Proposal for a COUNCIL REGULATION imposing a definitive anti-subsidy duty on imports of coated fine paper originating in the People's Republic of China
Date: 2011-04-12
Institutions: European Commission
Subjects: China, anti-dumping duty, anti-dumping legislation, import, originating product, pulp and paper industry

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EUROPEAN COMMISSION 

Brussels, 12.4.2011 
COM(2011) 201 final 

2011/0083 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive anti-subsidy duty on imports of coated fine paper originating in 
the People's Republic of China 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

This proposal concerns the application of Article 10 of Council Regulation (EC) No 597/2009 
of 11 June 2009 on protection against subsidised imports from countries not members of the 
European Community. 

General context 

This proposal is made in the context of the implementation of the basic Regulation and is the 
result  of  an  investigation  which  was  carried  out  in  line  with  the  substantive  and  procedural 
requirements laid out in the basic Regulation. 

Existing provisions in the area of the proposal 

Provisional anti-dumping measures were imposed on the same product group by Commission 
Regulation (EU) No 1042/2010 (OJ L 299, 16.12.2010, p.7). 

Parallel proposal to impose definitive anti-dumping measures. 

Consistency with other policies and objectives of the Union 

Not applicable. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

Interested parties concerned by the proceeding have had the possibility to defend their 
interests during the investigation, in line with the provisions of the basic Regulation. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal is the result of the implementation of the basic Regulation. 

The  basic  Regulation  does  not  foresee  a  general  impact  assessment  but  contains  an 
exhaustive list of conditions that have to be assessed. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

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On 17 April 2010, the Commission initiated an anti-subsidy proceeding concerning imports of 
coated fine paper originating in the People's Republic of China. 

The  investigation  found  subsidisation  of  the  product  concerned,  which  caused  injury  to  the 
Union  industry.  The  investigation  also  found  that  it  was  not  against  the  Union  interest  to 
impose anti-subsidy measures. 

Therefore,  it  is  proposed  that  the  Council  adopts  the  attached  proposal  for  a  Regulation  in 
order to impose definitive anti-subsidy measures on imports of coated fine paper originating in 
the People's Republic of China. 

Legal basis 

Council  Regulation  (EC)  No  597/2009  of  11  June  2009  on  protection  against  subsidised 
imports from countries not members of the European Community (‘the basic Regulation’)  

Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  Union.  The  subsidiarity  principle 
therefore does not apply. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

The form of action is described in the above-mentioned basic Regulation and leaves no scope 
for national decision. 

Indication  of  how  financial  and  administrative  burden  falling  upon  the  Union,  national 
governments, regional and local authorities, economic operators and citizens is minimized and 
proportionate to the objective of the proposal is not applicable. 

Choice of instruments 

Proposed instrument: Regulation. 

Other means would not be adequate because the basic Regulation does not foresee alternative 
options. 

4. 

BUDGETARY IMPLICATION  

The proposal has no implication for the EU budget. 

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2011/0083 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive anti-subsidy duty on imports of coated fine paper originating in 
the People's Republic of China 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having  regard  to  Council  Regulation  (EC)  No  597/2009  of  11  June  2009  on  protection 
against  subsidised  imports  from  countries  not  members  of  the  European  Community1  ('the 
basic Regulation'), and in particular Article 15 thereof, 

Having  regard  to  the  proposal  submitted  by  the  European  Commission  ('the  Commission') 
after consulting the Advisory Committee, 

Whereas: 

1. 

PROCEDURE 

1.1. 

Initiation 

(1) 

(2) 

(3) 

On 17 April 2010, the European Commission announced by a notice published in the 
Official  Journal  of  the  European  Union2  ('Notice  of  initiation'),  the  initiation  of  an 
anti-subsidy  proceeding  with  regard  to  imports  into  the  Union  of  coated  fine  paper 
originating in the People's Republic of China ('PRC' or the 'country concerned'). 

The  anti-subsidy  proceeding  was  initiated  following  a  complaint  lodged  on  4  March 
2010  by  CEPIFINE,  the  European  association  of  fine  paper  manufacturers,  ('the 
complainant')  on  behalf  of  producers  representing  a  major  proportion,  in  this  case 
more  than  25%  of  the  total  Union  production  of  coated  fine  paper.  The  complaint 
contained  prima  facie  evidence  of  subsidisation  of  the  said  product  and  of  material 
injury resulting therefrom, which was considered sufficient to justify the initiation of a 
proceeding.  

Prior  to  the  initiation  of  the  proceeding  and  in  accordance  with  Article  10(7)  of  the 
basic  Regulation,  the  Commission  notified  the  Government  of  the  PRC  ('the  GOC') 
that it had received a properly documented complaint alleging that subsidised imports 
of coated fine paper originating in the PRC were causing material injury to the Union 
industry.  The  GOC  was  invited  for  consultations  with  the  aim  of  clarifying  the 
situation  as  regards  the  contents  of  the  complaint  and  arriving  at  a  mutually  agreed 

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OJ L 188, 18.7.2009, p. 93. 
OJ C 99, 17.4.2010, p. 30. 

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solution.  The  GOC  accepted  the  offer  of  consultations  and  consultations  were 
subsequently  held.  During  the  consultations,  no  mutually  agreed  solution  could  be 
arrived at. However, due note was taken of comments made by the authorities of the 
GOC  in  regard  to  the  allegations  contained  in  the  complaint  regarding  the  lack  of 
countervailability  of  the  schemes.  Following  the  consultations,  submissions  were 
received from the GOC.  

1.2. 

Anti-dumping proceeding 

(4) 

(5) 

(6) 

On 18 February 2010, the European Commission had announced by a notice published 
in  the  Official  Journal  of  the  European  Union3,  the  initiation  of  an  anti-dumping 
proceeding concerning imports into the Union of coated fine paper originating in the 
PRC.  

On 17 November 2010, the Commission, by Regulation (EU) No 1042/104, imposed a 
provisional anti-dumping duty on imports of coated fine paper originating in the PRC. 

The  injury  analyses  performed  in  the  present  anti-subsidy  and  the  parallel  anti-
dumping  investigation  are  identical,  since  the  definition  of  the  Union  industry,  the 
representative  Union  producers  and  the  investigation  period  are  the  same  in  both 
investigations. For this reason, comments on injury aspects put forward in any of these 
proceedings were taken into account in both proceedings. 

1.3. 

Parties concerned by the proceeding 

(7) 

(8) 

The  Commission  officially  advised  the  complainant,  other  known  Union  producers, 
the  known  exporting  producers  in  the  PRC  and  an  association  of  producers  (a  paper 
association),  the  representatives  of  the  country  concerned,  known  importers  and 
known  users  of  the  initiation  of  the  proceeding.  Interested  parties  were  given  the 
opportunity to make their views known in writing and to request a hearing within the 
time limit set in the Notice of initiation.  

In  view  of  the  apparent  high  number  of  exporting  producers,  Union  producers  and 
unrelated importers, sampling was envisaged in the Notice of initiation in accordance 
with Article 27 of the basic Regulation. In order to enable the Commission to decide 
whether  sampling  would  be  necessary  and  if  so,  to  select  samples,  all  exporting 
producers  and  their  known  paper  association,  all  Union  producers  and  unrelated 
importers were asked to make themselves known to the Commission and to provide, as 
specified in the Notice of initiation, basic information on their activities related to the 
product concerned (as defined in section 2.1 below) during the period from 1 January 
2009 to 31 December 2009. The authorities of the PRC were also consulted. 

(9) 

As explained in recital (51) below, two Chinese exporting producer  groups provided 
the requested information and agreed to be included in a sample. On the basis of the 
above it was decided that sampling was not necessary for exporting producers in the 
PRC. 

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4 

OJ C 41, 18.2.2010, p. 6. 
OJ L 299, 17.11.2010, p.7. 

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(10)  As explained in recital (53) below, it was decided that sampling was not necessary for 

Union producers. 

(11)  As explained in recital (54) below, it was decided that sampling was not necessary for 

unrelated importers.  

(12)  The  Commission  sent  questionnaires  to  all  parties  known  to  be  concerned  and  to  all 
other parties that requested so within the deadlines set out in the Notice of initiation, 
namely  the  complainant,  other  known  Union  producers,  the  known  exporting 
producers  in  the  PRC  and  an  association  of  producers,  the  representatives  of  the 
country concerned, known importers, known users.  

(13)  Replies to the questionnaires and other submissions were received from two groups of 
Chinese exporting producers, the complainant association (the European association of 
fine paper manufacturers or ‘CEPIFINE’), the four complainant Union producers and 
one  additional  Union  producer,  13  unrelated  importers  and  traders,  5  users  and  one 
association of the printing industry.  

(14)  The  Commission  sought  and  verified  all  information  deemed  necessary  for  the 
determination of subsidisation, resulting injury and Union interest. Verification visits 
were carried out at the premises of the following State authority and companies:  

(a) 

Government of the People Republic of China 

–  Chinese Ministry of Commerce, Beijing, China 

(b) 

Union producers and association 

–  CEPIFINE, Brussels, Belgium 

–  Sappi Fine Paper Europe, Brussels, Belgium 

–  LECTA Group (CARTIERE DEL GARDA SpA, Riva del Garda, Italy CONDAT 
SAS, Le Plessis Robinson, France and TORRASPAPEL, S.A., Barcelona, Spain), 
Barcelona, Spain 

–  Burgo  Group  spa,  Altavilla  Vicentina,  Italy  and  its  related  companies  Burgo 

Distribuzione srl, Milan, Italy and Ebix sa, Barcelona, Spain 

–  Papierfabriek Scheufelen GmbH, Lenningen, Germany 

(c) 

Exporting producers in the PRC 

(1) 

Sinar Mas Paper (China) Investment Co Ltd, the holding company of the Asia 
Pulp & Paper Group ('APP') 

–  Gold East Paper (Jiangsu) Co., Ltd, Zhenjiang City, Jiangsu Province, PRC 

–  Gold  Huasheng  Paper  (Suzhou  Industrial  Park)  Co.,  Ltd,  Suzhou  City,  Jiangsu 

Province, PRC 

–  Ningbo Zhonghua Paper Co., Ltd, Ningbo City, Zhejiang Province, PRC 

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–  Ningbo Asia Pulp & Paper Co., Ltd, Ningbo City, Zhejiang Province PRC 

(2) 

Chenming Paper Group ('Chenming') 

–  Shangdong  Chenming  Paper  Holdings  Limited,  Shouguang  City,  Shandong 

Province, PRC 

–  Shouguang  Chenming  Art  Paper  Co.,  Ltd,  Shouguang  City,  Shandong  Province, 

PRC 

(d) 

Importers in the Union  

–  Cartaria Subalpina, Turin, Italy 

–  Paperlinx, Northampton, UK 

1.4. 

Investigation period and period considered 

(15)  The investigation of subsidisation and injury covered the period from 1 January 2009 
to  31  December  2009  (the  ‘investigation  period’  or  ‘IP’).  The  examination  of  trends 
relevant  for  the  assessment  of  injury  covered  the  period  from  1  January  2006  to  the 
end of the IP (‘the period considered’).  

2. 

PRODUCT CONCERNED AND LIKE PRODUCT 

2.1. 

Product concerned 

(16)  The  product  concerned  is  coated  fine  paper  which  is  paper  or  paperboard  coated  on 
one or both sides (excluding kraft paper or kraft paperboard), in either sheets or rolls, 
and with a weight of 70 g/m2 or more but not exceeding 400 g/m2 and brightness of 
more  than  84  (measured  according  to  ISO  2470-1),  originating  in  the  PRC  (‘the 
product  concerned’  or  ‘CFP’)  currently  falling  within  CN  codes  ex  4810  13  20,  ex 
4810 13 80, ex 4810 14 20, ex 4810 14 80, ex 4810 19 10, ex 4810 19 90, ex 4810 22 
10, ex 4810 22 90, ex 4810 29 30, ex 4810 29 80, ex 4810 99 10, ex 4810 99 30 and 
ex 4810 99 90.  

(17)  CFP  is  high  quality  paper  and  paperboard  generally  used  for  printing  of  reading 
material  such  as  magazines,  catalogues,  annual  reports,  yearbooks.  The  product 
concerned  includes  both  sheets  and  rolls  suitable  for  use  in  sheet-fed  ('cut  star') 
printing  machines.  Rolls  suitable  for  use  in  sheet-fed  presses  ('cutter  rolls')  are 
designed  to  be  cut  into  pieces  before  printing,  and  are  thus  considered  to  be 
substitutable and directly competitive with sheets.  

(18)  The product concerned does not include rolls suitable for use in web-fed presses. Rolls 
suitable for use in web-fed presses are defined as those rolls which, if tested according 
to the ISO test standard ISO 3783:2006 concerning the determination of resistance to 
picking – accelerated speed method using the IGT tester (electric model), give a result 
of  less  than  30  N/m  when  measuring  in  the  cross-direction  of  the  paper  (CD)  and  a 
result  of  less  than  50  N/m  when  measuring  in  the  machine  direction  (MD).  Also,  in 
contrast to rolls used in sheet-fed printing machines, rolls for use in web-fed presses 
are normally directly fed into the printing machines and are not cut beforehand.  

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(19)  One  party  claimed  that  the  product  scope  of  the  investigation  was  too  narrowly 
defined and that rolls of CFP suitable for web-fed printing should have been included. 
It  was  claimed  that  web-fed  rolls  and  the  ones  included  in  the  scope  of  the  present 
investigation  (cutter  rolls  and  sheets)  shared  the  same  basic  technical  and  physical 
characteristics  and  were  not  distinguishable  from  one  another.  Furthermore  it  was 
claimed that both were used for high quality printing and that they were therefore to 
some extent interchangeable. 

(20)  However,  in  contrast  to  the  above  claim  the  investigation  confirmed  that  there  are 
indeed  distinct  technical  and  physical  characteristics  such  as  humidity  and  stiffness 
between  paper  used  in  web-fed  and  the  one  used  in  sheet-fed  printing.  The 
investigation  further  confirmed  that  the  technical  characteristics  listed  in  recital  (18) 
above are unique to rolls suitable for use in web-fed presses. Due to these differences 
paper used in web-fed or the one used in sheet-fed printing cannot be used in the same 
type of printing machine and they are therefore not interchangeable. It is noted that all 
parties agreed that the two types of paper are distinct as regards their surface strength 
and tensile strength. 

(21)  Furthermore,  the  party  in  question  claimed  that  customers  view  CFP  in  the  form  of 
sheets, cutter rolls and web rolls as a single market and thus distribution channels are 
the  same.  The  different  technical  characteristics  are  only  reflected  in  minor  price 
differences among these product groups. 

(22)  However,  the  investigation  revealed  that  the  two  types  of  rolls  are  also  non-
interchangeable from an economic point of view because rolls for web-fed printing are 
used for mass-volume printing jobs and are generally made to order and require just-
in-time  delivery  therefore  these  products  are  not  stocked  by  intermediaries  but  are 
shipped  directly  to  the  final  users,  i.e.  they  are  also  sold  through  a  different 
distribution  channel  than  rolls  used  in  sheet-fed  printing.  The  different  production 
process  and  the  different  economies  of  scale  in  the  printing  process  are  reflected  in 
distinct price differences. 

(23)  To note as well is that no rolls for use in web-fed presses were imported from the PRC 
during  the  period  considered.  It  may  also  be  considered  unlikely  that  these  products 
would  be  imported  in  the  future  as  sourcing  these  products  from  long  distance  is 
economically not viable for the reasons mentioned in the previous recital. 

(24)  On this basis, these claims were rejected. 

(25)  The  same  party  claimed  that  the  resistance  to  picking  was  not  a  suitable  technical 
characteristic  for  differentiating  between  products  as  this  test  would  be  of  a  general 
nature and test results may moreover be affected by the moisture content of the paper 
tested. The party further claimed that on the basis of some other tests conducted in its 
own  laboratory  measuring  the  resistance  to  picking  of  web  rolls  produced  by  the 
Union  producers,  it  can  be  seen  that  these  products  would  not  fall  into  the  current 
product definition which would show that the criterion of "resistance to picking" for 
distinguishing  CFP  used  in  web-fed  and  sheet-fed  printing  is  unsuitable.  With  this 
evidence  the  party  alleged  that  the  exclusion  of  web  rolls  was  made  on  an  arbitrary 
basis. 

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(26)  No evidence was submitted with regard to the claim that the moisture content of the 
paper may render test results for ISO test standard ISO 3783:2006 unreliable.  

(27)  The test results presented by the exporting producer consisted of a summary of the test 
results performed in its own laboratory. Crucially, the results were not made available 
for  inspection  and  comments  by  other  interested  parties,  in  particular,  the  Union 
industry,  nor  did  the  exporting  producer  submit  a  meaningful  non-confidential 
summary thereof despite repeated reminders. 

(28)  After  disclosure,  no  further  detailed  information  was  provided  by  the  exporting 
producer which could help assess the reliability of the test. Since no non-confidential 
version of this test was provided, the companies whose web rolls were allegedly tested 
could  not  respond  to  the  conclusions  of  the  test.  The  Commission  thus  could  not 
objectively  check  whether  the  submitted  test  results  were  reliable  and  correct  and 
could  be  relied  upon  for  the  purposes  of  the  investigation.  On  the  basis  of  the  facts 
available to the Commission, the objectivity and reliability of the test was found to be 
insufficient  since  the  information  submitted  under  confidentiality  could  not  be 
counterchecked by any reliable sources. 

(29)  After the disclosure of the findings, the same exporting producer presented the results 
of  a  further  test  conducted  on  its  behalf  by  an  external  test  laboratory  and  reiterated 
that CFP used in web-fed printing has been arbitrarily excluded from the scope of the 
investigation. The test reports stated that the resistance to picking has been measured 
on 25 samples  of  web-fed rolls  provided  and identified by the exporting producer to 
the  laboratory  as  paper  samples  produced  by  Union  producers.  According  to  this 
report, none of the paper met both criteria set in recital (18) above. 

(30)  The assessment of the test report brought to light that, first of all, the test report by the 
external laboratory related mostly to products for which these results were irrelevant 
as the vast majority of the samples tested were not in fact web rolls; secondly, the test 
report  related  to  products  which  were  not  sufficiently  identified  as  it  could  not  be 
ascertained from the test report whether the paper tested was for sheet-fed printing or 
web-fed  printing  as  the  paper  brand  described  in  the  report  existed  in  both  formats. 
Furthermore  the  test  report  provided  no  assurance  that  the  sampled  rolls  indicated 
were indeed the ones that were tested.  

(31) 

In response to the external laboratory's test report, the complainant provided the results 
of the testing performed by one of the Union producers on the same samples of web 
rolls that were allegedly tested by the external laboratory. This test showed different 
results. The complainant attributed the differences to possibly different test conditions 
and  thus  a  potential  non-compliance  with  the  ISO  3783:2006  standard,  i.e.  the 
standard according to which resistance to picking set in Recital (16) of the provisional 
Regulation should be measured. 

(32)  After  disclosing  the  definitive  findings,  the  exporting  producer  questioned  the 
Commission's  objectivity  in  rejecting  the  test  result  of  the  external  laboratory.  It 
claimed  that  the  testing  was  carried  out  blindly  by  the  independent  expert  and  in 
accordance  with  the  relevant  ISO  standard.  It  provided  an  affidavit  of  its  manager 
explaining the sourcing process of the samples used in the testing in order to prove the 
independence, correctness and representativeness of the testing.  

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(33)  Firstly, the objectivity of the external laboratory test  report was never  questioned by 
the  Commission  and  in  this  regard  it  is  irrelevant  that  the  testing  was  carried  out 
blindly.  On  the  other  hand,  doubts  were  raised  as  to  the  assurances  on  the  selection 
and  origin  of  the  samples  tested  and  not  on  the  test  itself.  The  arguments  of  the 
exporting producer did not remove these doubts as these were not comprehensive and 
were unclear in several aspects, for example the inclusion of products other than web 
rolls  were  claimed  to  have  been  caused  by  administrative  errors  or  were  blamed  on 
mistakes by the suppliers in providing possibly wrong samples. 

(34)  Since both the source as well as the samples of the allegedly tested products were not 
clear  and  the  results  of  the  testing  by  the  different  parties  were  contradictory,  it  was 
considered that the submitted test report of the external laboratory acting on behalf of 
the Chinese exporting producer did not conclusively demonstrate that the resistance to 
picking test was not appropriate to distinguish between CFP suitable for use in web-
fed  printing  on  the  one  hand  and  CFP  used  in  sheet-fed  printing  on  the  other  hand. 
Consequently,  the  test  report  did  not  demonstrate  that  CFP  used  in  web-fed  printing 
had been arbitrarily excluded from the scope of the investigation. 

(35)  As regards the relevance of the resistance to picking as a distinguishing criterion for 
rolls suitable for web-fed printing, it is recalled that in the product definition the two 
product  groups  are  distinguished  from  each  other  based  on,  among  other  things,  the 
use of the products, i.e. whether the product is suitable for use in web-fed or sheet-fed 
printing  as  determined  by  the  requirements  of  the  presses  on  which  they  are  used 
which is reflected in, inter alia, the characteristic of resistance to picking. Furthermore 
it is noted that resistance to picking is only one of the characteristics that distinguish 
CFP suitable for use in web-fed printing from CFP used in sheet fed printing; recitals 
(18)  and  (20)  above  set  out  additional  criteria  which  have  not  been  contested  by  the 
exporting  producer  concerned.  One  party  claimed  that  humidity  as  defined  in  recital 
(20)  was  not  a  distinct  basic  characteristic  to  distinguish  products.  During  the 
investigation  however  differing  claims  in  this  regard  were  made  by  other  parties.  In 
any  event,  it  was  found  that  stiffness  and resistance  to  picking  are  the  most  relevant 
factors. 

(36) 

(37) 

In its responding submission, the complainant acknowledged that there might be rolls 
that do not fully meet all the criteria for resistance to picking set in recital (18) above, 
which could still be used in web-fed printing. However, it sustained its view that pick 
resistance  is  the  only  test  that  is  able  to  identify  with  certainty  that  a  roll  is  indeed 
suitable for web-fed printing, i.e. if a roll meets the picking resistance criteria in recital 
(18) above, it is certainly a web roll. 

In support of the above claims concerning resistance to picking the exporting producer 
referred to arguments put forward by one of the complainant Union producers in anti-
dumping  and  anti-subsidy  investigations  in  the  USA  in  which  the  Union  producer 
allegedly  acknowledged  that  web  rolls  cannot  be  differentiated  based  on  pick 
resistance test or by any other measurement. 

(38)  The complainant contested these statements of the exporting producer and claimed that 
contrary  to  what  has  been  claimed,  it  follows  from  the  proceedings  in  the  USA  that 
there is a clear dividing line distinguishing web rolls from CFP.  

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(39)  Firstly,  it  should  be  noted  that  the  statements  referred  to  by  the  exporting  producer 
were presented in investigations under other jurisdictions and by different parties than 
the  ones  in  the  current  proceeding  and  thus  are  not  relevant.  Secondly,  the  US 
authorities in the mentioned investigations concluded that there was a clear distinction 
between  on  one  hand  CFP  used  in  sheet-fed  printing  and  on  the  other  hand  rolls 
suitable  for  use  in  web-fed  printing.  Cutter  rolls  were  regarded  as  semi-finished 
products  while  rolls  suitable  for  web  fed  printing  were  not  considered  as  product 
concerned. The US authorities did not explicitly define web rolls in their definition of 
the  product  scope..  For  this  reason,  the  criterion  of  resistance  to  picking  was  not 
relevant in the definition of the product scope in the mentioned investigations. 

(40)  Based on the above comments, the technical characteristic "resistance to picking" was 
confirmed as being a reliable characteristic to describe CFP suitable for use in web-fed 
printing. 

(41)  The comments put forward have however also revealed that there exist web rolls that 
can  be  used  in  web-fed  printing  even  if  they  do  not  fully  meet  all  the  criteria  for 
resistance to picking. For this reason it was considered necessary to further refine the 
definition of rolls suitable for web-fed printing.  

(42) 

In order to provide a further criterion to distinguish web rolls which do not fully meet 
all  the  criteria  for  resistance  to  picking,  the  complainant  suggested  that  a  roll  which 
does not fully meet the picking resistance test but has an internal core size of less than 
80mm, should be considered as a web roll.  

(43)  The GOC and the exporting producer claimed that the addition of core size as a new 
element into the product definition constituted a revision of the definition of web rolls 
and  thus  the  product  concerned.  It  also  claimed  that  the  internal  core  size  is  not  a 
suitable  criteria  as  there  exist  web  rolls  with  higher  than  80mm  core  size  and  cutter 
rolls with lower than 80mm core size.  

(44)  The Commission endeavoured to further refine the definition of rolls suitable for use 
in web-fed printing and to give further clarification in order to distinguish even more 
clearly  between  the  product  concerned  and  other  products,  also  with  a  view  to 
minimize the possibility of circumvention of the measures. The evidence submitted on 
the  suitability  of  the  core  size  as  an  alternative  criterion  in  the  definition  however 
proved that this criterion would lead to the possible exclusion of product concerned, 
i.e. cutter rolls with a core size of less than 80mm from the measures. Therefore this 
criterion to define rolls suitable for use in web-fed printing was abandoned. 

(45)  The above is without prejudice to the reliability of the method according to which rolls 
suitable  for  use  in  web-fed  printing  have  been  excluded  from  the  scope  of  the 
investigation as it was claimed by the Chinese group of exporting producers.  

(46)  During the course of the investigation, certain parties also claimed that multi-ply paper 
and multi-ply paperboard (as defined in the next recital) should be excluded from the 
scope of the investigation. They claimed that multi-ply paper and multi-ply paperboard 
had different physical characteristics such as multiple plies, higher stiffness and lower 
density and that the final use of these products was different as these are usually used 
for  folding  carton  and  packaging  applications.  These  parties  finally  claimed  that 

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single-ply and multi-ply paper and paperboard would be easily distinguished by their 
physical appearance. 

(47)  Multi-ply  paper  and  multi-ply  paperboard,  as  defined  in  the  Harmonised  System 
Explanatory Notes to subheading 4805, are products obtained by pressing together two 
or more layers of moist pulps of which at least one characteristics different from the 
others.  These  differences  may  arise  from  the  nature  of  pulps  used  (e.g.  recycled 
waste), the method of production (e.g. mechanical or chemical) or, if the pulps are of 
the same nature and have been produced by the same method, the degree of processing 
(e.g. unbleached, bleached or coloured). 

(48)  The  investigation  showed  that  multi-ply  paper  and  paperboard  has  indeed  some 
different physical and technical characteristics; more specifically it has several layers 
of pulp giving it an increased rigidity. Multi-ply paper and paperboard is produced by 
a  different  production  method  requiring  a  different  paper  machine  than  the  one  used 
for  the  production  of  CFP,  as  in  the  production  process  several  layers  of  pulp  are 
layered into a single product. Finally, multi-ply paper and paperboard serves different 
purposes (mainly packaging) compared to CFP that is used for high quality printing of 
promotional  material,  magazines,  etc.  Multi-ply  paper  and  paperboard  as  defined  in 
recital (47) is therefore considered as not being the product concerned. Consequently, 
the  CN  codes  mentioned  covering  imports  of  multi-ply  paper  and  multi-ply 
paperboard are excluded from the scope of the investigation. 

(49)  Finally, one Chinese producer claimed that so called "paperboard" should be excluded 
from the scope of the investigation as it does not fall under the definition of fine paper 
(whether  coated  or  not)  because  of  alleged  differences  in  its  weight,  thickness  and 
rigidity. It was found that the term 'paperboard' is generally used for paper with high 
substances  making  the  paper  in  general  heavier,  i.e.  "paperboard"  is  commonly 
defined as paper with a basis  weight of above  224 g/m2. However, the investigation 
revealed  that  the  difference  in  weight  does  not  have  a  significant  impact  on  the 
remaining  physical  and  technical  characteristic  and  end  uses  which  would  it  make 
distinguishable from the product concerned. It is also noted that, as outlined in recital 
(16),  all  CFP  with  a  weight  of  70  g/m2  or  more  but  not  exceeding  400  g/m2  were 
explicitly included in the definition of the product concerned. Therefore paperboard is 
considered as being the product concerned. 

2.1.1.  Like product 

(50)  The product concerned, the product produced and sold on the domestic market of the 
PRC  as  well  as  the  product  manufactured  and  sold  in  the  Union  by  the  Union 
producers were found to have the same basic physical and technical characteristics as 
well as the same basic uses. They are therefore considered as alike within the meaning 
of Article 2(c) of the basic Regulation. 

3. 

SAMPLING 

3.1. 

Sampling for exporting producers in the PRC 

(51)  Only  two  exporting  producers  groups  in  the  PRC  came  forward  and  replied  to  the 
request for sampling data in the Notice of initiation. One group (Chenming) represents 
2  related  exporting  producers  while  the  other  group  (APP)  represents  4  related 
exporting producers. The cooperating exporting producers represent the total exports 

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of  the  product  concerned  from  the  PRC  to  the  Union.  In  these  circumstances,  the 
Commission decided  that  sampling  was not  necessary for exporting producers in the 
PRC.  

(52)  Two out of four related exporting producers of the APP group were found to produce 
only  the  multi-ply  paperboard,  mentioned  in  recital  (47)  above.  In  this  respect  it  is 
recalled that it was concluded that multi-ply paperboard should be excluded from the 
product  scope  of  the  current  investigation.  It  is  also  recalled  that  the  multi-ply 
paperboard  was  excluded  from  the  product  scope  of  the  parallel  anti-dumping 
proceeding. It is therefore concluded that the two related exporting producers found to 
produce only multi-ply paperboard are not concerned by the current proceeding. Thus 
the hereunder presented findings are not based on their information and data. 

3.2. 

Sampling of Union producers 

(53) 

In view of the potentially large number of Union producers sampling was envisaged in 
the  Notice  of  initiation  in  accordance  with  Article  27  of  the  basic  Regulation. 
However,  after  examination  of  the  information  submitted  and  given  that  only  four 
Union producers  came  forward within the deadlines set in the Notice of initiation, it 
was  decided  that  sampling  was  not  necessary.  The  four  above-mentioned  producers 
were considered to be representative (covering 61% of total production) of the Union 
industry  as  defined  in  recital  (372)  below.  The  information  provided  by  the  four 
companies was verified on-spot and was used for the micro indicators as explained in 
recital (386). 

3.3. 

Sampling of unrelated importers 

(54) 

In  view  of  the  potentially  large  number  of  importers,  sampling  was  envisaged  for 
importers  in  the  Notice  of  initiation  in  accordance  with  Article  27  of  the  basic 
Regulation.  However,  after  examination  of  the  information  submitted  and  given  the 
low  number  of  importers  which  indicated  their  willingness  to  co-operate,  it  was 
decided that sampling was not necessary. 

4. 

SUBSIDISATION  

4.1. 

Preliminary remarks  

(55) 

It is recalled that both the GOC and the four Chinese exporting producers submitted 
questionnaire replies and accepted on-spot visits in order to verify the replies.  

(56)  With  respect  to  the  GOC,  following  the  submission  of  the  questionnaire  reply,  the 
Commission  sent  to  the  Chinese  side  three  deficiency  letters  and  a  pre-verification 
letter.  The  Commission  provided  to  the  GOC  ample  time  for  the  preparation  and 
submission  of  its  representations  whenever  this  was  requested  and  justified.  Indeed 
substantial deadline extensions were granted to the GOC, i.e. two weeks extension for 
the  reply  to  the  questionnaire  which  led  to  a  total  deadline  of  49  days  for  the 
submission  of  the  questionnaire  reply  and  three  weeks  for  the  reply  to  the  first 
deficiency letter which led to a total deadline of 40 days.  

(57)  Prior to the on-spot verification visit, the GOC requested the Commission to provide 
further information in writing, in particular a list of all the questions that it intended to 
ask  during  the  verification  plus  a  list  of  the  Government  departments  which  were 

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expected to participate in the on-spot visit. In the absence of these, it was argued that 
the Commission would not fulfil its obligations as an investigating authority set out in 
the Agreement on Subsidies and Countervailing Measures ('SCM Agreement') and in 
particular those contained in paragraph 8 in Annex VI. The GOC also submitted that 
due to lack of such information it would not be in a position to guarantee the outcome 
of the verification.  

