Prováděcí nařízení Komise (EU) 2020/776 ze dne 12. června 2020, kterým se ukládají konečná vyrovnávací cla na dovoz některých tkaných a/nebo vpichovaných textilií ze skleněných vláken pocházejících z Čínské lidové republiky a Egypta a kterým se mění prováděcí nařízení Komise (EU) 2020/492, kterým se ukládá konečné antidumpingové clo na dovoz některých tkaných a/nebo vpichovaných textilií ze skleněných vláken pocházejících z Čínské lidové republiky a Egypta

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (the basic Regulation)OJ L 176, 30.6.2016, p. 55 . , and in particular Articles 15 and 24(1) thereof,

A definitive countervailing duty is imposed on imports of fabrics of woven and/or stitched continuous filament glass fibre rovings and/or yarns with or without other elements, excluding products which are impregnated or pre-impregnated (pre-preg), and excluding open mesh fabrics with cells with a size of more than 1,8 mm in both length and width and weighing more than 35 g/m2 originating in the People's Republic of China and Egypt currently falling under CN codes ex70193900, ex70194000, ex70195900 and ex70199000 (TARIC codes 7019390080, 7019400080, 7019590080 and 7019900080).

The definitive countervailing duty applicable to the net, free-at-Union-frontier price, before duty, of the product described in paragraph 1 and produced by the companies listed below shall be as follows: Country concernedCompanyDefinitive countervailing dutyTARIC additional codePRCJushi Group Co. Ltd; Zhejiang Hengshi Fiberglass Fabrics Co. Ltd; Taishan Fiberglass Inc. 30,7 %C531PGTEX China Co. Ltd; Chongqing Tenways Material Corp. 17,0 %C532Other companies cooperating in both anti-subsidy and anti-dumping investigation listed in the Annex I24,8 %See Annex IOther companies cooperating in anti-dumping investigation but not in anti-subsidy investigation listed in the Annex II30,7 %See Annex IIAll other companies30,7 %C999EgyptJushi Egypt For Fiberglass Industry S.A.E; Hengshi Egypt Fiberglass Fabrics S.A.E. 10,9 %C533All other companies10,9 %C999

The application of the individual countervailing duty rates specified for the companies mentioned in paragraph 2 or in Annexes I or II shall be conditional upon presentation to the customs authorities of the Member States of a valid commercial invoice, on which shall appear a declaration dated and signed by an official of the entity issuing such invoice, identified by his/ her name and function, drafted as follows: I, the undersigned, certify that the (volume) of (product concerned) sold for export to the European Union covered by this invoice was manufactured by (company name and address) (TARIC additional code) in the (country concerned). I declare that the information provided in this invoice is complete and correct. If no such invoice is presented, the duty rate applicable to all other companies shall apply.

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

In cases where the countervailing duty has been subtracted from the anti-dumping duty for certain exporting producers, refund requests under Article 21 of Regulation (EU) 2016/1037 shall also trigger the assessment of the dumping margin for that exporting producer prevailing during the refund investigation period.

OJ L 176, 30.6.2016, p. 55 .

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(1) On 16 May 2019 , based on Article 10 of the basic Regulation, the European Commission (the Commission) initiated an anti-subsidy investigation with regard to imports into the Union of certain woven and/or stitched glass fibre fabrics (GFF) originating in the People's Republic of China (the PRC) and Egypt (together referred to as the countries concerned). The Commission published a Notice of Initiation in the Official Journal of the European Union (Notice of Initiation)Notice of initiation of an anti-subsidy proceeding concerning imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ C 167, 16.5.2019, p. 11 ). on 16 May 2019 .

(2) The Commission initiated the investigation following a complaint lodged on 1 April 2019 by Tech-Fab Europe (the complainant) on behalf of producers representing more than 25 % of the total Union production of certain woven and/or stitched glass fibre fabrics. The complaint contained evidence of subsidisation and of a resulting injury that was sufficient to justify the initiation of the investigation.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of China (GOC)The term GOC is used in this Regulation in a broad sense, including the State Council, as well as all Ministries, Departments, Agencies and Administrations at central, regional or local level. and the Government of Egypt (GOE)The term GOE is used in this Regulation in a broad sense, including all Ministries, Departments, Agencies and Administrations at central, regional or local level. that it had received a properly documented complaint, and invited the GOC and the GOE for consultations in accordance with Article 10(7) of the basic Regulation. Consultations were held on 13 May 2019 with the GOC and with the GOE. However, no mutually agreed solution could be reached.

(4) On 21 February 2019 , the Commission initiated a separate anti-dumping investigation of the same product originating in the PRC and EgyptNotice of initiation of an anti-dumping proceeding concerning imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ C 68, 21.2.2019, p. 29 ). (the separate anti-dumping investigation). On 7 April 2020 , the Commission imposed definitive anti-dumping duties on imports of the product concerned originating in the PRC and EgyptCommission Implementing Regulation (EU) 2020/492 of 1 April 2020 imposing definitive anti-dumping duties on imports of certain woven, and/or stitched glass fibre fabrics originating in the People’s Republic of China and Egypt (OJ L 108, 6.4.2020, p.1 ). (the definitive anti-dumping Regulation). The injury, causation and Union interest analyses performed in the present anti-subsidy investigation and the separate anti-dumping investigation are mutatis mutandis identical, since the definition of the Union industry, the sampled Union producers, the period considered and the investigation period are the same in both investigations.

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

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

(7) More specifically, during the pre-initiation consultations, the GOC indicated that the complainant's references to any Chinese plans, programmes, or recommendations were irrelevant as they are not binding and that the GFF industry is not mentioned in China’s 13th Five Year Plan nor in the 13th Five Year Plan for the Building Materials Industry (2016-2020). Following initiation, the GOC also stated that GFF is not covered by the document Made in China 2025. The Commission noted that the GOC does not dispute the existence of such plans, programmes, or recommendations but only the extent to which they are binding or to which they cover the GFF industry. The Commission further observed that the complainant provided evidence indicating that 'new materials' are mentioned in several government documents, while 'glass-based materials' are mentioned in the 13th Five Year Plan for the Building Materials Industry (2016-2020). The GOC failed to produce any evidence showing that those statements would not be applicable to the product concerned.

(8) The GOC also stated that neither the Chinese Export & Credit Insurance Corporation (Sinosure) nor State-owned commercial banks are public bodies and that the GOC did not entrust or direct private banks. The Commission noted that this claim is connected to the claim already evoked above, and that the complaint among others mentioned the Bank Law in China, which the GOC does not dispute to belong to the Chinese legislation. The Commission also highlighted that recent EU anti-subsidy investigations had concluded differently on this matterCommission Implementing Regulation (EU) 2017/969 of 8 June 2017 imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China (OJ L 146, 9.6.2017, p. 17 ) (HRF case), Commission Implementing Regulation (EU) 2018/1690 of 9 November 2018 imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163 (OJ L 283, 12.11.2018, p. 1 ) (Tyres case) and Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People's Republic of China (OJ L 16, 18.1.2019, p. 5 ) (E-bikes case). .

(9) Furthermore, the GOC claimed that export buyers' credit are provided to foreign companies and hence do not benefit Chinese GFF producers. The Commission found however that benefits granted to foreign companies owned by Chinese GFF producers may benefit the latter.

(10) The GOC indicated that the tax scheme relating to accelerated depreciation of equipment used by High-Tech enterprises for High-Tech development and production, as well as some of the mentioned grants programmes had been terminated. The Commission took note of this comment, but highlighted that it does not apply to all programmes nor to the different levels of government authorities (i.e. national, regional or local) mentioned in the complaint. In addition, the tax scheme related to accelerated depreciation could still procure ongoing benefits such as depreciation over the lifespan of the relevant equipment, possibly covering the investigation period.

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

(12) In addition, the GOC stated that the complaint lacked sufficient evidence as it relied mostly on previous EU regulations, which concern different product scopes. The Commission however noted that the findings made in previous and recent anti-subsidy investigations relate to the same subsidy programmes alleged in the complaint. Following initiation, the GOC furthermore submitted that substantial changes and reforms had occurred in the financial sector in the years 2016 to 2018, and that the complaint could thus not rely on any pre-existing situation. However, the Commission noted that the complainant also provided additional evidence in the complaint of the continued existence of the subsidy programmes, without having been substantially altered. The Commission further recalled that the GOC failed to provide evidence rebutting the continuation of the relevant programmes. Thus, at the stage of initiation, the evidence available tended to show that there was no relevant change in the subsidy programmes at issue. Ultimately, this was also confirmed in this investigation.

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

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

(15) Finally, a particular element of this case is that the alleged subsidisation in Egypt concerns two companies in the China-Egypt Suez Economic and Trade Cooperation Zone ('SETC-Zone'), a special economic zone which was set up together by the PRC and Egypt, which are the two countries targeted by the complaint. The Commission stated its intention to investigate all subsidies received by these companies in the SETC-Zone, regardless of their source.

(16) During the pre-initiation consultations, the GOC indicated that the complainant had no legal basis to challenge the GOC via the product concerned originating in or exported from Egypt. The Commission noted the concerns of the GOC, but still considered that there was sufficient evidence to start an investigation into the alleged countervailable subsidies granted to the companies in the SETC-Zone, regardless of their source.

(17) Following initiation, the GOC argued that, when establishing the Union consumption, the adjustment made to the import data from the PRC was unfair when compared to the adjustment made to the import data from other third countries like Russia. The GOC further argued that these adjustments were not cross-checked by the Commission. The GOC also argued that there is no information on the record on what constitutes market information / intelligence used in adjustments made to import data.

(18) As also outlined in recital (937), further to the complainant’s import analysis on CN-basis, the imports were also assessed based on import statistics at TARIC level, cross-checked with other sources and adjusted where appropriate. With regards to Russia, the import data was cross-checked and adjusted based on the import data from GFF producers related to the Union producers that were the only known GFF producers in Russia. This methodology was found reasonable leading to an accurate estimate of the imports of the product concerned from Russia. In the same way, during the investigation, as explained in recital (937) below, the Commission cross-checked the Eurostat TARIC-level data with the data submitted by the known producers in the PRC, who came forward during the sampling exercise. The export volume of GFF reported by the cooperating Chinese exporting producers represented the totality of the imports recorded in Eurostat under the relevant TARIC codes and all exports were therefore considered to be the product concerned. Finally, by contrast to what was claimed by the GOC, the complaint explained how market information / intelligence was used to adjust import data. This claim was therefore rejected.

(19) In its comments on initiation, the GOC argued that the market for GFF is segmented and each of the segments represent vastly different price bands. The GOC argued that the three main types of products woven rovings (WR), knitted non-crimp fabrics (NCF), and complex materials (CM) have different composition and production steps/processes, and therefore also production costs and sales prices. Moreover, these three product types have different physical and technical characteristics, which in turn define their end uses. According to the GOC, the price comparison/undercutting assessment, as well as the assessment of the allegedly injurious impact of the Chinese imports as done in the complaint at an aggregate level is misleading and insufficient without actually assessing the extent of the presence, i.e. volume and market share, of the Chinese and the Union producers in each of the product segments.

(20) The Commission considered that the GOC failed to submit any evidence to support those claims. At initiation, the complainant provided sufficient evidence regarding costs and prices of the product under investigation. The fact that different types of products exist that may have different production processes, costs and sales prices does not automatically entail that there is a segmentation of the market. It is noted that in accordance with Article 10(2) of the basic Regulation the complainant must provide the information that is reasonably available to it. As costs and prices of products types produced in China are by nature confidential and not available to the complainant, the Commission considered that the complaint contained sufficient information that was reasonably available to the complainant to initiate the investigation.

(21) Furthermore, the information collected and received by the Commission during the investigation showed that the Union market for GFF is not segmented. The claim that the three product types – WR, NCF and CM – have different physical and technical characteristics, which in turn define their end uses, is factually incorrect. As explained in the complaint and in recitals (129) to (138), and as undisputed by the GOC, the product concerned is used to reinforce thermoplastic and thermoset resins in the composites industry. There are many overlaps in usage; the fabric type chosen will depend on the surface look, the resin flow, the tension to which the finished product will be subject and the application technique. Certain product types are particularly good for closed mould production techniques, or hand lay-up.

