(113) Regarding the claim concerning the product definition in anti-dumping cases in third countries, the Commission pointed out that the product definition falls within the wide margin of discretion of the investigating authority in trade defence matters (25). Therefore, the way that investigating authorities in third countries used their discretion in this respect cannot limit the margin of discretion of the Commission for the purposes of this investigation.

(114) It was also submitted that the product concerned should not be covered by several CN codes. In this regard, the Commission recalled, first, that it is very common that a single product concerned is covered by several CN codes. This arises naturally from the design of the Combined Nomenclature. Furthermore, the Notice of Initiation clearly stated that the CN codes were given for information only. Second, no factual evidence was provided, nor did the Commission find information that the product concerned was defined in such a way that imported retreated and new tyres could not be found to constitute alternatives to, and compete directly with, retreaded and new tyres produced in the Union. The same applies to producer and consumer perceptions, channels of distribution, or other factors as to the existence of a single or multiple product categories as opposed to the differentiation between new and retreaded tyres for the purposes of this investigation.

(115) Lastly, interested parties submitted that, arising from the market segmentation in the Union, retreaded tyres are perceived to be of lower quality than tier 1 new tyres, even if they are made on a tier 1 tyre-casing.

(116) The Commission accepted this claim which is in line with the tier mapping established for this investigation, and only considered retreaded tyres in tiers 2 and 3.

2.4. Like product

(117) The investigation showed that the following products have the same basic physical characteristics as well as the same basic uses: — the product concerned, — the product produced and sold in the Union by the Union industry.

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

3. SUBSIDISATION

3.1. Introduction: Presentation of Government plans, projects and other documents

(119) Before analysing the alleged subsidisation in the form of subsidies or subsidy programmes, the Commission assessed government plans, projects and other documents, which were relevant for more than one of the subsidies or subsidy programmes. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC's central planning to encourage the tyres industry for the following reasons.

(120) The 13th Five Year Plan for National Economic and Social Development of the PRC (‘the 13th Five Year Plan’), which covers the period 2016-2020, highlights the strategic vision of the GOC for improvement and promotion of key industries. It emphasizes the role of technological innovation in the economic development of the PRC, as well as the continued importance of ‘green’ development principles. According to its chapter 5, one of the main development lines is to promote the upgrading of the traditional industrial structure, as was already the case in the 12th Five Year Plan. This idea is further elaborated in chapter 22, which explains the strategy to modernize the traditional industry in the PRC by promoting its technological conversion. In this respect, the 13th Five Year Plan states that companies will be supported to ‘comprehensively improve in areas such as product technology, industrial equipment, environmental protection and energy efficiency’. Box 7 specifically refers to projects relating to downstream petrochemical products (which include tyres) in this context. Environmental protection is further elaborated in chapter 44. According to this chapter, a clean production ‘renovation’ will be implemented in key industries, and box 16 specifically refers to the petrochemical industry in this respect.

(121) At a more detailed level, the GOC also released the 13th Five Year Plan for the Development of the Chemical and Petrochemical Industry (‘the 13th Five Year Petrochemical Plan’), which includes the tyres industry, and is based on the 13th Five Year Plan. This plan indicates in the introduction that the petrochemical and chemical industry is an important pillar industry for China's national economy. It further elaborates on the principles of technological innovation, structural adjustment, and green development mentioned in the 13th Five Year Plan, links them to more specific priorities within the petrochemical industry (see chapter III – Main tasks), and makes the link with various fiscal and financial support measures (see chapter IV – Safeguard measures: section 4 — Strengthen policy support).

(122) Furthermore, the GOC has issued a specific plan for the tyres industry for the purpose of implementing the 13th Five Year Petrochemical Plan, i.e. the Tyres Industry Policy (26). This Policy highlights that the main priority for the GOC is the structural adjustment, technological reform and emission reduction of the tyres industry. Article 6 mentions that the development of high-performance radial tires and tubeless TBR tyres are encouraged. In addition, the preamble to the Tyres Industry Policy states that ‘This industry policy shall serve as the basis for all relevant departments when embarking on the various aspects of investment management, land supply, environmental assessment, energy-saving assessment, safety permission, credit financing and electricity supply for such tire industry project as the construction of production facilities and technology development.’