(58)  The Commission respectfully disagreed with GOC's request. In this respect it is noted 
that the Commission has fulfilled all the relevant conditions of paragraph 8 in Annex 
VI of the SCM Agreement as well as of Article 26 of the basic Regulation. A detailed 
pre-verification letter was sent to the GOC confirming the agenda (days and group of 
schemes  to  be  discussed  per  verification  day)  and  requesting  the  presence  of  the 
authorities  responsible  for  the  relevant  schemes  and  of  the  officials  involved  in  the 
preparation of the GOC submissions. The Commission also explained before the on-
spot  verification  visits  that  only  the  GOC  knows  the  authorities  responsible  for  the 
schemes  under  investigation  as  well  as  those  officials  whose  are  best  placed  to  take 
part in the verification and answer questions. As regards the list of specific questions, 
the Commission explained before and during the on-spot verification visit that such a 
list is not required by WTO or EU legislation and that the purpose of this investigation 
is  to  verify  the  GOC  reply  to  the  questionnaire  and  the  relevant  supplementary 
submissions; therefore the verification would follow the structure of these documents. 
The Commission would also seek to obtain and clarify further information necessary 
for the ongoing proceeding but precise questions in this context would depend on the 
GOC's  replies  to  the  initial  verification  of  its  replies.  It  was  also  made  clear  to  the 
GOC  before  the  on-spot  verification  visit  that  refusals  to  provide  necessary 
information  or  to  assist  the  investigating  authority  in  verifying  information  and  data 
deemed  necessary  for  the  purposes  of  the  proceeding  may  seriously  undermine  the 
investigation  process.  The  GOC  was  also  reminded  of  the  consequences  of  the 
provisions of Article 28 of the basic Regulation.  

(59)  During the on-spot verification visit to the Chinese Ministry of Commerce in Beijing, 
the  Commission  endeavoured  to  verify  information  provided  on  the  basis  of  the 
supporting documents that were used to prepare the GOC's response, in line with the 
provisions of Articles 11 and 26 of the basic Regulation. In doing so, the Commission 
came  preliminarily  to  the  conclusion  that  the  lack  of  information  and  supporting 
documents  available  does  not  allow  a  proper  verification  of  the  reply  to  the 
questionnaire. Moreover, certain information was not submitted at all although it was 
specifically requested and certain questions were simply not replied to. The GOC has 
been made aware of the consequences of non-cooperation in accordance with Article 
28(1) and (6) of the basic Regulation. 

(60)  The  GOC  argued  that  the  investigating  authority  should  determine  the  necessity  of 
information in a reasonable manner that would not amount to abuse of rights. It was 
also argued that even if information is considered not ideal in all aspects it should not 
be  disregarded.  On  the  basis  of  the  above  arguments  the  GOC  submitted  that  it 
cooperated  to  the  best  of  its  ability  and  that  its  questionnaire  reply  was  complete.  It 
was  also  argued  that  the  on-spot  verification  was  poorly  scheduled  as  the  pre-
verification  letter  failed  to  provide  a  reasonable  understanding  of  what  was  to  be 
verified  and  the  Commission  did  not  conduct  specific  on-spot  visits  at  each 
government  entity.  It  was  also  submitted  that  the  Commission  imposed  an 

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unreasonable  burden  on  the  GOC  and  requested  irrelevant  and  unnecessary 
information.  

(61)  With respect to the scheduling of the on-spot verification, it is recalled that the GOC 
agreed to the timing, schedule of visit and venue. Indeed, discussions on the timing of 
the  on-spot  visit  took  place  in  August  2010.  The  Commission  initially  proposed  the 
on-spot  verification  visit  to  take  place  on  the  first  week  of  October  2010  and 
subsequently amended its proposal twice, on the basis of Chinese requests, first for the 
second  week  of  October  2010  and  finally  for  the  third  week  of  October  2010.  Thus 
there  is  no  basis  to  any  complaints  concerning  scheduling  of  on-spot  visits  as  the 
Commission did its utmost to accommodate any duly justified Chinese request. With 
respect  to  the  requested  information  it  is  noted  that  the  GOC  has  never  disputed  the 
format  of  the  questionnaire  or  the  way  information  was  requested.  The  Chinese 
Ministry  of  Commerce  submitted  on  behalf  of  the  GOC  its  questionnaire  reply  and 
subsequent  representations.  The  Commission  requested  information  that  is  deemed 
necessary  for  the  purposes  of  arriving  at  a  representative  finding  and  remained 
consistent  in  its  requests  by  asking  for  the  same  data  and  information  during  the 
investigating  process  and  requesting  from  the  GOC  to  explain  the  submitted 
information and its implication to the investigated schemes.  

4.2. 

Specific Schemes 

(62)  On  the  basis  of  the  information  contained  in  the  complaint  and  the  replies  to  the 
Commission's  questionnaire,  the  following  schemes,  which  allegedly  involved  the 
granting of subsidies by the Governmental authority, were investigated:  

(I)  Preferential lending to the coated paper industry 

(II) 

Income tax Programmes 

– 

– 

– 

Preferential  tax  policies  for  companies  that  are  recognised  as  high  or 
new technology enterprises 

Preferential tax policies for Research & Development 

Dividend exemption between qualified resident enterprises 

(III)  Indirect Tax and Import Tariff Programmes 

– 

– 

– 

VAT and Tariff exemption on imported equipment 

VAT rebates on domestically produced equipment 

City maintenance and Construction Taxes and education surcharges for 
Foreign Invested Enterprises 

(IV)  Grant Programmes 

– 

– 

– 

Famous Brands  

Special Funds for Encouraging Foreign Investment Projects 

Anti-dumping Respondent Assistance 

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– 

– 

– 

– 

– 

– 

– 

– 

– 

Shouguang Technology Renovation Grant 

Suzhou Industrial park Intellectual Property Right Fund 

Subsidy of High-Tech Industrial Development Fund 

Award received from Suzhou Industrial Park for maintaining growth 

Special  fund  for  water  pollution  treatment  of  Taihu  lake  of  Jiangsu 
province 

Special funds for energy-saving of Suzhou Industrial Park 

Special  fund  for  reduction  of  total  emissions  of  major  pollutants  at 
municipal level of Suzhou municipality 

Subsidy for water-saving and emission reduction 

Environmental  Protection  award  received  from  Suzhou  Environmental 
Protection Bureau 

– 

Energy saving award in Shouguang 

(V)  Government  Provision  of  Goods  and  Services  for  Less  than  Adequate 

Remuneration (“LTAR”) 

– 

– 

– 

Provision of land use rights 

Provision of paper-making chemicals 

Provision of electricity 

4.2.1.  Preferential lending to the coated paper industry 

(a) 

Introduction 

(63) 

It is alleged that Chinese producers of the product concerned benefit from low-interest 
rate  loans  from  government  policy  banks  and  state-owned  commercial  banks 
(“SOCBs”)  pursuant  to  the  GOC’s  policy  to  provide  financial  assistance  in  order  to 
encourage and support the growth and development of the paper industry in China. As 
illustrated in the five-year plans and industrial policy, preferential financing initiatives 
have been granted by the banking system to the papermaking industry.  

(b) 

Use of facts available 

(64)  On the basis of the information contained in the complaint the Commission sought to 
investigate  the  bank  lending  to  the  coated  paper  industry.  To  this  extent  it  was 
considered  necessary  to  request  from  the  GOC  to  provide  in  its  questionnaire  reply 
and subsequent submissions specific information and data on a series of government 
plans and projects to encourage and support the development of China's paper sector. 
These plans and projects were:  

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– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

China  Civilian  Economy  and  Social  Development  10th  Five-Year  Plan  ('The 
10th Five Year Plan') 

The "10th Five year Plan" in the Papermaking Industry ('Papermaking Plan') 

The  10th  Five  year  and  2010  Special  Plan  for  the  Construction  of  a  National 
Forestry and Papermaking Integration Project ('Integration Project') 

Decision  No.  40  of  the  State  Council  on  Promulgating  and  Implementing  the 
"Temporary  Provisions  on  Promoting  Industrial  Structure  Adjustment" 
('Decision No. 40') 

Directory  Catalogue  on  Readjustment  of  Industrial  Structure  ('Directory 
Catalogue')  

Guidelines for the Eleventh Five-Year Plan for National Economic and Social 
Development (2006-2010) ('11th Five-year Plan') 

State Council Circular on Realizing the Major Targets in (The 11th Five Year-
Year  Plan)  and  the  Division  of  Tasks  ('11th  five-year  plan  implementing 
circular') 

2007  Development  Policy  for  the  Papermaking  Industry  ('2007  Papermaking 
Plan') 

The Guandong Development Plan 

The Zhanjiang City 11th Five-Year plan 

The 11th Five Year Plan of Jining Municipality 

(65)  The GOC only partially provided the information requested in relation to plans. Only 
two of the plans requested were provided in full, i.e. in the Chinese version together 
with  an  English 
translation  (Decision  No.  40  and  Directory  Catalogue  on 
Readjustment of Industrial Structure). For the three regional plans originally requested 
by the Commission, the Chinese authorities submitted that they are not relevant since 
the co-operating exporting producers are not located in these regions. They were thus 
not  provided. The  Commission  accepted  this  but  requested  the  development  plans 
related  to  the  areas  (regions,  provinces,  municipalities)  where  the  cooperating 
exporting  producers  are  established.  The  GOC  provided  Chinese  copies  of  the  11th 
Five  year  plan  for  Jiangsu  Province  and  11th  Five  year  plan  for  Shandong  Province, 
but  no  translation  whatsoever,  not  even  a  translation  of  the  table  of  contents.  In 
relation  to  two  plans  that  were  not  provided,  the  GOC  submitted  that  they  cover  the 
period between 2000 and 2005 and are thus obsolete. The Commission accepted this. 
The  remaining  plans  were  provided  only  in  Chinese  (Integration  Project,  11th  Five-
year Plan, 11th five-year plan implementing circular, 2007 Papermaking Plan) together 
with English tables of the contents. The GOC claimed that the Commission's requests 
were  too  burdensome,  that  they  only  had  limited  resources  and  therefore  could  not 
translate the texts.  

(66)  With respect to the above it is noted that the Commission requested information that 
was  deemed  necessary  for  the  investigation  as  the  aforesaid  documents  have  been 

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identified in the complaint. Moreover the Commission had repeatedly emphasized the 
need to provide the requested documents in English. This is necessary for this type of 
significant document given that, on the basis of the index only, it was not possible to 
determine which part of the document is relevant for the investigation. Moreover, the 
plans provided in Chinese were not voluminous and it appears that copies in English 
of the relevant documentation exist either from independent sources (legal firms that 
specialize in Chinese law) or from anti-subsidy investigations conducted in China by 
the United States of America ('USA').  

(67)  Consequently,  the  Commission  had  the  possibility  to  verify  only  the  following 
documents: the Decision No. 40, the Directory Catalogue and the 2007 Papermaking 
Plan, an English version of which was in the complaint and it was also made available 
from an exporting producer. 

(68) 

(69) 

(70) 

In  order  to  investigate  the  level  of  government  intervention  in  the  Chinese  financial 
market  and  obtain  the  necessary  overview  of  the  financial  sector  in  the  PRC,  the 
Commission  requested  information  on  the  percentage  of  government  ownership  of 
financial  institutions  and  on  the  records  of  amounts/percentages  of  loans  given  by 
State owned banks. The GOC claimed that they did not have any records on the bank 
shareholding  although  Article  61  of  the  Law  on  Commercial  Banks  [2003]  No.  13 
provides  that  banks  report  these  data  "to  the  banking  regulatory  organ  of  the  State 
Council  and  People's  Bank  of  China".  As  regards  the  amounts/percentages  of  loans 
given by State owned banks, the GOC confirmed that although relevant data is kept, it 
could not provide it. The Commission further facilitated the work of GOC by limiting 
the  requested  information  on  the  percentage  of  government  ownership  only  to  such 
financial  institutions  that  were  found  to  provide  loans  to  the  co-operating  exporting 
producers. Nevertheless, the GOC did not provide relevant data even for this restricted 
segment of financial institutions operating in China.  

In order to investigate the lending policies of the Chinese banks (e.g. methods used as 
regards  the  setting  of  the  interest  loan  rates,  assessment  of  loans  etc),  the  GOC  was 
requested to provide information with respect to the policies followed by the relevant 
state authorities namely the People's Bank of China ('PBOC') and the Bank Regulatory 
Commission. The GOC did not provide any relevant information on the loan policies. 
No  document,  regulation  or  guidelines  addressed  to  the  banking  system  from  the 
PBOC was  provided in  order  to substantiate the role of the PBOC in setting interest 
rates and its relation with the banking system. Furthermore no explanation was given, 
although  specifically  requested,  with  respect  to  the  application  of  the  Law  on 
Commercial Banks [2003] No. 13 and particularly Articles 34, 38 and 39 that set out 
the basic rules governing loans and other businesses of commercial banks. 

In  order  to  investigate  the  lending  policies  of  the  Chinese  banks  that  provided  loans 
during  the  IP  to  the  cooperating  exporting  producers,  the  Commission  requested  the 
GOC  to  arrange  meetings  with  specific  banks  that  have  provided  loans  to  the 
cooperating exporting producers in order to verify information concerning preferential 
lending to the CFP industry in China. The GOC claimed that it was unable to intervene 
with  State-owned  banks  to  arrange  such  meetings.  Therefore,  no  evidence  has  been 
collected from Chinese banks as to whether and, if so, how those banks evaluate credit 
risk when providing loans. 

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(71)  The GOC was made aware of the consequences of non-cooperation in accordance with 
Article 28(1) and (6) of the basic Regulation. In view of this lack of cooperation, it has 
been  necessary,  in  addition  to  taking  account  of  relevant  GOC  documents  submitted 
by other parties, to use information from secondary sources, including the complaint 
and publicly available information retrieved from internet. The GOC disputed the use 
of facts available but did not provide any further new evidence.  

(72)  The  cooperating  exporting  producers  were  also  requested  to  arrange  meetings  with 
specific  banks  that  have  provided  loans  to  them  during  the  IP  in  order  to  verify 
information  concerning  preferential  lending  to  the  CFP  industry  in  China.  However, 
no such meetings took place. The cooperating exporting producers communicated the 
repeated requests of the Commission for such meetings but the relevant banks refused 
to cooperate with the investigation. The co-operating exporting producers were made 
aware  of  the  consequences  of  non-cooperation  in  accordance  with  Article  28(1)  and 
(6)  of  the  basic  Regulation.  In  view  of  this  lack  of  cooperation,  it  is  considered 
necessary to base any findings with respect to the loans provided by banks to the co-
operating  exporting  producers  on  facts  available.  The  co-operating  exporting 
producers disputed the use of facts available but did not provide any further evidence.  

to  provide 

(73)  One  Chinese  exporting  producer  was  requested  to  provide  specific  information 
concerning  a  specific  debt  restructuring  agreement  with  three  Chinese  banks.  The 
aforesaid  exporting  producer  refused 
information. 
Consequently,  it  was  not  possible  to  verify  the  relevant  overall  agreement  and 
corresponding  contract  loans  as  well  as  all  specific  points  like  duration  of  loans, 
repayment schedules and interest rates. The co-operating exporting producer was made 
aware  of  the  consequences  of  non-cooperation  in  accordance  with  Article  28(1)  and 
(6)  of  the  basic  Regulation.  In  view  of  this  lack  of  cooperation,  it  is  considered 
necessary to base any findings with respect to the relevant loans provided by banks to 
the  co-operating  exporting  producer  on  facts  available.  The  co-operating  exporting 
producer disputed the use of facts available but did not provide any further evidence.  

the  necessary 

(c) 

Findings of the investigation 

(i)  Government  intervention  in  the  financial  banking  system  for  a  preferential 

lending to paper making industry 

- 

Role of government plans 

(74)  The investigation established the existence of specific policy plans with respect to the 
papermaking industry. These plans stipulate that the state authorities monitor closely 
the  performance  of  the  papermaking  industry  and  implement  special  policies  (e.g. 
implementing decrees) for the fulfilment of the goals of the policy plans. Furthermore, 
the investigation also established that the specific policy plans provide for preferential 
lending to the paper making industry.  

(75) 

Indeed,  by  examining  the  Decision  No  40  and  the  specific  financing  section  of  the 
2007  Papermaking  Plan  it  is  obvious  that  the  Chinese  state  planning  system  directs 
banks to provide loans to the paper making industry.  

(76)  With  reference  to  the  Decision  No  40,  it  is  noted  that  this  Act  is  an  order  from  the 
State  Council  i.e.  the  highest  administrative  body  in  the  PRC  and  so  legally  binding 
for  other  public  bodies  and  the  economic  operators.  The  Decision  classifies  the 

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industrial  sectors  into  'Encouraged,  Restrictive  and  Eliminated  Projects'.  This  Act 
represents  an  industrial  policy  guideline  that  along  with  the  Directory  Catalogue 
shows  how  the  GOC  maintains  a  policy  to  encourage  and  support  groups  of 
enterprises  or  industries,  such  as  the  paper  industry,  classified  by  the  Directory 
Catalogue as an 'Encouraged industry'. With respect to the number of industries listed 
as 'Encouraged' it is noted that there are in total 26, representing only a portion of the 
Chinese  economy.  Furthermore,  only  certain  activities  within  these  26  sectors  are 
given  "encouraged"  status.  The  Decision  No  40  also  stipulates  under  Article  17  that 
the  'Encouraged  investment  projects'  shall  benefit  from  specific  privileges  and 
incentives  (financial  support, 
tax 
exemption).  On  the  other  hand,  with  reference  to  the  'Restrictive  and  Eliminated 
Projects',  the  Decision  No  40  empowers  the  state  authorities  to  intervene  directly  to 
regulate the market. In fact, Articles 18 and 19 request the relevant authority to stop 
financial  institutions  from  supplying  loans;  they  also  order  the  State  price 
administrative  department  to  raise  the  electricity  price  and  instruct  the  electricity 
supply  companies  to  stop  supplying  electricity  to  such  'Restrictive  and  Eliminated 
Projects'. It is obvious from the above that Decision No 40 provides binding rules to 
all the economic institutions in the form of directives on the promotion and support of 
encouraged industries, one of which is the paper making industry. 

import  duty  exemption,  VAT  exemption, 

(77)  With  respect  to  the  2007  Papermaking  Plan  it  is  noted  that  it  provides  specific 
conditions, orientations and targets for the papermaking industry. It describes the state 
of  the  papermaking  industry  in  China  (e.g.  number  of  enterprises,  production, 
consumption and exports, statistics on the type of raw materials used). It sets out the 
policies and goals for the papermaking industry with respect to the industrial layout, 
the use of  raw  materials, the use of technology  and  equipment,  the product structure 
and  the  organizational  structure  of  the  papermaking  producers.  The  text  also  sets 
industry "admission criteria", as it lays down specific assets/liability ratio requirements 
for the papermaking industry, sets specific credit ratings for the papermaking industry 
and  specific  targets  for  economies  of  scale,  market  share  ratios,  energy  and  water 
consumption  to  be  achieved  or  attained  by  companies.  It  requests  enterprises  to 
formulate development plans based on the 2007 Papermaking Plan. It also instructs the 
local provinces and regions to participate in the implementation of the plan, while an 
entire chapter is devoted to "Investment and Financing" of the papermaking industry. 
In  this  respect  it  is  pertinent  to  note  that  the  Plan  clearly  states  that  financial 
institutions  shall  not  provide  loans  for  any  project  which  does  not  comply  with  its 
regulations. In sum it is clear from the reading of the text and the wording used that 
the  2007  Papermaking  Plan  is  a  specific  state  instrument  aimed  at  regulating  the 
papermaking industry in China and can only be considered as a compulsory industrial 
policy  tool  that  has  to  be  concretely  implemented  by  relevant  interested  parties  in 
China (state authorities, financial institutions and producers).  

(78)  The GOC argued that the 2007 Papermaking Plan is to be considered a guideline plan 
without  binding  force.  It  was  also  submitted  that  in  the  same  context  none  of  the 
government  plans  and  projects  are  legally  binding  and  as  a  result  no  financial 
contribution  or  benefit  can  be  granted  in  the  framework  of  such  plans  and  projects. 
However, a simple reading of the text on the 2007  Papermaking Plan and its above-
stated specific provisions reveals that the text cannot be considered as a non-binding 
guideline.  In  this  respect  it  is  noted  that  the  2007  Papermaking  Plan  text  inter  alia 
reads "The industrial development policy is formulated based on the requirements of 
perfecting  the  reform  of  the  socialist  market  economy  and  the  related  laws  and 

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regulations, so as to establish a fair market order and good development environment, 
solve  the  issues  existing  in  the  development  of  papermaking  industry  and  direct  the 
healthy development of the industry" With respect to the remaining plans and projects 
as listed under recital (64) above it is noted that at least one refers to an implementing 
circular of the 11th Five Year Plan. It is difficult to understand how an allegedly non-
legally  binding  document  (a  government  plan)  can  have  a  legally  binding 
implementing act (in this case a circular of the State Council).  

(79) 

In  addition,  Article  34  of  the  Law  on  Commercial  Banks  [2003]  No.  13  states  that 
banks 'carry out their loan business upon the needs of the national economy and the 
social  development  and  under  the  guidance  of  the  state  industrial  policy'.  In  this 
particular case the relevant state industrial policy is the 2007 Papermaking Plan. Thus, 
it only logical to conclude that loans received by the CFP producers from SOCBs are 
made pursuant to government directives. 

(80)  The  role  of  the  National  Development  and  Reform  Commission  ('NDRC')  was  also 
investigated.  It  was  submitted  by  the  GOC  that  the  NDRC  is  an  agency  of  the  State 
Council  coordinating  macro-economic  policy  and  managing 
the  Government 
investments.  This  state  authority  issued  among  other  plans  the  2007  Papermaking 
Plan.  No  available  information  was  submitted,  although  explicitly  requested,  on  the 
legal framework under which the NDRC was established and operates, e.g. its statute. 
The  only  explanation  provided  by  the  GOC  was  that  the  State  Council,  the  highest 
governmental  administrative  body,  gives  the  instructions  which  the  NDRC  has  to 
follow  and  that  in  any  event  this  information  is  irrelevant  to  the  investigation.  This 
argument  cannot  be  accepted.  The  statutes  of  the  authority  that  issues  government 
plans is considered relevant to  the  investigation,  in  view  of  the  fact  that  government 
plans and projects are investigated in this proceeding. The Commission also enquired 
about the reasons why the NDRC collects, on a permanent basis, detailed information 
from  companies.  The  GOC  clarified  that  the  information  could  be  collected  through 
industrial  associations  and  other  public  sources.  Nevertheless,  the  existence  of  a 
systematic mechanism to collect company related data to be used in government plans 
and  projects  reveals  that  these  plans  and  project  are  considered  as  an  important 
element of state industrial policy.  

(81) 

It follows from the above that any decision taken by financial institutions with respect 
to  the  papermaking  industry  would  have  to  take  into  consideration  the  need  to  fulfil 
the  goals  of  the  relevant  policy  plans.  Indeed,  companies  qualified  by  these  specific 
policy plans as 'Encouraged industries' are considered of high credit rating, something 
that has direct consequences on the assessment of the creditworthiness by the Chinese 
financial  system.  Furthermore,  from  examining  the  specific  financing  section  of  the 
2007 Papermaking Plan and a credit rating note that was made available from one co-
operating  exporting  producer  it  is  obvious  that  the  Chinese  state  planning  system 
directs  banks  to  provide  loans  to  the  papermaking  industry  and  companies  are 
considered  of  high  credit  rating  because  they  qualify  for  specific  policy  plans.  It  is 
pertinent to note that the particular credit rating note obtained during the investigation 
directly  links  the  positive  future  prospects  of  the  company  with  the  existence  of  the 
papermaking policy plans and the fulfilment of their objectives. There is also evidence 
that  the  State  authorities  monitor  the  performance  of  companies  as  they  examine 
annually  their  business  licenses  and  retain  in  this  way  financial  and  performance 
statistics.  Furthermore,  there  is  also  evidence,  derived  from  information  submitted 
from  co-operating  exporting  producers,  that  the  PBOC  monitors,  in  line  with  the 

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provisions of Article 9 of the Regulation on Registration and Consultation of Banks, 
the  loan  situation  of  companies  through  the  annual  examination  of  the  loans 
companies avail themselves of each year.  

(82)  All  the  above  facts  demonstrate  the  link  between  the  specific  policy  plans  and  the 

financing of the papermaking industry. 

- 

Government intervention in the banking sector 

(83)  With respect to the co-operating exporting producers the investigation established that 
two of them were, in the majority of cases, automatically granted the lowest possible 
interest  rate  within  the  limits  set  out  by  the  PBOC  while  other  two  co-operating 
exporting producers benefited from a substantial rescheduling of their loans that took 
place in 2008. Indeed, Chinese state-owned banks purchased all loans due to foreign 
banks  and  the  rescheduled  loans  did  not  provide  for  a  significant  risk  premium  over 
the PBOC interest rate benchmark. 

(84) 

In  addition,  the  investigation  has  established  that  the  Chinese  financial  market  is 
characterised by government intervention because most of the major banks are state-
owned.  The  Chinese  authorities  have  only  provided  some  very  limited  information 
concerning  shareholding/ownership  of  banks  in  China.  However,  as  further  outlined 
below,  the  Commission  compiled  available  information  in  order  to  arrive  at  a 
representative  finding.  In  performing  its  analysis  whether  banks  are  entities  vested 
with  or  exercising  government  authority  the  Commission  also  sought  information 
concerning  not  only  the  government  ownership  of  the  banks  but  also  other 
characteristics  such  as  the  government  presence  on  the  board  of  directors,  the 
government control over activities, the pursuit of government policies or interests and 
whether entities were created by statute.  

(85)  From  the  available  information  it  is  concluded  that  the  state-owned  banks  in  China 
command  the  highest  market  share  and  are  the  predominant  players  in  the  Chinese 
financial market; according to the 2006 Deutsche Bank Research on China's banking 
sector,  the  state-owned  banks'  share  may  amount  to  more  than  2/3  of  the  Chinese 
market. For the same matter the WTO Trade Policy Review of China noted that “The 
high  degree  of  state  ownership  is  another  notable  feature  of  the  financial  sector  in 
China”5. It is pertinent to note that the four big state-owned banks (Agricultural Bank, 
Bank  of  China,  Construction  Bank  and  Industrial  and  Commercial  Bank)  appear  to 
represent more than half of the Chinese banking sector. Policy banks and other state-
owned  banks  are  more  than  50%  state-owned.  The  Commission  also  requested 
information  concerning  the  structure  of  government  control  in  the  aforesaid  Chinese 
banks  and  the  pursuit  of  government  policies  or  interests  with  respect  to  the 
Papermaking  industry  (i.e.  board  of  directors  and  board  of  shareholders,  minutes  of 
shareholders/directors meetings, nationality of shareholders/directors, lending policies 
and  assessment  of  risk  with  respect  to  loans  provided  to  the  cooperating  exporting 
producers).  Nevertheless,  the  GOC  or  the  banks  did  not  provide  such  information. 
They only repeatedly referred to information in the Annual reports of the banks they 
had submitted. However, the information in the Annual reports of banks did not (and 
cannot)  contain  the  required  level  of  detailed  information.  Consequently,  the 

5 

Document WT/TPR/S/230 p. 79. 

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Commission  had  to  use  the  information  available.  It  concluded  on  the  basis  of  the 
available data that the aforesaid banks are controlled by the government and exercise 
government authority in a manner that their actions can be attributed to the State. The 
relevant  data  used  in  order  to  arrive  at  the  aforesaid  findings  is  derived  from 
information  submitted  by  the  GOC,  the  annual  reports  of  Chinese  banks  that  were 
either submitted from GOC or publicly available, information retrieved from the 2006 
Deutsche  Bank  Research  on  China's  banking  sector,  information  submitted  from  the 
co-operating  exporting  producers  and  information  existing  in  the  complaint.  As  for 
foreign  banks,  independent  sources  estimate  that  they  represent  a  minor  part  of  the 
Chinese  banking  sector  so  to  play  an  insignificant  role  in  the  policy  lending  with 
relevant information suggesting that this may be as low as 1% of the Chinese market6. 
Relevant  public  available  information  also  confirms  that  Chinese  banks,  particularly 
the large commercial banks, still rely on state-owned shareholders and the government 
for replenishment of capital when there is a lack of capital adequacy as result of credit 
expansion7.  With  respect  to  the  banks  that  provided  loans  to  the  co-operating 
exporting producers, the great majority are state-owned banks. Indeed on the basis of 
the available information it was found that at least 13 out of the 19 reported banks are 
state-owned  banks,  including  two  Policy  banks  (Export-Import  Bank  of  China,  the 
China Development Bank) and the major Commercial banks in China like Agricultural 
Bank  of  China,  Bank  of  China,  China  Construction  Bank  and  Industrial  and 
Commercial  Bank  of  China.  With  respect to  the remaining state-owned  banks, again 
the  Commission  requested  the  same  information  mentioned  above  concerning  the 
government control and the pursuit of government policies or interests with respect to 
the  Papermaking  industry.  Again,  no  such  detailed  information  was  provided  apart 
from  a  repeated  claim  to  refer  to  information  in  the  relevant  Annual  reports  of  the 
banks  which  in  the  majority  of  cases  was  only  in  Chinese  and  without  any  English 
translation.  However,  information  in  the  Annual  reports  of  banks  cannot  provide  the 
required level of detailed information. With respect to the Policy banks, as explained 
hereunder  the  investigation  established  that  there  are  no  clear  legal  provisions 
regulating their role and their relationship with the government. But it is also pertinent 
to note that according to statements made by the GOC during the on-spot verification 
it appears that Policy banks supported government policies in China and are not operating 
for  profit. All the above points confirm that the aforesaid banks are controlled by the 
government  and  exercise  government  authority  in  a  manner  that  their  actions  can  be 
attributed to the State. 

(86)  The  Commission  also  sought  to  investigate  the  difference  between  the  Policy  banks 
(according  to  available  information  these  are  the  Export-Import  Bank  of  China,  the 
China Development Bank and the Agricultural Development Bank of China) and State 
Owned  Commercial  banks.  The  Commission  requested  clarifications  on  these  two 
different types of financial institutions. The GOC submitted that the Policy banks do 
not  have  any  written  legal  provisions  regulating  their  sector,  given  that  the  Chinese 
authorities  are  currently  drafting  a  law  on  Policy  banks.  It  was  also  argued  that  one 
Policy bank (namely the China Development Bank) should not be considered as such 
since it has become a shareholding company and is in a transitional period. In relation 
to  the  above  it  is  noted  that  information  submitted  confirms  that  policy  banks  are 

6 
7 

Information retrieved from the 2006 Deutsch Bank Research on China's banking sector, pages 3-4.  
Information  retrieved  from  the  China  Monetary  Report  Quarter  Two,  2010  of  the  Monetary  Policy 
Analysis Group of the People's Bank of China, dated 5 August 2010, page 10.  

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treated differently. Although there lack of any rules governing the Policy banks sector 
and the way these banks act in the Chinese financial market it appears from the PBOC 
circulars mentioned hereunder, where they are mentioned explicitly, that they have a 
special  status  as  compared  to  the  remaining  banks.  As  to  the  status  of  the  China 
Development Bank it is noted that the Chinese state (through the Chinese Ministry of 
Finance) holds more than 50% of the bank's shares and thus its transformation into a 
share-holding company does not have any impact on the government control.  