(22) The three product types have the following main and overlapping uses: WRs are used on thermoset applications, especially hand lay-up, for marine products (boat hulls and decks), vehicle body panels (e.g. trucks, trains), windmill blades, pipes and tanks. NCFs are used for the construction of marine products (boat hulls and decks), vehicle bodies and panels (e.g. trucks, trains), windmill blades and nacelles, skis and snowboards, pipes and tanks. CMs are used in closed mould applications for vehicle bodies and panels, marine products (boat hulls and decks), windmill nacelles and leisure vehicles.

(23) Finally, the Commission notes that it is not unusual for a product concerned to have product types that have different cost structure and prices. This is the very reason for which the Commission collects data on the basis of detailed product types classification. That classification, aside of fabric forms, distinguished between sales formats, types of glass used, area weight and density of rovings. The undercutting calculation was based on product type per product type comparison and thus all these characteristics were taken into consideration when imports from the PRC were being compared with GFF from Union producers. This argument was therefore rejected.

(24) In its comments on initiation, the GOC further argued that significant differences between import prices of GFF from different sources also makes clear that the Union market for the different product types is segmented and imports from different countries are for different market segments.

(25) As noted above, the information collected by the Commission throughout the investigation confirmed that the Union market for GFF is not segmented. Furthermore, the investigation has shown that Chinese exporting producers and Egyptian exporting producers do not export completely different forms of GFF. The matching between product sold by exporting producers in the PRC and Egypt was at around 90 %. This argument was therefore rejected.

(26) In its comments on initiation, the GOC further argued that the Chinese import price comparison and undercutting calculation in the complaint were based on un-comparable and cherry-picked data that was wrongly adjusted.

(27) As mentioned above, Article 10(2) of the basic Regulation sets the standard of the evidence to be provided by the complainant in the complaint. Thus, while the information has to be sufficient it must also be reasonably available to the complainant. Since cost and price information are by nature confidential, no precise data on costs and prices per product types exported by companies in third countries are reasonably available to the complainant at initiation stage. The information provided was nonetheless considered sufficient to initiate the investigation since it was based on Chinese import prices statistics from Eurostat.

(28) The Commission further noted that, as specified in recital (965), the undercutting calculation during the investigation was mainly based on actual detailed data of sampled Union producers and exporting producers, which confirmed the undercutting allegations contained in the complaint based on Eurostat statistics. This argument was therefore considered moot also with regard to the data used in the investigation.

(29) In its comments on initiation, the GOC argued that Chinese GFF imports did not cause price pressure. This statement was not substantiated by any evidence.

(30) In contrast, the complaint provided information on the effect of the subsidised imports on prices of the like product in the Union market and the consequent impact of the imports on the Union industry that was considered sufficient to initiate the investigation. The evidence provided in the complaint showed that Union prices were significantly undercut by both Egyptian and Chinese import prices.

(31) In addition, that statement is factually incorrect. As found by the Commission during the investigation and explained in recital (966), the sampled Chinese exporting producers significantly undercut Union industry’s prices during the IP. This argument was therefore rejected.

(32) In its comments on initiation, the GOC argued the cumulation of imports from China and Egypt for the purpose of the injury analysis is not justified in the present case. This is because the conditions of competition between the imports from these countries, and between the imports from these countries and the like product produced and sold by the Union industry on the Union market are vastly differ. The GOC argued that Chinese GFF is not in competition with Egyptian GFF as (i) Egyptian GFF imports were practically inexistent until 2017; (ii) GFF imports from China and Egypt followed completely opposite trends; (iii) Egyptian imports are differently priced; and (iv) the Egyptian imports are only of NCF according to the Complainant’s own calculations and therefore do not compete with the Union and Chinese GFF sales on the Union market.

(33) The Commission first observed that the complaint contained sufficient evidence tending to show that imports of the product concerned were being subsidised and imports volumes were significant and cause injury to the Union industry. It also contained a number of elements regarding the cumulative assessment of imports from the two countries concerned (in particular that for each country the estimated amounts of subsidisation are not de minimis Annexes to Section 6 of the consolidated version of the complaint. , that for each country the import volumes are significantAnnexes to recitals 349 to 352 of the consolidated version of the complaint. and that the countries concerned are competing with each other, with the like product and third countries and that the products exported by these countries are sharing the same characteristics and end uses with the like productAnnexes to Section 4 of the consolidated version of the complaint. ), which were found to overcome their burden at initiation stage. This evidence was analysed further during the investigation and the Commission confirmed that the conditions for cumulation were met, as described in recitals (947) to (950) explained in detail.

(34) The GOC further argued that Chinese import volume decreased in the period considered and could not have injured the Union producers.

(35) As discussed above, the complaint contained sufficient evidence that Chinese and Egyptian imports of GFF should be assessed cumulatively. According to the evidence in the complaint, GFF imports from both countries are competing with each other and with the like product, as well as with imports from third countries. Imports from the PRC and Egypt have the same product characteristics and uses, and are sold to customers across the Union in direct competition with GFF produced by the Union industry and third countries.

(36) In its comments on initiation, the GOC argued that the complainant has failed to provide reliable data as regards the Union industry as a whole, as the data for non-complainants was unreliable. Furthermore, the complainant did not provide information on several injury indicators.

(37) The GOC did not explain in what way the data was unreliable. Again, confidential information on sales and production data of the non-complainant Union producers was not available to the complainant. The complainant therefore provided estimates that were considered reasonable and sufficiently accurate and in compliance with Article 10(2) of the basic Regulation. In order to provide sufficient evidence of injury, there is no obligation to provide data on all injury indicators mentioned in Article 8(4) of the basic Regulation; neither do all injury indicators have to show a downward trend.

(38) The Commission noted that the sample of Union producers selected during the investigation, included the biggest non-complainant, which gave the Commission an opportunity to cross-check macro data provide by the complainant. Furthermore, all relevant injury indicators were considered by the Commission in the investigation. This argument was therefore rejected.

(39) In its comments on initiation, the GOC argued that, the Union producers are not injured and particularly not on account of the Chinese imports. According to the GOC, between 2015 and the complaint IP, the Union industry was doing well and basically, all the injury indicators developed positively or remained stable.

(40) The data in the complaint clearly showed that the Union industry has been materially injured by heavily undercutting subsidised imports of GFF from the subject countries. The production, sales and market share of the Union industry have dropped substantially. The complainants were forced to reduce investment and employment. Stocks of Union producers supporting the complaint increased and their profitability dropped.

(41) The Commission noted that during the investigation the injury indicators established based on the actual verified data provided by sampled Union producers showed material injury that was caused by imports from the countries concerned. The GOC provided comments on these indicators, in its comments on the final disclosureDefinitive disclosure is the same as final disclosure for the purpose of this document. . These comments are addressed in Section 5.4. of this Regulation.

(42) In its comments on initiation, the GOC argued that the Union industry suffered injury due to its related imports from third countries and the decline in demand on the Union market.

(43) The Commission disagreed. The complaint demonstrated that due to the low volumes of the related imports from third countries these could not have caused the material injury. The complainant’s analysis of the injury indicators further showed that the injury cannot be explained with the decline in demand on the Union market as their losses in market share demonstrate that its loss in sales went clearly beyond the consumption decline.

(44) The complainant provided sufficient evidence of causal link between imports from the countries concerned and injury. In addition, the complainant analysed other potential causes of injury such as the performance of Union producers, the export performance of Union producers and imports from other third countries.

(45) During the investigation, imports from third countries and the decline in demand on the Union market, were examined in Section 6.2. below. After final disclosure, no new arguments were provided in the GOC’s comments on initiation. This argument was therefore rejected.

(46) In its comments on initiation, the GOC argued that vertically integrated Union producers suffered injury due to costs related to backward integration and decreased ability to sell on the open market due to downward integration.

(47) At initiation, no information was available concerning an apparent competitive disadvantage from the Union industry. Furthermore, Union producers are predominantly not vertically integrated.

(48) In addition, the Commission noted that the investigation has not demonstrated abnormal costs due to vertical integration. Furthermore, all sampled Union producers sold primarily to unrelated customers. This argument was therefore rejected.

(49) In its comments on initiation, the GOC argued that the different sales trends of the complainant and non-complainant producers between 2015 and the complaint IP indicate that the two sets of producers compete for sales and customers. Thus, the loss of sales and market share by the complainant producers to the non-complainant producers was also a likely reason that the former suffered in terms of sales volumes and could not increase prices in the complaint IP.

(50) Competition amongst Union producers is a consequence of the free market and it is normally an assumption (unless e.g. there is evidence of the existence of anti-competitive practices, which is not the case), rather than a factor explaining the existence of injury. Thus, not only complainant and non-complainant Union producers compete with each other on the Union market, but also the complainant Union producers themselves compete with each other. This cannot be considered as attenuating the causal link between subsidised imports and the material injury suffered by the entire Union industry. The findings of material injury based on a valid sample rely on an assessment of the industry as a whole, including data from complainants and non-complainants (micro and macro data).

(51) During the investigation, as specified in the Note to the file for inspection by the interested party on the final sample of the Union producers of 21 June 2019 , the sample of Union producers consisted of both, complainant and non-complainant Union producers. Furthermore, the injury determination was not limited to the complainant Union producers but to the entire Union industry as a whole. This claim was therefore rejected.

(52) Finally, in its comments following initiation, the GOC claimed that excessive confidentiality has been granted to key information such as the supporters of the complaint and the main injury-related data. The GOC asserted that this had prevented it from properly rebutting the injury claims made by the complainant.

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

(54) The GOE claimed that the investigation should not be initiated because the complaint did not satisfy the evidentiary requirements of Articles 11(2) of the WTO Agreement on Subsidies and Countervailing Measures and of Article 10(2) of the Basic Regulation. According to the GOE, there was insufficient evidence of countervailable subsidies, injury and a causal link between the subsidised imports and the injury. The Commission rejected that claim for the same reasons as mentioned in recital (6) above.

(55) During the pre-initiation consultations, the GOE indicated that the complainant did not present evidence that the alleged preferential loans are granted by the Egyptian government. However, in view of the body of evidence brought forward in the complaint, and most notably the arrangements between China and Egypt, as well as the objectives of these arrangements, the Commission is of the view that the complainant provided sufficient evidence as was reasonably available to it showing that the conduct of granting subsidies through preferential lending could be attributed to the GOE.

(56) Furthermore, the GOE claimed that the alleged tax benefits were removed from the legislation in 2015 and that the complainant failed to provide evidence that they continue to apply for existing projects. The Commission however found that the complainant provided sufficient evidence of the grandfathering of such tax benefits as was reasonably available to it.

(57) The GOE also stated that the remission of import duties on raw materials is not a subsidy to the extent that these imported products are re-exported as such or as processed into a downstream product. The Commission acknowledged that only the excess remission of import duties on raw materials is a countervailable subsidy, and paid particular attention to this during the investigation. The Commission further noted that the GOE’s comment does not apply to production equipment.

(58) The GOE claimed that the complainant failed to provide evidence of benefit on the provision of land at less than adequate remuneration. The Commission however found that the complainant provided sufficient evidence of benefit as was reasonably available to it.

(59) Finally, the GOE indicated that the complainant failed to provide evidence of specificity concerning the provision of electricity at less than adequate remuneration, as there is no specificity when access to a subsidy is subject to objective conditions. The Commission noted that the GOE did not provide any evidence with respect to such objective conditions during the pre-initiation consultations.

(60) Therefore, the Commission concluded that there was sufficient evidence provided in the complaint to start an investigation into the alleged countervailable subsidies granted directly or indirectly by the GOE.