(123) Finally, this document also establishes entry conditions on the market, since only enterprises that exceed a certain production capacity and that meet environmental requirements may enter the market (27).

(124) Following the disclosure of the Information Document, the GOC reiterated its basic position on China's Five Year Plans, claiming that they are not binding, and should merely be seen as ‘guiding’ documents. The Commission disagreed with this position- Indeed, chapter 17 of the 13th Five Year Plan states: ‘The national development strategy and plan will come into play with a leading and constraining role.’ (28) Furthermore, Chapter IV of the 13th Five Year Petrochemical Plan organizes the execution of the plan and notes that enterprises are expected to: ‘realize key tasks in the plan, realize self-regulation and feed back problems in plan execution in time’ (29). Finally, the Tyres Industry Policy mentions in its Preamble that it ‘shall be implemented by all relevant entities accordingly’. Thus, rather than making only general statements of encouragement, these plans use language which points to their binding nature.

(125) The following documents also identify the tyres industry as a strategic, prioritized and/or encouraged industry: — Decision No 40 of the State Council on ‘Promulgating and Implementing the Temporary Provisions on Promoting the Industrial Structure Adjustment’ (‘Decision No 40’). This Decision states that the ‘Guidance Catalogue for the Industrial Structure Adjustment’, which is an implementing measure of Decision No 40 is an important basis for guiding investment directions. It also guides the GOC to administer investment projects, and to formulate and enforce policies on public finance, taxation, credit, land, import and export (30). The tyres industry, and more specifically the production of certain tyres such as ‘high-performance radial tyre (including tubeless truck tyre (…))’ is indicated as an encouraged category in Chapter VIII of this Guidance Catalogue (31). As to its legal nature, the Commission noted that Decision No 40 is an Order from the State Council, which is the highest administrative body in the PRC. In that regard, the decision is legally binding for other public bodies and the economic operators. (32) — According to its chapters III.1&5 and VIII, the National Outline for the Medium and Long-term Science and Technology Development (2006 – 2020) supports the development of key fields and priority themes, and encourages financial and fiscal support to these key fields and priorities. Chapters III.1 & 5 of this document clearly mention the (petro)chemical industry in connection with priority themes No 1 called ‘Industrial Energy Efficiency’, and No 31 called ‘Basic Raw Materials’. Chapter VIII encourages financial and fiscal support to these priority themes. — The GOC's Catalogue of Chinese New and High-tech Exports Products (33) lists ‘new pneumatic radial tyre of a kind used on buses or lorries (of rubber, cross-section width ≥ 24 inch)’ as products encouraged for exports. — At local level, Shandong Province is the province with the largest tyre manufacturing industry in China, and has also promulgated plans to promote the tyre industry. For example, in October 2014, the Shandong provincial government promulgated the Implementation Plan for Transforming and Upgrading the Tire Industry of Shandong Province (34), which, among other things, sets production targets for truck and bus radial tyres of 91 million units by 2017 and 120 million units by 2020 and provides for support for backbone truck and bus tyre enterprises.

(126) In conclusion, the tyres industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective.

3.2. Partial non-cooperation and use of facts available

3.2.1. The application of the provisions of Article 28(1) of the basic Regulation in relation to preferential lending, inputs provided at less than adequate remuneration and export credit insurance

(127) For administrative convenience, the Commission requested the GOC to forward specific questionnaires to four specific state-owned banks mentioned in the complaint and Sinosure, as well as any other financial institution that provided loans or export credits to the sampled companies, or to the buyers of the sampled companies. Similarly, the Commission requested the GOC to forward specific questionnaires to those producers of natural rubber, synthetic rubber, carbon black and nylon cord which, according to the complaint, provided inputs at less than adequate remuneration to the sampled companies, as well as to any other producers and distributors of the raw materials in question which had provided inputs to the sampled companies.

(128) At first, the GOC did not respond to the Commission's request. In the deficiency letter, the Commission therefore repeated its request, with a view to maximising the possibilities to engage financial institutions and input suppliers in the investigation by providing the necessary information for the Commission to make findings on the existence and extent of the alleged subsidisation. Following the deficiency letter, the GOC did indeed contact the above-mentioned financial institutions and suppliers. However, only three state-owned banks specifically mentioned by the complainant and Sinosure responded to the questionnaire.