(87)  Another  factor  that  creates  a  distortion  on  the  Chinese  financial  market  is  the  role 
played by the PBOC in setting the specific limits on the way interest rates are set and 
fluctuate.  Indeed,  the  investigation  established  that  the  PBOC  has  specific  rules 
regulating the way interest rates float in China. According to the available information 
these  rules  are  set  out  in  the  PBOC's  Circular  on  the  Issues  about  the  Adjusting 
Interest Rates on Deposits and Loans-Yinfa (2004) No 251. Financial institutions are 
requested to provide loan rates within a certain range of the benchmark loan interest 
rate  of  the  PBOC.  For  commercial  bank  loans  and  policy  bank  loans  managed 
commercially  there  is  no  upper  limit  range  but  only  a  lower  limit  range.  For  urban 
credit cooperatives and rural credit cooperatives there are both upper and lower limit 
ranges.  For  preferential  loans  and  loans  for  which  the  State  Council  has  specific 
regulations  the  interest  rates  do  not  float  upwards.  The  Commission  sought 
clarifications  from  the  GOC  on  the  definition  and  wording  stated  in  the  aforesaid 
circular as well as to its preceding legislation (Circular of PBOC concerning expansion 
of Financial Institution's Loan Interest Rate Float Range – YinFa [2003] No. 250). The 
GOC  explained  that  the  above  Circulars  formed  part  of  the  marketization  reform  of 
interest rates in China but gave no further explanation. The GOC was also requested to 
explain  what  are  the  preferential  loans  and  other  loans  specified  by  State  Council. 
GOC argued that the wording of the relevant Chinese text refers to an assumption of 
other  loans  specified  by  the  State  Council.  No  other  explanation  or  relevant 
documentation was provided by the GOC to explain why preferential loans are defined 
in  the  Chinese  legislation.  As  to  the  other  type  of  loans,  even  if  one  accepts  the 
argument of the GOC, it is unclear why the legislator felt it necessary to introduce the 
possibility of other loans set out by the State Council. The Commission also requested 
clarifications on the existence of policy loans managed commercially, as mentioned in 
the aforesaid Circular. No explanation or any evidence was provided by the GOC on 
this  matter.  The  GOC  was  also  requested  to  provide  any  updates  or  subsequent 
legislation issued on the aforesaid Circular in relation to the loan policy of commercial 
and policy banks but no such information was provided.  

(88)  Finally  it  is  noted  that  no  other  data  or  statistics  concerning  the  structure  of  the 

Chinese banking system was provided by the GOC. 

(89)  On the basis of all the above (see recitals (74) to (88) above) and account taken of the 
lack  of  Chinese  cooperation  (and  in  the  light  of  the  considerations  in  recital  (90) 
below), the Commission concludes that , the financing market in China is distorted by 
government  intervention  and  interest  rates  charged  by  non-government  banks  and 
other financial institutions are likely to be aligned with government rates. Therefore, 
the  interest  rates  charged  by  non-governmental  banks  and  other  financial  institutions 
cannot  be  considered  as  appropriate  commercial  benchmarks  when  determining 
whether government loans confer a benefit.  

(ii)  Financial Contribution 

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(90)  Furthermore, having regard to the totality of the evidence, it is concluded that the vast 
majority  of  loans  to  the  two  co-operating  producers  are  provided  by  policy  or  other 
state-owned  banks  which  are  considered  to  be  public  bodies  because  of  their  close 
relationship  to  the  government.  They  are  more  than  50%  state-owned  and  are  thus 
considered  controlled  by  the  government.  There  is  further  evidence  that  these  banks 
effectively exercise government authority since as it is explained in recital (65) there is 
a  clear  intervention  by  the  State  (i.e.  PBOC)  in  the  way  commercial  banks  take 
decisions on interest rates for loans granted to Chinese companies while in some cases 
as explained in recital (83) companies were attributed quasi automatically the lowest 
possible  rate  within  the  limits  set  by  the  State.  In  these  circumstances,  the  lending 
practices  of  these  entities  are  directly  attributable  to  the  government.  The  fact  that 
banks  exercise  government  authority  is  also  confirmed  by  the  way  the  2007 
Papermaking Plan, Decision 40 and Article 34 of the Law on Commercial Banks act 
with respect to the fulfilment of the government industrial policies (see recitals (74) to 
(81)  above).  There  is  also  a  great  deal  of  circumstantial  evidence,  supported  by 
objective  studies  and  reports,  that  a  large  amount  of  government  intervention  is  still 
present in the Chinese financial system (see recital (312) below). Finally, China failed 
to provide information which would have enabled a greater understanding of the state-
owned banks' relationship with government (see recitals (68) to (70) and recital (84) to 
(86) above) Thus, in the case of loans provided by policy or other state-owned banks, 
the  Commission  concludes  that  there  is  a  financial  contribution  to  the  coated  paper 
producers  in  the  form  of  a  direct  transfer  of  funds  from  the  government  within  the 
meaning of Article 3(1)(a)(i) of the basic Regulation.  

(iii)  Benefit 

(91)  There  is  a  benefit  according  to  Articles  3(2)  and  6(b)  of  the  basic  Regulation  to  the 
extent  that  the  government  loans  are  granted  on  terms  more  favourable  than  the 
recipient could actually obtain on the market. Since it has been established that non-
government loans in China do not provide an appropriate market benchmark, this has 
been constructed using the method described in recitals (96) to (102) below.  

(iv)  Specificity 

(92)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore had to base its findings on the facts available in accordance with 
Article  28  of  the  basic  Regulation.  It  is  noted  that  Article  28(6)  states  that  "  If  an 
interested  party  does  not  cooperate,  or  cooperates  only  partially,  so  that  relevant 
information is thereby withheld, the result may be less favourable to the party than if it 
had co-operated". The facts considered included the following: 

–  The evidence of specificity submitted by the complainant. 

–  The findings (see recitals (77) and (78)) that specific subsidies are channelled to 
the  papermaking  industry  through  a  specific  sectoral  plan  i.e.  the  Papermaking 
Plan. 

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–  The  evidence  (see  recital  (76))  that  the  papermaking  industry  is  an  "encouraged 

industry" (Decision No 40).  

–  The provisions of Article 34 of the Law on Commercial Banks [2003] No. 13 (see 
recital (79)) stipulating that commercial banks shall carry out their loan business 
upon  the  needs  of  the  national  economy  and  the  social  development  and  in  the 
spirit of the state industrial policies i.e. in this particular case in the spirit of the 
Papermaking Plan. 

–  The findings (see recital (81)) that the Chinese state planning system directs banks 
to  provide  loans  to  the  papermaking  industry  and  companies  are  considered  of 
high credit rating because they qualify for specific policy plans. 

(93) 

In  the  light  of  the  above,  and  in  the  absence  of  any  cooperation  by  the  GOC,  the 
available evidence indicates that subsidies granted to companies in the paper industry 
are not generally available and are therefore specific under Article 4(2)(a) of the basic 
Regulation. In the light of the GOC's non-cooperation, there is nothing to suggest that 
eligibility  for  the  subsidy  is  based  on  objective  criteria  or  conditions  under  Article 
4(2)(b) of the basic Regulation. 

(d) 

Conclusion 

(94)  Account  taken  of  the  above,  the  financing  of  the  papermaking  industry  has  to  be 

considered a subsidy. 

(95) 

In  view  of  the  existence  of  a  financial  contribution,  a  benefit  to  the  exporting 
producers and specificity, this subsidy is considered countervailable. 

(e) 

Calculation of the subsidy amount 

(96)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. According to Article 6(b) of 
the  basic  Regulation,  the  benefit  conferred  on  the  recipients  is  considered  to  be  the 
difference between the amount that the company pays on the government loan and the 
amount that the company would pay for a comparable commercial loan obtainable on 
the market. 

(97)  As  explained  above,  since  the  loans  provided  by  Chinese  banks  reflect  substantial 
government intervention in the banking sector and do not reflect rates that would be 
found in a functioning market, an appropriate market benchmark has been constructed 
using the method described below. Furthermore, due to the lack of cooperation by the 
GOC,  the  Commission  has  also  resorted  to  facts  available  in  order  to  establish  an 
appropriate benchmark interest rate. 

(98)  When  constructing  an  appropriate  benchmark,  it  is  considered  reasonable  to  apply 
Chinese  interest  rates,  adjusted  to  reflect  normal  market  risk.  Indeed,  in  a  context 
where the exporters' current financial state has been established in a distorted market 
and  there  is  no  reliable  information  from  the  Chinese  banks  on  the  measurement  of 
risk and the establishment of credit ratings, it is considered necessary not to take the 
creditworthiness of the Chinese exporters at its face value, but to apply a mark-up to 
reflect the potential impact of the Chinese distorted market on their financial situation.  

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(99)  With  respect  to  the  above  as  explained  in  recitals  (68)  to  (72)  both  GOC  and  the 
cooperating exporting producers were requested to provide information on the lending 
policies  of  the  Chinese  banks  and  the  way  loans  were  attributed  to  the  exporting 
producers. Parties failed to provide such information although repeatedly requested to 
do  so.  Accordingly  in  view  of  this  lack  of  cooperation  and  the  totality  of  facts 
available, and in line with the provisions of Article 28(6) of the basic Regulation, it is 
deemed appropriate to consider that all firms in China would be accorded the highest 
grade  of  "Non-investment  grade"  bonds  only  (BB  at  Bloomberg)  and  apply  the 
appropriate  premium  expected  on  bonds  issued  by  firms  with  this  rating  to  the 
standard  lending  rate  of  the  People's  Bank  of  China.  For  loans  received  in  foreign 
currency, the Commission applies the appropriate premium expected on bonds issued 
by  firms  with  this  rating  to  the  standard  lending  rate  as  mentioned  in  the  relevant 
Chinese loan contracts (LIBOR rate). However, given the total non-cooperation of the 
GOC  as  regards  providing  information  on,  or  access  to,  state-owned  banks,  it  is 
considered appropriate, in accordance with Article 28(6) if the basic Regulation, to use 
a credit rating of BB (non-investment grade-speculative), in view of the totality of the 
facts available.  

(100)  The benefit to the exporting producers has been calculated by taking into consideration 
the interest rate differential, expressed as a percentage, multiplied by the outstanding 
amount  of  the  loan,  i.e.  the  interest  not  paid  during  the  IP.  This  amount  was  then 
allocated over the total turnover of the co-operating exporting producers. 

(101)  As explained in recital (73), one exporting producer refused to  provide  an important 
debt  restructuring  agreement.  As  a  consequence  it  was  not  possible  to  verify  basic 
information  reported  in  relation  to  the  loans  falling  under  this  agreement,  such  as 
interest  rate,  maturity  of  the  loan,  repayment  schedule  etc.  The  exporting  producer 
could  also  not  prove  that  it  repaid  the  principals  of  the  loans  falling  under  this 
agreement.  Therefore  in  the  calculation  of  benefit  these  loans  were  considered  as  a 
grant and were allocated over the IP in addition to the interest not paid during the IP as 
explained in recital (100) above. 

(102)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  amounts  to 

5.37% for APP companies and 1.26% for Chenming companies.  

4.2.2. 

Income tax Programmes 

- 

Preferential tax policies for companies that are recognised as high and new 
technology enterprises 

(103)  This  scheme  allows  a  company  that  applies  successfully  for  the  Certificate  of  High 
and New Tech Enterprise to benefit from a reduced income tax rate of 15%, compared 
to the normal rate of 25%. 

(a) 

Legal Basis 

(104)  The scheme is provided as a preferential tax treatment by Article 28 of the Enterprise 
Income  Tax  Law  of  the  PRC  (n.  63  promulgated  on  16  March  2007)  along  with 
Administrative  Measures  for  the  determination  of  High  and  New  Tech  Enterprises. 
The  Notice  of  the  State  Administration  of  Taxation  on  the  Issues  concerning 
Enterprise  Income  Tax  Payment  of  High  &  New  Technology  Enterprises  (Guo  Shui 

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Han  [2008]  No.985)  also  relates  to  this  scheme,  providing  further  details  on  its 
implementation. 

(b) 

Eligibility 

(105)  Article  10  of  Administrative  Measures  for  the  determination  of  High  and  New  Tech 
Enterprises lists the eligibility criteria for the companies to benefit from this scheme. If 
the  company  fulfils  all  the  conditions  set  out  in  Article  10,  it  has  to  submit  an 
application to the relevant authorities according to the procedure in Article 11 of the 
same Act. 

(c) 

Practical implementation  

(106)  Any  company  that  intends  to  apply  for  this  scheme  has  to  proceed  to  an  on-line 
application to the local Science and Technology Bureau that will make a preliminary 
examination.  Subsequently,  the  local  Science  and  Technology  Bureau  will  make  a 
recommendation to the provincial Science and Technology department. Before taking 
any decision on the issuance of the certificate of High and New Tech Enterprise, the 
latter  can  also  decide  to  carry  out  an  investigation  directly  at  the  premises  of  the 
applicant.  

(d) 

Findings of the investigation 

(107)  This scheme was used by the 3 cooperating exporting producers who obtained benefits 
during  the  IP.  Although  no  administrative  rules  were  provided  by  the  GOC,  the 
exporting  producers  provided  the  available  legal  texts.  Even  from  these  texts, 
however, it is difficult to discern the application procedure which remains vague and 
non-transparent.  

(e) 

Conclusion 

(108)  Account taken of the above, the scheme is considered a subsidy within the meaning of 
Article  3(1)(a)(ii)  and  Article  3(2)  of  the  basic  Regulation  in  the  form  of  foregone 
government revenue which confers a benefit upon the recipient companies. 

(109)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1, in accordance with Article 28 of the basic Regulation.  

(110)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates,  limited  the  access  to  this  scheme  only  to  certain  enterprises  and  industries 
classified as encouraged, such as those belonging to the coated paper industry. Indeed, 
in chapter 4 of the Enterprise Income Tax Law of the PRC (No. 63 promulgated on 16 
March  2007)  devoted  to  "Tax  Incentive",  Article  25  provides  that  "the  State  grants 
enterprise  income  tax  incentives  to  key  industries  and  projects  supported  and 
encouraged  by  the  State".  According  to  the  Commission's  understanding,  the  State 

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Council in its Decision 40 (Article 14) and in the Guiding Catalogue of the Industrial 
Restructuring  offers  the  principles  and  the  classification  to  consider  an  enterprise  as 
encouraged. In addition, there are no objective criteria to determine eligibility and no 
conclusive  evidence  to  conclude  that  the  eligibility  is  automatic  in  accordance  with 
Article  4(2)(b)  of  the  basic  Regulation.  Indeed,  although  some  administrative  rules 
have been collected during the visit to the exporting producers, the lack of cooperation 
from  the  GOC  authorities  do  not  permit  to  assess  the  existence  of  such  objective 
criteria. 

(111)  Account taken of the above, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(112)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the  recipients  which is found to exist during the IP.  The benefit conferred on  the 
recipients is considered to be the amount of total tax payable according to the normal 
tax rate, after the deduction of what was paid with the reduced preferential tax rate. In 
accordance with Article 7(2) of the basic Regulation this subsidy amount (numerator) 
has been allocated over the total sales turnover of the cooperating exporting producers 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. 

(113)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 1.22% for the APP Group and 0.58% for 
the Chenming Group. 

- 

Preferential tax policies for Research & Development (R&D) 

(114)  This  scheme  provides  a  benefit  to  all  companies  that  are  recognized  as  carrying  out 
R&D projects. This qualification permits that the corporate income tax is decreased by 
50% of the actual expenses for approved projects.  

(a) 

Legal Basis 

(115)  The  scheme  is  provided  as  a  preferential  tax  treatment  by  Article  30(1)  of  the 
Enterprise Income Tax Law of the PRC (n. 63 promulgated on 16 March 2007), Art. 
95  of  the  Regulations  on  the  Implementation  of  Enterprise  Income  Tax  Law  of  the 
PRC,  Decree  n.  512  of  the  State  Council  of  the  PRC,  promulgated  in  date  on  6 
December 2007 and the Guide to Key Fields (Notification n. 6, 2007). 

(b) 

Eligibility 

(116)  This scheme provides a benefit to companies that are recognized as carrying out R&D 
projects.  Only  R&D  projects  of  the  companies  of  New  and  High  Tech  Sectors 
Receiving  Primary  Support  from  the  State  and  projects  listed  in  the  Guide  to  Key 
Fields  of  High  Tech  Industrialization  under  the  current  Development  Priority 
promulgated  by  the  National  Development  and  Reform  Commission  are  eligible  for 
the scheme. 

(c) 

Practical implementation 

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(117)  Any company that intends to apply for this scheme needs to file detailed information 
about  the  R&D  projects  with  the  local  Science  and  Technology  Bureau.  After 
examination, the tax bureau will issue the notice of  approval.  The amount subject to 
the  corporate  income  tax  is  decreased  by  50%  of  actual  expenses  for  approved 
projects.  

(d) 

Findings of the investigation 

(118)  This scheme was used by the cooperating exporting producers who obtained benefits 
during  the  IP.  Although  no  administrative  rules  were  provided  by  the  GOC,  the 
exporting  producers  provided  the  available  legal  texts.  Even  from  these  texts, 
however, it is difficult to discern the application procedure - which remains vague and 
non-transparent.  

(e) 

Conclusion 

(119)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of 
foregone government revenue which confers a benefit upon the recipient companies. 

(120)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1, in accordance with Article 28 of the basic Regulation.  

(121)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates,  limited  the  access  to  this  scheme  only  to  certain  enterprises  and  industries 
classified  as  encouraged,  such  as  those  belonging  to  the  coated  paper  industry.  In 
addition, there are no objective criteria to limit eligibility and no conclusive evidence 
to conclude that the eligibility is automatic in accordance with Article  4(2)(b) of the 
basic  Regulation.  Indeed,  although  some  administrative  rules  have  been  collected 
during  the  visit  to  the  exporting  producers,  the  lack  of  cooperation  from  the  GOC 
authorities does not permit to assess the existence of such objective criteria. 

(122)  Account taken of the above, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(123)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. The benefit conferred on the 
recipients is considered to be the amount of total tax payable according to the normal 
tax rate, after the subtraction of what was paid with the additional 50% deduction of 
the actual expenses on R&D for the approved projects. In accordance with Article 7(2) 
of  the  basic  Regulation  this  subsidy  amount  (numerator)  has  been  allocated  over  the 
total sales turnover of the cooperating exporting producers during the IP, because the 
subsidy is not contingent upon export performance and was not granted by reference 
to the quantities manufactured, produced, exported or transported. 

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(124)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 0.02% for the APP Group and 0.05% for 
the Chenming Group. 

- 

Dividend exemption between qualified resident enterprises 

(125)  The  scheme  concerns  resident  enterprises  in  China  which  are  shareholders  in  other 
resident  enterprises  in  China.  The  former  are  entitled  to  a  tax  exemption  on  income 
from certain dividends paid by the latter.  

(a) 

Legal Basis 

(126)  This scheme is provided as a preferential tax treatment by Article 26 of the Enterprise 
Income Tax Law of the PRC and further explained in Article 83 of the Regulations on 
the Implementation of Enterprise Income Tax Law of the PRC, Decree n. 512 of the 
State Council of the PRC, promulgated in date on 6 December 2007. 

(b) 

Eligibility 

(127)  This  scheme  provides  a  benefit  to  all  resident  companies  which  are  shareholders  in 

other resident enterprises in China. 

(c) 

Practical implementation 

(128)  The companies may make use of this scheme directly through their tax return. 

(d) 

Findings of the investigation 

(129)  On  the  income  tax  statement  of  the  cooperating  exporting  producers  there  is  an 
amount exempted from income tax. This amount is referred to as Dividends, bonuses 
and  other  equity  investment  income  of  eligible  residents  and  enterprises  in  line  with 
the  conditions  in  Appendix  5  to  the  Income  tax  return  (Annual  Statement  of  Tax 
Preferences). No income tax was paid by the relevant companies on these amounts.  

(e) 

Conclusion 

(130)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of 
foregone government revenue which confers a benefit upon the recipient companies. 

(131)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1, in accordance with Article 28 of the basic Regulation.  

(132)  This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates,  limited  the  access  to  this  scheme  only  to  resident  enterprises  in  China 

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receiving  dividend  income  from  other  resident  enterprises  in  China,  as  opposed  to 
those enterprises which invest in foreign enterprises.  

(133)  In addition, since all the above tax schemes under Chapter 4 of the Enterprise Income 
Tax  Law  of  the  PRC  are  reserved  exclusively  to  important  industries  and  projects 
supported  or  encouraged  by  the  State  as  stated  in  Article  25,  also  this  scheme  is 
specific  because  it  is  reserved  only  to  certain  enterprises  and  industries  classified  as 
encouraged, such as the coated paper industry. Indeed, according to the Commission's 
understanding, the State Council in its Decision No. 40 (Article 14) and in the Guiding 
Catalogue of the Industrial Restructuring offers the principles and the classification to 
consider an enterprise as encouraged. Furthermore, in that case there are no objective 
criteria to limit eligibility and no conclusive evidence to conclude that the eligibility is 
automatic in accordance with Article 4(2)(b) of the basic Regulation. Indeed, although 
some  administrative  rules  have  been  collected  during  the  visit  to  the  exporting 
producers, the lack of cooperation from the GOC authorities does not permit to assess 
the existence of such objective criteria. 

(134)  Account taken of the above, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(135)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. The benefit conferred on the 
recipients is considered to be the amount of total tax payable with the inclusion of the 
dividend income coming from other resident enterprises in China, after the subtraction 
of what was actually paid with the dividend tax exemption. In accordance with Article 
7(2) of the basic Regulation this subsidy amount (numerator) has been allocated over 
the total sales turnover of the co-operating exporting producers companies during the 
IP,  because  the  subsidy  is  not  contingent  upon  export  performance  and  was  not 
granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. 

(136)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 1.34% for the APP Group and 0.21% for 
the Chenming Group. 

4.2.3. 

Indirect Tax and Import Tariff Programmes 

- 

VAT and Tariff exemption on imported equipment 

(137)  This scheme provides benefits in the form of VAT exemption and duty free imports of 
capital  goods  to  the  FIEs  or  domestic  companies  which  are  able  to  obtain  the 
Certificate of State-Encouraged projects issued by the Chinese authorities in line with 
relevant investment, tax and customs-related legislation. 

(a) 

Legal Basis 

(138)  The scheme is based on a set of legal provisions i.e. the Circular of the State Council 
on Adjusting Tax Policies on Imported Equipment No. 37/1997, the Announcement of 
the  Ministry  of  Finance,  the  General  Administration  of  Customs  and  the  State 
Administration  of  Taxation  [2008]  No.  43,  the  Notice  of  the  NDRC  on  the  relevant 
issues concerning the Handling of Confirmation letter on Domestic or Foreign-funded 

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Projects  encouraged  to develop  by  the  State,  No.  316  2006,  dated  22  February  2006 
and on the Catalogue on non-duty-exemptible Articles of importation for either FIEs 
or domestic enterprises-2008.  

(b) 

Eligibility 

(139)  Eligibility is limited to applicants, either FIEs or domestic enterprises, which are able 

to obtain the Certificate of State-Encouraged projects.  

(c) 

Practical implementation 

(140)  According to the Notice of the NDRC on the relevant issues concerning the Handling 
of Confirmation letter on Domestic or Foreign-funded Projects encouraged to develop 
by the State, No. 316 2006, dated 22 February 2006, Article I.1. the foreign investment 
projects  complying  "with  those  of  the  encouraged  category  in  the  Catalogue  of 
industries for Guiding Foreign Investment and the Catalogue of Priority Industries for 
Foreign Investment in Central-Western Region with technology transfer, the tariff and 
the  VAT  shall  be  exempted  on  the  self-use  equipment  imported  within  the  total 
investment and the technology, parts and components, and spare parts imported along 
with the equipment according to the contract; excluded are those commodities that are 
listed in the Catalogue of Import Commodities under Foreign Investment Projects not 
exempted from tax". The Projects Confirmation Letter for foreign investment projects 
of the encouragement category with the total investment of USD 30 million or more 
shall be issued by the NDRC. The Project Confirmation Letter for foreign investment 
projects of the encouragement category with the total investment of less than USD 30 
million  shall  be  issued  by  the  commissions  or  economic  municipalities  at  the 
provincial  level.  Once  they  have  received  the  Project  Confirmation  Letter  of  the 
encouragement category, the companies present the certificates and other application 
documents  to  their  local  Customs  authorities  in  order  to  be  eligible  for  customs  and 
VAT exemption on equipment imports. 

(d) 

Findings of the investigation 

(141)  All co-operating exporting producers benefited from this scheme. 

(e) 

Conclusion 

(142)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of 
foregone government revenue which confers a benefit upon the recipient companies. 

(143)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1, in accordance with Article 28 of the basic Regulation.  

(144)  This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 

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operates, limited the access to this scheme only to enterprises that invest under specific 
business  categories  defined  exhaustively  by  law  (i.e.  catalogue  for  guidance  of 
industries  for  foreign  investment  and  catalogue  of  key  industries,  products  and 
technologies which the state currently encourages development). In addition, there are 
no  objective  criteria  to  determine  eligibility  and  no  conclusive  evidence  to  conclude 
that  the  eligibility  is  automatic  in  accordance  with  Article  4(2)(b)  of  the  basic 
Regulation. Indeed, although some administrative rules have been collected during the 
visit to the exporting producers, the lack of cooperation from the GOC authorities does 
not permit to assess the existence of such objective criteria. 

(145)  Account taken of the above, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(146)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. The benefit conferred on the 
recipients is calculated by taking into consideration the VAT and duties exempted on 
imported  equipment.  In  accordance  with  Article  7(3)  of  the  basic  Regulation  this 
subsidy  amount  (numerator)  has  been  allocated  to  the  IP  using  a  useful  life 
corresponding  to  the  average  depreciation  period  of  the  industry  concerned  (i.e.  15 
years). The resulting amount was then allocated over the total sales turnover of the co-
operating  exporting  producers  during  the  IP,  because  the  subsidy  is  not  contingent 
upon  export  performance  and  was  not  granted  by  reference  to  the  quantities 
manufactured, produced, exported or transported.  

(147)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 1.17% for the APP Group and 0.61% for 
the Chenming Group. 

- 

VAT rebates on domestically produced equipment 

(148)  This  scheme  provides  benefits  in  the  form  of  VAT  rebates  paid  for  purchase  of 

domestically produced equipment by FIEs. 

(a) 

Legal Basis 

(149)  The scheme is based on the Circular of State Administration of taxation on the release 
of  the  provisional  measures  for  the  Administration  of  tax  refunds  for  purchases  of 
Domestically-Manufactured  Equipment  by  Foreign  Invested  Enterprises  No.  171, 
1999, 20/09/1999 and terminated by the Circular on Terminating Tax Refund Policies 
on  Purchase  of  Domestically-Manufactured  Equipment  by  FIEs  [Caishui  2008,  No. 
176].  The  latter  provides  for  a  transitional  period  after  the  termination  of  the 
programme as of 1 January 2009. 

(b) 

Eligibility 

(150)  Eligibility is limited to FIEs that purchase domestically-manufactured equipment. 

(c) 

Practical implementation 

(151)  The programme is aimed to refund VAT paid for purchase of domestically produced 
equipment by FIE if the equipment does not fall into the Non-Exemptible Catalogue 

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and if the value of the equipment does not exceed the total investment limit on an FIE 
according to the "trial Administrative measures on Purchase of Domestically Produced 
Equipment". 

(d) 

Findings of the investigation 

(152)  All co-operating exporting producers benefited from this scheme. 

(e) 

Conclusion 

(153)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation in the form of 
foregone government revenue which confers a benefit upon the recipient companies. 

(154)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(155)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates, limited the access to this scheme to a certain type of enterprises (i.e. FIE's). 
In  addition,  there  are  no  objective  criteria  to  determine  eligibility  and  no  conclusive 
evidence to conclude that the eligibility is automatic in accordance with Article 4(2) 
(b)  of  the  basic  Regulation.  Indeed,  although  some  administrative  rules  have  been 
collected during the visit to the exporting producers, the lack of cooperation from the 
GOC authorities does not permit to assess the existence of such objective criteria. 

(156)  Furthermore, the scheme is specific within the meaning of Article 4(4)(b) of the basic 
Regulation,  given  that  the  subsidy  is  contingent  upon  the  use  of  domestic  over 
imported goods.  

(157)  Consequently, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(158)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. The benefit conferred on the 
recipients  is  calculated  by  taking  into  consideration  the  VAT  reimbursed  on  the 
purchase of domestically produced equipment. In accordance with Article 7(3) of the 
basic Regulation this subsidy amount (numerator) has been allocated to the IP using a 
useful life corresponding to the average depreciation period of the industry concerned 
(i.e. 15 years). The resulting amount was then allocated over the total sales turnover of 
the  co-operating  exporting  producers  during  the  IP,  because  the  subsidy  is  not 
contingent upon export performance and was not granted by reference to the quantities 
manufactured, produced, exported or transported.  

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(159)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 0.03%.for the APP Group and 0.05% for 
the Chenming Group. 

- 

City  maintenance  and  Construction  Taxes  and  education  surcharges  for 
FIEs 

(160)  This  scheme  provides  an  exemption  to  FIEs  from  paying  the  local  city  maintenance 

and construction tax and education surcharge. 

(a) 

Legal Basis 

(161)  The  scheme  is  based  on  the  Interim  Rules  on  City  Maintenance  Tax  of  the  People's 
Republic of China (Guo Fa published 8 February 1985, No 19) and the Regulations of 
the Ministry of Finance on Several Specific Issues concerning the implementation of 
Interim Rules on City Maintenance Tax of the People's Republic of China (Cai Shui 
Zi, published 22 March 1985, No 69). 

(b) 

Eligibility 

(162)  Eligibility is limited to the FIEs. 

(c) 

Practical implementation 

(163)  According to the Interim Rules on City Maintenance Tax of the People's Republic of 
China  the  tax  basis  of  the  city  maintenance  and  construction  tax  "is  the  amount  of 
product tax, VAT and business actually paid by the taxpayers, and it shall be paid at 
the same time respectively as the product tax, VAT and business tax".  

(d) 

Findings of the investigation 

(164)  As explained under recitals (347) and (348) tax obligations with respect to this scheme 

are applicable from 1 December 2010 to all companies operating in China. 

(e) 

Conclusion 

(165)  Account taken of the above and on the basis of information up to 30 November 2010, 
the  scheme  has  to  be  considered  a  subsidy  within  the  meaning  of  Article  3(1)(a)(ii) 
and Article 3(2) of the basic Regulation in the form of foregone government revenue 
which confers a benefit upon the recipient companies. 

(166)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates, excludes certain type of enterprises (i.e. FIE's) from the payment of the city 
maintenance and construction tax. 

(167)  Consequently, this subsidy is considered countervailable. 

(168)  Nevertheless,  in  view  of  the  information  provided  by  the  GOC  and  the  relevant 
cooperating exporting producers it is concluded that the parties were in a position to 
demonstrate that this scheme no longer confers any benefit on the exporters involved.  

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(169)  Thus the conditions lay down in Article 15 of the basic Regulation are fulfilled. It was 

therefore concluded that this scheme should not be countervailed.  

4.2.4.  Grant Programmes 

(170)  From the various grant programmes mentioned in the complaint two were found to be 
used  by  co-operating  exporting  producers,  i.e  the  Famous  brands  award  and  Special 
funds  for  encouraging  foreign  economic  and  trade  development  and  for  drawing 
significant  foreign  investment  project  in  Shandong  province.  The  remaining 
programmes found to be used were reported by the co-operating exporting producers. 
The GOC was made aware of the existence of these programmes and was requested to 
provide  necessary  information  on  them.  The  GOC  submitted  that  any  programme 
which was not included in the complaint cannot be investigated, as this is contrary to 
the WTO rules. It was thus argued by the GOC that the Commission request has to be 
considered  inconsistent  with  the  rules  of  evidence  and  consultation  under  the  WTO 
SCM Agreement. It was also submitted by the GOC that the information provided by 
the  Commission  with  respect  to  these  schemes  was  general  and  that,  even  assuming 
that  these  programs  can  be  investigated,  the  Commission  should  send  a  new, 
sufficiently  substantiated  request  to  the  GOC,  requesting  it  to  provide  details  on  the 
newly- alleged subsidies that would be relevant to the investigation.  

(171)  In this respect it is noted that it is standard EU practice to inform the authorities of the 
investigating  country  of  the  existence  of  any  alleged  subsidy  scheme  used  by  the 
cooperating exporting producers, other than the ones mentioned in the complaint, and 
request information and clarification thereon. The practice followed is in line with the 
relevant  WTO  rules.  The  Commission  informed  the  GOC  on  the  existence  of  such 
schemes at the time that these schemes were made known and provided the GOC with 
the  information  it  has  received  from  the  Chinese  co-operating  exporting  producers. 
The  Commission  provided  the  GOC  with  the  opportunity  for  consultations  with 
respect 
the  relevant  schemes  and  consultations  were  subsequently  held. 
Consequently, the provisions of Articles 12.1, 13.1 and 13.2 of the SCM Agreement as 
well  as  of  Article  11(10)  of  the  basic  Regulation  were  fully  honoured.  The  findings 
presented  hereunder  take  into  consideration  the  information  submitted  by  the  GOC 
with respect to the relevant programmes.  

to 

(i) 

Programmes mentioned in the complaint 

- 

Famous Brands  

(a) 

Legal Basis 

(172)  This programme is implemented with the Notice of Shandong Province concerning the 
special  award  Fund  Budget  in  2008  for  the  Development  of  Self  Exporting  Brand 
[Lucaiqizhi (2008) No. 75]. This programme provides grants to companies in order to 
boost exporting brands and increase the market share of famous brands.  