(61) Following definitive disclosure, Yuntianhua Group claimed that the replacement of factors of production performed in the separate anti-dumping investigation is inappropriate and requested the Commission to perform a dumping margin calculation for the exporting producers of the group without any recourse of Article 2(6a) of Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (the basic anti-dumping Regulation)OJ L 176, 30.6.2016, p. 21 . . According to Yuntianhua Group, the anti-subsidy investigation found no evidence that the inputs of GFF were provided for less than adequate remuneration. It similarly argued that the anti-subsidy investigation accepted that inputs of GFF were purchased at undistorted market values since the turnover of input and raw material suppliers were used for the calculation of the subsidy benefits.

(62) The Commission, firstly, noted that comments on the calculation and methodology used in the separate anti-dumping investigation are outside of the scope of this proceeding. Therefore, comments concerning the methodology used for the determination of the dumping should be provided in the context of the said investigation.

(63) Second, the investigation, as described in Section 3, showed that the key suppliers of the exporting producers benefited extensively from government subsidies. The Commission recalled that the use of the turnover of related companies supplying inputs and raw materials does not imply the acceptance of undistorted market values of those supplies. On the contrary, the turnover is the allocation key, which allows a sound apportionment of the established subsidies from which the exporting producers benefited.

(64) Finally, the Commission noted that the findings made under Article 2(6a) of the basic anti-dumping Regulation relate to significant distortions when prices or costs are affected by substantial government intervention. A variety of elements is examined in this context holistically. Accordingly, the fact that an anti-dumping investigation under Article 2(6a) does not rely on evidence concerning subsidisation of raw materials or of the product concerned is not a bar for the Commission to investigate separately and pursuant to the applicable rules in the basic Regulation whether there is subsidisation. The arguments of Yuntianhua Group were therefore rejected.

(65) Following the additional definitive disclosure, the Yuntianhua Group claimed that the disclosure contained new findings regarding: (i) the lack of GFF market segmentation; (ii) physical and technical product characteristics; (iii) cost and price structure; (iv) double counting resulting from the concurrent imposition of anti-dumping and anti-subsidy duties which affected the level of definitive anti-dumping duties imposed on 7 April 2020 ; and (v) the fact that the dumping margin found in the anti-dumping investigation for this party was incorrect and should be reduced by the entire amount of subsidization established in the PRC to avoid double-counting. These elements were not contained in the final disclosure of the parallel anti-dumping procedure, which would thereby not contain these essential findings and considerations. As a result, according to this party, the definitive anti-dumping Regulation (EU) 2020/492 would be manifestly unreasoned and illegal, and the dumping margin of 64,7 % appearing in the anti-dumping Regulation (EU) 2020/492 would be wrong.

(66) The Commission noted at the outset that the explanations contained in the additional definitive disclosure in this proceeding are a reaction to comments received by parties further to that disclosure, and thus contained more details to the findings made by the Commission. Accordingly, they do not constitute new findings but simply address the comments of the interested parties.

(67) Furthermore, with regard to points (i)-(iii) raised by this party i.e. the lack of GFF market segmentation, the product characteristics, and the cost and price structure, the Commission noted that the remarks in the additional disclosure concerning these three points were meant to address new claims raised by the parties. These new claims were submitted only in the context of this anti-subsidy proceeding. The only claim raised in the anti-dumping proceeding on segmentation was that Union producers would only produce OEM customer-specific products and no measures should be imposed on the OEM segment. These arguments were fully addressed in recital 409 of the anti-dumping RegulationOJ L 108, 6.4.2020, p. 67 . . Therefore, the Commission could not possibly have addressed these new comments already in the context of the anti-dumping disclosure. The definitive anti-dumping regulation contained all the essential findings and considerations on the basis of which the Commission took its decision in relation to that procedure and fully addressed all the arguments that had been raised in the context of that proceeding. The findings in the anti-subsidy procedure do not affect the reasoning provided for in the definitive anti-dumping regulation.

(68) Moreover, from a substantive point of view, these points do not affect or alter in any way the findings of the investigation, either the anti-dumping or the anti-subsidy. Therefore, there is no impact whatsoever of these points in the situation of the party raising this claim or of other parties. Despite that, the Commission decided to give an additional opportunity for parties to comment on those points. Indeed, even though they did not introduce any changes themselves (and thus the Commission did not have in principle an obligation to address them in the additional disclosure but in the definitive regulation), they were included in the additional definitive disclosure. For all these reasons, these claims were rejected.

(69) In any event, there is no contradiction between the findings of the two investigations. The only difference is that parties had the opportunity to comment at a later stage and made additional comments in this proceedings. The Commission had the obligation to reply to these comments and have done so in this Regulation.

(70) With regard specifically to the last two issues, (iv) and (v) in recital (67) above, of possible double counting and the dumping margin, the Commission noted the following. First, as already explained in reply to the parties’ comments to the definitive disclosure of this proceeding in particular at recital (1137), the Commission fully addressed the potential issue of double counting and gave ample opportunity to all parties to submit comments in the course of this proceeding. It could not possibly have done so in the context of the then ongoing anti-dumping proceeding. Second, the Commission notes that in the context of separate anti-dumping and anti-subsidy proceedings on the same product originating from the same country where the imposition of countervailing duties occurs later than the imposition of anti-dumping duties, there is no option other than amending the previously imposed anti-dumping duties. This must be done in order to take into account the new countervailing duties while at the same time preventing double counting and respecting the lesser duty rule if applicable and relevant. For this purpose, in these cases the legislative technique is to impose the relevant countervailing duties and then at the same time amend the relevant accplicable anti-dumping duties accordingly via the same Regulation. Therefore, contrary to what this party is arguing, the anti-dumping Regulation (EU) 2020/492 is not manifestly wrong and unreasoned. The relevant assessments and claims were fully addressed in this Regulation, which also constitutes the basis for amending the definitive anti-dumping regulation. As the relevant anti-dumping duty applicable to the Yuntianhua Group is also modified accordingly pursuant to this Regulation, as explained in details at Section 8, also the claim of this party that the level of its anti-dumping duty in Regulation (EU) 2020/492 is incorrect is both factually and legally wrong. For all these reasons, the claims by the Yuntianhua Group are rejected.

(71) On 31 July 2019 , the complainant submitted a request for registration of imports of GFF originating in the countries concerned based on Article 24(5) of the basic Regulation. On 21 November 2019 , the complainant re-submitted a request for registration pursuant to Article 24(5) of the basic Regulation, with updated import figures.

(72) Under Article 24(5) of the basic Regulation, imports of the product concerned are subject to registration for the purpose of ensuring that should the investigation result in findings leading to the imposition of definitive countervailing duties, those duties can, if the necessary conditions are fulfilled, be levied retroactively on the registered imports in accordance with the applicable legal provisions.

(73) Responding to the request for registration, interested parties submitted comments that the Commission addressed in the registration Regulation. The Commission had at its disposal sufficient evidence justifying the need to register imports.

(74) On 21 January 2020 , the Commission published Implementing Regulation (EU) 2020/44 (the registration Regulation)Commission Implementing Regulation (EU) 2020/44 of 20 January 2020 making imports of certain woven and/or stitched glass fibre fabrics originating in the People’s Republic of China and Egypt subject to registration (OJ L 16, 21.1.2020, p. 1 ). making imports of GFF originating in the PRC and Egypt subject to registration as of 22 January 2020 .

(75) During the investigation, it became apparent that some economic operators might not have come forward based on an incorrect understanding of the definition of the product under investigation. For that reason, on 18 September 2019 , the Commission clarified the wording of the product scope description included in the Notice of Initiation by publishing a Notice (Clarification Notice)Notice clarifying the notices of initiation of anti-dumping and anti-subsidy proceedings concerning imports of certain woven and/or stitched glass fibre fabrics originating in the People’s Republic of China and Egypt (OJ C 314, 18.9.2019, p. 6 ). . The Clarification Notice also gave the possibility for parties to come forward within a prescribed time limit to make themselves known and to request a questionnaire, if they wished so. No interested party submitted any comment on the Clarification Notice nor requested a questionnaire.

(76) After publication of the Clarification Notice and in the subsequent investigation, it was confirmed that no economic operators had failed to come forward due to the possible misunderstanding in the definition of the product concerned contained in the Notice of Initiation.

(77) The investigation of subsidisation and injury covered the period from 1 January 2018 to 31 December 2018 (the investigation period or IP). The examination of trends relevant for the assessment of injury covered the period from 1 January 2015 to the end of the investigation period (the period considered).

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

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

(80) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. The Yuntianhua Group requested an intervention from the Hearing Officer to raise concerns related to the deadline given to respond to a deficiency letter. The company argued that it had not noticed the deficiency letter because its IT server had mistakenly considered the Commission’s e-mail as junk mail, and requested an extension of 18 days. The Hearing Officer invited the Commission to extend the deadline by 6 days.

(81) As mentioned in Section 1.3, the Commission clarified the product scope during the investigation and gave interested parties concerned by the clarification, or who might not have made themselves known because they believed they were not concerned by the proceeding, the opportunity to make themselves known and request a questionnaire within a time limit. No additional parties came forward.

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

(83) In the Notice of Initiation, the Commission stated that it had decided to limit the investigation to a reasonable number of Union producers by applying sampling. It added that it had provisionally selected a sample of Union producers based on the reported production volume of the like product in the Union between October 2017 and September 2018 also taking into consideration the geographical spread. This sample consisted of four Union producers accounting for more than 40 % of the estimated total Union production of GFF. None of the interested parties provided comments and the provisional sample was therefore confirmed. The sample is representative of the Union industry.

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

(85) Only one unrelated importer (Euroresins UK Ltd.) provided the requested information and agreed to be included in the sample. In view of the low number of cooperating importers, the Commission decided that sampling was not necessary.

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

(87) Eight exporting producers or groups of exporting producers in the PRC provided the requested information and agreed to be included in the sample. In accordance with Article 27(1) of the basic Regulation, the Commission selected a sample of two groups of exporting producers based on the largest representative volume of exports to the Union, which could reasonably be investigated within the time available. The sampled groups of exporting producers represented more than 79 % of the reported exports of GFF from the PRC to the Union during the investigation period.

(88) The sample of exporting producers or groups of exporting producers is the following:China National Building Materials Group (CNBM Group), including Jushi Group Co. Ltd (Jushi or Jushi China); Zhejiang Hengshi Fiberglass Fabrics Co. Ltd (Hengshi); Taishan Fiberglass Inc (Taishan) Yuntianhua Group (Yuntianhua Group), including: PGTEX China Co. Ltd (PGTEX), Chongqing Tenways Material Corp. (CTM).

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

(90) Comments on the selection of the sample were received from two sampled exporting producers, Jushi and Hengshi, belonging to the CNBM Group. While Jushi and Hengshi did not dispute the fact that they were related companies, they claimed that they were not related to Taishan. Jushi claimed that the Commission could not mechanically rely on Article 127(1)(d) or (f) of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code (OJ L 343, 29.12.2015, p. 558 ). (the Union Customs Code Implementing Act) to treat Hengshi, Jushi and Taishan as a single entity. In support of that claim, Jushi referred to the WTO Panel in Korea – Certain PaperWT/DS312/R of 28 October 2005 and the Guidelines for related transactions of listed companies of Shanghai Stock Exchange.

(91) They highlighted that (i) they had no common direct shareholding, (ii) there was no overlap in the members of their boards, (iii) there were no related transactions between Hengshi/Jushi and Taishan, and (iv) they were competitors on the market.

(92) After the sampling exercise, on 13 November 2019 , a hearing took place with Taishan, in which the above-mentioned arguments were again raised.

(93) The investigation revealed that China National Building Material (CNBM) is a Chinese state-owned enterprise owned directly and indirectly as to 41,27 % by CNBM Parent, which is in turn wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). CNBM owns 26,97 % stake in China Jushi Co., Ltd. (China Jushi), which is the sole shareholder of Jushihttp://cnbm.wsfg.hk/index.php?SectionID=FinancialReports&PageID=2019&Language=eng (last viewed on 20 November 2019 ) .