3.2.1.1. Preferential lending

(129) According to the GOC, it had no authority to demand information from the state-owned banks that did not reply to the questionnaire, as they operate independently of the GOC.

(130) The Commission disagreed with this view. First, it is the Commission's understanding that the information requested from state-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. Indeed, according to the Law of the People's Republic of China on State-Owned Assets of Enterprises (35), State-owned assets supervision and administration agencies established by the State-owned Assets Supervision and Administration Commission of the State Council and local people's governments perform the duties and responsibilities of the capital contributor of a State-invested enterprise on behalf of the government. Such agencies are thus entitled to receive returns on assets, to participate in major decision making and to select managerial personnel of State-invested enterprises. Furthermore, according to Article 17 of the above mentioned Law on State-owned Assets, State-invested enterprises shall accept administration and supervision by governments and relevant governmental departments and agencies, accept public supervision, and be responsible to capital contributors.

(131) In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not state-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority. For example, according to Articles 33 & 36 of the Banking Supervision Law (36), the CBRC has the authority to require all financial institutions established in the PRC to submit information, such as financial statements, statistical reports and information concerning business operations and management. The CBRC can also instruct financial institutions to disclose information to the public.

(132) Furthermore, although they provided some general explanations on the functioning of their loan approval and risk management systems, none of the cooperating state-owned banks provided specific information concerning loans provided to the sampled companies, arguing that they were bound by statutory and regulatory requirements and contractual clauses with respect to the confidentiality of the information related to the sampled companies.

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

(134) In the end, the Commission only received information on corporate structure and ownership from the three state-owned banks mentioned in recital (48) but not from any of the other financial institutions which had provided loans to the sampled companies. Moreover, none of the financial institutions provided any information specific to the risk assessment of the loans granted to the sampled groups of exporting producers.

(135) Since it had no information in relation to most of the state-owned banks which provided loans to the sampled companies, and no company-specific information on the loans provided by the cooperating banks, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

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

(137) In the reply to the Commission's letter as well as in the comments to the Information Document and to the final disclosure, the GOC objected to the application of Article 28(1) of the basic Regulation regarding preferential lending. The GOC reiterated that it had no authority over the banks. The GOC also considered that it had cooperated to the best of its abilities, that the Commission had imposed an unreasonable extra burden on it, and that the missing information was not ‘necessary’ in the sense of Article 28 of the basic Regulation, since it was already available through the responses to the questionnaires.

(138) The Commission maintained its position that the GOC has the authority to request information from the banks for the reasons explained in recitals (130) to (131) above. It acknowledged that the GOC has forwarded the relevant questionnaires to the banks, and that it has received replies from three state-owned banks. It used the information so provided, and complemented it with facts available only for those parts that were missing.

(139) This missing information mainly concerns two aspects: first, information on the ownership and governance structure of the non-cooperating banks. This information was necessary for the Commission to determine whether these banks are public bodies or not. Second, company-specific information from the cooperating banks, such as e.g. the internal loan approval process of the bank and the creditworthiness assessment of the banks for the loans provided to the sampled companies was necessary in the sense of Article 28 of the Basic Regulation in order to determine whether loans where provided at preferential rates to the sampled companies. Furthermore, such internal documents can only be provided by the banks, and could thus not be supplied through the questionnaire replies of the sampled companies.

(140) Finally, the Commission did not consider that it had imposed an unreasonable burden on the GOC. From the start, the Commission limited its investigation to those financial institutions that had provided loans to the sampled companies. The Commission also did not burden the GOC with the identification of these financial institutions, as the list with names and addresses of the banks, as well as the request to forward the questionnaires, was provided to the GOC at the very beginning of the investigation, in December 2017. This provided ample time for the GOC to comply with the Commission's request. However, the Commission's questionnaires were only effectively sent by the GOC to the banks on 28 March 2018, with a deadline of three working days for the banks to reply. This delay cannot be attributed to the Commission. It thus considered that it had done its utmost to facilitate the tasks requested from the GOC.