(b) 

Eligibility 

(173)  Only the exporting famous brand enterprises established in the Shandong Province are 
eligible to get the award. No legal or administrative acts were submitted to substantiate 
the eligibility criteria. 

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(c) 

Practical implementation  

(174)  The  programme  aims  to  award  the  enterprises  which  have  been  recognized  as  the 
exporting  famous  brand  enterprises  of  Shandong  Province,  so  as  to  improve  their 
development  and  competitiveness.  The  enterprise  does  not  need  to  apply  for  this 
programme, so there is no approval document.  

(d) 

Findings of the investigation 

(175)  One co-operating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(176)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning  of  Article  3(1)(a)(i)  and  Article  3(2) of  the basic Regulation in the form of 
direct transfer of funds which confers a benefit upon the recipient companies. 

(177)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(178)  This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic 
Regulation as access to it is limited to certain enterprises i.e. exporting famous brand 
enterprises.  In  the  light  of  the  lack  of  any  legal  or  administrative  information  on  the 
eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on 
objective criteria and conditions under Article 4(2)(b) of the basic Regulation. 

(179)  Consequently, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(180)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported.  

(181)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating  exporting  producers  amounts  to  less  than  0.01%  (negligible)  for  the 
Chenming group.  

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Special Funds for Encouraging Foreign Investment Projects 

(a) 

Legal Basis 

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(182)  The official document on this programme is the Announcement of Shouguang People's 
Government  on  Commendation  of  advanced  enterprises  in  2008.  This  programme, 
established  on  9  February  2008,  gives  commendation  to  the  enterprises  which 
achieved excellent performance during 2008.  

(b) 

Eligibility 

(183)  Companies  which  have  been  recognized  as  the  "advanced  enterprise  on  foreign 
investment  attraction"  and  the  "advanced  enterprise  on  foreign  trade  business 
performance"  with  remarkable  foreign  trade  business  performance  or  significant 
foreign  investment  attractions  are  eligible  for  the  programme.  No  law  or  regulation 
concerning  the  policy  or  the  definition  of  the  "advanced  enterprise  on  foreign 
investment  attraction"  and  the  "advanced  enterprise  on  foreign  trade  business 
performance" was provided by the GOC. 

(c) 

Practical implementation  

(184)  Shouguang  People's  Government  is  responsible  for  awarding  funds  to  enterprises 
which have been recognized as "advanced enterprise on foreign investment attraction" 
and the "advanced enterprise on foreign trade business performance". 

(185)  According to the GOC, the enterprise does not need to apply for this programme, so 

there is no approval document.  

(d) 

Findings of the investigation 

(186)  One co-operating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(187)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning  of  Article  3(1)(a)(i)  and  Article  3(2)  of the  basic Regulation in the form of 
direct transfer of funds which confers a benefit upon the recipient companies. 

(188)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(189)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation as access to it is limited to certain enterprises i.e. to advanced enterprise on 
foreign  investment  attraction  and  advanced  enterprise  on  foreign  trade  business 
performance. In the light of the lack of any legal or administrative information on the 
eligibility criteria, there is nothing to suggest that eligibility for the subsidy is based on 
objective criteria and conditions under Article 4(2)(b) of the basic Regulation. 

(190)  Consequently, this subsidy is considered countervailable. 

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(f) 

Calculation of the subsidy amount 

(191)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported.  

(192)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating  exporting  producers  amounts  to  less  than  0.01%  (negligible)  for  the 
Chenming group. 

(ii)  Programmes reported by the cooperating exporting producers 

- 

Anti-dumping Respondent Assistance  

(a) 

Legal Basis 

(193)  The official document on this programme is the Rules for the Implementation of the 
investigation 
Support  Policy  for 
Respondent. GOC claims that the scheme was terminated in 2008, but no relevant law 
legal notification was provided. 

the  Anti-dumping,  Anti-subsidy,  Safeguard 

(b) 

Eligibility 

(194)  Subsidy  provided  by  regional/provincial  financial  bureau  in  order  to  facilitate 
company's  participation  in  the  US  anti-dumping  investigation.  Eligible  companies 
must be registered in Shandong Province (excluding Qingdao City), and shall work in 
compliance  with  the  instructions  of  the  Ministry  of  Commerce  and  provincial 
authorities. 

(c) 

Practical implementation  

(195)  The programme is regional specific (only available in Shandong Province but with the 
exception of its largest city Qingdao) with eligibility criteria that are not objective by 
law. 

(196)  According to the relevant law, 40% of the lawyer fees will be granted to the applicant. 

(d) 

Findings of the investigation 

(197)  One co-operating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(198)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a 
direct transfer of funds which confers a benefit upon the recipient companies. 

(199)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(3)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 

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40 

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operates,  limited  the  access  to  this  scheme  to  companies  within  a  designated 
geographical region. 

(200)  Consequently, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(201)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported.  

(202)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating  exporting  producers  amounts  to  less  than  0.01%  (negligible)  for  the 
Chenming group. 

- 

Shouguang Technology Renovation Grant 

(a) 

Legal Basis 

(203)  The  programme  was  implemented  according  to  the  Opinion  to  accelerate  high-tech 
industry  development  (Trial  Implementation)  (Shoufa  [2005]  No.  37)  issued  by  the 
Shouguang Municipal Government. The GOC claimed that relevant legal framework 
for the scheme exists but it did not provide a copy of it.  

(b) 

Eligibility 

(204)  The scheme is a subsidy provided to enhance competitiveness of enterprises. No legal 

or administrative acts were submitted to substantiate the eligibility criteria. 

(c) 

Practical implementation  

(205)  According to GOC this programme is a local grant to encourage R&D, energy-saving 
and  environmental  protection.  There  is  no  application  procedure.  The  regional 
Government issues form time  to time notices informing  the  exporting  producers that 
are awarded a grant of a certain amount.  

(d) 

Findings of the investigation 

(206)  One co-operating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(207)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a 
direct transfer of funds which confers a benefit upon the recipient companies. 

(208)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 

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41 

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Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore had to base its findings on the facts available, as stated in Section 
4.1 above, in accordance with Article 28 of the basic Regulation.  

(209)  This subsidy scheme is specific within the meaning of the Article 4(2)(a) of the basic 
Regulation as access to it is limited to certain enterprises. In the light of the lack of any 
legal  or  administrative  information  on  the  eligibility  criteria,  there  is  nothing  to 
suggest  that  eligibility  for  the  subsidy  is  based  on  objective  criteria  and  conditions 
under Article 4(2)(b) of the basic Regulation.  

(210)  Consequently, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(211)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported.  

(212)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 

cooperating exporting producers amounts to 0.59% for the Chenming group. 

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Suzhou Industrial Park Intellectual Property Right Fund 

(a) 

Legal Basis 

(213)  The  programme  is  implemented  in  accordance  with  the  Interim  Measures  on 
Strengthening the Work of Suzhou Industrial Park Intellectual Property Right and the 
Administrative Rules on Suzhou Industrial Park Intellectual Property Right Fund. 

(b) 

Eligibility 

(214)  The  scheme  is  provided  only  to  company  established  in  the  Suzhou  Industrial  Park 
that have obtained Certificate of Registry of Computer Software Copyright, Certificate 
of Registry of Integrated Circuit Layout Design and has newly obtained famous brand 
products. 

(c) 

Practical implementation  

(215)  An eligible company to obtain a grant for patent application or trademark award has to 
fill in an application form for the Famous Brand Award of Suzhou Province or level–
above  and  submit  it  to  the  Science  and  Technology  Bureau  of  the  Park.  Grants  are 
provided by the Suzhou Industrial Park. No information exists on the Park's financing 
and from which state authorities it receives the grants amounts. 

(d) 

Findings of the investigation 

(216)  One  co-operating  exporting  producer  benefited  from  this  scheme.  However,  the 
Commission  notes  the  total  lack  of  any  relevant  documentation  concerning  the 

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cooperating  exporting  producer  as  no  application  to  the  scheme  or  decision  granting 
the award was provided. 

(e) 

Conclusion 

(217)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a 
direct transfer of funds which confers a benefit upon the recipient companies. 

(218)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(219)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation as access to it is limited to certain enterprises. In the light of the lack of any 
legal  or  administrative  information  on  the  eligibility  criteria,  there  is  nothing  to 
suggest  that  eligibility  for  the  subsidy  is  based  on  objective  criteria  and  conditions 
under Article 4(2)(b) of the basic Regulation.  

(220)  In addition, this subsidy scheme is specific within the meaning of Article 4(3) of the 
basic  Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting 
authority operates, limited the access to this scheme to companies within a designated 
geographical  region.  The  scheme  is  only  available  for  companies  established  in  the 
Suzhou Industrial Park.  

(221)  Consequently, this subsidy is considered countervailable. 

(f) 

Calculation of the subsidy amount 

(222)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported.  

(223)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to less than 0.01% for the APP Group.  

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Subsidy of High-Tech Industrial Development Fund  

(a) 

Legal Basis 

(224)  No  legal  basis  was  provided  by  the  GOC  or  by  the  exporting  producers.  The 
programme  foresees  financial  assistance  to  companies  in  the  Suzhou  Industrial  Park 
and according to the GOC, this scheme aims to accelerate the reforming and upgrading 

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43 

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of  Suzhou  Industrial  Park  and  to  promote  the  improvement  of  scientific  research 
quality of enterprises in the Park. 

(b) 

Eligibility 

(225)  The scheme is provided only to companies established in the Suzhou Industrial Park 
that comply with the requirements set out in a number of plans as well as the existence 
of  relevant  scientific  research  projects.  The  GOC  submitted  the  description  of  the 
programme however did not provide copies of the relevant plans.  

(c) 

Practical implementation  

(226)  Assistance  is  provided  to  companies  that  invest  in  the  Park  and  request  grants  for 
specific  types  of  action  (research  and  development;  new  products  assistance; 
intellectual  property  administration;  overseas  market  development;  project 
coordination with government; public technology service). Grants are provided by the 
Suzhou Industrial Park. No information exists on the Park's financing and from which 
state authorities it receives the grant amounts. 

(d) 

Findings of the investigation 

(227)  One co-operating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(228)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning  of  Article  3(1)(a)(i)  and  Article  3(2) of  the basic Regulation in the form of 
direct transfer of funds which confers a benefit upon the recipient companies. 

(229)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(230)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(2)(a)  of  the  basic 
Regulation as access to it is limited to certain enterprises. In the light of the lack of any 
legal  or  administrative  information  on  the  eligibility  criteria,  there  is  nothing  to 
suggest  that  eligibility  for  the  subsidy  is  based  on  objective  criteria  and  conditions 
under Article 4(2)(b) of the basic Regulation.  

(231)  In addition, this subsidy scheme is specific within the meaning of the Article 4(3) of 
the  basic  Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting 
authority operates, limited the access to this scheme to companies within a designated 
geographical  region.  The  scheme  is  only  available  for  companies  established  in  the 
Suzhou Industrial Park.  

(232)  Consequently, this subsidy is considered countervailable. 

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(f) 

Calculation of the subsidy amount 

(233)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  sales  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is not contingent upon export performance and was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported..  

(234)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 

cooperating exporting producers amounts to 0.03% for the APP Group. 

- 

Award received from Suzhou Industrial Park for maintaining growth 

(a) 

Legal Basis 

(235)  No  legal  basis  was  provided  by  the  GOC  or  by  the  exporting  producers.  The  GOC 
states  that  the  programme  is  implemented  according  to  the  Opinion  of  Suzhou 
Industrial  Park  on  Promoting  Smooth,  Stable  and  Rapid  Growth  and  its  aim  is  to 
accelerate industrial structure growth and foreign trade. 

(b) 

Eligibility 

(236)  The scheme is provided only to companies established in the Suzhou Industrial Park. 
No eligibility criteria have been clearly set out by the Chinese authorities. However, in 
order  to  receive  this  grant,  enterprises  established  in  the  park  must  reach  a  higher 
export performance in 2009 than the previous year's actual performance. 

(c) 

Practical implementation  

(237)  According  to  the  GOC  the  enterprises  does  not  need  to  apply  for  this  programme, 
although  the  relevant  cooperating  exporting  producer  has  submitted  an  application 
form of Suzhou Industrial Park for hi-tech Industrial Development Fund. As submitted 
by  the  GOC,  the  programme  is  related  to  the  export  performance  of  the  enterprises 
with companies receiving a set amount of RMB for every dollar of growth in increased 
export quantities and values. The RMB incentive is also differentiated on the basis of 
type of products and models. Grants are provided by the Suzhou Industrial Park. No 
information exists on the Park's financing and from which state authorities it receives 
the grants amounts.  

(d 

Findings of the investigation 

(238)  One cooperating exporting producer benefited from this scheme. 

(e) 

Conclusion 

(239)  Account  taken  of  the  above,  the  scheme  has  to  be  considered  a  subsidy  within  the 
meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation in the form of a 
direct transfer of funds which confers a benefit upon the recipient companies. 

(240)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 

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45 

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to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore  had  to  base  its  findings  on  the  facts  available,  as  stated  under 
Section 4.1 above, in accordance with Article 28 of the basic Regulation.  

(241)  This  subsidy  scheme  is  specific  within  the  meaning  of  Article  4(3)  of  the  basic 
Regulation  given  that  the  legislation  itself,  pursuant  to  which  the  granting  authority 
operates,  limited  the  access  to  this  scheme  to  companies  within  a  designated 
geographical  region.  The  scheme  is  only  available  for  companies  established  in  the 
Suzhou Industrial Park. 

(242)  In  addition,  the  scheme  is  contingent  in  law  upon  export  performance,  and  therefore 
deemed  to  be  specific  and  countervailable  under  Article  4(4)(a)  of  the  basic 
Regulation.  The  grant  is  linked  and  calculated  according  to  the  export  performance 
since benefit received is based on the increase of export quantities and values from one 
year to the next. 

(243)  Consequently, this subsidy is considered countervailable. 

(e) 

Calculation of the subsidy amount 

(244)  The amount of countervailable subsidy is calculated in terms of the benefit conferred 
on the recipients, which is found to exist during the IP. This amount (numerator) has 
been  allocated  over  the  total  export  turnover  of  the  co-operating  exporting  producer 
during the IP, because the subsidy is contingent upon export performance.  

(245)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 

cooperating exporting producers amounts to 0.05% for APP Group. 

- 

Programmes  reported  by  the  cooperating  exporting  producers  but  not 
assessed 

(246)  The  following  schemes  and  programmes  related  to  energy  saving  and  environment 

protection were reported from the cooperating exporting producers: 

–  Special fund for water pollution treatment of Taihu lake of Jiangsu province 

–  Special funds for energy-saving of Suzhou Industrial Park 

–  Special fund for reduction of total emissions of major pollutants at municipal level 

of Suzhou municipality 

–  Subsidy for water-saving and emission reduction 

–  Environmental Protection award received from Suzhou Environmental Protection 

Bureau 

–  Energy saving award in Shouguang 

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(247)  In view of the small amount of benefits involved, it was not considered necessary to 

pursue our investigation of these programmes. 

4.2.5.  Government  Provision  of  Goods  and  Services  for  Less  than  Adequate 

Remuneration (“LTAR”) 

(i) 

Programmes mentioned in the complaint and assessed 

- 

Provision of land use rights 

(a) 

Legal Basis and Eligibility 

(248)  The allegation in the complaint was that the GOC had provided land use rights to the 
cooperating  exporters  for  less  than  adequate  remuneration.  In  response  to  this,  GOC 
provided the Land Administration Law and the Provisions on the Assignment of State-
Owned Construction Land Use Right through Bid Invitation, Auction and Quotation, 
No. 39, dated 28 September 2007. The GOC refused to provide any data with respect 
to actual land use rights prices, minimum land price benchmarks that they claim that 
exist,  the  way  of  evaluating  minimum  land  price  benchmarks  as  well  as  the 
methodology followed when the State expropriates land from former users.  

(b) 

Practical implementation 

(249)  According to Article 2 of the Land Administration Law, all land is government-owned 
since according to the Chinese constitution and relevant legal provisions land belongs 
collectively  to  the  People  of  China.  No  land  can  be  sold  but  land  use  rights  may  be 
assigned  according  to  the  law:  the  State  authorities  assign  it  through  public  bidding, 
quotation or auction.  

(c) 

Findings of the investigation 

(250)  The  cooperating  exporting  producers  have  reported  information  regarding  the  land 
they  hold  as  well  as  the  relevant  land  use  rights  contracts/certificates,  but  no 
information was provided by the GOC about pricing of land-use rights. 

(d) 

Conclusion 

(251)  Account  taken  of  the  above,  the  provision  of  land-use  rights  by  the  GOC  has  to  be 
considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the 
basic Regulation in the form of provision of goods which confers a benefit upon the 
recipient  companies.  As  explained  in  recitals  (260)  to  (262)  below,  there  is  no 
functioning  market  for  land  in  China  and  the  use  of  an  external  benchmark 
demonstrates that the amount paid for land-use rights by the cooperating exporters is 
well below the normal market rate. 

(252)  The GOC was requested to provide information on the eligibility criteria for obtaining 
this subsidy and on the use of the subsidy, in order to determine to what extent access 
to the subsidy is limited to certain enterprises and whether it is specific according to 
Article  4  of  the  basic  Regulation.  The  GOC  provided  no  such  information.  The 
Commission,  mindful  of  the  requirement  of  Article  4(5)  of the basic Regulation that 
any determination of specificity shall be "clearly substantiated" on the basis of positive 
evidence, therefore had to base its findings on the facts available in accordance with 

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Article  28  of  the  basic  Regulation.  It  is  noted  that  Article  28(6)  states  that  "  If  an 
interested  party  does  not  cooperate,  or  cooperates  only  partially,  so  that  relevant 
information is thereby withheld, the result may be less favourable to the party than if it 
had co-operated". The facts considered included the following: 

(253)  The evidence of specificity submitted by the complainants. 

(254)  The  findings  (see  recitals  (77)  and  (78))  that  specific  subsidies  are  channelled  to  the 
papermaking  industry  through  a  specific  sectoral  plan  i.e.  the  Papermaking  Plan.  In 
this respect it is noted that Articles 7 to 11 of the aforesaid Plan set out specific rules 
on industrial layout by stating what type of papermaking industries shall be established 
in various geographical regions of the country.  

(255)  The  evidence  (see  recital  (76))  that  the  papermaking  industry  is  an  "encouraged 

industry" (Decision No 40).  

(256)  The findings (see recitals (260) to (262)) that there is no functioning market for land in 

China.  

(257)  The  findings  from  the  cooperating  exporting  producers,  as  confirmed  in  the  parallel 
anti-dumping  investigation,  that  land  was  allocated  to  them  in  view  of  their 
papermaking projects8. 

(258)  In  the  light  of  the  above,  and  in  the  absence  of  any  cooperation  by  the  GOC,  the 
available evidence indicates that subsidies granted to companies in the paper industry 
are not generally available and are therefore specific under Article 4(2)(a) of the basic 
Regulation. In the light of the GOC's non-cooperation, there is nothing to suggest that 
eligibility  for  the  subsidy  is  based  on  objective  criteria  and  conditions  under  Article 
4(2)(b) of the basic Regulation. 

(259)  Consequently, this subsidy is considered countervailable. 

(e) 

Calculation of the subsidy amount 

(260)  Account taken of the above, it is concluded that the situation in China with respect to 
land  use  rights  is  not  market-driven.  Indeed,  there  appear  to  be  no  available  private 
benchmarks at all in China. Therefore, an adjustment of costs or prices in China is not 
practicable.  In  these  circumstances  it  is  considered  that  there  is  no  market  in  China 
and, in accordance with Article 6(d)(ii) of the basic Regulation, the use of an external 
benchmark for measuring the amount of benefit is warranted. Given that the GOC did 
not  cooperate  and  failed  to  submit  any  proposal  for  an  external  benchmark  the 
Commission  had  to  resort  to  facts  available  in  order  to  establish  an  appropriate 
external  benchmark.  In  this  respect  it  is  considered  appropriate  to  use  information 
from  the  Separate  Customs  Territory  of  Taiwan,  Penghu,  Kinmen  and  Matscu 
(Chinese Taipei), hereafter mentioned as "Taiwan", as an appropriate benchmark.  

(261)  The Commission considers that the land prices in Taiwan offers the best proxy to the 
areas in China where the cooperating exporting producers are based. All the exporting 
producers  are  located  in  the  east  part  of  China,  in  developed  high-GDP  areas  in 

8 

See Commission Regulation (EC) No 1042/10, OJ L 299, 17.11.2010, p. 7, recitals (39) and (46).  

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provinces  with  a  high  population  density  surrounding  Shanghai.  The  amount  of 
countervailable  subsidy  is  calculated  in  terms  of  the  benefit  conferred  on  the 
recipients,  which  is  found  to  exist  during  the  IP.  The  benefit  conferred  on  the 
recipients is calculated by taking into consideration the difference between the amount 
paid  by  each  company  for  land  use  rights  and  the  amount  that  should  have  been 
normally paid on the basis of the Taiwanese benchmark.  

(262)  In doing this calculation, the Commission used the average land price per square meter 
established  in  Taiwan  corrected  for  currency  depreciation  as  from  the  dates  of  the 
respective land use right contracts. The information concerning industrial land prices 
was retrieved from the website of the Industrial Bureau of the Ministry of Economic 
Affairs of Taiwan. The currency depreciation was calculated on the basis of inflation 
rates  for  Taiwan  as  published  by  the  IMF  in  its  2009  World  Economic  Outlook.  In 
accordance with Article 7(3) of the basic Regulation this subsidy amount (numerator) 
has  been  allocated  to  the  IP  using  the  normal  life  time  of  the  land  use  right  for 
industrial  use land in  China, i.e. 50 years.  This  amount has then been allocated over 
the total sales turnover of the co-operating exporting producers during the IP, because 
the  subsidy  is  not  contingent  upon  export  performance  and  was  not  granted  by 
reference to the quantities manufactured, produced, exported or transported.  

(263)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  IP  for  the 
cooperating exporting producers amounts to 2.81% for APP companies and 0.69% for 
Chenming companies. 

(ii)  Programmes mentioned in the complaint but not assessed 

- 

Provision of electricity  

(264)  It was found that the cooperating exporting producers did not benefit from this scheme 
during  the  IP.  Therefore  there  was  no  need  to  asses  whether  this  scheme  is 
countervailable or not. 

- 

Provision of paper-making chemicals  

(265)  It was found that the cooperating exporting producers did not benefit from this scheme 
during  the  IP.  Therefore  there  was  no  need  to  asses  whether  this  scheme  is 
countervailable or not. 

4.3. 

Comments of parties in relation to subsidisation 

4.3.1. 

Introduction 

(266)  The GOC, two groups of cooperating exporting producers  (APP  and Chenming) and 

the EU complainant submitted comments on the definitive disclosure. 

(267)  The EU complainant supported the findings of the Commission. 

(268)  The GOC, APP and Chenming disputed the findings of the Commission. To the extent 
that arguments have already been fully addressed in the definitive disclosure they are 
not repeated in this Regulation. 

4.3.2.  Allegations with respect to double remedy  

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49 

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(269)  The  GOC  argued  that  the  proposal  for  countervailing  measures  amounts  to  a  double 
remedy.  It  was  submitted  that  under  the  EU  practice  in  anti-dumping  investigations 
against  China  normal  value  is  determined  by  reference  to  data  obtained  from 
producers  in  a  third  market-economy  country.  Thus,  in  such  cases  countervailing 
duties  would  provide  a  double  remedy  to  address  the  same  matter  since  the  anti-
'offset'  any  subsidy  allegedly  granted  to  Chinese 
dumping  duties  effectively 
companies. 

(270)  APP  claimed  that  if  the  normal  value  is  based  on  domestic  sales  in  the  analogue 
country,  the  rejection  of  the  MET  claim  and  the  use  of  non-subsidised  normal  value 
have the effect of increasing the duty by the amount of subsidisation and the subsidies 
would be counted twice. 

(271)  GOC  submitted  that  the  same  alleged  distortions  have  already  been  addressed  in  the 
parallel  anti-dumping  proceeding.  GOC  also  submitted  that  that  the  practice  of  the 
Commission  is  in  violation  of  EU  and  WTO  law  and  that  the  Commission  should 
either  terminate  the  CVD  proceeding  or  grant  MET  to  the  co-operating  exporting 
producers  in  the  parallel  anti-dumping  proceeding.  The  GOC  also  submitted  that  it 
does not accept the Commission's argument that there is no double counting by virtue 
of the injury margin that is lower than the dumping margin. Finally the GOC argued 
that on the basis of the findings of the WTO Appellate Body on the US – PRC dispute 
DS3799 with respect to double remedy the current proceeding should be terminated.  

(272)  These claims had to be rejected. In this respect it is noted that double remedy does not 
play any role in this proceeding. Whether or not the simultaneous imposition of anti-
dumping and countervailing duties in the case of a non-market economy can lead to a 
potential "double remedy", this situation, by definition, could only occur where there 
is  a  cumulation  of  the  dumping  margin  and  the  amount  of  subsidy  i.e.  where  the 
combined level of two types of duty exceeds the higher of the dumping margin or the 
amount of subsidy. As will be explained below, this is not the case here. 

(273)  First  of  all  it  is  recalled  that  the  EU  is  applying  the  lesser  duty  rule  when  imposing 
anti-dumping  and  countervailing  duties  on  the  same  product.  In  other  words  in  EU 
investigations  the  Commission  establishes  the  level  of  dumping,  subsidization  and 
injury caused to the Union industry. The level of duties can never be higher than the 
injury  margin  and  the  injury  margin  here  is  the  same  for  both  proceedings.  In  the 
parallel  anti-dumping  proceeding  the  Commission  established  a  margin  of  dumping 
that  is  much  higher  than  the  injury  margin.  In  line  with  the  lesser  duty  rule  the 
Commission proposed the imposition of measures that are based on the injury margin 
(see  Council  Regulation  (EU)  No  xxx/2011).  Thus  the  subsidy  margin  found  in  the 
current  ant-subsidy  investigation  will  not  provide  any  additional  protection  to  the 
Union  industry  as  compared  to  the  dumping  margin  because  the  anti-dumping  duty 
will  already  be  capped  by  the  injury  margin.  Therefore  there  is  no  overlap  or 
cumulation of duties in the two parallel proceedings and consequently, even assuming 
that there is a potential for a double remedy as described in recital (269) above, there 
can  be  no  requirement  by  law  to  "offset"  dumping  against  the  subsidy.  Indeed,  the 
difference  between  the  dumping  and  injury  margins  found  in  the  anti-dumping 
proceedings  was  much  higher  than  the  amount  of  subsidization  found  in  the  present 

9 

United  States  –Definitive  Anti-Dumping  and  Countervailing  Duties  on  Certain  Products  from  China, 
(DS379), Appellate Body Report WT/DS379/AB/R, 11 March 2011 

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investigation.  It  should  be  also  highlighted  that  when  it  comes  to  the  actual 
composition of the duties to be paid the Commission has a practice to first impose the 
duty amount resulting from the CVD investigation. If there is still a gap between the 
aforementioned duty level and the injury margin, this gap can be filled with the duty 
resulting from the anti-dumping investigation. However, this does not mean that there 
is  double  counting  because  the  combined  level  of  duties  could  already  have  been 
justified as a result of the anti-dumping investigation alone. 

(274)  Secondly, it should be noted that the remedies proposed by the GOC are not permitted 
by law since (i) the investigation established the existence of countervailing subsidies 
that  caused  material  injury  to  the  Union  industry  and  imposition  of  measures  was 
found to be in the Union interest thus this proceeding cannot be terminated, (ii) not all 
Chinese  parties  requested  MET  in  the  parallel  anti-dumping  proceeding,  (iii)  MET 
cannot  be  granted  automatically  to  parties  that  have  not  requested  and  (iv)  for  those 
parties  where  MET  was  refused  this  was  done  because  of  the  serious  deficiencies 
found with respect to Criteria 1, 2 and 3 of Article 2(7)(c) of the basic anti-dumping 
Regulation. 

4.3.3.  Allegations with respect to use of adverse inferences 

(275)  The GOC also argued that the Commission used illegally adverse inferences as a result 
of the insufficient cooperation. In this context, they refer to Article 28(6) of the basic 
Regulation  that  inter  alia  mentions  that  if  an  interested  party  does  not  cooperate  or 
cooperates  partially  the  result  may  be  less  favourable  to  the  party  than  if  it  had 
cooperated. According to the GOC the application of adverse inferences is in violation 
of  Article  12(7)  of  the  SCM  Agreement  as  well  as  of  Annex  II  of  the  WTO  Anti 
Dumping Agreement. 

(276)  With respect to this point it is noted that the GOC understanding of Article 28 (6) of 
the  basic  Regulation  is  groundless.  The  Commission  did  not  impose  any  "adverse 
inferences"  to  the  GOC,  in  that  the  Commission  did  not  deliberately  choose  a  less 
favourable outcome for the exporters concerned, nor did it seek to impose a punitive 
option  with  regard  to  the  existence  of  subsidies  or  amount  of  countervailing  duties. 
The  Commission  as  investigating  authority  requested  a  set  of  information  from  the 
GOC  within  a  reasonable  period  of  time.  However,  the  GOC  failed  to  provide  the 
information deemed necessary for the investigation (e.g. copies of plans, information 
on  banks,  the  assessment  that  banks  carried  out  when  attributing  loans  to  the 
cooperating  exporting  producers,  pricing  of 
these 
circumstances  the  Commission  was  forced  to  use  the  provisions  of  Article  28  of  the 
basic  Regulation  concerning  facts  available  in  order  to  arrive  at  a  representative 
finding.  It  is  pertinent  to  underline  that  this  was  not  done  by  imposing  punitive 
findings  to  the  GOC.  By  way  of  example,  it  is  noted  that  the  Commission  did  not 
reject  information  concerning  LUR;  rather,  the  GOC  did  not  submit  all  the  required 
information  on  the  pricing  of  LUR.  In  the  same  way  the  Commission  did  not  apply 
any  adverse inferences to the GOC with  respect to preferential lending to the coated 
paper industry but had to find the missing information with respect to plans, the role of 
the banks and the lending policies of the banks to the cooperating exporting producers, 
since  such  information  was  simply  not  provided  by  the  GOC.  Thus  the  Commission 
used  whatever  information  provided  by  the  GOC.  Whenever  information  submitted 
was not sufficient or not found to be probative the Commission had to complement it 
with other relevant data in order to make its findings. In some instances, it cannot be 

land  use  rights).  Under 

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excluded that the result was less favourable to the GOC than if it had fully cooperated 
but this outcome was not sought by the Commission. 

(277)  The Commission's approach in this case can be contrasted with the manner in which 
the  notion  of  "adverse  inferences"  under  paragraph  7  of  Annex  V  of  the  SCM 
Agreement  has  been  applied  by  WTO  panels.  For  example,  the  EC-Aircraft  panel 
applied  adverse  inferences  on  two  occasions  with  regard  to  the  Spanish  "PROFIT" 
R&D  programme  in  cases  where  insufficient  data  was  provided  by  the  EU.  With 
regard  to  both  the  amount  of  funding  and  the  issue  of  de-facto  specificity,  the  panel 
disregarded the evidence submitted by the EU and substituted the solution proposed by 
the  complainant  (the  United  States)  for  its  findings10.  This  was  not  the  case  in  the 
present  investigation  as  the  Commission  did  not  disregard  any  data  provided  by  the 
GOC and simply substitute the solution proposed by the complainant but rather used 
the  totality  of  information  it  had  available  to  come  to  a  conclusion.  In  view  of  the 
above it is concluded that the aforesaid claims had to be rejected. 