(94) In September 2017, CNBM entered into a Merger Agreementhttps://www1.hkexnews.hk/listedco/listconews/sehk/2017/0908/ltn20170908865.pdf (last viewed on 20 November 2019 ) with Sinoma that was finalised in May 2018. Sinoma, through its subsidiary Sinoma Science & Technology Co. was the owner of Taishan. After the merger, Sinoma was merged into and absorbed by CNBM. As a consequence, CNBM holds 26,97 % stake in China Jushi (the sole shareholder of Jushi) and 60,24 % in Sinoma Science & Technology Co., Ltd. (sole shareholder of Taishan).

(95) Article 127(1)(d) of the Customs Code Implementing Act establishes that two persons shall be deemed to be related if: a third party directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them. CNBM holds 26,97 % stake in China Jushi (the sole shareholder of Jushi) and 60,24 % in Sinoma Science & Technology Co., Ltd. (sole shareholder of Taishan). Therefore, the companies were found to be related.

(96) Furthermore, according to a company report by the Chinese brokerage company Guotai Junan Securities from 2019https://img3.gelonghui.com/pdf/3a1a2-2862061c-769f-43a8-823e-ebbf7ac6de94.pdf (page 4, last viewed on 20 November 2019 ) , CNBM has been reorganising its operating entities in order to enhance regional coordination and eliminate horizontal competition among listed subsidiaries since 2017. Furthermore, CNBM intends to resolve horizontal competition issues by 2020. According to the publicly available information in the report, CNBM planned to start this process by consolidating its glass fibre business by asset injections between China Jushi and Sinoma Science & Technology (Taishan’s sole shareholder). Thus, the evidence collected during the investigation does not support the companies’ argument that the common shareholding has no practical implication and that the companies operate independently. To the contrary, that evidence suggests that beyond the mere shareholding (which alone could be determinant for the conclusion that the companies are related), the three companies are also able to significantly influence each other’s business decisions, and that their controlling company (CNBM) aims to at least coordinate, if not to integrate, their operations (resolve the horizontal competition issues). This means that the subsidies received by any of those companies may be used to the advantage of the product concerned indistinctly. Therefore, the Commission rejected the claim that its conclusion to consider the three companies as related disregarded factual and economic realities.

(97) In relation to the argument that the Commission could not treat Hengshi, Jushi and Taishan as a single group for the purpose of calculating the amount of subsidisation conferred on the product concerned, the Commission recalled that in order to ensure that measures can be enforced effectively, particularly to avoid channelling exports through a related company with the lowest duty, it is the Commission's practice to establish the relationship between exporting producers through the criteria laid down in Article 127 of the Union Customs Code Implementing Act. This was clearly communicated to all parties in the Notice of initiation at the start of the proceeding. In addition, reference to Article 127 of the Union Customs Code Implementing Act is explicitly contained in Article 2(1) of the basic Anti-dumping RegulationRegulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (OJ L 176, 30.6.2016, p. 21 ) and the Commission should have the same treatment of parties in both anti-dumping and anti-subsidy casesPursuant to Declaration on Dispute Settlement Pursuant to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or Part V of the Agreement on SCM. See also DS 427 WT/DS427/RW China anti-dumping CVD measure on broilers — paragraph 7.1 cites that declaration. The Commission considers that it should ensure consistent results in parallel anti-dumping and anti-subsidy investigations to the extent possible (see also Appellate Body Report, Mexico – Definitive Anti-Dumping Measures on Beef and Rice (WT/DS295/AB/R), para. 295. . Moreover, pursuant to Article 7(1) of the basic Regulation, the calculation of the amount of subsidisation is made per unit of the subsidised product exported to the Union. The calculation of the amount of countervailable subsidies on the basis of the product concerned exported into the Union implies that, when companies are related, since money is fungible, they can use those benefits for the product concerned indistinctly, and thus, regardless of the exporting producer in particular. In this case, since Henghsi, Jushi and Taishan make and export the product concerned, the amount of countervailable subsidies granted upon them should take into account the fact that, because of their relationship, they are capable of channelling those benefits to the product concerned exported to the Union as they see fit. Consequently, the benefits granted to those exporting producers with respect to the product concerned should result in one single amount for the group.

(98) Finally, the WTO caseWT/DS312/R of 28 October 2005 referred to by Jushi in recital (90) does not support the company’s claim. In fact, contrary to what Jushi tries to infer, the WTO Panel in that case confirmed that, for the purpose of dumping determinations in anti-dumping investigations, the rule in Article 6.10 of the WTO Anti-Dumping Agreement (where a dumping margin should be calculated per exporting producer) did not necessarily preclude treating distinct legal entities as a single exporter or producer. The Panel noted that this treatment would be permittedwhere the structural and commercial relationship between the companies in question is sufficiently close to be considered as a single exporter WT/DS312/R of 28 October 2005 , para. 7.162. . Applying this consideration, the Panel did not establish the criteria that investigating authorities must apply to assess whether companies are related. The Panel merely looked into the specific elements (such as shareholding, board of directors, sales channels) which where before the investigating authority in that case. The Appellate Body in EC – Fasteners confirmed the possibility of treating a number of exporters as a single entity, listing also elements which may be relevant, such as the existence of corporate and structural links between the exporters, such as (i) common control, shareholding and management; (ii) the existence of corporate and structural links between the State and the exporters, such as (i) common control, shareholding and management; and (iii) control or material influence by the State in respect of pricing and outputWT/DS397AB/R of 15 July 2011 , para. 376. The same language is now reproduced in Article 9(5), second paragraph, of the Basic Anti-Dumping Regulation. . In that respect, from the legal and factual elements of this case, the existence of corporate links between Jushi, Hengshi and Taishan cannot be disputed.

(99) Based on the above, the Commission concluded that they were related companies for the purpose of this investigation and all claims in this regard were thus rejected.

(100) Following definitive disclosure, Taishan objected to the application of a countervailing duty combined with Hengshi/Jushi. This interested party claimed that the common ultimate shareholder CNBM had only very limited control on the business and operation decisions of Jushi or Hengshi. They reiterated that Taishan and Hengshi/Jushi were competitors on the market and noted that they had previously submitted evidence in support of these claims. Taishan offered a written commitment that would effectively cut any commercial link between Taishan and Hengshi/Jushi and thus it would not allow the channelling of any exports of GFF to the Union from Hengshi/Jushi via Taishan.

Implementing Regulation (EU) 2020/492 is amended as follows:

The definitive anti-dumping duty applicable to the net, free-at-Union-frontier price, before duty, of the product described in paragraph 1 and produced by the companies listed below shall be as follows: Country concernedCompanyDefinitive anti-dumping dutyTARIC additional codePRCJushi Group Co. Ltd; Zhejiang Hengshi Fiberglass Fabrics Co. Ltd; Taishan Fiberglass Inc. 69,0 %C531PGTEX China Co. Ltd; Chongqing Tenways Material Corp. 37,6 %C532Other companies cooperating in both anti-subsidy and anti-dumping investigation listed in the Annex I37,6 %See Annex IOther companies cooperating in anti-dumping investigation but not in anti-subsidy investigation listed in the Annex II34,0 %See Annex IIAll other companies69,0 %C999EgyptJushi Egypt For Fiberglass Industry S.A.E; Hengshi Egypt Fiberglass Fabrics S.A.E. 20,0 %C533All other companies20,0 %C999

The application of the individual duty rates specified for the companies listed in paragraph 2 or in Annexes I or II shall be conditional upon presentation to the Member States’ customs authorities of a valid commercial invoice, on which shall appear a declaration dated and signed by an official of the entity issuing such invoice, identified by name and function, drafted as follows: I, the undersigned, certify that the (volume) of (product concerned) sold for export to the European Union covered by this invoice was manufactured by (company name and address) (TARIC additional code) in (country concerned). I declare that the information provided in this invoice is complete and correct. If no such invoice is presented, the duty applicable to all other companies shall apply.

Should the definitive countervailing duties imposed by Article 1 of Commission Implementing Regulation (EU) 2020/776Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ L 189, 15.6.2020, p. 1 ). be modified or removed, the duties specified in paragraph 2 or in Annexes I or II will be increased by the same proportion limited to the actual dumping margin found or the injury margin found as appropriate per company and from the entry into force of this Regulation.

In cases where the countervailing duty has been subtracted from the anti-dumping duty for certain exporting producers, refund requests under Article 21 of Regulation (EU) 2016/1037 shall also trigger the assessment of the dumping margin for that exporting producer prevailing during the refund investigation period.

Notice of initiation of an anti-subsidy proceeding concerning imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ C 167, 16.5.2019, p. 11 ).

⟪TABLE:tbl_002⟫

(101) As described in recital (96), the investigation revealed that through their common shareholders the three companies are able to significantly influence each other’s business decisions. The evidence on file showed that the companies are in the process of consolidating and coordinating glass fiber operations. No new information or evidence was provided that could invalidate these findings. In fact, Taishan did not contest the plans of its main shareholder to consolidate its glass fibre business. Such plans are in clear contradiction with any commitment to cut commercial links between Taishan and Hengshi/Jushi. Besides, and without taking a position on whether the Commission could accept such a commitment, the company is clearly not in the position to enter into any kind of commitment without the endorsement of its ultimate controllers. Therefore, Taishan’s claims and commitment request were rejected.

Article 1 Article 1 1.A definitive countervailing duty is imposed on imports of fabrics of woven and/or stitched continuous filament glass fibre rovings and/or yarns with or without other elements, excluding products which are impregnated or pre-impregnated (pre-preg), and excluding open mesh fabrics with cells with a size of more than 1,8 mm in both length and width and weighing more than 35 g/m2 originating in the People's Republic of China and Egypt currently falling under CN codes ex70193900, ex70194000, ex70195900 and ex70199000 (TARIC codes 7019390080, 7019400080, 7019590080 and 7019900080). 2.The definitive countervailing duty applicable to the net, free-at-Union-frontier price, before duty, of the product described in paragraph 1 and produced by the companies listed below shall be as follows: Country concernedCompanyDefinitive countervailing dutyTARIC additional codePRCJushi Group Co. Ltd; Zhejiang Hengshi Fiberglass Fabrics Co. Ltd; Taishan Fiberglass Inc. 30,7 %C531PGTEX China Co. Ltd; Chongqing Tenways Material Corp. 17,0 %C532Other companies cooperating in both anti-subsidy and anti-dumping investigation listed in the Annex I24,8 %See Annex IOther companies cooperating in anti-dumping investigation but not in anti-subsidy investigation listed in the Annex II30,7 %See Annex IIAll other companies30,7 %C999EgyptJushi Egypt For Fiberglass Industry S.A.E; Hengshi Egypt Fiberglass Fabrics S.A.E. 10,9 %C533All other companies10,9 %C999 3.The application of the individual countervailing duty rates specified for the companies mentioned in paragraph 2 or in Annexes I or II shall be conditional upon presentation to the customs authorities of the Member States of a valid commercial invoice, on which shall appear a declaration dated and signed by an official of the entity issuing such invoice, identified by his/ her name and function, drafted as follows: I, the undersigned, certify that the (volume) of (product concerned) sold for export to the European Union covered by this invoice was manufactured by (company name and address) (TARIC additional code) in the (country concerned). I declare that the information provided in this invoice is complete and correct. If no such invoice is presented, the duty rate applicable to all other companies shall apply. 4.Unless otherwise specified, the provisions in force concerning customs duties shall apply. 5.In cases where the countervailing duty has been subtracted from the anti-dumping duty for certain exporting producers, refund requests under Article 21 of Regulation (EU) 2016/1037 shall also trigger the assessment of the dumping margin for that exporting producer prevailing during the refund investigation period.

(102) Following definitive disclosure, the CNBM Group argued that the subsidies received by the related trader Jushi Hong Kong Co. Ltd. could not be countervailed, since the company was based in Hong Kong and not in China. Hong Kong is an independent member of the WTO and is therefore considered an independent jurisdiction under WTO law and for the purposes of the Union trade defence investigations. Since the current anti-subsidy proceedings were not initiated against Hong Kong, any subsidies allegedly received by Jushi Hong Kong should not be taken into account. The Commission noted that the CNBM Group did not dispute the Commission’s findings regarding subsidisation for this related trader. Irrespective of the status of Hong Kong in this investigation, the real center of activities and control of the company Jushi Hong Kong was actually located in Mainland China. As stated by the company itself, In fact, Jushi Hong Kong is a paper company, with no dedicated employee, no land, no physical office and benefit, neither tax programmes nor grants . The accounting records were located in Jushi Group Co. Ltd., relevant personnel for the verification was also located there, and the subsidies received and benefiting the product concerned were granted by Chinese entities. Moreover, as confirmed by the Appellate Body in United States - Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea , subsidies bestowed on the recipient in countries other than the subsidising Member may be relevant in order to calculate the amount of ad valorem subsidisationAppellate Body Report, United States - Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea (WT/DS464/AB/R), 7 September 2016 , para. 5.298. . The company’s claim was therefore rejected.