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

3.2.1.2. Export credit insurance

(142) Sinosure partially responded to the specific questionnaire concerning export credit insurance provided to the sampled companies. However, Sinosure failed to provide the supporting documentation requested concerning its corporate governance, such as its Annual Report or its Articles of Association, arguing that this was confidential information.

(143) Sinosure also did not give specific information about the export credit insurance provided to the tyres industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business.

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

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

(146) In the reply to the Commission's letter as well as in the comments to the Information Document and to the final disclosure, the GOC objected to the application of Article 28(1) of the basic Regulation regarding export credit insurance, by pointing to the fact that Sinosure had provided a questionnaire reply, and had answered to the Commission's questions during the on-spot verification.

(147) Sinosure indeed provided a questionnaire reply and representatives from Sinosure were present at the verification at the GOC's premises. However, as mentioned in recitals (142) and (143) above, the information provided was incomplete, and did not allow the Commission to draw conclusions on crucial parts of the investigation regarding export credit insurance, that is whether Sinosure is a public body and whether the premiums charged to the sampled companies were market conform.

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

3.2.1.3. Provision of inputs a less than adequate remuneration

(149) None of the producers of natural rubber, synthetic rubber, carbon black and nylon cord which had provided inputs to the sampled companies responded to the specific questionnaires forwarded by the GOC.

(150) According to the GOC, it had no authority to demand information from the state-owned suppliers that did not reply to the questionnaire, as they operate independently of the GOC. The Commission disagrees with this view. It is the Commission's understanding that the information requested from state-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder.

(151) In addition, the GOC refused to provide an overview with the names and the ownership structure of the Chinese producers of the inputs under investigation, claiming that this was confidential information.

(152) Since the Commission had no information concerning the corporate governance of the state-owned producers which provided inputs to the sampled companies, and no company-specific information on the price setting of the inputs provided by the suppliers of inputs to the sampled companies, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

(153) Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through the provision of inputs at less than adequate remuneration.

(154) In the reply to the Commission's letter as well as in the comments to the Information Document, the GOC objected to the application of Article 28(1) of the basic Regulation regarding the provision of inputs at less than adequate remuneration, for the same reasons as developed in recital (137) above. Concerning the GOC's lack of authority to request information from the producers, as well as the existence of an unreasonable burden imposed on the GOC, the Commission maintained its argumentation developed in recitals (138) and (140) above, which also applies to the suppliers of inputs to the sampled companies.

(155) This missing information mainly concerns two aspects: first, information on the ownership and governance structure of the non-cooperating producers. Without such information the Commission could not determine whether these producers are public bodies or not. Second, company-specific information from the non-cooperating producers, such as e.g. information on the price setting of the inputs provided to the sampled companies. Such information is necessary in the sense of Article 28 of the Basic Regulation in order to determine whether inputs had been provided at less than adequate remuneration to the sampled companies. Furthermore, such information could only be provided by the producers, and could thus not be supplied through the questionnaire replies of the sampled companies.

(156) The Commission thus maintained that it had to rely also on facts available for its findings concerning the provision of natural rubber, synthetic rubber, carbon black and nylon cord at less than adequate remuneration in accordance with Article 28(1).

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

(157) Xingyuan Group reported in its questionnaire reply that it did not have any export credit insurance agreement during the investigation period. However, after the verification visit, the Commission found that the company had received grants in the form of refunds of export credit insurance premiums paid for the year 2016, thus covering the investigation period. The documents provided do not clarify whether such refunds represent the total or only part of the premium paid by the company for its export insurance.

(158) Under these circumstances, the Commission considered that it had received false or misleading information.

(159) Therefore, the Commission notified the company that it would consider basing its findings partially on facts available pursuant to Article 28(1) of the basic Regulation (i.e. as far as the information related to export credit insurance was concerned).

(160) In the reply to the Commission's letter, the company objected to the application of Article 28(1) of the basic Regulation regarding the export credit insurance. It claimed that as it did not export directly, it did not have any credit risks. Therefore, the company did not need any export credit insurance and could not receive refunds of premiums which they had not paid.