(278)  As  the  Commission  did  not  use  adverse  inferences  in  relation  to  the  GOC  or  any 
exporter,  the  claim  that  the  application  of  adverse  inferences  to  a  government  is  in 
violation of the WTO legal provisions is devoid of any purpose. 

(279)  This  had  to  be  rejected  as  this  allegation  is  not  supported  by  the  actual  facts.  The 
Commission  informed  the  GOC  on  the  provisions  of  Article  28  and  on  which  cases 
these provisions may apply in the first letter the GOC received upon the initiation of 
this  proceeding  as  well  as  in  the  last  letter  the  GOC  received  before  the  on-spot 
verification visit. Furthermore the GOC was made aware of the consequences of non-
cooperation as explained under recital (59) above. 

(280)  The  GOC  also  claimed  that  the  Commission  never  requested  it  to  arrange  meetings 

with state-owned banks. 

(281)  This had to be rejected. In this respect it is noted that the Commission requested the 
direct involvement  of the  GOC when  arranging meetings  with  those banks that have 
provided loans to the cooperating exporting producers. For this purpose, the GOC was 
also provided with a list of the banks that had provided such loans. The GOC was also 
requested to ensure that policy banks and other financial institutions would be present 
during  the  on-spot  verification  visit  at  the  premises  of  the  GOC  in  order  to  reply  to 
questions referring to the part of the questionnaire intended for these parties. None of 
the above requests was ever acted upon by the GOC. 

(282)  The GOC argued that the use of adverse inferences is unjustified in the present case as 
the  GOC  provided  to  its  best  of  its  abilities  the  information  it  had  available.  GOC 
submitted that banks are third parties to this proceeding and not interested parties as 
defined  in  Article  12(9)  of  the  ASCM  and  thus  there  is  no  obligation  for  them  to 
cooperate. It was also submitted that the Commission displayed arbitrariness and acted 
inconsistently to WTO rules since GOC provided sufficient information with respect 
to lending from banks and land use rights. 

10 

European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, 
(DS316) Panel Report 30.6.2010 Paras 7.1480 & 7.1580 

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(283)  These claims had to be rejected. In this respect it is recalled that the Commission did 
not  apply  adverse  inferences  to  the  GOC.  Furthermore,  as  it  is  stated  under  recital 
(276) above the Commission used whatever information the GOC provided but since 
significant  information  was  missing  it  had  to  complement  data  provided  with  other 
available sources in order to arrive at a representative finding. 

(284)  With respect to the claims made on interested parties it is recalled that Article 12(9) of 
the ASCM clearly states that domestic or foreign parties other than the ones mentioned 
therein  could  be  included  as  interested  parties.  With  respect  to  this  proceeding  the 
Commission,  on  the  basis  of  the  complaint,  requested  information  concerning  the 
preferential  lending  to  the  coated  paper  industry.  Moreover,  such  information  is 
directly linked to banks that are majority State-owned. Both the cooperating exporting 
producers and the GOC were made aware of this. The fact that sufficient information 
with respect to lending from banks was simply not provided forced the Commission to 
resort in the application of facts available in line with the provisions of Article 28 of 
the basic Regulation. 

4.3.4.  Allegations with respect to use of best information available 

(285)  APP claimed that the Commission is prevented from discarding information that is not 
ideal  in  all  respects  if  the  interested  party  that  supplied  the  information  has, 
nevertheless, acted to the best of its ability. And even in cases where a party failed to 
cooperate  to  the  best  of  its  ability,  the  Commission  when  using  facts  available  must 
take  into  account  all  the  substantiated  facts  provided  by  an  interested  party  even  if 
those  facts  may  not  constitute  the  complete  information  requested  of  the  party.  The 
Commission  is  therefore  compelled  under  both  the  basic  Regulation  and  the  WTO 
SCM Agreement not to disregards such information. 

(286)  The  GOC  submitted  that  that  recourse  to  facts  available  is  not  permissible  if  an 
interested Member or interested party has demonstrated that it has acted to its best of 
its abilities and provided information that was verifiable, appropriately submitted so it 
can  be  used  in  the  investigation,  supplied  in  timely  fashion  and  in  a  medium  or 
computer language requested by the investigating authorities. 

(287)  This was not the case here. In this respect it is recalled that the Commission resorted to 
facts  available  in  line  with  the  provisions  of  Article  28  of  the  basic  Regulation  and 
Article  12(7)  of  the  SCM  Agreement  because  the  GOC  and  exporting  producers, 
although  repeatedly  requested  to  do  so,  did  not  provide  information  that  was 
considered necessary for the investigation in order to arrive at a representative finding. 
Indeed, the Commission had to seek to repair the fundamental problem it encountered 
as investigating authority i.e. the fact that the GOC refused access or failed to provide 
actual information on plans, role of the banks, evaluation of credit risk when granting 
loans to cooperating exporting producers, pricing of LUR or legal documents referring 
to  the  various  investigated  schemes.  In  the  same  way  the  co-operating  exporting 
producers failed to provide information concerning loans attributed by Chinese banks. 
Therefore, the way the GOC and the exporting producers cooperated does not meet the 
standards  established  by  the  WTO  Appellate  Body  in  United  States  –  Anti-Dumping 
Measures on Certain Hot-Rolled Steel Products from Japan, which concluded that the 
level  of  cooperation  required  of  interested  parties  is  a  "high"  one  and  that  interested 

EN 

53 

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parties must act to the "best of their abilities"11. The Commission fails to understand 
why it was not possible to the GOC and the exporting producers to submit/arrange the 
missing items and no credible explanation was provided by the GOC or the exporting 
prodcuers. The GOC also submitted that the conditions for resorting to the use of best 
information  available  were  not  fulfilled  and  that  GOC  may  have  failed  to  provide 
certain  information  simple  because  such  information  does  not  exist,  is  no  longer 
relevant  or  is  unavailable,  it  was  not  requested  in  the  questionnaire  or  in  advance 
before verification. 

(288)  This  had  to  be  rejected.  In  this  respect  it  is  noted  that  as  it  has  been  clearly 
demonstrated under the Subsidisation section above that the use of facts available was 
the  only  available  option  for  the  Commission  as  investigating  authority  in  order  to 
arrive at a representative finding. With respect to the type of information requested it 
is recalled that the Commission requested information that existed (e.g. information on 
plans, role of the banks, evaluation of credit risk when granting loans to cooperating 
exporting  producers,  pricing  of  LUR  or  legal  documents  referring  to  the  various 
investigated  schemes)  and  offered  the  possibility  to  the  GOC  to  provide  such 
information on numerous occasions following the initiation of the proceeding. 

(289)  Further to the above it should also be highlighted that the Commission as investigating 
authority had to investigate allegations made in the complaint and for which sufficient 
evidence had been provided to initiate an investigation (e.g. use of five-year plans and 
industrial  policies  for  preferential  lending  to  the  coated  paper  industry,  role  of  the 
banks  as  public  bodies,  existence  of  direct/indirect  tax  and  grant  programmes)  and 
thus the GOC as interested party was requested to provide all the information deemed 
necessary.  However,  the  GOC  took  a  different  approach  that  was  tantamount  to 
substituting  themselves  for  the  investigating  authority.  Indeed,  the  GOC  wanted  to 
judge for itself what they considered relevant and limit their submissions to documents 
that they considered relevant without allowing the investigating authority to examine 
these matters. This is perfectly illustrated by the GOC's approach to state-owned banks 
(see  recital  (282)  above).  The  GOC  claimed  that  such  banks  were  "third  parties": 
however,  the  complainant  had  provided  sufficient  evidence  that  they  are  "public 
bodies" and the Commission was therefore entitled to require the GOC to provide the 
requested  information  on their activities. In response, the GOC  took it upon  itself to 
decide  that  these  banks  were  not  public  bodies  and  to  refuse  to  provide  any 
information on them. However, this decision belongs to the investigating authority i.e. 
the  Commission  and  not  to  the  GOC.  Such  behaviour  is  clearly  not  in  line  with  the 
abovementioned WTO case law stating that interested parties must act to the "best of 
their  abilities".  It  is  hard  to  see  how  it  fits  with  the  Appellate  Body's  conclusion  in 
United  States  –  Anti-Dumping  Measures  on  Certain  Hot-Rolled  Steel  Products  from 
Japan  that  "…cooperation  is  a  process, involving  joint  effort,  whereby  parties  work 
together  towards  a  common  goal"12.  It  should  also  be  noted  that  the  Commission 
provided  ample  time  to  any  interested  party  to  submit  requested  information  and 
conducted  the  investigation  in  line  with  the  provisions  of  Annex  VI  of  the  SCM 
Agreement  setting  out  the  rules  for  on-spot  verifications  which  inter  alia  allow 
requests made on the spot for further details in light of the information obtained. 

11 

12 

United  States  –  Anti-Dumping  Measures  on  Certain  Hot-Rolled  Steel  Products  from  Japan,  (DS184) 
Appellate Body Report , para. 100 
United  States  –  Anti-Dumping  Measures  on  Certain  Hot-Rolled  Steel  Products  from  Japan,  (DS184) 
Appellate Body Report , para. 99. 

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(290)  The  GOC  argued  that  the  requested  Plans  are  voluminous  as  they  contain  282,000 
pages and thus it is an unreasonable extra burden to translate them. It also claimed that 
it  is  not  aware  of  Plans  appearing  in  independent  translations  and  that  it  did  not 
provide the National Five Year Plans in the U.S. proceedings. 

(291)  This  had  to  be  rejected.  The  plans  mentioned  in  recital  (65)  above  that  the  GOC 
provided in Chinese amounted to less than 300 pages. The claim of 282,000 pages is 
not  confirmed  by  what  the  GOC  submitted  on  record.  The  claim  is  nevertheless 
worrying because it may point to an even much more detailed government intervention 
than found in the current investigation and in the parallel anti-dumping investigation. 
With  respect  to  plans  appearing  in  independent  translations  it  is  noted  that  the 
Commission  received  such  documentation  from  other  interested  parties  and  to  the 
extent that such translated plans were received they were used for the purposes of this 
investigation. It should finally be clarified that the Commission did not wish to allege 
that  the  GOC  had  submitted  plans  to  the  U.S.  proceedings.  Recital  (66)  above  only 
mentions that it appears that translated information exists in this respect. 

4.3.5.  Allegations with respect to use of information not ideal in all respects 

(292)  The  GOC  argued  that  the  Commission,  before  applying  best  information  available, 
must  conduct  an  analysis  as  required  by  Article  28(3)  of  the  basic  Regulation  and 
conclude whether the specific conditions set thereon are fulfilled. 

(293)  In this respect it is noted that the Commission resorted to the use of facts available in 
line  with  the  provisions  of  Article  28  of  the  basic  Regulation  because  the  specific 
conditions set out under Article 28(3) were not fulfilled. As it is explained above the 
GOC  either  provided  information  that  was  deficient  or  in  many  instances  it  did  not 
even provide requested information. It is recalled that information on plans was either 
not  provided  at  all  or  partially  provided,  information  on  the  role  of  the  banks  was 
incomplete or non-conclusive, evaluation of credit risk by banks when granting loans 
to  cooperating  exporting  producers  was  not  provided,  pricing  of  LUR  was  not 
provided  and  a  number  of  legal  documents  referring  to  certain  tax  and  grant 
programmes  were  also  not  provided.  Account  taken  of  the  deficiencies  or  the  non-
existence  of  the  information  the  Commission  was  not  in  a  position  to  verify  certain 
information submitted. Given the above, the fact that in these circumstances the GOC 
could not be considered as acting to the best of its abilities and the undue difficulties in 
arriving at a reasonably accurate finding, the Commission was forced to resort to the 
application of facts available. 

(294)  The  GOC  also  argued  that  the  Commission  should  have  used  as  best  information 

available the information already provided by the GOC. 

(295)  In this respect it is noted that the Commission used the totality of information provided 
by interested parties (including whatever information was submitted by the GOC) and 
found from publicly available sources in order to arrive at a representative finding. 

(296)  With  respect  to  loans  it  was  argued  that  in  the  absence  of  information  from  specific 
banks  in  order  to  evaluate  credit  risk  when  providing  loans,  the  Commission  should 
have  resorted  to  the  explanations  provided  by  PBOC  and  the  CBRC  as  well  as  the 
Annual Reports of the Commercial Banks. 

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(297)  This  had  to  be  rejected.  In  this  respect  it  is  noted  that  banks,  although  explicitly 
requested  to  do  so,  did  not  provide  the  necessary  data.  The  information  provided  by 
PBOC and CBRC was only of a very general nature and was in no way directly linked 
to the loans provided to the co-operating exporting producers. The GOC placed on file 
a  number  of  Annual  Reports  of  Commercial  Banks  (some  of  which  where  only  in 
Chinese)  and  claimed  that  Commercial  Banks  make  their  own  decisions  regarding 
their business operations in accordance with law without any interference from unit or 
individual. However, these are simple statements that do not allow to verify whether 
and how the banks evaluated the credit risk when providing loans to the co-operating 
exporting  producers  and  must  be  set  against  specific  instances  encountered  in  the 
investigations where firms clearly obtained loans with no apparent assessment of their 
credit risk. 

(298)  With  respect  to  LUR  it  was  argued  that  the  Commission  should  have  used  the 
information  submitted  by  the  GOC  which,  according  to  the  GOC,  demonstrates  the 
existence  of  a  functioning  market.  It  was  asserted  that  information  required  by  the 
Commission  on  minimum  prices  of  land  use  rights  was  massive  and  it  was  not 
requested in the questionnaire or in advance before verification. 

(299)  This had to be rejected. In this respect it is recalled that without having information on 
pricing  on  LUR  it  is  not  possible  to  arrive  at  any  conclusion  with  respect  to  the 
existence  of  a  functioning  land  market  in  China  that  reflects  supply  and  demand 
forces.  It  is  also  noted  that  the  Commission  has  offered  ample  time  to  the  GOC  to 
provide such information for the areas where the co-operating exporting producers are 
established  but  the  GOC  failed  to  submit  even  a  single  figure  in  this  respect.  In  any 
event the Commission followed the provisions of Annex VI of the ASCM setting out 
the rules for on-spot verifications which inter alia allow requests made on the spot for 
further details in light of the information obtained. 

4.3.6.  Allegations with respect to the definition of public bodies 

(300)  The  GOC  argued  that  Government  ownership  is  not  a  reasonable  basis  for  finding  a 
bank or a utility to be a public body and for such an analysis the Commission should 
use the EU State aid criteria. The GOC also requested that on the basis of the findings 
of  the  WTO  Appellate  Body  on  the  US  –  PRC  dispute  DS379  with  respect  to  the 
definition of public body the current proceeding should be terminated.  

(301)  This had to be rejected. In this respect it is noted that the Commission has explained 
under recital (90) above the definition of a public body. This definition is in line with 
the  relevant  WTO  case  law  on  anti-subsidy  proceedings  including  the  aforesaid 
Appellate  Body  report.  Thus,  there  is  no  need  to  depart  from  what  is  generally 
accepted and use another benchmark (i.e. the EU State aid rules) that applies to a very 
different branch of the law. Note that State aid law operates in a completely different 
context, i.e. not in order to regulate international trade in goods but as a complement to 
the common market. Finally there is no legal or factual basis to confirm the claim that 
the current proceeding should be terminated.  

Specific Schemes 

4.3.7.  Preferential Lending to the coated paper industry 

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(302)  The GOC submitted with respect to preferential lending to the coated paper industry 
that the Commission failed to provide sufficient evidence of specific subsidization as 
required  by  Article  2(1)(a)  of  ASCM  and  Article  4(2)(a)  of  the  basic  Regulation.  It 
was submitted that the Commission analysis failed to fulfil its burden to establish de 
jure specificity of the alleged subsidy. 

(303)  Two cooperating exporting producers also claimed that the loans granted Chinese state 

owned banks are not specific. 

(304)  This had to be rejected. In this respect it is recalled that specificity was established on 
the totality of information on file, including the information provided by the GOC, as 
listed  under  recital  (92)  above.  This  information  confirms  the  existence  of  de  jure 
specificity in line with the provisions of Article 2(1)(a) of ASCM and Article 4(2)(a) 
of the basic Regulation. 

(305)  The  GOC  also  argued  that  the  Commission  failed  to  provide  positive  evidence  of 
subsidisation in line with the provisions of Article 2(4) of the ASCM and Article 4(5) 
of  the  basic  Regulation  since  the  evidence  used  by  the  Commission  cannot  be 
considered as positive evidence as it is not of an affirmative, objective and verifiable 
character which is credible. 

(306)  This had to be rejected. In this respect it is noted that the facts described under recital 
(92) above demonstrate positive evidence of specificity (i.e. specific subsidies granted 
through  a  sectoral  industrial  plan,  the  papermaking  industry  considered  as  an 
encouraged industry, the role of commercial banks and of the Chinese state planning 
system as well as the high credit rating of companies because they qualify for specific 
policy  plans).  This  information  is  affirmative  since  it  is  clear,  objective  and 
convincing. It is derived from various sources and was provided by interested parties 
or found in the public domain. 

(307)  With  respect  to  the  2007  Papermaking  Plan  it  was  argued  that  it  does  not  provide 
specific subsidies or preferential treatment to the papermaking industry. According to 
the GOC the fact that this plan states that financial institutions shall not provide loans 
for any project which does not comply with its regulation is only a provision aimed to 
suspend projects which caused serious pollution. 

(308)  This  had  to  be  rejected.  In  this  respect  it  is  noted  that  the  wording  used  in  the  2007 
Papermaking Plan, as explained in detail in recital (77) above, leaves no doubt on the 
existence of specific subsidies and preferential treatment to the papermaking industry. 
The  claim  that  the  detailed  rules  referring  to  financial  institutions  exist  only  for 
environmental reasons is not borne out by the actual wording of the relevant texts. 

(309)  With  respect  to  the  policy  plans  as  well  as  accompanying  documents  such  as  the 
Integration Project and the Directory Catalogue, GOC repeated again that they are not 
as  such  legally  binding  in  line  with  the  Chinese  Law  on  Legislation.  They  rather 
needed a legally binding implementing act. It was also argued that plans are too vague 
to  be  considered  for  the  determination  of  specificity  and  the  mere  fact  that  the 
papermaking  industry  is  an  encouraged  industry  does  not  prove  that  GOC  explicitly 
limits access to a subsidy to certain enterprises. 

(310)  These  claims  had  to  be  rejected.  In  this  respect  it  is  recalled  that  the  investigation 
established that plans are legally binding for the reasons detailed in recital (78) above. 

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The  investigation  also  established  that  the  status  of  "encouraged  industry"  for  the 
papermaking industry entails specific benefits to the relevant enterprises. 

(311)  With respect to the attribution of loans it was argued that the analysis of the Annual 
Reports of Chinese banks that provided loans to cooperating exporting producers does 
not reveal that loans were granted because of policy plans. 

(312)  This had to be rejected. As noted above the Annual Reports of banks do not provide 
specific  information  on  loan  attribution  to  cooperating  exporting  producers.  Indeed 
Annual Reports are general documents that do not provide any information on the way 
Chinese  banks  attributed  loans  to  the  co-operating  exporting  producers  and  the  way 
the  banks  evaluated  credit  risk  for  the  co-operating  exporting  producers.  This 
information was repeatedly requested from interested parties and is considered crucial 
inter alia account taken of the finding of the IMF 2006 report which suggested that the 
bank liberalisation in China is incomplete and credit risk is not properly reflected13 , 
the  IMF  2009  report  which  highlighted  the  lack  of  interest  rate  liberalization  in 
China14,  the  IMF  2010  Country  Report  which  stated  that  cost  of  capital  in  China  is 
relatively low, credit allocation is sometimes determined by non-price means and high 
corporate saving is partly linked to low cost of various factor inputs (including capital 
and  land)15,  the  OECD  2010  Economic  Survey  of  China16  and  OECD  Economic 
Department  Working  Paper  No.  747  on  China's  Financial  Sector  Reforms17  which 
stated that ownership of financial institutions remains dominated by the State raising 
issues  as  the  extent  which  banks'  lending  decisions  are  based  purely  on  commercial 
considerations while banks' traditional role appears to be that of government agencies 
with ties to the government. 

(313)  With  respect  to  the  aforementioned  credit  rating  note  the  GOC  argued  that  a  single 
credit rating note cannot be regarded as positive evidence on specificity. According to 
the  GOC,  unless  most  or  even  all  of  the  loans  granted  to  the  cooperating  exporting 
producers  show  that  the  industrial  policy  enables  them  to  have  higher  credit  rating 
during the IP, the Commission cannot apply the conditions of one specific instance to 
all loan decisions. 

(314)  This  had  to  be  rejected.  In  this  respects  it  is  recalled  that  the  credit  rating  note 
mentioned  in  recital  (81)  above  links  directly  the  positive  future  prospects  of  a 
cooperating  exporting  producer  with  the  existence  of  the  papermaking  policy  plans 
and  the  fulfilment  of  their  objectives.  In  order  to  arrive  at  its  conclusions,  the 
Commission  placed considerable  emphasis on this document in conjunction with the 
Papermaking plan because other information requested in this context, such as the risk 
assessment for loans, was not provided despite repeated requests, as described above. 

13 

14 

15 

16 
17 

IMF  Working  Paper,  "Progress  in  China's  Banking  Sector  Reform:  Has  Bank  Behaviour  Changed?", 
WP/06/71, March 2006, (see pages 3-4, 13, 18-20).  
IMF Working Paper, "Interest Rate Liberalization in China", WP/09/171, August 2009, (see pages 3-4, 
21-23). 
IMF Country Report, PRC: 2010 Article IV Consultation, No 10/238, July 2010, (see pages 22, 24 and 
28-29). 
OECD 2010 Economic Survey of China, February 2010, (see Chapter 3, pages 71, 73-81, 97).  
OECD  China's  Financial  Sector  Reforms,  Economic  Departmert  Working  Paper  No.  747,  ECO/WKP 
(2010) 3, 1 February 2010, (see pages 2, 8-15, 36).  

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(315)  The GOC also argued that the Commission failed to take into account when analyzing 
the 
allegations  on  preferential 
Administration of Special Loans YINFA [1999] No. 228. According to the GOC the 
aforesaid  circular  confirms  that  preferential  lending  or  special  loans  have  been 
eliminated. 

the  PBOC  Circular  on 

Improving 

lending 

(316)  This  had  to  be  rejected.  In  this  respect  it  is  recalled  that  as  explained  in  recital  (87) 
above the Commission found that more recent PBOC circulars than the 1999 circular 
exist that clearly mention the existence of preferential loans and other loans specified 
by State Council. Thus, the arguments of GOC on the abolition of preferential lending 
and  special  loans  cannot  be  supported  by  the  actual  case  facts.  Notwithstanding  the 
above,  it  is  pertinent  to  note  that  the  1999  circular  states  that  wholly  State-owned 
banks  shall  actively  communicate  with  the  authorities  in  charge  of  the  relevant 
industries  with  a  view  to  gaining  their  understanding  and  support.  This  again  is  a 
statement  that  confirms  the  control  that  State  authorities  exercise  over  wholly  State-
owned banks. 

(317)  With respect to the evidence of specificity submitted by the complainant it was argued 
that  this  is  only  references  of  findings  of  the  various  U.S.  investigations  where 
specificity was established, inter alia, by reference to five-year plans. 

(318)  In this respect it is noted that the Commission used all the relevant information it had 
in its disposal in order to arrive at a representative finding. In this manner, the publicly 
available  information  stated  in  the  complaint,  even  if  referring  to  findings  of  other 
investigating authorities, was deemed to be relevant and its use was appropriate. 

(319)  With respect to Decision 40 and the Directory Catalogue it was argued that they do not 
explicitly define the coated fine paper industry as encouraged industry or encouraged 
projects. It was also argued that the term "encouraged projects" in China spans broad 
sectors of economy activity, covering various industries. 

(320)  These claims had to be rejected. In this respect it is recalled that Decision 40 and the 
Directory Catalogue define the papermaking industry, to which the coated fine paper 
industry  belongs,  as  an  encouraged  industry  or  encouraged  projects.  With  respect  to 
encouraged  projects  it  is  recalled  that  these  cover  only  certain  activities  within  26 
sectors  and  thus  this  categorisation,  covering  only  a  subset  of  enterprises  in  China, 
cannot  be  considered  as  of  a  general  nature  and  non-specific.  The  Commission 
considered  this  as  the  most  natural  interpretation  in  the  absence  of  any  explanation 
(and corroborating documents) as to how the GOC precisely applied the notion of the 
"papermaking  industry"  e.g.  for  the  purposes  of  Decision  40  and  the  Directory 
Catalogue. 

(321)  With respect to the Law on Commercial Banks, the GOC argued that Article 34 is of a 
general nature and that, in line with the provisions of Article 41 of the same law, there 
is  no  mandatory  obligation  for  commercial  banks  to  provide  loans  based  on  the 
industrial policies. 

(322)  These claims had to be rejected. In this respect it is noted that the wording of Article 
34 links directly commercial banks' loan business with the State's industrial policies. 
Thus, it cannot be considered of a general and non- compulsory nature. With respect to 
Article  41  of  the  aforesaid  law  it  is  noted  that  this  refers  to  the  prerogative  of  a 

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commercial bank to provide loans to parties but it does not refer to the conditions that 
banks will have to take into consideration when taking loan decisions. 

(323)  APP  claimed  it  has  provided  the  Commission  with  sufficient  information  and 
documents  showing  that  APP  was  rated  A-1  by  Moody's  in  2007  and  2008  and 
therefore  it  was  not  correct  that  the  Commission  disregarded  this  rating  and  applied 
Bloomberg's BB rating. 

(324)  The Commission closely analysed credit rating reports submitted by APP group. These 
credit rating reports are linking the promising future outlook of the paper industry to 
the promulgation of the Paper Industry Development Policy. Therefore information in 
these  documents  actually  confirms  the  Commission's  findings  that  the  exporter's 
current  financial  state  has  been  established  in  the  distorted  market  and  therefore  the 
creditworthiness of Chinese exporters could not be taken at its face value. This claim 
had to be rejected. 

(325)  APP also claimed that the internal financial management reports mentioned under this 
point  in  APP's  comments  on  general  disclosure  are  "far  more  satisfactory  than  the 
facts currently relied on". 

(326)  This claim had to be rejected. The figures calculated in these reports result from the 
financial situation of the company achieved on the distorted market which is of course 
affected by the preferential lending as established by the Commission. It is therefore a 
circular  issue,  i.e.  the  company  receives  preferential  lending  which  has  a  positive 
impact on its financial indicators and subsequently these have positive impact on the 
conditions of future loans. 

(327)  APP  claimed  that  the  methodology  used  by  the  Commission  in  calculating 
benchmarks  for  loans  in  USD  and  EUR  is  wrong  and  claimed  that  the  Commission 
double  counted  the  spread  over  LIBOR  and  thereby  inflated  the  benchmark  interest 
rate. 

(328)  This claim has to be rejected. The Commission did not double count the spreads over 
the LIBOR. As explained in the definitive disclosure, in order to establish benchmarks 
for the USD and EUR loans with term exceeding 1 year the Commission added to the 
relevant 1 year LIBOR rate a spread between BB rated corporate bonds with maturity 
of 1 year and BB rated corporate bonds with maturity of n years, n being the number 
of  years  representing  the  term  for  which  the  "long-term  USD  LIBOR"  rate  was 
calculated  (i.e.  2,  3,…,  15  years).  It  should  be  stressed  that  the  spread  as  described 
above was added to "clean" 1 year LIBOR rates (i.e. not increased by x basis points as 
APP claimed). 

4.3.8.  Preferential  tax  policies  for  companies  that  are  recognized  as  high  and  new 

technology enterprises 

(329)  With  respect  to  this  scheme  the  GOC  submitted  that  the  Commission  failed  to 
established specificity on the basis of positive evidence. It was submitted that Article 
25  of  the  Enterprise  Income  Tax  Law  is  a  general  piece  of  legislation  that  applies 
across the entire Chinese economy and not only to coated fine paper producers. 

(330)  GOC also argued that the eligibility criteria for this scheme are objective and defined 
in  detail,  that  eligibility  is  automatic  and  thus  the  scheme  cannot  be  considered 

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specific  in  line  with  the  provisions  of  Article  2(1)  (b)  of  the  SCM  Agreement  and 
Article 4(2)(b) of the basic Regulation. 

(331)  These claims had to be rejected. Thus the findings of the Commission were established 
on  the  basis  of  positive  evidence.  In  this  respect  it  is  noted  that  Article  25  of  the 
Enterprise Income Tax Law limits the access to this scheme only to certain enterprises 
and industries that are classified as "encouraged" i.e. to a specific subset of enterprises 
in  China.  As  noted  above,  the  Commission  concluded  that  the  coated  paper  industry 
falls  under  this  category  and  therefore  benefits  under  this  programme  are  specific 
under  Article  4(2)(a)  of  the  basic  Regulation.  With  respect  to  eligibility  criteria  it  is 
noted  that  the  relevant  provisions  mention  inter  alia  the  obligation  that  products  are 
within the range described in the High and New Tech Fields under the Key Support of 
the  State  and  that  enterprises  have  been  incessantly  carrying  out  research  and 
development  activities  for  the  purpose  of  acquiring  new  knowledge  of  science  and 
technology,  innovatively  employing  new  knowledge  or  substantially  improving 
technologies or products. These conditions, taken as a whole, cannot be considered as 
objective eligibility criteria that lead to automatic granting of the subsidy according to 
the  provisions  of  Article  2(1)  (b)  of  the  SCM  Agreement  and  Article  4(2)(b)  of  the 
basic Regulation. 

(332)  APP wondered whether the amount of countervailable subsidies resulting from these 
schemes should not rather be calculated on the basis of the tax return and payment of 
the year 2008 instead of 2009 (IP). They claimed that these two schemes are related to 
income tax, which is usually fully paid and settled in the following calendar year to the 
taxation  period  in  China.  Therefore  the  income  tax  of  2009  or  any  preferential 
treatment granted thereto was only decided in 2010. 

(333)  This claim had to be rejected. The actual amounts of benefits received were confirmed 
and verified with the tax returns for the year 2009, therefore they are benefits relating 
to sales and income generated in 2009, i.e. the IP. 

4.3.9.  Preferential tax policies for Research and Development 

(334)  With  respect  to  this  scheme  the  GOC  submitted  that  the  Commission  failed  to 
established specificity on the basis of positive evidence. It was thus submitted that the 
eligibility criteria for this scheme are objective and defined in detail and eligibility is 
automatic  and  thus  the  scheme  cannot  be  considered  specific  in  line  with  the 
provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic 
Regulation. 

(335)  This had to be rejected. In this respect it is recalled that the investigation established 
the existence of preferential tax treatment for certain companies that are recognized as 
carrying  out  certain  type  of  R&D  projects  i.e.  to  a  specific  subset  of  enterprises  in 
China.  As  noted  above  these  are  companies  falling  under  the  New  and  High  Tech 
Sectors Receiving Primary Support from the State and projects listed in the Guide to 
key Fields of High-Tech Industrialization, such as those belonging to the coated paper 
industry,  and  therefore  benefits  under  this  programme  are  specific  under  Article 
4(2)(a) of the basic Regulation. With respect to eligibility criteria it is noted that the 
relevant  provisions  submitted  by  the  cooperating  exporting  producers  are  vague  and 
non transparent and thus cannot be considered as objective eligibility criteria that lead 
to  automatic  granting  of  the  subsidy.  Thus  the  findings  of  the  Commission  were 

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established on positive evidence in line with the provisions of Article 2(1) (b) of the 
SCM Agreement and Article 4(2)(b) of the basic Regulation. 

4.3.10.  Dividend exemption between qualified resident enterprises 

(336)  With  respect  to  this  scheme  the  GOC  submitted  that  the  Commission  failed  to 
established  specificity  on  the  basis  of  positive  evidence.  It  was  argued  that  dividend 
exemption is not a subsidy under the SCM Agreement as dividend exemption is not a 
subsidy  by  nature  and  the  relevant  Chinese  provisions  aim  to  clarify  tax  basis  so  to 
avoid double taxation. 

(337)  APP claimed that this scheme is not specific it is generally and uniformly applied all 
over China on the basis of objective criteria, i.e. the source of dividend income. It also 
claimed that this scheme does not constitute a subsidy. 