Article 2 Article 2

(103) Following definitive disclosure, Yuntianhua Group claimed that its subsidy margin has been inflated by adding subsidies granted to companies that did not supply inputs used in the production of the product concerned, and, therefore, requested that subsidies of these companies should not be taken into consideration for the calculation of the countervailing duty.

Article 3 Article 3 1.Customs authorities are hereby directed to discontinue the registration of imports established in accordance with Article 1 of Implementing Regulation (EU) 2020/44. 2.No definitive countervailing duty will be levied retroactively for registered imports. 3.Data collected in accordance with Article 1 of Implementing Regulation (EU) 2020/44 shall no longer be kept.

(104) Article 1 of the basic Regulation provides that a countervailing duty may be imposed to offset any subsidy granted, directly or indirectly, for the manufacture, production, export or transport of any product whose release for free circulation in the Union causes injury. The Commission has evidence that the companies included in the investigation and whose subsidy benefits have contributed to the duty of the group, have participated directly or indirectly, providing inputs, services, materials, or assets that used in the production of the product concerned as describes in the Article 1 of the basic Regulation. In this respect, the comments made by the Yuntianhua Group were not supported by concrete evidence.

Article 4 Article 4

(105) The Commission, nonetheless, observed that one of the related companies, whose subsidies have been countervailed, was originally requested to participate in the investigation since it leased machinery to one of the exporting producers. However, following the comments received, the Commission revised the allocation key relating to the leasing activities of the company that were linked to the product concerned. Since the benefits that could be allocated through the leasing activities were considered negligible, the Commission decided not to take them into account.

(106) Five of the Chinese exporting producers that returned the sampling form informed the Commission of their intention to request individual examination under Article 27(3) of the basic Regulation. The Commission made the questionnaire available online on the day of the initiation. Moreover, the Commission informed the non-sampled exporting producers that they were required to provide a questionnaire reply if they wished to be examined individually. However, none of the companies provided a questionnaire reply. As a result, no individual examinations were possible.

(107) In the notice of initiation, the Commission invited all exporting producers in Egypt to contact it. Two related exporting producers, representing 100 % of the exports to the Union and 100 % of the production of GFF in Egypt, came forward:Jushi Egypt For Fiberglass Industry S.A.E (Jushi Egypt), The third Sector of North-West Gulf of Suez Economic Zone, Egypt, Hengshi Egypt Fiberglass Fabrics S.A.E (Hengshi Egypt), The third Sector of North-West Gulf of Suez Economic Zone, Egypt.

(108) The questionnaires for the Union producers, importers, users, and exporting producers in the PRC and in Egypt were made available onlineAvailable at http://trade.ec.europa.eu/tdi/case_details.cfm?id=2398 on the day of initiation.

(109) The Commission received questionnaire replies from the two sampled Chinese exporting producer groups, the two Egyptian exporting producers, from the four sampled Union producers, five users and one unrelated importer. None of the non-sampled Chinese exporting producers sent a reply to the questionnaires.

(110) The Commission also sent a questionnaire to the GOC and to the GOE. The questionnaire for the GOC included specific questionnaires for the China Development Bank ('CDB'), Export Import Bank of China (EXIM), and Sinosure. Those financial institutions had been specifically referred to in the complaint as public bodies or bodies directed or entrusted granting subsidies. In addition, the GOC was asked to forward the specific questionnaire for financial institutions to any other financial institution that provided loans or export credits to the sampled companies, or to the customers of the sampled companies. The GOC was also asked for administrative convenience to gather any responses provided by these financial institutions and to send them directly to the Commission.

(1) Article 1(2) and (3) is replaced by the following:2.The definitive anti-dumping duty applicable to the net, free-at-Union-frontier price, before duty, of the product described in paragraph 1 and produced by the companies listed below shall be as follows: Country concernedCompanyDefinitive anti-dumping dutyTARIC additional codePRCJushi Group Co. Ltd; Zhejiang Hengshi Fiberglass Fabrics Co. Ltd; Taishan Fiberglass Inc. 69,0 %C531PGTEX China Co. Ltd; Chongqing Tenways Material Corp. 37,6 %C532Other companies cooperating in both anti-subsidy and anti-dumping investigation listed in the Annex I37,6 %See Annex IOther companies cooperating in anti-dumping investigation but not in anti-subsidy investigation listed in the Annex II34,0 %See Annex IIAll other companies69,0 %C999EgyptJushi Egypt For Fiberglass Industry S.A.E; Hengshi Egypt Fiberglass Fabrics S.A.E. 20,0 %C533All other companies20,0 %C999 3.The application of the individual duty rates specified for the companies listed in paragraph 2 or in Annexes I or II shall be conditional upon presentation to the Member States’ customs authorities of a valid commercial invoice, on which shall appear a declaration dated and signed by an official of the entity issuing such invoice, identified by name and function, drafted as follows: I, the undersigned, certify that the (volume) of (product concerned) sold for export to the European Union covered by this invoice was manufactured by (company name and address) (TARIC additional code) in (country concerned). I declare that the information provided in this invoice is complete and correct. If no such invoice is presented, the duty applicable to all other companies shall apply.

(111) The questionnaire to the GOE included specific questionnaires for the National Bank of Egypt, Ahli Bank and Bank Misr. Those financial institutions had been specifically referred to in the complaint as public bodies or bodies directed or entrusted granting subsidies. In addition, for administrative convenience the GOE was asked to forward the specific questionnaire for financial institutions to any other financial institution that provided loans or export credits to the sampled companies. Furthermore, the questionnaire to the GOE included specific questionnaires for Egypt-TEDA Investment Company (Egypt TEDA) and for the Egyptian Chinese JV Company for Investment (ECCI), which had been identified in the complaint as state-owned entities operating in the SETC-Zone. The GOE was asked to gather any responses provided by these financial institutions and other entities, and to send them directly to the Commission.

(112) The Commission received questionnaire replies from the GOC, which included replies to the specific questionnaire from EXIM and Sinosure, as well as from the GOE, which included replies to the specific questionnaire from the National Bank of Egypt, Bank Misr and Egypt TEDA.

(113) Without prejudice to the application of Article 28 of the basic Regulation, the Commission sought and verified all information deemed necessary and made available by the parties in a timely manner for the determination of subsidy, injury and Union interest. A verification visit took place at the premises of the Chinese Ministry of Commerce, during which officials from other relevant ministries also participated. Moreover, representatives from EXIM, CDB and Sinosure were present during this verification visit.

(114) A verification visit took also place at the premises of Egypt TEDA, as well as at the premises of the following Egyptian government authorities:General Authority for Investment (GAFI), Cairo, Egypt; General Authority of the Suez Canal Economic Zone (General Authority of the SCZone), Suez Canal Economic Zone, Egypt; Egypt Gas Holding (EGAS), Cairo, Egypt; Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA), Cairo, Egypt.

(115) Moreover, the Commission carried out verification visits pursuant to Article 26 of the basic Regulation at the premises of the following companies:Union producers European Owens Corning Fiberglas, Sprl (OC); Chomarat Textiles Industries S.A.S. (Chomarat); Saertex GmbH & Co. KG (Saertex); Ahlstrom-Munksjö Glassfibre Oy (Ahlstrom); Sampled producers in the PRC This list includes exporting producers as well as other related entities with in the same group, regardless of whether they are making the product concerned. China National Building Materials Group (CNBM group); Jushi Group Co., Ltd, Tongxiang, PRC; Zhejiang Hengshi Fiberglass Fabrics Co., Ltd, Tongxiang, PRC; China Jushi Co., Ltd., Tongxiang, PRC; Jushi Group Hong Kong Co., Limited, Tongxiang, PRC; Tongxiang Leishi Mineral Powder Co., Ltd., Tongxiang, PRC; Tongxiang Jinshi Precious Metal Equipment Co., Ltd., Tongxiang, PRC; Huajin Capital Limited, Hong Kong, PRC; Jushi Group (HK) Sinosia Composite Materials Co., Ltd., Hong Kong, PRC; Taishan Fiberglass Inc., Taian, PRC; China National Building Material Group finance Co., Ltd, Beijing, PRC; Sinoma Science & Technology Co., Ltd, Beijing and Nanjing, PRC; Huatai Non-Metallic Powder Co., Ltd, Taian, PRC; Taian Antai Gas Co., Ltd, Taian, PRC; Taishan Fiberglass Zoucheng Co., Ltd, Zoucheng, PRC; Sinoma Jinjing Fiber Glass (Zibo) Co., Ltd, Zibo, PRC; Shandong Linyi Shanqi Mining Co., Ltd, Station of Sunzu Town, PRC Yuntianhua Group (Yuntianhua Group): PGTEX China Co., Ltd., Changzhou; PRC Chongqing Tenways Material Corp.Ltd, Chongqing, PRC; Chongqing Polycomp International Corporation (CPIC), Chongqing, PRC; CPIC International Co., Limited (CPIC HK), Chongqing, PRC; Changzhou Diba Textile Machinery Co., Ltd., Changzhou; PRC Changzhou Newtry Co., Ltd., Changzhou; PRC Chongqing Tianze New Material Co., Ltd., Chongqing, PRC; Wenzhou Jinhui Nonmetallic Mining Co., Ltd., Chongqing, PRC; Chongqing Yuanjia Mining Co., Ltd. (Chongqing Wingreat), Chongqing, PRC; Yunnan Yuntianhua Group Co., Ltd., Kunming, PRC; Yunnan Yuntianhua Financial Co., Ltd., Kunming, PRC; Exporting producers in Egypt Jushi Egypt For Fiberglass Industry S.A.E, Suez; Hengshi Egypt Fiberglass Fabrics S.A.E., Suez; Users Siemens Gamesa Renewable Energy GmbH&Co KG (SGRE); Vestas Wind Systems A/S (Vestas).

(116) Due to the threat of the COVID-19 transmission and the consequent measures taken to deal with the outbreakSee Note to the file on the consequences of the coronavirus outbreak on anti-dumping and anti-subsidy investigations, reference t20.001353 , the Commission was unable to verify the data submitted by a number of companies belonging to the group of one of the exporting producers located in the PRC. Given that this unforeseen situation occurred at a very late stage of the proceeding and that no other solution was possible, the Commission exceptionally used the information submitted by these companies for the subsidy calculation, which was verified based on available information.

(117) On 24 January 2020 , pursuant to Article 29(a)(2) of the basic Regulation, the Commission informed interested parties that it intended not to impose provisional measures and continue with the investigation.

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

(119) On 27 February 2020 , the Commission informed all parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-subsidy duty on imports of the product concerned into the Union (definitive disclosure).

(120) All parties were granted a 15 days period within which they could make comments on the definitive disclosure. Several interested parties requested an extension of the deadline. The Commission granted until 20 March and 23 March 2020 for submitting comments to those parties. Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(2) A new Article 1(5) is inserted:5.Should the definitive countervailing duties imposed by Article 1 of Commission Implementing Regulation (EU) 2020/776Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ L 189, 15.6.2020, p. 1 ). be modified or removed, the duties specified in paragraph 2 or in Annexes I or II will be increased by the same proportion limited to the actual dumping margin found or the injury margin found as appropriate per company and from the entry into force of this Regulation.

(121) In the separate anti-dumping investigation parties received, on 19 December 2019 a final disclosure of the essential facts and considerations on the basis of which it intended to impose a definitive anti-dumping duty on imports of the product concerned into the Union. Furthermore, interested parties received an additional disclosure on 10 February 2020 .