(161) The Commission accepted that the company only exported indirectly to the EU. However, the claim of the company that it did not need an export credit insurance and that it could not receive refunds for an insurance premium which it had not paid, was in contradiction with the evidence on the file, which showed that the company actually did receive a refund. The company failed to explain why the government would have provided a refund for a premium which had allegedly not been paid. The Commission also noted that the definition of the rights and obligations between the company and its traders selling to the EU was not clear. In fact, the company did execute some export formalities on behalf of the traders selling to the EU during the investigation period, and it received import duty waivers for natural rubber used in exported tires, even though it did not export these directly.

(162) In the absence of any new information to the contrary received from the company, the Commission concluded that the company had provided incorrect and incomplete information about the export credit insurance received in the investigation period. The Commission therefore relied on the facts available for its findings concerning export credit insurance for this company, which consisted of the highest subsidy amount concerning export credit insurance found in the other sampled companies.

3.2.3. The application of the provisions of Article 28(1) of the basic Regulation to one exporting producer in relation to preferential financing

(163) Huaqin Rubber Industry Group and Yanzhou Yinhe Power Plant Co. Ltd failed to provide complete information about their loan agreements.

(164) Therefore, the Commission notified the companies in question that it would consider basing its findings partially on facts available pursuant to Article 28(1) of the basic Regulation (i.e. as far as the information related to these agreements was concerned). In the reply to the Commission's letter informing the companies in question of the possible application of Article 28(1) of the basic regulation, they objected to this application in general.

(165) However, since no additional evidence was submitted concerning the loan agreements mentioned in recital (163) above, the Commission continued to rely partly on facts available for its findings concerning these loan agreements.

3.3. Subsidies and subsidy programmes within the scope of the current investigation

(166) On the basis of the information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaire, the alleged subsidisation through the following subsidies by the GOC were investigated: (i) Preferential policy loans, credit lines, export sellers and export buyers credits, other financing, and guarantees; (ii) Preferential Export credit insurance, (iii) Grant Programmes — Famous Brand Programme; — Export Assistance Grants, such as e.g. rewards for advanced exporting enterprises or export performance, reward for processing trade, grants for outward investment; — Environmental Protection grants, such as e.g. Special fund for energy-saving technology reform, the clean production technology fund, incentives for Environmental Protection and Resource Conservation; — Grants related to technological upgrading or transformation, such as e.g. State Key Technology Project Fund Subsidies, promotion of R & D tasks under Science and Technology Support Plans, Promotion of Key Industry Adjustment, Revitalisation and Technology Renovation; — ad-hoc subsidies provided by the municipal/provincial authorities; (iv) Revenue foregone through Direct Tax Exemption and Reduction programmes — EIT privileges for High and New Technology Enterprises; — EIT offset for research and development; — Western Region preferential tax policies; — Land Use Tax exemption or reduction; — Local tax discounts; (v) Revenue foregone through Indirect Tax and Import Tariff Programmes — VAT exemptions and import tariff rebates for the use of imported equipment and technology; — Import tariff waivers for processing trade; (vi) Government provision of goods and services for less than adequate remuneration (LTAR) — Government provision of natural rubber for less than adequate remuneration; — Government provision of synthetic rubber for less than adequate remuneration; — Government provision of carbon black for less than adequate remuneration; — Government provision of nylon cord for less than adequate remuneration; — Government provision of power for less than adequate remuneration; — Government provision of land and land-use rights for less than adequate remuneration.

3.4. Preferential financing and insurance: loans

(167) According to the information provided by the four sampled groups of exporting producers, 32 financial institutions located within the PRC had provided loans to them. Of these 32 financial institutions, 27 were state-owned banks (37). The 5 remaining financial institutions were privately owned. However, only three state-owned banks filled in the specific questionnaire, despite a request to the GOC that covered all financial institutions which had provided loans to the sampled companies.

3.4.1. State-owned banks acting as public bodies

(168) The Commission ascertained whether the state-owned banks were acting as public bodies within the meaning of Articles 3 and 2 (b) of the basic Regulation. In this respect, the applicable test to establish that a State-owned undertaking is a public body is as follows (38): ‘What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.’ In the present case, the conclusion that the state-owned banks are vested with authority to exercise governmental functions is based on formal indicia of government control and evidence showing that it has been exercised in a meaningful way.

(169) The Commission sought information about State ownership as well as formal indicia of government control in the state-owned banks. It also analysed whether control had been exercised in a meaningful way. For this purpose, the Commission had to partially rely on facts available due to the refusal of the GOC and the state owned banks to provide evidence on the decision making process that had led to the preferential lending.