(338)  These claims had to be rejected. In this respect it is noted that income from dividends 
from  resident  enterprises  is  exempted  from  the  corporate  income  tax  obligations  of 
resident  enterprises.  First  of  all  it  is  recalled  that  the  investigation  established  the 
existence  of  preferential  tax  treatment  for  certain  companies,  i.e.  resident  enterprises 
receiving  dividend  from  other  resident  enterprises  and  in  addition  to  important 
industries and projects supported or encouraged by the State such as the coated paper 
industry i.e. to a specific subset of enterprises in China. Therefore benefits under this 
programme are specific under Article 4(2)(a) of the basic Regulation. Secondly, this is 
a tax incentive that leads to government revenue forgone in line with the definition of 
a subsidy as set out in Article 1(1)(a) of the SCM Agreement and Article 3(a) of the 
basic Regulation. As to the claim that this incentive aims at avoiding double taxation it 
is noted that although the SCM Agreement has recognized that WTO Members are not 
limited from taking measures to avoid double taxation (see SCM Agreement, Annex I, 
footnote 59), this provision is an "affirmative defence" and no concrete evidence was 
provided  to  corroborate  the  claim  that  e.g.  dividends  from  resident  and  non-resident 
enterprises  are  treated  differently  because  of  legal  obligations  that  the  PRC  has 
undertaken under relevant bilateral double taxation agreements with third countries. 

(339)  It was also submitted that the scheme is totally irrelevant to enterprises and industries 
classified as encouraged but by definition applies to all resident companies. The GOC 
also  submitted  that  Article  2(2)  of  the  SCM  Agreement  provides  that  setting  of 
generally  applicable  tax  rates  shall  not  be  deemed  a  specific  subsidy.  It  was  thus 
submitted that the eligibility criteria for this scheme are objective and defined in detail 
and eligibility is automatic thus the scheme cannot be considered specific in line with 
the  provisions  of  Article  2(1)  (b)  of  the  SCM  Agreement  and  Article  4(2)(b)  of  the 
basic Regulation. 

(340)  These claims had to be rejected. In this respect it is recalled that the legal provisions 
setting  out  this  scheme  fall  under  Chapter  4  "Preferential  Tax  Treatments"  of  the 
Enterprise  Income  Tax  Law  that  foresees  specific  tax  incentives  for  important 
industries  and  projects  supported  or  encouraged  by  the  State.  As  explained  above 
under  these  conditions  benefits  under  this  programme  are  specific  under  Article 
4(2)(a) of the basic Regulation. The investigation did not find objective criteria to limit 
eligibility and  conclusive evidence to conclude that the eligibility is automatic. With 
respect to the claim on the provisions of Article 2(2) of the SCM Agreement it is noted 
that the present scheme does not refer to the setting of a generally applicable tax rate 

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but to the existence of an exemption from tax of a certain type of revenue stemming 
from a certain type of companies. 

4.3.11.  VAT and Tariff exemption on imported equipment 

(341)  With  respect  to  this  scheme  the  GOC  submitted  that  the  Commission  failed  to 
establish specificity on the basis of positive evidence. It was argued that the specific 
business  categories  defined  exhaustively  by  law  are  not  specific  because  they  span 
broad sectors of economic activity covering various industries. It was thus submitted 
that  the  eligibility  criteria  for  this  scheme  are  objective  and  defined  in  detail  and 
eligibility is automatic thus the scheme cannot be considered specific in line with the 
provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic 
Regulation. 

(342)  These claims had to be rejected. In this respect it is recalled that this scheme is only 
available  to  companies  that  invest  under  specific  business  categories  defined 
exhaustively  by  law  (i.e.  catalogue  for  guidance  of  industries  for  foreign  investment 
and  catalogue  of  key  industries,  products  and  technologies  which  the  state  currently 
encourages  development).  The  fact  that  eligibility  is  restricted  to  specific  business 
categories  confirms  that  the  scheme  is  not  generally  available  to  broad  economic 
sectors and therefore benefits under this programme are specific under Article 4(2)(a) 
of the basic Regulation. Furthermore the investigation did not find objective criteria to 
limit  eligibility  and  conclusive  evidence  to  conclude  that  the  eligibility  is  automatic. 
Thus  the  findings  of  the  Commission  were  established  on  positive  evidence  in  line 
with the provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of 
the basic Regulation. 

(343)  APP claimed that the depreciation period used by the Commission in the calculation of 
benefit  resulting  from  this  scheme  attributable  to  the  IP  is  not  correct  and  the 
Commission  should  have  used  the  depreciation  period  as  reported  by  companies  of 
APP  Group.  According  to  APP  this  methodology  is  in  breach  of  Article  7(3)  of  the 
basic Regulation. 

(344)  This claim had to be rejected. The depreciation period reported by APP is determined 
for the accounting and financial purposes. Other cooperating exporting producers and 
the Union Industry reported different depreciation periods. Therefore the Commission, 
in line with its usual practice, and with Article 7(3) of the basic Regulation, used the 
period  of  15  years  as  the  useful  life  of  the  machinery  for  the  purpose  of  this 
calculation,  which  is  considered  as  the  "normal"  depreciation  period  by  the  industry 
concerned. 

4.3.12.  VAT rebates on domestically produced equipment 

(345)  With  respect  to  this  scheme  the  GOC  submitted  that  the  Commission  failed  to 
establish  specificity  on  the  basis  of  positive  evidence.  It  was  argued  that  the  GOC 
explained the eligibility criteria of this scheme and as a result there is no basis for the 
application of facts available. 

(346)  These  claims  had  to  be  rejected.  In  this  respect  it  is  recalled  that  this  scheme  is 
reserved to FIEs that purchase certain type of domestically-manufactured equipment, 
i.e.  to  a  specific  subset  of  enterprises  in  China  and  therefore  benefits  under  this 
programme are specific under Article 4(2)(a) of the basic Regulation. Furthermore the 

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investigation did not find objective criteria to limit eligibility and conclusive evidence 
to conclude that the eligibility is automatic. Thus the findings of the Commission were 
established,  by  using  the  submitted  information  and  the  provisions  of  Article  28  of 
basic Regulation, on positive evidence in line with the provisions of Article 2(1) (b) of 
the SCM Agreement and Article 4(2)(b) of the basic Regulation. 

4.3.13.  City  Maintenance  and  Construction  Taxes  and  Education  Surcharges  for  the 

FIEs 

(347)  Both APP and Chenming claimed that since according to the Notice on Unifying the 
Urban  Maintenance  Construction  Tax  and  Education  Surcharges  for  Domestic  and 
Foreign-invested Enterprises and Individuals issued by the State Council of China on 
18 October 2010 and applicable from 1 December 2010 the above mentioned tax and 
surcharge  are  now  universally  applicable  to  all  companies  and  individuals  in  China, 
without  any  exception.  According  to  these  claims  this  subsidy  scheme  is  not  longer 
countervailable. 

(348)  The arguments provided were analyzed in line with the submitted documentation and 
evidence  provided  by  parties.  The  GOC  was  requested  to  confirm  the  aforesaid 
information.  The  GOC,  an  interested  party  in  this  proceeding  and  the  granting 
authority for this programme, notify the European Commission that this scheme was 
withdrawn  and  was  not  replaced  by  any  other  incentive  referring  to  the  same  tax 
obligation. On the basis of information submitted by cooperating exporting producers 
it is concluded that both groups have demonstrated that they are no longer benefiting 
from  any  subsidy  derived  from  this  scheme.  In  this  respect  it  is  recalled  that  in  line 
with Article 15 of the basic Regulation no measures shall be imposed if the subsidy is 
withdrawn or it has been demonstrated that the subsidy no longer confers any benefit 
on  the  exporters  involved.  Account  taken  of  the  above  and  information  on  file  it  is 
concluded  that  the  subsidy  under  this  scheme  no  longer  confers  any  benefit  to  the 
exporters  involved.  Thus  the  findings  presented  under  recitals  (160)  to  (169)  above 
were amended accordingly.  

4.3.14.  Famous  Brands  and  Special  Funds  for  Encouraging  Foreign  Investment 

Projects 

(349)  With  respect  to  these  schemes  the  GOC  submitted  that  the  Commission  failed  to 
establish  specificity  on  the  basis  of  positive  evidence.  It  was  argued  that  the  GOC 
provided sufficient information with respect to these schemes and that there is no law 
or regulation concerning these schemes. 

(350)  These claims had to be rejected. In this respect it is recalled that these schemes were 
found specific and countervailable on the basis of information submitted by the GOC 
and the cooperating exporting producers notwithstanding the fact that no actual legal 
provisions  were  submitted.  The  fact  that,  as  the  GOC  argued,  there  are  no  legal 
provisions  for  these  schemes  confirms  beyond  any  doubt  that  objective  criteria  or 
conditions  set  by  the  law  governing  these  schemes  simply  do  not  exist.  Thus  the 
findings of the Commission were established, by using the submitted information and 
the provisions of Article 28 of basic Regulation, on positive evidence in line with the 
provisions of Article 2(1) (b) of the SCM Agreement and Article 4(2)(b) of the basic 
Regulation.  In  the  absence  of  any  criteria  or  conditions,  the  government  appears  to 

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have  wide  discretion  and  access  to  the  subsidy is  considered  to  be  limited  to  certain 
enterprises. 

4.3.15.  Subsidy of High-Tech Industrial Development Fund and Award received from 

Suzhou Industrial Park for maintaining growth 

(351)  With  respect  to  these  schemes  the  GOC  argued  that  the  Commission  misinterpreted 
Article  2(2)  of  the  SCM  Agreement  since  Industrial  Parks  are  not  designated 
geographical regions. 

(352)  This had to be rejected. In this respect it is recalled that the Suzhou Industrial Park is 
clearly an economic and administrative subdivision within the jurisdiction of the PRC 
and thus a designated geographical region in line with the provisions of Article 2(2) of 
the SCM Agreement. Notwithstanding the above, it should also be noted that even if 
the  above  were  not  confirmed  by  the  actual  facts  of  the  investigation,  an  industrial 
park by its very definition can only host a sub-set of enterprises within the territory of 
a  country  or  the  granting  authority  and  thus  in  line  with  the  provisions  of  Article 
2(1)(a) of the SCM Agreement the subsidies provided by the industrial park would be 
considered as specific. 

4.3.16.  Provisions of land use rights 

(353)  With respect to LUR the GOC argued that the use of an external benchmark is illegal 
by making reference to Article 14(d) of the SCM Agreement and the Appellate Body 
in US – Softwood Lumber IV. It was submitted that EU and WTO law restricts the use 
of  external  benchmarks  to  very  exceptional  circumstances  i.e.  only  when  private 
market prices are distorted because of the government's predominant role as a provider 
of  the  good  or  service  in  question.  According  to  the  GOC  the  Commission  has  not 
proven  that  private  market  prices  are  distorted  by  the  GOC's  predominant  role  as  a 
provider. 

(354)  These claims had to be rejected. First of all it is noted that WTO rules, as confirmed 
by the Appellate Body in US – Softwood Lumber IV (DS257) and the Panel in US – 
China countervailing duties (DS379) do not prohibit the use of external benchmarks. 
Secondly,  the  Commission  approach  took  fully  into  account  the  special  conditions 
requested by the WTO case law in order to resort to an external benchmark. Indeed, as 
it  has  been  demonstrated  under  recitals  (248)  to  (259)  above,  land  is  government-
owned  in  China  and  provided  by  the  government  on  a  lease  basis.  Furthermore,  the 
Chinese authorities control the supply and allocation of land to enterprises including in 
secondary markets and land assignment to enterprises is linked to a strict set of rules, 
while any type of change in land assignment, e.g. a transfer of a LUR contract from 
one enterprise to another enterprise, has to be approved by the State and recognized by 
a new LUR contract between the assignee with the relevant State authority. In view of 
the above, it is concluded that GOC has a predominant role in the distribution of LUR 
and that any Chinese "private" market prices (to the extent that they exist – none have 
been  provided  in  this  investigation)  are  bound  to  be  distorted  because  of  the  GOC's 
predominant  role  as  a  provider  and  its  monopoly  role  as  a  regulator  of  land 
transactions.  Consequently,  the  GOC's  financial  contribution  would  effectively 
determine the level of any private prices. 

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65 

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(355)  GOC also argued that by choosing Taiwan as an external benchmark the Commission 
failed to use an external benchmark which relates or refers to, or is connected with, the 
prevailing  market  conditions  in  China.  It  was  submitted  that  the  use  of  Taiwanese 
benchmark  to  offset  differences  in  comparative  advantages  between  countries  is 
expressly prohibited by WTO rules. 

(356)  These  claims  had  to  be  rejected.  The  Commission  considers  Taiwan18  as  an 
appropriate  external  benchmark  because  of the  totality  of  the  information  on  the  file 
i.e.  (i)  the  level  of  economic  development  and  economic  structure  prevailing  in 
Taiwan  and  the  relevant  Chinese  provinces  where  the  co-operating  exporting 
producers are established, (ii) the physical proximity of these two Chinese provinces 
with  Taiwan,  (iii)  the  high  degree  of  infrastructure  that  both  Taiwan  and  these  two 
Chinese provinces have, (iv) the strong economic ties and cross border trade between 
Taiwan  and  the  PRC,  (v)  the  similar  density  of  population  in  the  Chinese  provinces 
concerned and in Taiwan, (vi) the similarity between the type of land and transactions 
used  for  constructing  the  relevant  benchmark  in  Taiwan  with  those  in  the  PRC  and 
(vii) the common demographic, linguistic and cultural characteristics in both Taiwan 
and the PRC. One should also add that Jiangsu and Shandong provinces are considered 
top  manufacturing  provinces  in  the  PRC19.  Although  the  GDP  per  capita  of  Taiwan 
and  the  two  Chinese  provinces  is  not  identical,  the  GDP  of  these  Chinese  provinces 
has  grown  rapidly  in  recent  years  i.e.  they  are  catching  up  with  Taiwan.  In  addition 
recent  data  suggest  that  the  both  PRC  and  Taiwan  have  similar  real  GDP  growth 
rates20.  Having  said  that,  it  is  important  to  note  that  the  exact  comparison  made 
between  the  GDP  of  a  non-market  economy  (the  PRC)  and  the  GDP  of  a  well 
established market economy (Taiwan) is not a decisive fact because it is normal for a 
non-market economy to lag behind a functioning market economy in terms of GDP. In 
addition, many other factors e.g. planning rules, environmental policy may affect the 
supply and demand of industrial land. The real issue is what would be the "prevailing 
market  conditions"  with  regard  to  LUR  in  the  PRC  if  it  was  a  functioning  market 
economy  and  on  the  basis  of  all  evidence  they  would  be  very  similar  to  those  of 
Taiwan. 

(357)  Based  on  the  totality  of  the  above  information  it  is  considered  that  the  benchmark 
chosen  is  in  line  with  the  requirements  of  the  Appellate  Body  in  US  –  Softwood 
that  "the  benchmark  chosen  must, 
Lumber  IV  (Para.103)  which  concluded 
nevertheless, relate or refer to, or be connected with, the prevailing market conditions 
in 
that  country,  and  must  reflect  price,  quality,  availability,  marketability, 
transportation and other conditions of purchase or sale, as required by Article 14(d)". 
Indeed, the totality of conditions in Taiwan relate to the prevailing market conditions 
in the two Chinese provinces. Land is available in similarly dense areas, the physical 
proximity  of  the  areas  ensures  that  quality  of  land  is  similar  while  the  fact  that  both 
Taiwan  and  the  two  Chinese  provinces  share  the  same  language  and  culture,  have 

18 
19 

20 

EN 

General information concerning Taiwan retrieved from http://en.wikipedia.org/wiki/Taiwan 
Information 
retrieved 
http://en.wikipedia.org/wiki/Shandong_Province 
Information  on  statistical  data  retrieved  from  representations  made  by  Chinese  cooperating  producers 
and from 
factbook/rankorder/2003rank.html?countryName=China&countryCode=ch&regionCode=eas&rank=6#
ch 

https://www.cia.gov/library/publications/the-world-

http://en.wikipedia.org/wiki/Jiangsu_Province 

from 

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export-  oriented  economies  and  important  manufacturing  sectors  confirm  that  price, 
marketability and other conditions of purchase or sale of land are closely connected. 

(358)  Cooperating  exporting  producers  claimed  that  the  information  available  to  the 
Commission was sufficient to conclude that there is a market for land in China. 

(359)  This claim had to be rejected. From the information made available to the Commission 
it was not possible to come to a conclusion that there is a functioning land market in 
China.  From  the  legislation  made  available  to  the  Commission  by  the  GOC  it  is 
obvious that all of the land in PRC is government-owned and it is provided only on the 
lease basis. The Chinese authorities are in full control of the supply and allocation of 
land to enterprises, including transactions in the secondary market. No evidence was 
submitted  that  there  is  any  market  mechanism  in  the  distribution  of  land  use  rights, 
despite the Commission's requests to this effect. The situation is explained in detail in 
recital (354) addressing similar claims of the GOC. 

(360)  APP submitted that today's Chinese LUR prices should be used as benchmark or in the 
alternative  today's  land  prices  in  the  Indian  state  of  Maharashtra.  Chenming  also 
suggested Indian state of Maharashtra for benchmark. 

(361)  As already described in the recital (359) above, there is no functioning land market in 
China.  Therefore  it  is  not  appropriate  to  use  today's  Chinese  LUR  prices  as  a 
benchmark.  Exporting  producers  based  its  claim  that  the  land  prices  in  Maharashtra 
could be used as a benchmark on the comparison of the Indian state of Maharashtra in 
terms of GDP per capita and the population density at the time of purchase of LURs. 
As explained above the Commission is of the opinion that the GDP per capita and the 
population density cannot be the only decisive factors when choosing a country/region 
for  the  purpose  of  application  of  external  benchmark.  In  any  event  the  methodology 
proposed  by  co-operating  exporting  producers  is  not  consistent  with  their  claims.  In 
the IP, Mumbai, the capital of Maharashtra and by far the most developed area of the 
state  had  per  capita  income  is  $2,675  (Rs1.28  lakh)  which  is  in  fact  lower  than  the 
Chinese  national  average  of  $3,52921  let  alone  the  GDP  par  capita  in  the  highly 
developed regions of Shandong and Jiangsu ($5,255 and $6,550 respectively). As far 
as population density is concerned, this is also not by itself a decisive factor, but, for 
the record, the population density is 314/km² in Maharashtra, 736/ km² in Jiangsu and 
600/km² in Shandong, i.e. not in the same level. Furthermore, other factors, such as the 
lack of physical proximity and common characteristics between India and China lead 
to the conclusion that the Maharashtra benchmark does not relate or refer to, and is not 
connected with, the prevailing market conditions in China. For the reasons explained 
in recital (356), Commission maintains the opinion that the prices of land in Taiwan 
are far more suitable external benchmark. 

(362)  APP  claimed  that  some  of  the  LUR  taken  in  account  by  the  Commission  in  the 
calculation of benefit resulting from this scheme are no longer held by APP. APP also 
argued  that  by  using  information  from  the  website  of  the  Industrial  Bureau  of  the 
Ministry  of  Economics  Affairs  of  Taiwan  it  has  arrived  in  a  different  average  land 
price  per  square  meter  and  the  Commission  did  not  make  any  effort  in  order  to  find 
representative offers for the industrial land.  

21 

http://www.livemint.com/2009/08/03224002/India-needs-cities-network-for.html,  Livemint.com  is  an 
online partner server of Wall Street Journal 

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(363)  With respect to the total surface of the land used by APP, the Commission took APP's 
claim  into  account  and  on  the  basis  of  information  and  evidence  presented  in  the 
comments  on  definitive  disclosure  it  was  accepted.  The  corrected  information  was 
reflected in subsidy calculation. With respect to information derived from Taiwan it is 
noted that this claim had to be rejected. Although this party did not propose to use this 
price  for  the  calculation  of  an  appropriate  benchmark  the  following  should  be 
highlighted.  The  Commission  used  the  information  that  was  available  on  file  with 
respect  to  land  prices  in  Taiwan  and  the  methodology  on  how  it  arrived  to  the 
benchmark price was disclosed to parties and explained in the Note for the file of 11 
February 2011. On the other hand the data presented by APP refer to February 2011 
only, i.e. a different time period as used in the Commission's calculation and it appears 
that  it  refers  only  to  a  list  of  examples  of  some  data  derived  from  some  areas  in 
Taiwan.  Furthermore,  the  Commission  can  not  address  the  calculation  of  the 
benchmark performed by APP, as APP did not provide any details on the methodology 
it used for this calculation and did not substantiate why its calculation represents more 
accurately average land prices in Taiwan.  

(364)  Cooperating exporting producers claimed that any subsidy in the form of the provision 

of land-use right for less than adequate remuneration would not be specific. 

(365)  This  argument  had  to  be  rejected.  As  already  explained  in  the  definitive  disclosure 
document, the GOC provided insufficient information in relation to this scheme which 
had to be complemented with other information and facts in the record. Consequently, 
the findings were made on this basis and are explained and analysed in recitals (253)-
(258). 

4.3.17.  Other 

(366)  APP claimed that the interest rate used by the Commission in order to transform the 
face  value  of  the  subsidy  into  the  value  prevailing  during  the  investigation  period  is 
not correct. 

(367)  The  Commission  took  APP's  claim  in  account  and  on  the  basis  of  information  and 
evidence  presented  in  the  comments  on  definitive  disclosure  it  was  accepted.  The 
interest  rate  suggested  by  APP  was  used  in  the  subsidy  calculations.  This  change  is 
already reflected in the recitals dealing with the calculation of subsidy margins and in 
the resulting subsidy margins for the individual schemes concerned. 

(368)  APP  claimed  that  the  subsidy  amounts  must  be  expressed  as  a  percentage  of  their 
reported  CIF  price  and  not  as  a  percentage  of  the  turnover  and  that  the  Commission 
should apply this methodology for the calculation of subsidy margins.  

(369)  The arguments provided were analyzed in line with the submitted documentation and 
evidence provided by the party. It is noted that, except for one of the subsidy schemes 
found to be countervailable, no other scheme was found to be contingent upon export 
performance  and  was  not  granted  by  reference  to  the  quantities  manufactured, 
produced, exported or transported. Therefore the amount of subsidy was allocated over 
the total sales turnover of the companies of APP group in line with Article 7(2) of the 
basic  Regulation  which  reads  as  follows:  "Where  the  subsidy  is  not  granted  by 
reference  to  the  quantities  manufactured,  produced,  exported  or  transported,  the 
amount of countervailable subsidy should be determined by allocating the value of the 

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in 

in  calculating 

total  subsidy,  as  appropriate,  over  the  level  of  production,  sales  or  exports  of  the 
products  concerned  during  the  investigation  period  for  subsidisation".  Since  this 
subsidy is not linked to production of any particular product or exports, the total sales 
turnover of the company is the most appropriate denominator. In that respect, it should 
be noted that the relevant turnover has been determined on a basis which ensures that 
it  reflects  as  closely  as  possible  the  sales  value  of  the  products  sold  by  the  recipient 
company. This change is already reflected in the recitals dealing with the calculation 
of  subsidy  margins  and  in  the  resulting  subsidy  margins  for  the  individual  schemes 
the  amount  of 
concerned.  Any  other  proposed  methodology 
countervailable  subsidy  would  be  contrary  to  the  relevant  provisions  of  the  basic 
Regulation  (Articles  7  and  15)  and  the  administrative  practice  followed  by  the 
Commission 
the  appropriate 
its  anti-subsidy  proceedings  when  selecting 
numerator/denominator  for  the  allocation  of  the  amount  of  the  countervailable 
subsidy. The party also invoked the part of the Guidelines22 referring to the calculation 
of the subsidy per unit as a basis for their claim. However, and for the same reasons as 
described  before,  aper  unit  approach  was  not  considered  appropriate  in  the 
circumstances  of  this  case.  Indeed  the  proposed  methodology  is  considered  non 
representative as it mixes turnover and units produced only for the product concerned 
while it disregards units of other products produced. No information was submitted or 
verified  with  respect  to  the  total  units  produced  for  all  products  by  the  respective 
companies and subsidies where not granted in any event by reference to quantities. As 
to CIF prices it is pertinent to note that evidence on file suggests that they vary within 
and  between  product  types.  In  any  event,  the  subsidies  in  question  are  not  product-
specific. Furthermore, the Commission established the amount of subsidization in the 
PRC and denominated it by allocating the value of the total subsidy over the turnover 
in China account taken of the specific modalities of the respective cooperating Chinese 
exporting producers. This ensures the use of the verified amount of subsidies and the 
most  appropriate  turnover.  Finally  it  is  noted  that  account  taken  of  the  practical 
circumstances  of 
imposition  of  anti-dumping  and 
countervailing duties at the level of the injury margin, it is concluded that there is no 
impact  whatsoever  to  the  APP's  position  irrespective  of  what  methodology  one 
chooses  in  allocating  the  amount  of  countervailable  subsidy  and  the  countervailing 
duty.  

this  proceeding, 

i.e. 

the 

4.4. 

Amount of countervailable subsidies 

(370)  The amount of countervailable subsidies in accordance with the provisions of the basic 
Regulation,  expressed  ad  valorem,  for  the  investigated  companies  are  set  out  in  the 
table below: 

Exporting 
Producer 

Anti-subsidy 
margin rate 

APP Group 
Chenming Group 

12.04% 
4.06% 

(371)  Based  on  the  information  available  from  the  complaint  and  the  cooperating  Chinese 
exporting producers, there are other known producers of the product concerned in the 

22 

Guidelines for the calculation of the amount of subsidy in countervailing duty investigations, OJ C 394, 
17.12.98, p.6.  

EN 

69 

   EN 

  
  
                                                 
PRC.  Nevertheless,  given  the  fact  that  the  reported  export  volume  was  found  to  be 
higher  than  the  import  data  derived  from  Eurostat,  the  level  of  cooperation  was 
considered high. It was therefore considered appropriate to set the subsidy level for the 
non-cooperating exporting producers at the level of the highest subsidisation found for 
the cooperating exporting producers i.e. 12.04%, in order to ensure effectiveness of the 
measures.  

5. 

UNION PRODUCERS 

5.1. 

Union production 

(372)  During the IP, the like product was manufactured by 14 known and some other very 
small  producers  in  the  Union.  The  data  provided  by  CEPIFINE  is  estimated  to  be 
covering  98%  of  the  production  of  Union  producers.  On  this  basis,  the  total  Union 
production  was  estimated  to  be  around  5  270  000  tonnes  during  the  IP.  The  Union 
producers  accounting  for  the  total  Union  production  constitute  the  Union  industry 
within the meaning of Article 9(1) of the basic Regulation.  

(373)  The  coated  fine  paper  industry  is  energy  and  capital  intensive.  For  this  reason 
economies of scale apply that explain the concentration of the production within a few 
large  players,  complemented  by  smaller  producers  that  focus  on  the  geographically 
close  markets.  Five  similarly  large  producers  cover  most  of  the  Union  market  with 
production facilities spread over Europe. The large part of CFP is a commodity-type 
product  and  is  mainly  traded  through  paper  merchants  and  wholesalers.  These 
distribution  channels  are  characterized  by  a  high  degree  of  concentration  of  buying 
power and price transparency through price quotations. 

(374)  As mentioned in recital (19) above, one interested party claimed that CFP suitable for 
web-fed printing should have been included in the scope of the present investigation. 
On  this  basis,  the  party  argued  that  the  complainant  Union  industry  would  not  have 
enough standing in the present proceeding. Based on the conclusions outlined above in 
recitals (22) and (25), however, i.e. that CFP suitable for web-fed printing and CPF for 
sheet-fed printing are two different products, this claim had to be rejected. 

(375)  The  government  of  China  commented  that  one  of  the  representative  producers  was 
allegedly  related  to  a  Chinese  company  and  thus  should  be  excluded  from  the 
definition of the Union industry. The investigation however revealed that the products 
produced by the Chinese company referred to are not product concerned. Therefore the 
relationship  does  not  have  any  impact  on  the  injury  analysis  nor  on  the  inclusion  of 
this Union producer in the definition of Union industry. 

6. 

INJURY  

6.1. 

Union consumption 

(376)  Consumption was established on the basis of the following: 

–  Eurostat for imports from third countries duly adjusted on the basis of information 
provided by the Union producers for products not covered by the proceeding. The 
investigation has found, based on evidence provided, that these assumptions were 
reasonable and justified; 

EN 

70 

   EN 

–  the  verified  total  export  volume  of  the  cooperating  exporting  producers  in  the 
PRC to the Union market, as the reported export volume was found to be higher 
than the import data derived from Eurostat; 

–  the  total  sales  on  the  Union  market  of  all  Union  producers  based  on  the 

information provided by CEPIFINE. 

(377)  On this basis, total Union consumption was established as follows: 

Table 1: Union consumption 

Union consumption 

Tonnes 
Index 

2006 
5.308.275 
100 

2007 
5.508.183 
104 

2008 
5.384.770 
101 

2009/IP 
4.572.057 
86 

Source:  Verified  questionnaire  replies,  Eurostat  adjusted  and  verified  data  provided  by 
CEPIFINE. 

(378)  Overall,  Union  consumption  decreased  by  14%  during  the  period  considered.  It  was 
found that the consumption first increased by 4% between 2006 and 2007, after which 
it dropped by 18% between 2007 and the IP. The decline in consumption in 2008 and 
the IP was the result of a lower demand, especially in the first half of 2009, due to the 
economic downturn.  

6.1.1. 

Imports into the Union from the PRC 

(379)  As  mentioned  above  in  recital  (376),  the  verified  total  sales  volume  of  the  product 
concerned  of  the  Chinese  cooperating  exporting  producers  on  the  Union  market  was 
found  to  be  higher  than  the  import  volumes  reported  by  Eurostat.  Since  it  was 
considered that the verified information is more accurate than the available statistics, 
total  import  volume  from  the  PRC  was  established  on  the  basis  of  the  verified 
information  provided  by  the  cooperating  companies.  The  sales  volumes  of  the 
cooperating  companies  that  were  found  to  have  been  exporting  only  multi-ply 
paperboard  during  the  period  considered,  were  excluded  from  the  total  imports, 
because  it  was  concluded,  as  explained  in  recital  (47),  that  multi-ply  paper  and 
paperboard should not be considered as the product concerned. Since the import data 
relating  to  the  product  concerned  only  refer  to  two  companies,  it  was  considered 
appropriate for confidentiality reasons to show them in indexed form. 

Table 2: Total subsidised imports from the PRC  

Total imports from the 
PRC 

Volumes (index) 
Market share (index) 
Prices (EUR/tonne) 
Index 

2006 
100 
100 
677  
100 

2007 
218 
210 
661 
98 

2008 
212 
209 
657 
97 

2009/IP 
283 
329 
621 
92 

Source: Verified questionnaire replies. 

(380)  The volume of total imports from the PRC increased dramatically, almost tripling over 
the  period  considered.  As  a  result,  their  market  share  increased  significantly  from 
approx. 1% in 2006 to over 4 % in the IP. This has to be seen against the background 
of a decreasing consumption which dropped by 14% during the same period. Average 

EN 

71 

   EN 

prices  of  the  subsidised  imports  from  the  PRC  showed  a  decrease  of  8%  during  the 
period considered. 

6.1.2.  Price undercutting 

(381)  For the purposes of analysing price undercutting, the weighted average sales prices per 
product  type  of  the  Union  producers  to  unrelated  customers  on  the  Union  market, 
adjusted to an ex-works level, were compared to the corresponding weighted average 
prices  of  the  imports  from  the  PRC  to  the  first  independent  customer  on  the  Union 
market, established on a CIF basis with appropriate adjustments for the existing duties 
and post-importation costs. 

(382)  As explained in recital (51), cooperation from the Chinese exporters was very high and 
considered to be covering the total export volume from the PRC to the Union during 
the  IP.  Given  the  fact  that  two  Chinese  exporting  producers  who  originally  came 
forward were found not to be exporting the product concerned to the Union market, as 
explained in recital (52) their imports have not been taken into account for the purpose 
of the price undercutting analysis. Export sales of a company within the group of one 
cooperating  exporting  producer  were  also  excluded  from  the  comparison  as  none  of 
the representative Union producers produced comparable product types. With respect 
to the export quantities of this particular company it is noted that they represented only 
a minor part of the total export sales of the group and their price levels appeared to be 
in line with the overall export sales price levels of the group. 