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

(123) Following definitive disclosure, no party requested a hearing with the hearing officer.

(124) Furthermore, interested parties received an additional definitive disclosure on 17 April 2020 and were granted until 22 April 2020 for submitting comments (additional definitive disclosure).

(125) Moreover, interested parties received a second additional definitive disclosure on 24 April 2020 and were granted until 27 April 2020 for submitting comments (second additional definitive disclosure).

(126) The Commission had hearings with the Union industry, with the exporting producers Jushi/Hengshi China, and with the Egyptian exporting producers Jushi/Hengshi Egypt as well as with the GOE.

(127) The product concernedAs clarified in the Notice of Clarification. is fabrics of woven and/or stitched continuous filament glass fibre rovings and/or yarns with or without other elements, excluding products which are impregnated or pre-impregnated (pre-preg), and excluding open mesh fabrics with cells with a size of more than 1,8 mm in both length and width and weighing more than 35 g/m2 (GFF), originating in the PRC and Egypt, currently falling under CN codes ex70193900, ex70194000, ex70195900 and ex70199000 (TARIC codes 7019390080, 7019400080, 7019590080 and 7019900080) (the product concerned).

(128) GFF is used in a wide range of applications, for example for the production of blades for wind turbines, in the boat, truck and sport equipment production, as well as in pipe rehabilitation systems.

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

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

(3) A new Article 1(6) is inserted:6.In cases where the countervailing duty has been subtracted from the anti-dumping duty for certain exporting producers, refund requests under Article 21 of Regulation (EU) 2016/1037 shall also trigger the assessment of the dumping margin for that exporting producer prevailing during the refund investigation period.

(131) One exporting producer and the Ministry of Trade of the Arab Republic of Egypt claimed that pre-cut GFF kits should not be covered by the scope of the investigation. They argued that pre-cut GFF kits would be a downstream product requiring additional production steps and with differences in physical characteristics, having a much smaller size. It would come in different forms and packaging, consisting of several smaller pieces of fabrics quilted together. It was further argued that there would be no circumvention risk by excluding kits as the process of cutting would be irreversible and that the product is not interchangeable with the uncut GFF.

(132) The complainant argued that pre-cut GFF kits and non-cut GFF have the same basic characteristics and end uses. As GFF are reinforcement materials, the cutting to shape is necessary to fit the form of the product that needs to be reinforced, but does not change its basic characteristics as such. The cutting process can be carried out by the GFF producer, an independent industrial cutter or the customer itself. It is a very simple and low-cost operation. The complainant further argued that users do not perceive pre-cut GFF differently from other GFF, as GFF are generally produced to user specifications. If the cutting process would change the characteristics of the GFF, that would render them unusable for the specific customer.

(133) The investigation showed that pre-cutting and kitting processes do not change the basic physical, technical or chemical characteristics of GFF or their basic end uses. Customers of both products are largely the same and both are sold via the same distribution channels.

(134) The investigation also confirmed that for most applications GFF are produced to order according to customers’ specifications. Pre-cut GFF kits constitute merely an additional specification in the customer order. That pre-cut GFF kits receive a different packaging does also not change the characteristics. Since GFF is ordered increasingly in the form of pre-cut GFF kits and the services of external kitters are used increasingly, there would be a high circumvention risk, if pre-cut GFF would be excluded from the scope of the investigation. Therefore, the Commission concluded that it would not be appropriate to exclude pre-cut GFF from the scope of the investigation.

(135) Another exporting producer argued that glass fibre yarns should be deemed to be excluded from the scope of the investigation. This exporting producer argued that glass fibre yarn was not to be mentioned explicitly in the questionnaire, the complaint or in the Notice of Initiation, which would indicate that they are not covered by the product scope. It further argued that GFF from yarn could not be classified under the characteristics of the product control number (PCN), that GFF from yarn would be imported under different CN codes than the ones mentioned in the complaint and that glass fibre yarns would also not be covered by the measures against glass fibre rovings in other proceedings.

(136) The complainant and another Union producer (not party to the complaint) argued that only GFF from non-twisted or zero-twisted glass fibre yarns should be covered by the investigation, whereas twisted yarns could be excluded from the scope of the investigation. The complainant argued that non-twisted or zero-twisted glass fibre yarns share the characteristics of glass fibre rovings to consist of a bundle of untwisted filaments or strands and are also used for the same purposes as rovings and are typically 13-24 micrometres in diameter and are 300-4800 tex.

(137) Regarding the inclusion of GFF from glass fibre yarns, the Notice of Initiation defined the product under investigation as fabrics of woven, and/or stitched continuous filament glass fibre rovings and/or yarn, […] Notice of Initiation as clarified by Clarification Notice. . The investigation has shown that non-twisted or zero-twisted glass fibre yarns share the same basic characteristics as glass fibre rovings, i.e. to consist of a bundle of untwisted filaments or strands, and are also used for the same purposes. Both are typically 13-24 micrometres in diameter and are 300-4800 tex. Thus, it would not be appropriate to exclude these product types from the scope of the investigation.

(138) In relation to GFF made mainly from twisted glass fibre yarn, the Commission notes that this product, which has different basic characteristics and is also subject to different end uses, e.g. printed circuit boards, was never part of the product concerned. The Commission explicitly clarified this point in the Clarification Notice.

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

(140) The 12th Five-Year Plan for National Economic and Social Development of the PRC (the 12th Five-Year Plan) highlighted the importance of the new materials industry, which includes GFF, as a strategic emerging industry and stipulates that it should be developed into a leading pillar industry through comprehensive policy support and guidanceSee 12th Five-Year Plan, page 9. . Furthermore, the 13th Five-Year Plan for National Economic and Social Development of the PRC (the 13th Five-Year Plan), which covers the period 2016-2020, aims to develop further new materials industries by strengthening research and development and enhancing the innovation capability of the manufacturing industrySee 13th Five-Year Plan, pages 23 and 24. .

(4) The Annex is replaced by Annex I and Annex II.

(141) The 13th Five-Year Plan highlights the strategic vision of the GOC for improvement and promotion of key industries. It emphasizes the role of technological innovation in the economic development of the PRC, as well as the continued importance of green development principles. According to its Chapter 5, one of the main development lines is to promote the upgrading of the traditional industrial structure, as was already the case in the 12th Five-Year Plan. Chapter 22 further elaborates this idea explaining the strategy to modernize the traditional industry in the PRC by promoting its technological conversion. In this respect, the 13th Five-Year Plan states that companies will be supported to comprehensively improve in areas such as product technology, industrial equipment, environmental protection and energy efficiency.

(142) The 13th Five-Year Plan mentions the new materials in a couple of instances: we will move faster to make breakthroughs in core technologies in fields such as next generation information and communications, new energy, new materials […] See 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China, part II, Chapter 6, Section 1. . The plan furthermore envisages that there will be projects carried out related to key new materials research, development and applicationIbid, part II, Chapter 6, Section 4. .

(143) Following definitive disclosure, the GOC reiterated its basic position on China's Five Year Plans, claiming that they are not mandatory or legally binding but are simply guidance documents because they do not contain actual legal provisions, sanctions or any rules on applicability. The GOC further stated that the 12th Five-Year Plan is not applicable anymore and even if the 13th Five-Year Plan would be legally binding, quod non, it does not mention GFF. Additionally, while the plan refers to new materials, it does not define this term. Finally, the 13th Five-Year Plan is not specific to the GFF industry or to the new materials industry but covers nearly the entire economy

(144) The Commission disagreed with this position. Chapter 17 of the 13th Five-Year Plan states: the national development strategy and plan will come into play with a leading and constraining role. Thus, rather than making only general statements of encouragement, this plan uses language which points to its binding nature.

(145) Even if the 12th Five-Year Plan is not applicable anymore, it is the predecessor that highlighted the importance of the new materials industry as a strategic emerging industry that the 13th Five-Year Plan further developed. As demonstrated in recitals (148) and (149), the new materials industry includes the GFF industry. As mentioned in recital (141), the 13th Five-Year Plan highlights the strategic vision of the GOC for improvement and promotion of key industries; therefore, it prioritise certain sectors and technologies, including GFF.

(146) Therefore, the claims of the GOC in this respect were rejected.

(147) The new materials industry is also an encouraged industry under the Made in China 2025 initiativehttp://www.gov.cn/zhengce/content/2015-05/19/content_9784.htm , and thereby eligible to benefit from considerable State funding. A number of funds had been created to support the Made in China 2025 initiative and hence indirectly the GFF industry such as the National Integrated Circuit fund, the Advanced Manufacturing Fund and the Emerging Industries Investment FundSee US-China Economic and Security Review Commission: The 13th Five-Year Plan, page 12. .

(148) Furthermore, GFF is often referred to under the umbrella of new materials. The Made in China 2025 Roadmaphttps://www.cae.cn/cae/html/files/2015-10/29/20151029105822561730637.pdf 10 strategic sectors, which are the key industries for the GOC. It describes in Sector 9 new materials and its subcategories, including advanced fundamental materials (point 9.1), key strategic materials (point 9.2) including high performance fibres and composite materials, new energy materialsSee Made in China 2025 Roadmap. p.142, 152. . New materials thus benefit from the advantages stemming from the support mechanisms listed in the document, including, among others, Financial Support Policies, Fiscal & Taxation Policy, State Council Oversight and SupportSee Made in China 2025, Chapter 4: Strategic Support and Supply. .

(149) Additionally, further to the Made in China 2025 Roadmap, in November 2016, the list of 10 strategic sectors was refined into a Catalogue of Four Essentials published by the National Manufacturing Strategy Advisory Committee (NMSAC), an advisory group to the National Leading Small Group on Building a National Manufacturing Power. In this catalogue, each of the 10 strategic sectors is split into four chapters: (i) core essential spare parts, (ii) key essential materials, (iii) advanced essential processes/technologies and (iv) industry technology platforms. Glass fibre can be found in sector 7: electrical equipment, point II key essential material: subpoint 16 glass fibre insulation boards and sector 9: new materials, point II key essential materials, subpoints 10. High-performance fibre, monomer and composite materials and 24. Glass-based materials.

(150) Following definitive disclosure, the GOC claimed that GFF is not mentioned in the Made in China 2025 initiative which is broadly available throughout the economy and that Made in China 2025 is not mandatory but is a mere guideline.

(151) In this respect, the Commission reiterates that the Made in China 2025 initiative clearly targets the new material industries, which include the GFF industry as already demonstrated. It provides for strategic support and guarantee through, inter alia, improved financial support policy and increased support of fiscal taxation policy. For instance, it clearly provides to increase the support to the new generation of information technology, high-end equipment, new materials, etc.

(152) The Made in China 2025 initiative states that it is the program of actions in the first ten years of implementing the strategy of manufacturing power and it sets clear strategic policies and targets. The Made in China 2025 initiative also provides that various regions shall work out specific implementation program and refine the policy measures to ensure various tasks to be implemented and further states that the Ministry of Industry and Information shall strengthen the tracking analysis, supervision and direction jointly with relevant departments, and report major events to the State Council in a timely manner. Furthermore, the Made in China 2025 initiative is supported by implementing measures such as the Made in China 2025 Roadmap and the Notice of the General Office of the Ministry of Industry and Information Technology on the release of the 2017 Industrial Transformation and Upgrade (Made in China 2025) Funding Guidehttp://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757016/c5657745/content.html , which provided for funds that benefitted certain cooperating GFF exporting producers. In addition, the Building Materials Industry Development Plan (2016-2020) mentioned in recital (153) is prepared based on the Outline of the 13th Five-Year Plan for National Economy and Social Development of the People’s Republic of China and the Made in China 2025 Strategy. Considering the above-mentioned, the Made in China 2025 initiative does not appear to be a mere guideline; on the contrary, it appears to have a de facto mandatory effect and is largely implemented. Therefore, the claims of the GOC were rejected.