(170) In order to carry out this analysis, the Commission first examined information for the three state-owned banks that had filled in the specific questionnaire and allowed for verification.

3.4.1.1. Cooperating state-owned banks

(171) The following three state-owned banks provided a questionnaire reply, which was verified on site: EXIM, ABC, and BOC.

(a) Ownership and formal indicia of control by the GOC

(172) Based on the information received in the questionnaire reply and during the verification visit, the Commission established that the GOC held, either directly or indirectly, more than 50 % of the shares in each of these financial institutions.

(173) Concerning the formal indicia of government control of the three cooperating state-owned banks, the Commission qualified all of them as ‘key State-owned financial institutions’. In particular, the notice ‘Interim Regulations on the Board of Supervisors in Key State-owned Financial Institutions’ states that: ‘The key State-owned financial institutions mentioned in these Regulations refer to State-owned policy banks, commercial banks, financial assets management companies, securities companies, insurance companies, etc. (hereinafter referred to as State-owned financial institutions), to which the State Council dispatches boards of supervisors’.

(174) The Board of Supervisors of the key State-owned financial institutions is appointed according to the ‘Interim Regulations of Board of Supervisors of State-owned Key Financial Institutions’. Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating state-owned banks' business activities. In addition to these generally applicable indicia, the Commission found the following with respect to the three state-owned banks:

EXIM

(175) EXIM was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council, as well as the Articles of Association of EXIM. According to its Articles of Association, the State directly nominates the management of EXIM. The Board of Supervisors is appointed by the State Council in accordance with the ‘Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions’ (State Council Decree No 282) and other laws and regulations, and it is responsible to the State Council.

(176) The Articles of Association also mention that the Party Committee of EXIM plays a leading and political core role to ensure that policies and major deployment of the Party and the state are implemented by EXIM. The Party's leadership is integrated into all aspects of corporate governance.

(177) The Articles of Association further state that EXIM is dedicated to supporting the development of foreign trade and economic cooperation, cross-border investment, the One Belt One Road Initiative, cooperation in international capacity and equipment manufacturing. Its scope of business includes short-term, medium-term and long-term loans as approved and in line with the state's foreign trade and ‘going out’ policies, such as export credit, import credit, foreign contracted engineering loans, overseas investment loans, Chinese government foreign aid loans and export buyer loans.

ABC

(178) As mentioned in Article 137 of ABC's Articles of Association, the GOC, in its capacity of main shareholder holding 79,62 %, has the power to appoint all of the Directors in the Board of Directors. The same applies to the Board of Supervisors according to Article 204 of the Articles of Association.

(179) Moreover, according to ABC's Articles of Association, the Board of Directors determines the strategy of the bank, decides on the budget of the bank, takes investment decisions, appoints the President and the Board Secretary of the bank, and establishes and monitors the risk management system of the bank. This non-exhaustive list of responsibilities illustrates the institutional control of the State on ABC's daily business.

(180) The Commission also found that state-owned financial institutions, including ABC and BOC, have changed their Articles of Associations in 2017 to increase the role of the China Communist Party (‘CCP’) at the highest decision-making level of the banks.

(181) These new Articles of Association stipulate that:

(182) the Chairman of the Board of Directors shall be the same person as the Secretary of the Party Committee;

(183) the CCP's role is to ensure and supervise the Bank's implementation of policies and guidelines of the CCP and the State; as well as to play a leadership and gate keeping role in the appointment of personnel (including senior management); and

(184) the opinions of the Party Committee shall be heard by the Board of Directors for any major decisions to be taken.

BOC

(185) As mentioned in Article 125 of the Articles of Association, the GOC, in its capacity of main shareholder holding 64,63 %, has the power to appoint both the executive and the non-executive Directors of the bank, which constitute the Board of Directors.

(186) Moreover, according to BOC's Articles of Association, the Board of Directors decides, inter alia, the financial institution's strategic principles, business plans and major investment plans, appoints or dismisses senior staff such as the President and Secretary of the Board, the Vice President, and other senior management personnel. The Board further decides on the implementation of resolutions at the shareholders' meeting, and approves corporate governance policies. This non-exhaustive list of responsibilities illustrates the institutional control of the State on BOC's daily business.