(383)  The  comparison  showed  that  during  the  IP,  the  subsidised  product  concerned 
originating in the PRC sold in the Union undercut the Union producers’ sales prices on 
average  by  7.6  %.  The  level  of  the  undercutting  margin  is  to  be  seen  against  the 
background of the high level of price transparency supported by price quotations that 
characterizes the CFP distribution market. 

6.2. 

Economic  situation  of  the  Union  industry  and  the  four  representative  Union 
producers  

6.2.1.  Preliminary remarks 

(384)  In accordance with Article 8(4) of the basic Regulation, the examination of the impact 
of  the  subsidised  imports  on  the  Union  producers  included  an  evaluation  of  all 
economic indicators for an assessment of the state of the Union producers from 2006 
to the end of the IP. 

(385)  The macroeconomic elements (production, capacity, capacity utilization, sales volume, 
market share, growth and magnitude of the amount of countervailable subsidies) were 
assessed  at  the  level  of  the  whole  Union  industry,  on  the  basis  of  the  information 
provided by CEPIFINE.  

(386)  The  analysis  of  microeconomic  elements  was  carried  out  at  the  level  of  the  Union 
producers (average unit prices, employment, wages, productivity, stocks, profitability, 
cash flow, investments, return on investments, ability to raise capital) on the basis of 
their information, duly verified. 

(387)  It  was  claimed  that  the  injury  analysis  failed  to  analyze  all  injury  indicators  for  the 
complainants and for the Union industry as a whole in a coherent and comprehensive 

EN 

72 

   EN 

fashion.  Parties  suggested  that  conclusions  concerning  material  injury  would  be 
different,  were  some  indicators  such  as  market  share  established  at  the  level  of 
complainants.  

(388)  Firstly it is noted that the statements of these parties seem to have been drawn on the 
basis  of  indicators  calculated  from  different  datasets  and  information  than  those 
established  during  the  investigation  and  presented  below.  Consequently,  these 
conclusions are factually wrong and are thus irrelevant.  

(389)  Secondly,  it  is  the  Commission's  practice  to  evaluate  macroeconomic  factors  for  the 
indication  of  the  injury  suffered  at  the  level  of  the  Union  industry  as  a  whole  as 
explained  above.  In  the  present  investigation  the  Union  industry  was  defined  at  the 
level  of  Union  producers  accounting  for  the  total  Union  production  as  explained  in 
recital (372) above, regardless of whether producers supported the complaint or have 
been cooperating in the investigation. 

(390)  Microeconomic factors are analyzed at the level of the representative Union producers, 
regardless of whether these support the complaint or not. The representative producers 
covered  58%  of  the  Union  production.  None  of  the  other  Union  producers  came 
forward claiming that the Commission's conclusions on microeconomic factors would 
be unreliable or not substantiated. Therefore there are no reasons to put into question 
the findings established based on the information provided by the representative Union 
producers only.  

(391)  It was claimed that one of the four representative producers failed to fully cooperate as 
it would be related to another producer in the European Union that did not cooperate 
in  the  investigation.  The  companies  were  alleged  to  be  related  as  a  consequence  of 
transitional  agreements  concluded  at  the  time  of  the  acquisition  by  the  cooperating 
Union producer of the CFP business segment of the other producer. It was alleged that 
through  these  transitional  agreements  the  cooperating  Union  producer  controls  some 
of  the  mills  which  remained  in  the  ownership  of  the  partially  acquired  producer.  To 
support its claim the exporting producer made reference to the Commission Decision23 
examining at the time of the acquisition whether the transaction should be considered 
as an acquisition within the meaning of Council Regulation (EC) No 139/2004 on the 
control of concentrations between undertakings. 

(392)  The investigation on the other hand confirmed that the number of shares held by the 
EU producer in question was minor and below the threshold set in Article 143 of the 
IPCCC24.  Furthermore,  the  transitional  agreements  referred  to  did  not  show  any 
relationship between the companies that would be extending beyond a normal business 
relationship  between  a  buyer  and  a  seller.  In  particular,  the  terms  of  the  transitional 
agreements  aim  to  administer  the  coated  paper  sales  for  a  transitional  period  and 
according to these terms the Union producer only has functions comparable to a sales 
agent during the transitional period. Furthermore, in its consolidated audited accounts 

23 

24 

Commission  Decision  of  31/10/2008  declaring  a  concentration  to  be  compatible  with  the  common 
market  (Case  No  COMP/M.5283  -  SAPPI  /  M-REAL)  according  to  Council  Regulation  (EEC)  No 
139/2004, OJ C 324, 19.12.2008, p. 8 
Commission  Regulation  (EC)  No  2454/93  of  2  July  1993  laying  down  provisions  for  the 
implementation  of  Council  Regulation  (EC)  No  2913/92  establishing  the  Community  Customs  Code, 
OJ L 253, 11.10.1993, p. 1.  

EN 

73 

   EN 

                                                 
and in its reply to the questionnaire it reported commission income while acting as an 
agent  for  the  mills  concerned;  no  ownership  and  therefore  no  costs  were  recognized 
for these mills by the Union producer. 

(393)  According to the Commission Decision referred to above, the transaction between the 
companies was considered as an acquisition by the Union producer of part of the other 
companies' business, not the take-over of the company as such. The Decision does not 
suggest that the companies should be considered as one entity after the acquisition; in 
particular,  there  is  no  joint  venture  between  the  companies.  It  is  also  noted  that  the 
geographical scope examined in the above decision is EEA – wide and not EU wide. 
To note is also that in the Decision the Commission did not analyze the relationship 
between the companies in question within the meaning of Article 143 of the IPCCC 25. 

(394)  In view of the above, it was considered that the two companies are not related in the 
sense  of  Article  143  of  the  IPCCC  and  therefore  the  Union  producer  in  question 
cooperated fully with the investigation. 

(395)  In  the  analysis  of  microeconomic  indicators  information  about  paper  mills  that  have 
been  acquired  by  the  above  mentioned  Union  producer  were  excluded  for  all  years 
under examination in order to present a fully comparable trend over the years. 

(396)  The  exporting  producer  also  claimed  that  each  affiliated  company  of  the  Union 
producers  should  have  filled  in  a  separate  questionnaire  reply  as  they  were  separate 
legal entities.  

(397)  In the case of the Union producer in question it was considered that one questionnaire 
reply would be sufficient for a meaningful reply and analysis of the injury aspects. In 
particular, the reply provided a detailed breakdown of information at individual paper 
mill level and all the necessary data relating to all of the related producers/sellers of 
the like product could be verified during the verification visits.  

(398)  In  a  subsequent  submission  the  exporting  producer  also  claimed  that  the  same 
company failed to fully cooperate as it filed its questionnaire reply on behalf of a non-
existing  entity  and  that  the  audited  accounts  of  the  company  do  not  reflect  the  data 
provided  in  its  questionnaire  reply.  The  conclusions  in  the  preceding  recital  are 
relevant also in this regard. 

6.2.2.  Data relating to the Union industry (macroeconomic indicators) 

(399)  After disclosure of the findings, the GOC and one Chinese exporting producer argued 
that the macro-economic data used for the analysis is incomplete and inaccurate thus 
cannot be used as a positive evidence of material injury.  

(400)  The on spot verification at the complainant association confirmed that the data used to 
establish  macroeconomic  indicators  are  directly  collected  from  Union  producers 
covering  around  98%  of  the  total  Union  production  and  are  sufficiently  detailed  to 
identify  information  about  the  product  concerned.  Assumption  and  /  or  estimations 

25 

Commission  Regulation  (EC)  No  2454/93  of  2  July  1993  laying  down  provisions  for  the 
implementation of Council Regulation (EC) no 2913/92 establishing the Community Customs Code, OJ 
L 253, 11.10.1993, p.1. 

EN 

74 

   EN 

                                                 
used were made on a reasonable and justifiable basis, e.g. cutter rolls were not taken 
into  account  because  of  their  clearly  insignificant  volumes  as  witnessed  in  their 
proportion  in  the  total  sales  volume  of  the  representative  Union  producers.Therefore 
this claim had to be rejected. 

6.2.2.1.  Production, production capacity and capacity utilisation 

Table 3: Production, production capacity and capacity utilisation 

Production (tonnes) 
Index 
Capacity (tonnes) 
Index 
Capacity Utilisation 
Index 

2006 
6.483.462 
100 
7.032.734 
100 
92% 
100 

2007 
6.635.377 
102 
7.059.814 
100 
94% 
102 

2008 
6.381.324 
98 
6.857.226 
98 
93% 
101 

2009/IP 
5.164.475 
80 
6.259.129 
89 
83% 
90 

Source: Verified data provided by CEPIFINE. 

(401)  As shown in the above table, the production volume of the Union industry decreased 
by  20  %  over  the  period  considered.  It  should  be  noted  that  although  Union 
consumption increased by around 1 % between 2006 and 2008, the production of the 
Union industry fell by 2% during that period, while it decreased significantly between 
2008 and the IP, following the drop in the Union consumption. 

(402)  Since  2000,  Union  producers  have  undertaken  major  restructuring  efforts  aiming  at 
addressing  structural  overcapacity.  Through  consolidations  and  mill  closures  the 
Union  industry  decreased  its  CFP  production  capacity  by  approximately  770  000 
tonnes between 2006 and the IP, i.e. by 11%. 

(403)  Despite the drop in total capacity, utilisation rates still declined from 92% in 2006 to 
83 % in the IP. The main decrease occurred in the period between 2008 and the IP. It 
is noted that high capacity utilization is an important factor in the long-term viability 
of  the  paper  producing  producers  because  of  high  investment  in  fixed  assets. 
Therefore, the capacity utilisation rate during the IP was considered to be low. 

6.2.2.2.  Sales volume and market share 

(404)  The sales figures in the table below relate to the volume sold to the first independent 

customer on the Union market. 

Table 4: Sales volume and market share 

Sales volume (tonnes) 
Index 
Market share 
Index 

2006 
4.921.141 
100 
93% 
100 

2007 
4.999.524 
102 
91% 
98 

2008 
4.875.841 
99 
91% 
98 

2009/IP 
4.008.354 
81 
88% 
95 

Source: Verified data provided by CEPIFINE. 

(405)  While  Union  consumption  grew  by  4  %  between  2006  and  2007  (see  recital  (377) 
above),  the  sales  volume  of  the  product  concerned  by  the  Union  industry  to 
independent  customers  on  the  Union  market  only  increased  by  2%  during  that  same 

EN 

75 

   EN 

  
 
period. This means that the Union industry could not benefit fully from the increased 
consumption  in  that  period.  Moreover,  between  2008  and  the  IP,  whereas  Union 
consumption  decreased  by  15  %,  the  sales  volume  of  all  Union  producers  decreased 
even  more,  by  18  %.  Consequently  the  Union  industry's  sales  volume,  after  a  small 
increase in 2007, decreased continuously and significantly which translated in a loss in 
market share of 5 percentage points during the period considered. 

(406)  One group of Chinese exporting producers claimed that the market share of the Union 
producers  should  also  include  imports  from  Switzerland  as  these  come  from  a  mill 
owned by one of the representative Union producer. 

(407)  The  geographical  scope  of  anti-subsidy  investigations  is  the  European  Union. 

Therefore this claim had to be rejected. 

(408)  It was also claimed that the complainants' market share increased remarkably during 

the period considered. 

(409)  Market  share  is  a  macro  indicator  analyzed  at  the  level  of  the  whole  Union  industry 
and  not  at  the  level  of  the  complainants.  Secondly,  the  statement  concerning  the 
complainant's market share is factually erroneous.  

6.2.2.3.  Growth 

(410)  When looking at the development over the period considered, the drop of 19 % in the 
sales volume of the Union industry was far more pronounced than the decrease of 14 
% in Union consumption. As a consequence, the market share of the Union industry 
also decreased significantly by 5 percentage points during the same period. 

6.2.2.4.  Magnitude of the amount of countervailable subsidies 

(411)  The amount of countervailable subsidies for the PRC, specified above in the subsidy 
section, is significant. Given the volumes and the prices of the subsidised imports, the 
impact of the actual subsidy margin cannot be considered to be negligible. 

6.2.3.  Data  relating  to  the  four  representative  Union  producers  (microeconomic 

indicators) 

6.2.3.1.  Average unit prices of the four representative Union producers 

(412)  Overall,  average  ex-works  sales  prices  of  the  four  representative  Union  producers  to 
unrelated  customers  on  the  Union  market  remained  stable  over  the  years,  except  for 
the year of 2007 when they were slightly above this level. 

Table 5: Prices of the Union producers 

Prices of the Union producers 

2006 

2007 

2008 

2009/IP 

Average price (EUR/tonne) 
Index 

692 
100 

717 
104 

691 
100 

699 
101 

Source: Verified questionnaire replies. 

6.2.3.2.  Stocks 

EN 

76 

   EN 

(413)  Stocks  represented  around  10  %  of  the  production  volume  in  the  IP.  The  four 
representative Union producers increased their stock levels by 10 % during the period 
considered, in particular between 2006 and 2007 and later between 2008 and  the IP. 
Notably, this coincided with the surge in the low-priced subsidised imports from the 
PRC.  

Table 6: Stocks 

Stocks 
Stocks (tonnes) 
Index 

2006 
278.265 
100 

2007 
298.547 
107 

2008 
296.387 
107 

2009/IP 
306.588 
110 

Source: Verified questionnaire replies. 

6.2.3.3.  Employment, wages and productivity 

Table 7: Employment 

Employment 

2006 

2007 

2008 

2009/IP 

Employment — full-
time equivalent (FTE) 
Index 
Labour cost (EUR/FTE) 
Index 
Productivity (unit/FTE) 
Index 

7.756 
100 
54.053 
100 
453 
100 

7.487 
97 
54.948 
102 
478 
106 

7.207 
93 
57.026 
105 
486 
107 

6.197 
80 
58.485 
108 
484 
107 

Source: Verified questionnaire replies. 

(414)  Due  to  the  paper  mill  closures  and  consolidation  of  the  four  representative  Union 
producers, the number of employees was reduced substantially by 20 % (almost 1600 
jobs) during the period considered.  

(415)  Efficiency  gains  have  been  achieved  by  raising  and  maintaining  a  high  output  per 
employee  even  at  a  time  of  significant  layoffs  in  2007  and  2008.  Labour  costs 
increased steadily, totalling an 8 % increase over the period considered. 

6.2.3.4.  Profitability, cash flow, investments, return on investment 

Profitability 
Change (100=2006) 

Cash flow (EUR thousand) 
Index 
Investments (EUR 
thousand) 
Index 
Return on investments 
Change (100=2006) 

Table 8: Profitability 

2006 
-1,08% 

260.047 
100 

151.900 
100 
-0,73% 

2007 
-0,20% 
+0,88% 

211.036 
81 

151.027 
99 
-0,54% 
+0,19% 

2008 
-2,49% 
-1,41% 

172.570 
66 

127.845 
84 
-2,73% 
-2,00% 

2009/IP 
2,88% 
+3,95% 

336.753 
129 

87.875 
58 
0,39% 
+1,12% 

Source: Verified questionnaire replies. 

EN 

77 

   EN 

  
  
  
(416)  The four representative Union producers incurred losses in the years 2006 to 2008 and 
the financial situation only turned positive in 2009 when the world price of pulp, the 
main  raw  material  exceptionally  decreased  significantly  as  a  result  of  the  economic 
downturn.  The  drop  in  the  price  of  pulp  (20%)  was  considered  an  abnormally  large 
drop that directly contributed to the improved financial situation in the IP. It is to be 
noted that since the IP, pulp prices returned to their pre-IP levels. 

(417)  The trend shown by the cash flow, which is the ability of the producers to self-finance 
their  activities,  reflects  to  a  large  extent the  evolution  of  profitability.  Consequently, 
the  cash  flow  shows  an  exceptional  increase  in  the  IP  due  to  the  falling  pulp  prices. 
Return  on investments  showed negative development in line  with the negative profit 
results achieved by the four representative Union producers until 2008 and a positive 
trend in the IP due to the exceptional cost savings on pulp prices. 

(418)  Following the above, the ability of the four representative Union producers to invest 
became  limited  as  the  cash  flow  significantly  deteriorated  during  the  period 
considered,  except  for  the  IP.  As  a  consequence,  the  investments  dropped  by  35% 
during the period considered and were limited to the installation of cogeneration plants 
that helped the Union producers to mitigate the effect of continuously raising energy 
costs. 

(419)  One party claimed that the improvement of profitability should not be considered as a 
limited instance based on an exceptional drop of raw material costs. The drop in costs 
benefited  both:  all  local  as  well  as  Chinese  producers,  not  only  the  complainants, 
therefore  the  breakthrough  in  profitability  was  not  exclusively  based  on  the  drop  in 
costs  but  was  rather  the  result  of  a  change  in  the  pricing  behaviour  of  the 
complainants.  

(420)  Furthermore  the  exporting  producer  claimed  that  the  profitability  is  driven  by  CFP 
prices,  rather  than  the  price  of  pulp.  It  was  found,  however,  that  when  pulp  prices 
sharply  fell  in  2009,  CFP  prices  remained  stable  and  profits  rose  as  a  consequence. 
Therefore  given  that  prices  remained  stable,  no  correlation  can  be  made  between 
prices and profitability in this specific time period. 

(421)  The profitability rate is an indicator that is analysed at the level of the representative 
Union producers and not at the level of complainants as suggested by the party. The 
analysis of information gathered showed a direct link between the exceptional fall in 
pulp  prices,  the  main  raw  material  and  the  increased  profitability;  whereby  stable 
prices  of  the  finished  products  indeed  played  a  role  in  the  improvement  of 
profitability.  While  this  was  probably  the  case  for  other  producers  on  the  market  as 
well,  this  does  not  affect  the  conclusion  that  this  temporary  improvement  of 
profitability is due to the exceptional drop in raw material prices in the IP. 

6.2.3.5.  Ability to raise capital 

(422)  The  paper  industry  in  general  is  characterized  by  high  indebtedness  linked  to  the 
significant investment in fixed assets. As a consequence of the losses incurred in most 
of the period considered, the ability of the four representative Union producers to raise 
capital  and  to  finance  its  activities  at  reasonable  finance  costs  was  also  undermined. 
This  was  the  case  in  particular  in  2008  when  one  of  the  four  representative  Union 
producers  had  to  be  refinanced  at  a  significant  risk  premium  while  the  smallest 

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representative producer went into insolvency in 2008 and was taken over by another 
Union producer. 

6.3. 

Conclusion on injury 

(423)  The  investigation  has  shown  that  most  of  the  injury  indicators  such  as  production 
volume (– 20%), capacity utilisation (– 10%), sales volume to unrelated customers on 
the  Union  market  (–  19%),  market  share  (–  5  percentage  points)  deteriorated  during 
the  period  considered.  In  addition,  the  injury  indicators  related  to  the  financial 
performance of the four representative Union producers such as return on investment 
and  profitability  were  seriously  affected  until  2008.  The  sudden  increase  of  the 
profitability in the IP was due purely to the temporary and exceptional drop of world 
pulp prices in the IP. It is noted that even during the IP the profitability rate was very 
low and was not considered to be altering the conclusion that the four representative 
Union producers were in a very weak financial position.  

(424)  The  investigation  also  showed that the above injury picture can be mainly explained 
by the fact that despite its restructuring efforts and productivity improvements the four 
representative  Union  producers  were  not  able  to  raise  their  CFP  prices  above  cost-
covering  level  or  to  a  level  of  viable  profitability.  This  is  mainly  due  to  the  price 
undercutting practiced by the Chinese exporters during the IP which has a significant 
effect  in  a  market  where  price  transparency  is  high.  During  the  IP,  the  four 
representative  Union  producers  managed  to  reduce  their  cost  of  production  through 
further productivity improvement and due to the decrease of pulp prices which mainly 
occurred in the second half of the IP. As demand and supply became more balanced on 
the market following the efforts of the producers to tackle structural overcapacity by 
means  of  consolidation  and  capacity  closures,  CFP  prices  could  be  kept  at  a  stable 
level.  However,  the  four  representative  Union  producers  were  not  in  a  position  to 
increase  their  sales  prices  to  a  level  that  would  have  profitability  rates  necessary  for 
long-term viability.  

(425)  As  mentioned  above  in  recital  (19),  one  party  claimed  that  CFP  used  in  web-fed 
printing should have been included in the scope of the present investigation. On this 
basis,  the  party  claimed  that  the  exclusion  of  this  product  from  the  determination  of 
material  injury  and  the  analysis  of  trends  would  have  distorted  the  injury  picture. 
However, based on the conclusions presented in recitals (20) and (22) to (25), i.e. that 
CFP  used  in  web-fed  and  sheet-fed  printing  are  different  products,  this  claim  was 
rejected. 

(426)  The same party claimed that the acquisition of one Union producer by one of the four 
representative  Union  producers  in  2008  was  evidence  that  this  four  representative 
Union  producer  was  in  rather  good  health.  It  is  first  noted  that  material  injury  is 
assessed  on  the  basis  of  the  situation  of  the  Union  industry  and  not  based  on  the 
particular  situation  of  a  single  producer.  As  concluded  in  (423)  above,  most  injury 
indicators  have  shown  a  negative  trend  evidencing  the  deterioration  of  the  Union 
industry's  situation  over  the  period  considered.  The  acquisition  was  furthermore 
considered as part of the restructuring efforts of the Union industry during the period 
considered.  In  any  case,  it  is  noted  that  when  analysing  macro  indicators  such  as 
production  volume,  capacity,  sales  volume  and  market  share  the  acquisition  had  a 
neutral effect since macro indicators are assessed with respect to all Union producers 

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constituting the Union industry as defined in recital (372). In other words these factors 
should remain overall unchanged in case of a change in the ownership. 

(427)  After  disclosure,  parties  claimed  that  there  was  no  positive  evidence  that  the 
complaining  Union  producers  suffered  material  injury.  Contrarily,  complainants 
presented overall stable economic results and increased profitability in the IP.  

(428)  First of all, the state of the Union industry is analysed at the level of the representative 
Union producers and not at the level of complainants as suggested by the parties.  

(429)  Secondly,  as  already  pointed  out  in  recital  (409)  above,  the  conclusions  of  these 
parties  seem  to  have  been  drawn  from  indicators  calculated  on  the  basis  of  different 
datasets  and  information  than  what  was  established  during  the  investigation  and 
presented  above.  Consequently,  these  conclusions  are  factually  wrong.  Furthermore, 
the parties' analysis was not consistent in the use of two different datasets for macro 
and micro indicators. 

(430)  It was further claimed that the improvement of profitability should be regarded also as 
a  consequence  of  the  restructuring  efforts  of  the  industry  including  reduction  of 
production,  employment  and  increased  productivity.  In  this  case,  the  latter  factors 
cannot be deemed to be the sole indicators of injury, but all injury indicators should be 
looked at together.  

(431)  Article  8(2)  of  the  basic  Regulation  lists  the  economic  factors  and  indices  to  be 
evaluated  in  the  examination  of  the  impact  of  the  dumped  imports  on  the  Union 
industry. Article 8(2) explicitly states that the list of factors is not exhaustive, nor can 
any  one  or  more  of  these  factors  necessarily  give  decisive  guidance.  Thus,  while 
indicators have to be assessed individually, conclusions should be reached through the 
analysis of all factors. 

(432)  Parties also commented on a possible threat of further material injury in view of the 
huge  capacity  build-up  by  Chinese  producers  supported  by  State  policies  and 
subsidies. The scope of the investigation was the existence of material injury and not 
the  threat  of  further  material  injury.  Therefore  these  comments  could  not  affect  the 
findings and had to be disregarded. 

(433)  Considering the above, it is concluded that the Union industry suffered material injury 

within the meaning of Article 8(4) of the basic Regulation. 

7. 

CAUSALITY 

7.1. 

Introduction 

(434)  In  accordance  with  Articles  8(5)  and  (6)  of  the  basic  Regulation,  it  was  examined 
whether  the  material  injury  suffered  by  the  Union  industry  has  been  caused  by  the 
subsidised imports from the country concerned. Furthermore, known factors other than 
the subsidised imports, which might have injured the Union industry, were examined 
to  ensure  that  any  injury  caused  by  those  other  factors  was  not  attributed  to  the 
subsidised imports. 

7.2. 

Effect of the subsidised imports 

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(435)  It  is  to  be  noted  that  the  Union  CFP  market  is  characterized  by  a  high  degree  of 
concentration  of  buying  power  and  price  transparency  through  price  quotations. 
Furthermore CFP is a commodity-type product and does not allow for significant price 
differences  among  different  sources.  A  major  part  of  the  products  is  sold  through 
merchants  that  force  the  Union  industry  to  keep  prices  in  line  with  low  priced  and 
subsidised  imports.  Therefore  the  prices  of  imported  CFP,  out  of  which  35% 
originated in the PRC in the IP, have in general a significant effect on price levels on 
the Union market.  

(436)  The investigation showed that subsidised imports from the PRC increased dramatically 
(+183%)  over  the  period  considered.  The  subsidised  imports  from  the  PRC  first 
doubled from 2006 to 2007, while prices were in 2007 2% lower than the year before. 
In 2008  imports  from China remained stable while average prices fell by 1 more %. 
Chinese  import  volumes  (+71%)  and  market  share  (+120%)  increased  again 
dramatically  in  the  IP  with  falling  prices  (-5%)  undercutting  the  prices  of  the  four 
representative Union producers by 7.6% thereby exerting price pressure on the Union 
market  and  preventing  the  Union  producers  from  raising  their  prices  to  profitable 
levels.  

(437)  It  is  recalled  that  during  the  period  considered  the  Union  consumption  decreased  by 
about 14%. The Union industry faced a significant drop in their sales volume (19%). 
However this decrease of sales was much more pronounced than the drop in demand 
and led to a loss of market share of 5 percentage points. At the same time the market 
share of Chinese imports increased by 3 percentage points. This shows that the Union 
industry's market share has largely been taken over by the subsidised imports from the 
PRC.  

(438)  It  is  therefore  considered  that  the  continued  pressure  exercised  by  the  low-priced 
subsidised  imports  from  the  PRC  on  the  Union  market  did  not  allow  the  Union 
industry  to  adapt  its  sales  prices  to  the  increased  raw  material  costs,  in  particular  in 
2008,  when  pulp  prices  peaked.  This  led  to  the  loss  in  market  share  and  the  loss  in 
profitability of the Union industry. 

(439)  During  the  investigation  and  after  disclosure,  several  parties  brought  forward  the 
argument that Chinese imports did not have significant impact in terms of volume and 
prices. It was argued that there was no surge of Chinese imports but rather these grew 
gradually over the years and therefore their impact was quite limited which should not 
be exaggerated for the purpose of the injury determination. It was further argued that 
Chinese prices, even if they were below Union prices, did not have any impact on the 
relatively stable prices of the Union industry. One exporting producer questioned the 
Commission's finding that there would be price suppression caused by Chinese prices. 
It  pointed  out  that  in  2009  when  the  Chinese  prices  declined  further,  the  Union 
industry's prices not only recorded an increase but in fact allowed the Union industry 
to make profits. 

(440)  The  evolution  of  Chinese  imports  is  analyzed  in  detail  in  recitals  (380)  and  it  was 
concluded that the increase in the volume cannot be regarded as insignificant. 

(441)  In  terms  of  prices  Chinese  imports  undercut  the  prices  of  the  representative  Union 
producers  by  7.6%  which  is  considered  significant  in  a  market  where  price 
transparency  is  high.  As  depicted  in  recital  (412)  above,  indeed  prices  of  the 

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representative  Union  producers  were  stable  over  the  period  considered,  with  an 
exceptional  increase  in  2007,  the  year  where  Chinese  exports  did  not  grow.  In  2009 
the  Union  producers  could  keep  their  prices  stable  at  the  expense  of  losing  further 
market share and their profitability derived from the combination of these stable prices 
and the decreased cost of raw material.  

(442)  One Chinese exporting producer claimed that CFP imports from China do not have an 
impact  on  the  prices  of  the  Union  industry  as  these  are  not  comparable  to  the  CFP 
manufactured and sold by the representative Union producers as only 10% of the sales 
of  the  representative  Union  producers  were  compared  in  the  determination  of  the 
undercutting  and  non-injurious  price  level.  It  is  noted  that  these  determinations  are 
made  on  the  basis  of  fully  comparable  products  that  are  directly  matching  in  all 
characteristics  so  as  to  ensure  a  fair  comparison.  However,  CFP  produced  by  the 
Chinese  and  Union  producers  in  general  are  comparable  products  as  concluded  in 
recital (50) and thus are competing with each other directly on the Union market.  

(443)  It was furthermore alleged that the finding that the CFP market is a commodity-market 
characterized by a high degree of transparency is incorrect as the Union producers sell 
around  half  of  their  products  directly  to  end  users.  In  contrast  to  this  claim  the 
representative Union producers sold the majority of their products through merchants 
either directly or indirectly (so called indent sales when products are directly shipped 
to  the  customer  but  ordering  and  invoicing  process  goes  through  merchants).  Indeed 
merchants  play  a  crucial  role  in  both  stocking  products  and  providing  price 
transparency to the market. 

(444)  In view of the established trend of imports form the PRC that cannot be regarded as 
insignificant,  it  was  concluded  that  the  surge  of  the  low-priced  subsidised  imports 
from  the  PRC  had  a  considerable  negative  impact  on  the  economic  situation  of  the 
Union industry. 

7.3. 

Effect of other factors 

7.3.1.  Development of the consumption on the Union market and the economic crisis 

(445)  As mentioned in recital (378) above, the Union consumption of CFP first increased in 
2007, after which it decreased in 2008 and the IP. During the period considered, the 
Union industry lost market share. One of the cooperating exporters in the PRC and the 
government  of  China  claimed  that  the  decrease  in  sales  volume,  market  share  and 
production of the Union industry was due to the decrease in consumption which had 
been caused by the economic crisis and the expansion of electronic media and should 
not  be  attributed  to  Chinese  imports.  To  support  its  claim,  the  GOC  quoted  a 
Manifesto  for  Competitiveness  and  Employment  launched  by  the  paper  and  pulp 
industry in June 2009 ('Manifesto'). 

(446)  Although  it  cannot  be  disregarded  that  this  negative  evolution  of  the  Union 
consumption, for whatever reason, between 2007 and the IP has had a negative impact 
on the situation of the Union industry in terms of sales volumes and production, it is 
noteworthy that the Chinese exporters managed at the same time and especially from 
2008  to  2009  to  increase  their  sales  volumes  and  market  share  through  the  price 
pressure exerted on the market by the subsidised imports.  

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(447)  The Manifesto quoted by the GOC covers the whole paper and pulp industries sectors 
and serves a general policy purpose. On the basis of the information included in this 
document, no separate conclusions could be drawn for the production and sales of the 
product concerned. It is therefore not possible to conclude whether the statements or 
findings of the Manifesto in fact apply one-to-one to the product concerned. Since, in 
addition,  the  investigation  did  not  bring  to  light  a  strong  link  between  the  financial 
crisis and the material injury suffered by the Union industry, this argument had to be 
rejected. 

(448)  Account  taken  of  the  above,  it  is  considered  that  the  deterioration  of  the  economic 
situation of the Union industry is mainly caused by the surge in the subsidised imports 
from  the  PRC  and  the  undercutting  practised  by  the  Chinese  exporters  and  not  by 
decreasing  consumption.  Even  though  the  contraction  in  demand  contributed  to  the 
injury, it could not break the causal link between the material injury suffered and the 
increase in subsidised imports.  

7.3.2.  Prices of raw material 

(449)  The  average  cost  of  production  of  the  four  representative  Union  producers  slightly 
increased  (2%)  between  2006  and  2008  and  fell  by  5%  in  the  IP.  The  investigation 
showed  that  the  cost  of  production  of  the  four  representative  Union  producers  to 
produce CFP followed in general a similar trend as the evolution of the prices of the 
pulp,  one  of  the  main  raw  materials  in  paper  production.  The  average  price  of  pulp 
increased by 8% between 2006 and 2008 after which it decreased sharply from the end 
of 2008 till the last month of the IP. The price of pulp was on average 19% lower in 
2009 than in the previous year.  