(153) Furthermore, the Building Materials Industry Development Plan (2016-2020) also promotes the GFF industry. This plan calls for optimizing industrial structure by, inter alia, expanding emerging industries such as glass-based materials, industrial ceramics, intraocular lens, high-performance fibres and composites, and graphene and modified materials. This is to be achieved through government funding, taxation, financial, pricing, energy, and environmental protection policies, and support for capital to participate in the mergers, acquisitions and restructuring of building materials enterprises through various means including lendingSee the Building Materials Industry Development Plan (2016-2020) .

(154) Following definitive disclosure, the GOC claimed that the Building Materials Industry Development Plan applies to all building materials and is thus also broadly available throughout the economy. Furthermore, this plan only concerns general information about government policy.

(155) The Building Materials Industry Development Plan provides for specific measures targeting the building materials industry, to which the GFF industry belongs as explained in recital (166). Therefore, the Commission disagrees with the GOC’s statement that it is available through the economy.

(156) Although the Building Materials Industry Development Plan might appear merely as a guidance document, as mentioned in recital (152), it is an implementation of the 13th Five-Year Plan and the Made in China 2025 Strategy. It aims at promoting transformation and upgrading of the building materials industry, facilitating the transition of the building materials industry from a large industry to a powerful one and achieving the sustainable development during the 13th Five-Year Plan period and sets clear tasks and projects in order to achieve the fixed objectives during a defined concrete five-year periodSee the Building Materials Industry Development Plan (2016-2020) . Therefore, its purely guidance character is disputable, and more so when examining in its broader context.

(157) The GFF industry is also covered by the Intelligent Manufacturing Development Plan (2016-2020) published by the Chinese Ministry of Industry and Information Technology (the MIIT), which sets up 10 key tasks that aim at shortening the product development cycle, improving production efficiency, product quality, reducing operating cost, resources and energy consumption, and accelerating the development of intelligent manufacturing. In 2018, the State Council announced China’s plans to expand its program for smart manufacturing by adding about 100 pilot projects that same year, and according to publicly available information, one of the cooperating exporting producers, Taishan Fiberglass, Inc. was listed in 2015 among The Intelligent Manufacturing Plants by the MIITTaishan Fiberglass Inc. website. .

(158) According to the GOC, the Intelligent Manufacturing Development Plan (2016-2020) is irrelevant, since this is not specific to the GFF industry but concerns the entire manufacturing industry. Additionally, the GOC claimed that the plan is not a mandatory document but a mere guideline.

(159) The Intelligent Manufacturing Development Plan (2016-2020) is prepared in accordance with the Outline of the 13th Five-Year Plan for National Economy and Social Development of the People’s Republic of China, the Made in China 2025 Strategy See the Intelligent Manufacturing Development Plan (2016-2020) . Therefore, it implements the strategy laid down in these documents. As already explained before, the 13th Five-Year Plan and the Made in China 2025 Strategy target specifically certain industries, among which is the GFF industry as part of the new materials industries. In addition, at many instances, the Intelligent Manufacturing Development Plan refers to the ten key fields of Made in China 2025 Strategy. In particular, the Special Column 6 Intelligent transformation emphasis of key field provides that for the new generation of information technologies, (…) new material, (…) building material (…), the deep application of intelligent and digital technologies in the research and development and design, manufacturing, logistics and warehousing, operation and management, after-sales service and other key links of enterprises is promoted. Therefore, the Intelligent Manufacturing Development Plan (2016-2020) is specific to the key industries laid down by the Made in China 2025 Strategy and covers, inter alia, the new materials and the building materials sectors to which the GFF industry belongs.

(160) The Commission also notes that the language used in the Intelligent Manufacturing Development Plan (2016-2020) suggests a mandatory character of the document. In particular, Section II (III) Development objectives provides that Before 2025, Two-Step strategy shall be implemented to promote intelligent manufacturing development: Step one, by 2020, the intelligent manufacturing development foundation and supporting capacity will be obviously enhanced, the digital manufacturing will be basically realized in the key field of traditional manufacturing industry, and the intelligent transformation of key industry with conditions and foundation will make obvious progress; Step two, by 2025, the intelligent manufacturing support system is basically established, and the intelligent transformation is initially realized in the key industry. Furthermore, Section V Organization and implementation provides that the Ministry of Industry and Information Technology and Ministry of Finance are responsible for organizing and implementing the Plan, strengthening the leadership, carefully organizing, timely solving the problems met in the implementation process of the Plan, and promoting the implementation of various tasks and measures and that the competent departments of industry and information technology and of finance in various regions shall quickly formulate the implementation scheme connected with the Plan, implement relevant supporting policies, and complete the information feedback work according to the assignment of responsibility. Therefore, the Commission concluded that the Intelligent Manufacturing Development Plan has clearly defined objectives that are mandatory for the companies involved.

(161) In light of the above findings, the claims of the GOC were rejected.

(162) Moreover, the China High-Tech Export Products Catalogue issued by the Ministry of Science and Technology, the Ministry of Foreign Trade and the General Administration of customs lists 1900 high-tech products in 8 categories, which are targeted for preferential export policies by the GOC. One of the categories is the New Materials category, which includes GFFPreferential policies of the National High-Tech Industrial Development Zones, pages 12 to 14. . In addition, the China High-Tech Products Catalogue issued by the Ministry of Science and Technology, the Ministry of Finance and State Administration of Taxation refers to 11 areas, among which the new materials category. Furthermore, according to the Law of the PRC on Science and Technology Progress, the high-tech enterprises established in High-tech Development Zones can benefit from a list of preferential policies, which include: (i) an Enterprise Income Tax rate of 15 %, instead of the normal rate of 25 %; (ii) if the output value of export products reaches 70 % of the total value for that year, the EIT rate is further reduced to 10 %; (iii) newly-established high-tech enterprises are exempt from EIT tax for the first two years from the date production begins; (iv) newly-established high-tech enterprises are exempt from construction tax; (v) for new technology development and production and operation houses, R&D land is tax-free; (vi) equipment used by high-tech enterprises for high-tech production and development is subject to accelerated depreciation; (vii) export products produced by high-tech enterprises are exempt from export tariffs except those restricted by the State or concerning specific products, etcPreferential policies of the National High-Tech Industrial Development Zones, page 1. .

(163) Following definitive disclosure, the GOC claimed that the China High-Tech Products Catalogue, read in conjunction with the Law of the PRC on Science and Technology Progress is not specific to a certain industries because these documents set out objective criteria for eligibility, which are applied automatically.

(164) In this respect, as already mentioned in recital (162), the China High-Tech Export Products Catalogue high-tech products in 8 categories, including new materials. The Commission further notes that the China High-Tech Products Catalogue refers to 11 areas, among which 6. New material. Considering that both catalogues are limited to a certain number of areas, it cannot be concluded that they applies to all industries. Therefore, the claim of the GOC is rejected.

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

(166) The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment)Catalogue for Guiding Industry Restructuring (2011 Version) (2013 Amendment) (Issued by Order No. 9 of the National Development and Reform Commission on March 27, 2011 , and amended in accordance with the Decision of the National Development and Reform Commission on Amending the Relevant Clauses of the Catalogue for Guiding Industry Restructuring (2011 Version) issued by Order No. 21 of the National Development and Reform Commission on February 16, 2013 ). lists under Category I EncouragementXII. Building Materials: […] 6. Technology development and production of alkali free glass fiber tank kiln wire drawing and high-performance glass fiber and products with an annual yield of 50000 ton

(167) According to the GOC, Decision No. 40 is not specific to an enterprise or industry, as required by Article 2.1 of the SCM Agreement but to certain encouraged projects. Moreover, Decision No. 40 is not mandatory. The GOC affirmed that the Guiding Catalogue for Industry Restructuring referred to by the Commission is irrelevant because the Commission refers to the 2011 version of this catalogue, which has already expired. According to the GOC, the new version of this catalogue does not mention GFF.

(168) First, the Commission points out that it referred to The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment); therefore, it did not refer to the 2011 version but to the 2013 amended version. To the Commission’s knowledge, the latest amendment of the Catalogue was approved by Decree of the National Development and Reform Commission of the People's Republic of China No. 29 of 27 August 2019 and entered into force on 1 January 2020 http://www.gov.cn/xinwen/2019-11/06/5449193/files/26c9d25f713f4ed5b8dc51ae40ef37af.pdf . This new Guiding Catalogue for Industry Restructuring (2019 Version) indeed abolished the Guiding Catalogue for Industry Restructuring (2011 Version) (Amendment). However, it was adopted and entered into effect after the investigation period. Therefore, ‘The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment) was applicable during the investigation period. In any event, contrary to the GOC’s statement, the 2019 version of the Guiding Catalogue for Industry Restructuring refers to GFF under Section I Encouraged industries as follows:XII. Building materials […] 6. […] Technology development and production of high-performance glass fiber and glass fiber products such as degraded and irregular cross-section .

(169) Second, the Commission disagrees that Decision No. 40 has no mandatory effect. Indeed, Decision No. 40 lays down the temporary regulations promoting the industrial restructuring and it refers to The Guiding Catalogue for Industry Restructuring , which defines three kinds of content: encouraged projects content, limited projects content and eliminated projects content. However, Article XVII of Decision No. 40 establishes the treatment of investment projects belonging to the encouraged content in a mandatory manner, e.g. all financial institutions shall provide credit , other favourite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations. Furthermore, Article XXI sets that the relevant preferential policies implemented according to The Content of Industries, Products and Technologies Currently Especially Encouraged by the State (amended in 2000) shall be adjusted to be implemented according to the encouragement content of The Guiding Catalogue for Industry Restructuring. Therefore, Decision No. 40 has a mandatory effect in this respect. The Guiding Catalogue for Industry Restructuring, Category I Encouragement lists a certain number of projects under a certain number of industries. As explained in recital (166), it includes the building materials industry and specific projects related to the GFF industry. Consequently, Decision No. 40 read together with The Guiding Catalogue for Industry Restructuring provides for specific treatment of certain projects within certain encouraged industries. Therefore, although these documents refer to specific projects, they first establish the specific industries that are encouraged and then certain projects in these industries that could benefit from the preferential treatment provided for in Decision No. 40. Therefore, the Commission rejected the claims of the GOC.

(170) Furthermore, GFF is covered by the Building Materials Industry Development Plan 2016-2020Building Materials Industry Development Plan 2016-2020, Ministry of Industry and Information Technology, GXBG [2016] No. 315. , which envisages, among others, the transition of the construction material industry from a large industry to a strong industry. It also envisages an optimisation of the construction sector's structures, improvement of the security of supply of key materials, increase in the level of concentration in the industry as well as enhancement of the international competitiveness. The plan provides for quantitative development targets, governmental control over production capacity, detailed production targets, geographical distribution of industries among provinces in the PRC, security of supply, development of specific industries, government control and influence over enterprises and industry support measuresReport, Chapter 12.3.1.4, p. 283-286. . This demonstrates the strong presence and intervention of the State in the fibreglass industry.

(171) The 13th Five-Year Plan for Fibre and Composite Materials Industry13th FYP for Fibre and Composite Materials Industry published by the China Glass fiber industry association and the China composite materials association on 2 June 2015 . is a plan targeting specifically the fibre material industry. It clearly guides the development of the sector, for example Section III.3 sets the goal to:

(172) Actively integrate and upgrade the upstream and downstream ends of the industry chain to maintain the healthy and stable development of the fibre and composite materials industry: Encourage large-scale pond and kiln enterprises to steadily implement the go global development strategy, implement global production capacity patterns. On this basis: - keep the control over the domestic glass fibre production volume growth rate at a relatively low level; - at the same time, reduce the export ratio of domestic glass fibre and products; -actively adjust product structures; […] - actively adjust product structure and guide enterprises to implement differentiated development, vigorously develop deep processing of glass fibre products, expand the market size of fibre and composite materials products in mid-to-high-end application fields, and improve product quality and added value. Ensure that the annual growth rate of the main business revenue of the fibre and composite materials industry is higher than the national GDP growth rate by about 5 to 6 percentage points, that is, as of 2020, the total revenue of enterprises above designated size will reach 500 billion yuan, i.e. doubling compared to the situation prevailing at the end of the 12th Five-Year Plan. Ibid. section III.3.