(187) In addition, the new stipulations concerning the role of the CCP mentioned in recital (181) above also apply to BOC.

(b) Evidence showing that the Government exercised meaningful control over the conduct of those institutions

(188) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of the three cooperating state-owned banks with respect to their lending policies and assessment of risk, where they provided loans to the tyres industry. The following regulatory documents have been taken into account in this respect: — Article 34 of the Law of the PRC on Commercial Banks (‘Bank law’); — Article 15 of the General Rules on Loans (implemented by the People's Bank of China) — Chapter 4 of the 13th Five-year Petrochemical Plan, — Decision No 40; — Preamble to the Tyres Industry Policy — Implementing Measures of the China Banking Regulatory Commission (‘CBRC’) for Administrative Licensing Matters for Chinese-funded Commercial Banks (Order of the CBRC [2017] No 1) — Implementing Measures of the CBRC for Administrative Licensing Matters relating to Foreign-funded Banks (Order of the CBRC [2015] No 4) — Administrative Measures for the Qualifications of Directors and Senior Officers of Financial Institutions in the Banking Sector (CBRC [2013] No 3)

(189) Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC's industrial policy objectives when taking financial decisions, for the following reasons.

(190) With respect to EXIM, its public policy mandate is established in the notice of establishing the Import Export Bank of China as well as in its Articles of Association.

(191) At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that ‘Commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State’. Although Article 4 of the Bank Law states that ‘Commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property’, the investigation showed that Article 4 of the Bank law is applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions.

(192) In addition, Article 15 of the General Rules on Loans provides: ‘In accordance with the State's policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas.’

(193) Following the disclosure of the Information Document, the GOC commented that the Commission had misinterpreted Article 34 of the Bank law. Article 34 should not be read in isolation, and Article 4, being part of the General Provisions, has an overarching effect over the remaining articles of the law. However, the findings of this investigation (as well as the Commission's findings in previous investigations concerning the same subsidy programme) (39) did not support the claim that banks do not take government policy and plans into account while making lending decisions. It rather confirmed the contrary, as has been described in recitals (202) to (206) below. Therefore, the Commission found that Article 4 of the Bank law did not prevent commercial banks from taking government industrial policy and plans into account.

(194) The GOC also requested to disregard Article 15 of the General Rules on Loans, since it was established more than 20 years ago, and has remained inactive for a long period. However, the GOC at the same time acknowledged that the General Rules on Loans had not been formally repealed yet. The Commission thus considered that its reference to the General Rules on Loans remains valid.

(195) The industrial policy of the State is established through central planning, as explained in section 3.1 above. With regards to the tyres industry, chapter 5 of the 13th Five Year Petrochemical Plan provides to ‘Strengthen the connection between financial, taxation, trading policies and industrial policies. Realize bank-enterprise connection and production cooperation policies. Strengthen financing support on key enterprises and key projects. Make use of existing special capital channels (special projects and funds, etc.) to keep supporting industrial upgrading and technical reconstruction’.

(196) Furthermore, the Tires Industry Policy ‘shall serve as the basis for all relevant departments’ concerning ‘credit financing for such tire industry projects’.

(197) Similarly, Decision No 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. As already explained in section 3.1, projects of the tyres industry belong to the ‘encouraged’ category. Decision No 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations.

(198) In response to the Information Document, the GOC commented that Decision No 40 only allows credit support if it is based on the principles of credit lending. The Commission acknowledged that Articles 17 and 18 of the same Decision also ask the banks to respect credit principles. However, as explained in more detail in recitals (202) to (206) below, the Commission could not establish during the investigation that this was done in practice.

(199) The Commission also found that the China Banking and Regulatory Commission (‘CBRC’) has far-reaching approval authority over all aspects of the management of all financial institutions established in the PRC (including privately owned and foreign owned financial institutions), such as (40): — approval of the appointment of all managers of the financial institutions, both at the level of headquarters and at the level of local branches. Approval of the CBRC is required for the recruitment of all levels of management, from the most senior positions down to branch managers, and even includes managers appointed in overseas branches as well as managers respon