(450)  In  the  absence  of  subsidization  causing  injury  to  the  Union  industry,  it  could  be 
expected  that  prices  are  regularly  adapted  to  reflect  the  development  of  the  various 
components of the cost of production. Up until 2008, this did, however, not take place. 
Indeed, the Union producers was forced to keep their sales prices low even when pulp 
prices were increasing in 2008 in order to compete against the low-priced subsidised 
imports  from  the  PRC,  which  led  to  a  significant  drop  in  their  profitability  in  that 
period. In the IP, the situation ameliorated due to the abnormal decrease in prices of 
pulp – while prices of CFP could be kept stable at the same time. However even in this 
exceptional period the still very low profit levels did not allow the four representative 
Union producers to recover from continued subsidisation. Indeed, despite the decrease 
in raw material costs the price levels could still not be increased to levels to achieve 
solid profit margins necessary for this capital intensive industry. 

(451)  Accordingly, it is concluded that the subsidised imports from the PRC which undercut 
the  four  representative  Union  producers’  prices  depressed  the  prices  on  the  Union 
market  and  prevented  the  four  representative  Union  producers  from  increasing  their 
sales prices to cover their costs or to achieve a reasonable profitability. Given that the 
raw material prices were significantly decreasing in the IP, it was concluded that they 
could  not  have  had  an  impact  on  the  material  injury  suffered  by  the  Union  industry 
during that same period.  

7.3.3.  Export performance of the representative Union producers 

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(452)  Export  performance  was  also  examined  as  one  of  the  known  factors  other  than  the 
subsidised imports, which could at the same time have injured the Union industry, to 
ensure  that  possible  injury  caused  by  these  other  factors  was  not  attributed  to  the 
subsidised  imports.  The  analysis  showed  that  the  export  sales  to  unrelated  parties 
made by the four representative Union producers represented an important part of their 
sales  (around  26%)  during  the  period  considered.  Even  though  export  sales  volumes 
also decreased in the period considered by 16 %, the loss of export sales volumes was 
less pronounced than the loss of sales volumes on the Union market (19%). Hence, it 
was considered that the decrease in export volume cannot explain the level of injury 
suffered by the four representative Union producers. Since exports play an important 
role in keeping capacity utilization high to cover the high fixed costs of investments 
into  machinery,  it  was  considered  that  although  the  export  performance  was 
deteriorating it had an overall positive effect. Accordingly, it is considered that even if 
the  decrease  in  export  activities  may  have  contributed  to  the  overall  deterioration  of 
the  situation  of  the  Union  industry,  these  activities  were  on  the  other  hand  still 
mitigating the losses suffered on the Union market and thus are not such as to break 
the  causal  link  established  between  the  subsidised  imports  from  the  PRC  and  the 
injury suffered by the Union industry. 

(453)  One  party  claimed  that  the  Union  industry  suffered  a  significant  decline  in  exports 
because of the strength of the Euro versus the US dollar and that the injury caused by 
this factor should not be attributed to imports from the PRC. As concluded above, the 
deterioration of the export performance of the Union industry, regardless of the causes 
for such deterioration, is not the main reason for the injury suffered by the producers 
and thus does not break the causal link established in recital (444). 

7.3.4. 

Imports from other third countries 

(454)  The trends in import volumes and prices from other third countries between 2006 and 

the IP were as follows: 

Table 9: Imports from third countries  

2006 

2007 

2008 

2009/IP 

Switzerland 
Imports (tonnes) 
Index 
Market share 
Index 
Price (EUR/tonne) 
Index 
Indonesia 
Imports (tonnes) 
Index 
Market share 
Index 
Price (EUR/tonne) 
Index 
South Korea 
Imports (tonnes) 
Index 
Market share 

194.748 
100 
3,7% 
100 
787 
100 

19.834 
100 
0,4% 
100 
855 
100 

45.154 
100 
0,9% 

191.636 
98 
3,5% 
95 
782 
99 

30.714 
155 
0,6% 
149 
818 
96 

65.251 
145 
1,2% 

226.736 
116 
4,2% 
115 
758 
97 

27.178 
137 
0,5% 
135 
845 
99 

46.498 
103 
0,9% 

172.233 
88 
3,8% 
103 
793 
105 

49.877 
251 
1,1% 
292 
681 
80 

46.068 
102 
1,0% 

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Index 
Price (EUR/tonne) 
Index 
All other countries 
Imports (tonnes) 
Index 
Market share 
Index 
Price (EUR/tonne) 
Index 

100 
562 
100 

58.623 
100 
1,1% 
100 
962 
100 

139 
669 
119 

70.984 
121 
1,3% 
117 
860 
89 

102 
664 
118 

62.844 
107 
1,2% 
106 
914 
95 

118 
618 
110 

100.711 
172 
2,2% 
199 
824 
86 

Source: Eurostat. 

(455)  The  main  other  third  countries  exporting  CFP  to  the  Union  market  are  Switzerland, 
Indonesia and South Korea. From the trends of import volumes it can be seen that the 
increase of the imports from the PRC was more pronounced than from any of the other 
third  countries.  In  case  of  imports  from  Switzerland,  these  were  sold  always  at 
significantly higher prices than imported products from the PRC. The market share of 
Swiss  products  remained  relatively  stable,  except  for  the  year  2008  when  they 
increased temporarily to above 4% before falling back to close to the 2006 level in the 
IP. CFP imported from Switzerland constituted mainly the production of one company 
owned  by  one  of  the  four  representative  Union  producers  and  the  higher  unit  prices 
may be linked to different product mixes and sales structures. As far as imports from 
Indonesia are concerned, these were also entering the Union at higher prices than the 
Chinese products, with the exception of the IP where prices fell, very likely in large 
part  due  to  the  decrease  in  pulp  prices.  The  resulting  increase  of  imports,  which 
however  remained  in  volume  terms  at  a  low  level  in  the  IP,  led  to  a  market  share 
which also remained at a low level in that period. Imports from South Korea entered 
the  Union  in  low  quantities  throughout  the  period  considered  and  market  share 
remained stable. Even though Korean import prices were comparable to import prices 
from the PRC, Korean prices were not showing a continuously decreasing trend as the 
Chinese  imports  did  over  the  whole  period  considered.  Imports  from  all  other 
countries  had  significantly  higher  prices  than  the  imports  from  the  PRC  and  import 
volumes were low. 

(456)  On the basis of the above, it is concluded that the imports from these third countries 

did not contribute to the material injury suffered by the Union industry. 

7.3.5.  Structural overcapacity 

(457)  One  cooperating  exporter  in  the  PRC  argued  that  the  injury  suffered  by  the  Union 
industry  was  caused  by  the  Union  industry's  overcapacity.  The  reduction  in  capacity 
and  consolidation  of  the  Union  industry  were  therefore  not  a  consequence  of  the 
Chinese imports but should be seen as a measure against the overcapacity. However, 
the investigation showed that losses were incurred by the Union industry in the period 
considered, especially in 2008, despite the restructuring of the  producers because, as 
outlined above in recitals (435) to (444), the Union industry was still not able to raise 
its prices to levels above costs. This situation was mainly caused by the price pressure 
exerted by the subsidised imports undercutting Union industry prices. This argument 
had therefore to be rejected. 

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(458)  It was also argued that the restructuring efforts of the Union industry were completed 
in  2009  by  the  consolidation  of  two  large  producers  that  resulted  in  the  immediate 
improvement  of  the  situation  of  the  Union  industry.  Restructuring  efforts  took  place 
since 2000 up until the IP. The positive effect of the mentioned consolidation should 
have  been  reflected  in  the  improvement  of  capacity  utilisation  and  at  least  in  stable 
sales volume but both these indicators deteriorated in the IP. On the other hand, it had 
been  established  that  the  improved  profitability  of  the  Union  industry  in  the  IP  was 
caused primarily and directly by the exceptional one-off drop in pulp prices. Therefore 
this argument had to be rejected. 

7.4. 

Conclusion on causation 

(459)  The  above  analysis  demonstrated  that  there  was  a  substantial  increase  in  the  volume 
and market share of the low-priced subsidised imports originating in the PRC over the 
period considered. In addition, it was found that these imports were made at subsidised 
prices  which  were  below  the  prices  charged  by  the  Union  industry  on  the  Union 
market for similar product types.  

(460)  This increase in volume and market share of the low-priced subsidised imports from 
the PRC coincided with an overall decrease of the demand on the Union market during 
the  period  between  2006  and  the  IP  and  also  with  the  negative  development  in  the 
market  share  of  the  Union  producers  during  the  same  period.  At  the  same  time  a 
negative development in the main indicators of the economic and financial situation of 
the Union industry was observed as outlined in recital (423). 

(461)  The  examination  of  the  other  known  factors  which  could  have  caused  injury  to  the 
Union  industry  revealed  that  these  factors  are  not  such  as  to  break  the  causal  link 
established  between  the  subsidised  imports  from  the  PRC  and  the  injury  suffered  by 
the Union industry. 

(462)  Based  on  the  above  analysis,  which  has  properly  distinguished  and  separated  the 
effects of all known factors on the situation of the Union industry from the injurious 
effects of the subsidised imports, it is concluded that the subsidised imports from the 
PRC have caused material injury to the Union industry within the meaning of Article 
8(5) of the basic Regulation. 

8. 

UNION INTEREST 

8.1. 

Preliminary remark 

(463)  In  accordance  with  Article  31  of  the  basic  Regulation,  it  was  examined  whether, 
despite the above findings, compelling reasons existed for concluding that it was not in 
the  Union  interest  to  adopt  countervailing  measures  in  this  particular  case.  For  this 
purpose,  and  in  accordance  with  Article  31(1)  of  the  basic  Regulation,  the  likely 
impact  of  possible  measures  on  the  Union  producers,  importers,  merchants  and 
distributors and users of the product concerned and also the likely consequences of not 
taking measures were considered on the basis of all evidence submitted. 

8.2. 

Union industry 

(464)  The  Union  industry  as  a  whole  is  composed  of  14  known  producers  estimated  to 
represent  around  98%  of  the  Union  CFP  production  according  to  CEPIFINE.  The 

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producers  are  located  in  different  Member  States  of  the  Union,  employing  directly 
over 11 000 people in relation to the product concerned. 

(465)  Two of the known producers opposed the initiation of the investigation but provided 
no further information and did not cooperate with the investigation. On the basis of the 
information  available,  however,  and  in  particular  on  the  basis  of  the  data  made 
available  by  CEPIFINE  which  showed  a  deterioration  of  the  situation  of  the  Union 
industry, it can be reasonably assumed that these two companies were also negatively 
affected by the subsidised imports. The non-cooperation was therefore not seen as an 
indication that their situation would be different from the one of the remaining Union 
producers.  

(466)  The Union industry has suffered material injury caused by the subsidised imports from 
the PRC. It is recalled that most injury indicators showed a negative trend during the 
period considered. In particular injury indicators related to the financial performance 
of  the  four  representative  Union  producers,  such  as  profitability  and  return  on 
investments,  despite  a  slight  improvement  in  the  IP,  were  seriously  affected.  In  the 
absence of measures, a further deterioration in the Union industry’s economic situation 
appears very likely. 

(467)  It is expected that the imposition of countervailing duties will restore effective and fair 
trade conditions on the Union market, allowing the Union industry to align the prices 
of  CFP  to  reflect  the  costs  of  the  various  components.  It  can  be  expected  that  the 
imposition of measures would enable the Union industry to regain at least part of the 
market  share  lost  during  the  period  considered,  with  a  further  positive  impact  on  its 
economic situation and profitability. 

(468)  It was therefore concluded that the imposition of definitive countervailing measures on 

imports of CFP originating in the PRC would be in the interest of the Union industry. 

8.3. 

Importers and traders 

(469)  Questionnaires  were  sent  to  fourteen  known  unrelated  importers  and  traders  [in  the 
Union that were listed in the complaint. During the investigation several other traders 
(called  also  merchants  in  the  industry)  made  themselves  known.  Finally  thirteen 
companies  cooperated  in  the  investigation,  even  though  some  of  these  respondents 
provided only partial information. Importers were found to be acting also as traders on 
the market therefore all these parties will hereinafter be referred to as 'traders'.  

(470)  The  investigation  showed  that  all  traders  purchased  CFP  from  several  sources  and 
mainly  from  Union  producers.  Two  traders  did  not  purchase  or  only  occasionally 
purchased  the  imported  CFP  from  the  PRC.  The  ten  companies  that  provided 
quantitative information about their purchases of the product concerned represented in 
total 47 % of the total imports from the PRC. Imports, including imports from the PRC 
represented only a limited share of their total business and any negative impact of the 
proposed measures is thus likely to be negligible. All traders stated that CFP produced 
in the Union and the PRC were largely of a similar quality and were interchangeable. 
Furthermore  the  investigation  confirmed  that  there  exist  a  large  number  of  other 
import sources and traders could revert to these other sources of supply, at least in the 
longer term.  

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(471)  Two importing traders were relying mainly on Chinese sources for their purchases of 
CFP.  Both  companies  stated  that  they  would  have  difficulties  in  sourcing  products 
from  Union  producers  because  there  would  be  traditional  sales  channels  due  to 
minimum  order  volumes  required  by  producers  and  distribution  agreements  to  be 
respected.  This  did,  however,  not  directly  affect  the  availability  of  CFP  from  Union 
producers as they had sufficient spare capacity available. This argument had therefore 
to be rejected. 

(472)  Concerning  the  possibility  to  pass  on  possible  cost  increases  to  their  customers,  all 
cooperating traders referred to the strong price transparency on the Union market and 
stated that they would only be able to increase their sales prices to the final customers 
in  case  the  price  level  in  the  Union,  in  general,  would  increase.  On  this  basis,  and 
given  that  the  intended  effect  of  countervailing  duties  is,  inter  alia,  to  increase  the 
price  level  in  the  Union  to  cost-covering  levels,  it  is  expected  that  importers  would 
therefore be able to pass any price increases caused by the countervailing duty at least 
partly  on to their customers. It  should also be noted that as mentioned above, it was 
found that Chinese imports constitute only a very small part of the overall business of 
traders  and  that  therefore,  the  effect  of  the  countervailing  duty,  in  general  would  be 
negligible. Finally it is also considered that importers achieve a higher profitability on 
their re-sales of CFP sourced from the producers in the PRC; therefore they would also 
be able to make less profit by absorbing at least a partial cost increase. 

(473)  Therefore, the imposition of definitive measures should overall not have a significant 

negative impact on the importers and traders. 

8.4. 

Users 

(474)  Questionnaires  were  sent  to  eight  known  users  in  the  Union  that  were  listed  in  the 
complaint.  During  the  investigation  several  other  users  made  themselves  known. 
Altogether  five  companies  provided  a  full  or  partial  questionnaire  reply.  These 
companies are located throughout the Union and represent the printing and publishing 
sectors.  Since  market  conditions  and  cost  structures  were  found  to  be  different  for 
printers  and  publishers,  the  impact  of  measures  was  analysed  separately  for  each 
group.  

8.4.1.  Printers 

(475)  Only one printer provided basic information. According to the information submitted 
by  this  printer,  the  share  of  the  CFP  in  relation  to  the  total  cost  of  production  of  a 
printed  material  was  relatively  high.  While  the  investigation  has  shown  that  printers 
are mainly sourcing CFP from Union producers, it was confirmed that CFP produced 
in  the  Union  and  the  PRC  are  of  similar  quality  and  that  there  is  a  strong  price 
competition between traders.  

(476)  It  was  stated  that  any  price  increase  would  have  a  significant  negative  effect  on  the 
profitability. It was claimed that the printing industry is already under pressure due to 
structural overcapacity and any increase in purchase prices of CFP would put further 
pressure  on  the  printers.  In  this  regard,  it  is  noted  that  given  the  small  quantities  of 
Chinese CFP used by printers (who still source the majority of the CFP needed from 
Union producers) the direct impact of any duty was considered negligible. As far as a 
general price increase in the Union market is concerned, it was considered that since 

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this  price  increase  would  impact  on  all  economic  players  this  would  have  a  neutral 
effect.  

8.4.2.  Publishers 

(477)  Regarding  the  publishing  sector,  four  questionnaire  replies  were  received  from 
companies. Only one company had a minor purchase of Chinese-origin CFP in the IP. 
Two of the companies provided quantitative data concerning their use of CFP. 

(478)  Overall, it was found that on average the products where CFP is used represented 16 
% of the total turnover of these companies and that the average profit achieved in this 
business  was  around  12  %.  Furthermore,  it  was  found  that  the  six  companies 
purchased CFP mainly from the Union producers, while only one of them used CFP 
imported from the PRC. Another one started to buy Chinese products only after the IP. 
Therefore,  and  in  particular  on  the  basis  of  the  low  volumes  of  Chinese-origin  CFP 
used  in  this  sector,  the  imposition  of  countervailing  measures  on  imports  from  the 
PRC  is  unlikely  to  seriously  affect  the  publishing  sector  overall.  In  addition,  these 
companies were found to be profitable and could pass on price increases to the final 
customer  more  easily  because  the  use  of  customer-directed  and  customer-nominated 
paper whereby the paper used in the production is purchased by the customer itself is 
more  common.  Finally,  publishers  have  stronger  purchasing  power  because  of 
economies of scale. 

(479)  Two  associations  of  the  printing  and  publishing  industry  provided  submissions.  One 
opposed  the  imposition  of  duties,  claiming  that  any  price  increases  would  lead  to 
higher  costs  and  consequently  to  loss  of  competitiveness  and  jobs  in  downstream 
industries.  The  other  remained  neutral  but  claimed  that  the  measures  could  have 
negative  effects  on  the  downstream  industries  as  price  increases  could  lead  to  the 
relocation of the printing industry leading to increased imports of downstream printed 
matter.  

(480)  The investigation found that there exist several segments in paper products in terms of 
expected growth and that the segment of high quality printing paper, in which CFP is 
primarily  used,  is  still  growing.  As  regards  the  claim  that  losses  would  shift  to  the 
downstream market, this claim is vague and was not supported by any substantiating 
information or evidence.  

(481)  After  disclosure,  the  same  claim  about  possible  effects  on  the  downstream  industry 
was  repeated  and  supported  by  the  fact  that  imports  of  printed  matter  from  China 
increased  rapidly  in  recent  years  and  apparently  took  a  considerable  market  share 
within European consumption for all printed matter. 

(482)  As  explained  above,  the  cooperation  of  printers  was  limited  and  on  the  basis  of  the 
limited  quantitative  information  received  it  was  found  that  because  of  their 
profitability level and the share of CFP in their costs, printers are indeed sensitive to 
price  increases.  However,  most  printers  had  no  or  very  limited  direct  purchases  of 
Chinese paper in the IP and the amount of Chinese paper used by printers is in general 
low  therefore  the  direct  impact  of  the  duty  would  be  negligible.  Most  printers  also 
stated that because of their need for short delivery times, the share of supplies directly 
from third countries would remain limited.  

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(483)  As regards the claims concerning downstream printed matter from China it should be 
noted  that  the  import  statistics  of  printed matter  cover  a  wide  range  of  products  that 
include  final  printed  matter  that  is  not  printed  on  coated  fine  paper.  Based  on  the 
information available it could not be assessed what part of the products imported from 
China is printed on the product concerned and what is printed on other types of paper. 
However,  from  information  submitted  it  is  known  that  printed  matter  originating  is 
China  is  mostly  comprised  of  some  specific  categories  of  books,  children  books, 
calendars, packaging and greeting cards. Products that are more "time sensitive" such 
as weekly/monthly magazines and other newsprint are less susceptible to be imported 
from China because of the time needed for transportation. While the printing of some 
printed products may be more susceptible to relocation, on the other hand there exist 
product types for which proximity and service are crucial and therefore would not be 
affected by foreign competition. Furthermore, even though paper is an important cost 
element for the printing industry, it is also a labour-intensive industry and thus labour 
costs may be a more significant driver in relocation trends. In summary, it cannot be 
excluded that imports of printed products that are printed on CFP will increase but it is 
not  possible  to  estimate  with  any  accuracy  what  the  level  of  increase  might  be  and 
how  far  this  would  play  a  role  in  the  competitiveness  of  printing  producers  and 
therefore  and  therefore  what  direct  impact  price  increases  might  have  on  the 
downstream Union printing industry.  

(484)  From  information  submitted,  it  is  also  known  that  the  printing  industry  suffers  from 
structural overcapacity that leads to the continuing restructuring of the sector. One of 
the  driving  forces  towards  the  restructuring  was  also  the  consolidation  of  the  paper 
manufacturers  within  the  value  chain.  Any  difficulty  of  the  printing  industry  to 
increase  prices  is  considered  to  be  rather  largely  due  to  this  structural  overcapacity 
within the printing industry itself.  

8.4.3.  Conclusions on users 

(485)  Taking  the  above  into  consideration,  even  if  some  of  the  users  are  likely  to  be 
negatively  impacted  by  the  measures  on  imports  from  the  PRC,  the  impact  on  the 
users  in  the  two  distinctive  sectors  appears  to  be  limited  overall.  Furthermore,  the 
investigation  did  not  bring  to  light  any  significant  impact  on  users  which  purchased 
paper mainly from other sources than the PRC. On the contrary, most users stated that 
because  of  their  need  for  short  delivery  times,  the  share  of  supplies  from  third 
countries remains limited. Finally, the difficulties of the printing industry to increase 
prices are considered to be rather due to the structural overcapacity within the printing 
industry itself.  

(486)  It was also claimed that measures would cause a shortage of supply on the market and 

longer delivery times for users.  

(487)  The interested parties claiming possible shortages of supply did not quantify or give an 
estimate  of  the  possible  shortages.  These  claims  in  any  case  do  not  seem  to  be 
supported by the capacity utilization rate of the Union producers that was 83% in the 
IP leaving around one million tonnes of free capacity. On this basis, it is unlikely that 
shortages would occur. 

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(488)  Therefore, it was concluded that, on the basis of the information available, the effect of 
the countervailing measures against imports of CFP originating in the PRC will most 
likely not have a significant negative impact on the users of the product concerned. 

8.5. 

Conclusion on Union interest 

(489)  In view of the above, it is concluded that overall, based on the information available 
concerning the Union interest, there are no compelling reasons against the imposition 
of measures on imports of CFP originating in the PRC. 

9. 

COUNTERVAILING MEASURES 

9.1. 

Injury elimination level 

(490)  In view of the conclusions reached with regard to subsidization, injury, causation and 
Union  interest,  anti-subsidy  measures  should  be  imposed  in  order  to  prevent  further 
injury being caused to the Union producers by the subsidised imports. 

(491)  For the purpose of determining the level of these measures, account was taken of the 
subsidy  margins  found  and  the  amount  of  duty  necessary  to  eliminate  the  injury 
sustained by the Union producers, without exceeding the subsidy margin found. 

(492)  When calculating the amount of duty necessary to remove the effects of the injurious 
subsidization, it was considered that any measures should allow the Union industry to 
cover its costs of production and to obtain a profit before tax that could be reasonably 
achieved  by  an  industry  of  this  type  in  the  sector  under  normal  conditions  of 
competition, i.e. in the absence of subsidised imports, on sales of the like product in 
the Union.  

(493)  The complainant requested that the target profit should be set at minimum 10%, basing 
its  arguments  on  the  expected  profit  margin  used  by  independent  rating  agencies  in 
their classification methodology and the profitability achieved by a producer active in 
another paper production segment that is not affected by Chinese imports. 

(494)  The  target  profit  as  suggested  in  the  complaint  and  the  subsequent  request  of  the 
complainant was examined based on the questionnaire replies and verification visits to 
the  representative  Union  producers.  It  was  considered  that  the  target  profit  should 
reflect  the  high  up-front  investment  needs  and  risk  involved  in  this  capital-intensive 
industry  in  the  absence  of  dumped  and  or  subsidised  imports.Also  the  cost  of 
investment into machinery was considered. It was considered that a profit margin of 8 
%  on  turnover  could  be  regarded  as  an  appropriate  minimum  which  the  Union 
producers could have expected to obtain in the absence of injurious subsidisation. 

(495)  On this basis, a non-injurious price was calculated for the Union producers for the like 
product.  The  non-injurious  price  was  obtained  by  adding  the  abovementioned  profit 
margin of 8 % to the cost of production. 

(496)  The export sales of a company within the group of one cooperating exporting producer 

were excluded based on the reasons explained in recital (382).  

(497)  The  necessary  price  increase  was  then  determined  on  the  basis  of  a  comparison,  per 
product type, of the weighted average import price of the exporting producers in the 

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PRC, with the non-injurious price of the product types sold by the Union producers on 
the  Union  market  during  the  IP.  Any  difference  resulting  from  this  comparison  was 
then expressed as a percentage of the average CIF import value of the compared types. 

9.2. 

Definitive measures 

(498)  In  the  light  of  the  foregoing  conclusion  reached  with  regard  to  subsidisation,  injury, 
causation  and  Union  interests,  and  in  accordance  with  Article  15(1)  of  the  basic 
Regulation, it is considered that a definitive countervailing duty should be imposed on 
imports of the product concerned originating in the PRC at the level of the lower of the 
subsidy and the injury margins in line with the lesser duty rule. In this case, the duty 
rate should accordingly be set at the level of the subsidy margins found. 

(499)  The injury elimination margins and the subsidy margins and the proposed rates of the 
definitive countervailing duty for the PRC, expressed on the CIF Union border price, 
customs duty unpaid, are as follows: 

Exporting producer  Subsidy margin 

Injury margin 

Countervailing 
duty rate 

12% 

20% 

12% 

12% 

20% 

12% 

4% 

39.1% 

4% 

4% 

39.1% 

4% 

Gold  East  Paper 
(Jiangsu)  Co.,  Ltd, 
City, 
Zhenjiang 
Province, 
Jiangsu 
PRC 

Huasheng 
Gold 
(Suzhou 
Paper 
Industrial Park) Co., 
Ltd,  Suzhou  City, 
Jiangsu 
Province, 
PRC 

Shangdong 
Paper 
Chenming 
Holdings  Limited, 
Shouguang 
City, 
Shandong  Province, 
PRC 

Shouguang 
Chenming 
Art 
Paper  Co.,  Ltd, 
Shouguang 
City, 
Shandong  Province, 
PRC 

All other companies 

12% 

39.1% 

12% 

(500)  As concerns the parallel anti-dumping investigation, pursuant to Article 24(1), second 
subparagraph of the basic Regulation and Article 14(1) of Council Regulation (EC) No 
1225/2009  of  30  November  2009  on  protection  against  dumped  imports  from 

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countries not members of the European Community  26 no product shall be subject to 
both  anti-dumping  and  countervailing  duties  for  the  purpose  of  dealing  with  the  one 
and  the  same  situation  arising  from  dumping  and  from  export  subsidisation.  As 
concerns the subsidy schemes, as stated under recitals (235) to (245), only one scheme 
refers  to  export  subsidisation.  The  relevant  dumping  margin  of  the  cooperating 
exporting  producer  concerned  will  be  adjusted  accordingly  in  the  parallel  anti-
dumping investigation. With respect to other subsidy schemes, in  view of  the use of 
the  lesser  duty  rule  in  the  anti-dumping  investigation  carried  out  in  parallel  and  the 
amount  of  subsidisation  found  in  the  present  investigation,  it  was  not  considered 
necessary to further examine whether and to what degree the same subsidies are being 
offset twice when anti-dumping and countervailing duties are simultaneously imposed 
on the same imported product.  

(501)  The  individual  company  countervailing  duty  rates  specified  in  this  Regulation  were 
established  on  the  basis  of  the  findings  of  the  present  investigation.  Therefore,  they 
reflect  the  situation  found  during  that  investigation  with  respect  to  these  companies. 
These  duty  rates  (as  opposed  to  the  countrywide  duty  applicable  to  ‘all  other 
companies’) are  thus exclusively applicable to imports of products originating in  the 
country  concerned  and  produced  by  the  companies  and  thus  by  the  specific  legal 
entities mentioned. Imported products produced by any other company not specifically 
mentioned in the operative part of this Regulation with its name and address, including 
entities  related  to  those  specifically  mentioned,  cannot  benefit  from  these  rates  and 
shall be subject to the duty rate applicable to ‘all other companies’. 

(502)  Any  claim  requesting  the  application  of  an  individual  company  countervailing  duty 
rate (e.g. following a change in the name of the entity or following the setting-up of 
new production or sales entities) should be addressed to the Commission27 forthwith 
with all relevant information, in particular any modification in the company's activities 
linked  to  production,  domestic  and  export  sales  associated  with,  for  example,  that 
name  change  or  that  change  in  the  production  and  sales  entities.  If  appropriate,  the 
Regulation  will  then  be  amended  accordingly  by  updating  the  list  of  companies 
benefiting from individual duty rates. 

(503)  In  order  to  ensure  proper  enforcement  of  the  countervailing  duty,  the  residual  duty 
level  should  not  only  apply  to  the  non-cooperating  exporting  producers  but  also  to 
those producers which did not have any exports to the Union during the IP. 

10. 

DISCLOSURE 

(504)  Interested parties were informed of the essential facts and considerations on the basis 
of which it was intended to recommend the imposition of a definitive countervailing 
duty  on  imports  of  coated  fine  paper  originating  on  the  People's  Republic  of  China. 
They  were  also  granted  a  period  within  which  they  could  make  representations 
subsequent  to  this  disclosure.  The  comments  submitted  by  the  parties  were  duly 
considered, and, where appropriate, the findings have been modified accordingly. 

26 

27 

Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports 
from countries not members of the European Community, OJ L 343, 22.12.2009, p. 51.  
European  Commission,  Directorate-General  for  Trade,  Directorate  H,  Office  Nerv-  105,  B-1049 
Brussels. 

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HAS ADOPTED THIS REGULATION: 

Article 1 

1. A definitive countervailing duty is hereby imposed on coated fine paper, which is paper or 
paperboard coated on one or both sides (excluding kraft paper or kraft paperboard), in either 
sheets  or  rolls,  and  with  a  weight  of  70  g/m2  or  more  but  not  exceeding  400  g/m2  and 
brightness of more than 84 (measured according to ISO 2470-1), currently falling within CN 
codes ex 4810 13 20, ex 4810 13 80, ex 4810 14 20, ex 4810 14 80, ex 4810 19 10, ex 4810 
19 90, ex 4810 22 10, ex 4810 22 90, ex 4810 29 30, ex 4810 29 80, ex 4810 99 10, ex 4810 
99 30 and ex 4810 99 90 (TARIC codes 4810 13 20 20, 4810 13 80 20, 4810 14 20 20, 4810 
14 80 20, 4810 19 10 20, 4810 19 90 20, 4810 22 10 20, 4810 22 90 20, 4810 29 30 20, 4810 
29 80 20, 4810 99 10 20, 4810 99 30 20 and 4810 99 90 20) and originating in the People's 
Republic of China.  

The definitive countervailing duty does not concern rolls suitable for use in web-fed presses. 
Rolls suitable for use in web-fed presses are defined as those rolls which, if tested according 
to the ISO test standard ISO 3783:2006 concerning the determination of resistance to picking 
– accelerated speed method using the IGT tester (electric model), give a result of less than 30 
N/m when measuring in the cross-direction of the paper (CD) and a result of less than 50 N/m 
when measuring in the machine direction (MD). The definitive countervailing duty does also 
not concern multi-ply paper and multi-ply paperboard. 

2. The rate of the definitive countervailing duty applicable to the net, free-at-Union-frontier 
price,  before  duty,  of  the  products  described  in  paragraph  1  and  manufactured  by  the 
companies listed below shall be as follows:  

Company 

Countervailing 
duty rate 

TARIC additional 
code 

12% 

B001 

4% 

B013 

Gold 
Paper 
East 
(Jiangsu)  Co.,  Ltd, 
Zhenjiang 
City, 
Province, 
Jiangsu 
PRC;  Gold  Huasheng 
Paper 
(Suzhou 
Industrial  Park)  Co., 
Ltd, 
Suzhou  City, 
Jiangsu Province, PRC 

Shangdong  Chenming 
Paper 
Holdings 
Shouguang 
Limited, 
Shandong 
City, 
; 
PRC 
Province, 
Shouguang  Chenming 
Art  Paper  Co.,  Ltd, 
City, 
Shouguang 
Province, 
Shandong 

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PRC 

All other companies 

12% 

B999 

3. Unless otherwise specified, the provisions in force concerning customs duties shall apply. 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the Council 

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