(173) Furthermore, Section IV.3.4 of that plan sets basis for governmental guidance of the enterprises and the entire industry:

(174) Guide various types of enterprises to get involved in differentiated operations taking into account their individual advantages and specific market segments. In particular, it is necessary to guide small and medium-sized enterprises to follow the growth path consisting in filling up specific gaps, in having small enterprises being complementary to big ones, in considering specialisation as the way to success. Thanks to differentiated operations, scale-competition between large enterprises is

(175) The industry associations are closely interlinked with the State, mostly through the importance of CCP building in those associationsSee Commission Staff Working Document on Significant Distortions in the Economy of the People’s Republic of China for the purposes of Trade Defence Investigations, 20 December 2017 , SWD(2017) 483 final/2, p. 33-34. . The provisions of Section IV.3.6 of the same plan also point to a State intervention into the fibre production, including the GFF sector:[The Association shall] assist the government in duly designing and implementing industry policy, to ensure the sound development of the sector; ensure the effective implementation of the glass fiber sector entry and management system and at the same time explore and implement and entry and management system applicable to the composite material sector; set out and implement sector and entry management systems in order to effectively curb low level duplications, strengthen enterprises’ self-discipline awareness as well as the sector’s perspectives, foster the elimination of obsolete production capacities and the transformation and upgrade of the sector, maintain a sound and orderly competition and orderly development of the sector; take account of the sector’s development needs, strive to set out incentive policies and measures, guide the sector’s sound development; actively strive to obtain export tax refund on glass fiber deeply processed products and guide the sound development of the glass fiber deep processing industry; actively strive to obtain the introduction and improvement of import and export tax rates for fibers and composite materials so as to offer incentives to the growth of high value-added composite material products exports;

(176) The PRC has actively promoted the GFF industries on different government levels, an example of a local initiative covering one of the sampled companies can be found in the Jiujiang City 13th Five-Year Plan for the economic and social development:Section III 2.2 Effectively implement a development plan for strategic and emerging industries New materials: […] Extend and support the new materials industry chain, foster the development of new materials industry clusters; Rely on Jiujiang economic development zone, Jiujiang Chihu district industry park, Yongxiu Xinghuo Industry park and the Lushan fiber production base, and focus on the development of organic silicone new materials, glass fiber composite materials, bio-fiber new materials, metal new materials, and graphene new materials; […] Actively foster the JUSHI GROUP, Shengxiang Electronics, Cabot Chemical Industry and other leading enterprises’ innovation-driven development, active connexion to the market, exploration and development of new fields of application for glass fiber and composite new materials so as to speed up the transformation and upgrade of the glass fiber industry Jiujiang City 13th Five-Year Plan for the economic and social development. .

(177) Following definitive disclosure, the GOC claimed that the 13th Five-Year Plan for Fiber and Composite Materials Industry and the Jiujiang City 13th Five-Year Plan both only concerns general information about government policy, with no direct connection to any of the alleged subsidy programs at issue and are thus not sufficient evidence of specificity.

(178) The Commission disagreed with this claim. As explained in recitals (171) and (172), the 13th Five-Year Plan for Fibre and Composite Materials Industry targets specifically the fibre material industry and it clearly guides the development of the sector. Even if this document might have no direct connection to the alleged subsidy programs as claimed by the GOC, it points to specific measures encouraging the fibre and composite materials industry. Furthermore, as mentioned in recital (176), the Jiujiang City 13th Five-Year Plan for the economic and social development specifically targets Jushi Group, which is one of the cooperating exporting producers. Therefore, these documents demonstrate that the Chinese authorities target specifically a given industry, which includes the GFF industry, and certain companies in this industry. Consequently, the claims of the GOC were rejected.

(179) Considering the above-mentioned, the GFF industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective.

(180) Following definitive disclosure, the GOC objected to the Commission’s assessment that the GFF industry is an encouraged industry and that the Commission's allegation that the GFF industry is encouraged in China does not show that the measures at issue are specific within the meaning of Article 2 of the SCM Agreement.

(181) The Commission disagreed with the COG’s statement. The findings demonstrated in recitals (140) to (178) show that the GFF industry, as part of the building materials and the new materials industries, is particularly targeted and encouraged through various policy and regulatory tools and listed in catalogues of encouraged industries. The fact that these documents provide for specific measures with respect to certain industries, including the GFF industry, is sufficient to demonstrate that they are specific within the meaning of Article 2 of the SCM Agreement.

(182) For administrative convenience, the Commission requested the GOC to forward specific questionnaires to the two specific state-owned banks mentioned in the complaint, to Sinosure, as well as to any other financial institution that provided loans or export credits to the sampled companies.

(183) The GOC indeed forwarded the specific questionnaires to the banks. 15 bank branches confirmed their outstanding loans with the sampled companies during the IP, but without providing a reply to the questionnaire as such. Only the in-house bank of one of the exporting producers (CNBM Finance) and one state-owned bank (Export-Import Bank of China) actually responded to the questions in the questionnaire. Furthermore, the CDB did not respond to the questionnaire, but was available for questions during the verification visit.

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

(185) The Commission disagreed with this view. First, it is the Commission's understanding that the information requested from state-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. Indeed, according to the Law of the People's Republic of China on State-Owned Assets of EnterprisesLaw of the People's Republic of China on State-Owned Assets of Enterprises, Decree No. 5 of the President of the People's Republic of China, 28 October 2008 , article 11 & 12 , State-owned assets supervision and administration agencies established by the State-owned Assets Supervision and Administration Commission of the State Council and local people's governments perform the duties and responsibilities of the capital contributor of a State-invested enterprise on behalf of the government. Such agencies are thus entitled to receive returns on assets, to participate in major decision-making and to select managerial personnel of State-invested enterprises. Furthermore, according to Article 17 of the above-mentioned Law on State-owned Assets, State-invested enterprises shall accept administration and supervision by governments and relevant governmental departments and agencies, accept public supervision, and be responsible to capital contributors.

(186) In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority. For example, according to Articles 33 and 36 of the Banking Supervision LawLaw of the People's Republic of China on Regulation of and Supervision over the Banking Industry, Order No. 58 of the President of the People's Republic of China, 31 October 2006 , the China Banking and Insurance Regulatory Commission (CBIRC) has the authority to require all financial institutions established in the PRC to submit information, such as financial statements, statistical reports and information concerning business operations and management. The CBIRC can also instruct financial institutions to disclose information to the public.

(187) Furthermore, although the sole cooperating State-owned bank provided some general explanations on the functioning of their loan approval and risk management systems, it did not provide specific information concerning loans provided to the sampled companies. It argued that it was bound by statutory and regulatory requirements and contractual clauses with respect to the confidentiality of the information related to the sampled companies.

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

(189) In the end, the Commission only received information on corporate structure and ownership from the cooperating State-owned bank but not from any of the other financial institutions, which had provided loans to the sampled companies. Moreover, none of the financial institutions provided any information specific to the risk assessment of the loans granted to the sampled groups of exporting producers.

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

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

(192) In the reply to the Commission's letter, the GOC objected to the application of Article 28(1) of the basic Regulation. In general, it argued that the specific information requested was not necessary to begin with because the proceeding was based on a complaint that failed to provide sufficient evidentiary requirements of the SCM Agreement and the basic Regulation. The Commission considered that the sufficiency of evidence of the complaint was already addressed in Section 1.1.1 above and thus maintained its conclusion that there was sufficient evidence provided in the complaint tending to show the existence of the alleged subsidisation by the GOC.

(193) The GOC also objected more specifically to the application of Article 28(1) of the basic Regulation regarding preferential lending. The GOC reiterated that it had no authority over the banks. The GOC also considered that it had cooperated to the best of its abilities, that the Commission had imposed an unreasonable extra burden on it, and that the missing information was not necessary in the sense of Article 28 of the basic Regulation, since it was already available through the responses to the questionnaires. The GOC reiterated these claims after the definitive disclosure.

(194) The Commission maintained its position that the GOC has the authority to request information from the banks for the reasons explained in recitals (185) and (186) above. It acknowledged that the GOC forwarded the relevant questionnaires to the banks, and that it received a meaningful reply from one State-owned bank. The Commission used the information so provided, and complemented it with facts available only for those parts that were missing.

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

(196) The GOC also claimed that company-specific information could not be provided for regulatory reasons. Even if the Commission had a general written consent from the sampled companies waiving their confidentiality rights, the GOC maintained that the relevant banks or financial institutions would be required to ask the parties for their express permission with respect to each particular loan transaction and that these permissions would have to be verified by the relevant financial institutions.

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

(198) Finally, the Commission did not consider that it had imposed an unreasonable burden on the GOC. From the start, the Commission limited its investigation to those financial institutions that had provided loans to the sampled companies. The Commission also did not burden the GOC with the identification of these financial institutions, as the list with names and addresses of the banks, as well as the request to forward the questionnaires, was provided to the GOC at the very beginning of the investigation, in June 2019. This provided ample time for the GOC to comply with the Commission's request. The Commission thus considered that it had done its utmost to facilitate the tasks requested from the GOC.

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

(200) Sinosure responded partially to the specific questionnaire concerning export credit insurance provided to the sampled companies. In particular, Sinosure did not give specific information about the export credit insurance provided to the GFF industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business.

Customs authorities are hereby directed to discontinue the registration of imports established in accordance with Article 1 of Implementing Regulation (EU) 2020/44.

No definitive countervailing duty will be levied retroactively for registered imports.

Data collected in accordance with Article 1 of Implementing Regulation (EU) 2020/44 shall no longer be kept.

The term GOC is used in this Regulation in a broad sense, including the State Council, as well as all Ministries, Departments, Agencies and Administrations at central, regional or local level.

⟪TABLE:tbl_003⟫

(201) Furthermore, Sinosure failed to provide the requested supporting documentation concerning its corporate governance, such as its Articles of Association, arguing that this was confidential information.

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

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

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

(205) Sinosure indeed provided a questionnaire reply and representatives from Sinosure were present at the verification at the GOC's premises. However, as mentioned in recitals (200) and (201) above, the information provided was incomplete. For example, Sinsoure provided global figures on its profitability, but not on the profitability of its short-term export credit insurance business as such. The information provided thus did not allow the Commission to draw conclusions on crucial parts of the investigation regarding export credit insurance, that is whether Sinosure is a public body and whether the premiums charged to the sampled companies were market conform.

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

(207) According to the subsidy questionnaire sent to exporting producers, holding companies are required to provide a reply to sections A & E of the questionnaire. However, China National Building Materials Co. Ltd. (CNBM), the ultimate owner of the exporting producers Jushi, Hengshi and Taishan, failed to provide such a reply.

(208) CNBM considered that it was not involved in the glass fibre fabrics business, and that it did not have any direct transactions with the exporting producers. However, the Commission found that there had been significant capital increases funded by CNBM relating to one of the exporting producers. Furthermore, the Commission found evidence that grants provided to some entities in the group had transited through the bank accounts of CNBM, and that some grants had been allocated between various entities in the group via the capital reserves accounts.

(209) The Commission considers that in the absence of a questionnaire reply from the parent company CNBM, it is impossible to determine the full extent of the subsidies received by the CNBM Group. Under these circumstances, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

(210) Therefore, the Commission informed the CNBM Group that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted to CNBM, the parent company of the CNBM Group.

(211) In the reply to the Commission's letter, Jushi objected to the application of Article 28(1) of the basic Regulation regarding CNBM. Jushi reiterated that CNBM plays the role of equity investor, rather than the role of an actual controller of China Jushi, that it was not involved in the glass fibre fabrics business, and that it did not have any direct transactions with the exporting producers. Furthermore, although CNBM is the top 1 shareholder of China Jushi, its shareholding accounts for only 26,97 %.

(212) Concerning the capital increases, Jushi stated that the proportion of CNBM’s shareholding in China Jushi decreased from 60,25 % in 1998 to 26,97 % at the end of the IP. In the last three years, the registered capital of China Jushi was only increased via its own capital reserves, so the shareholding of CNBM remained stable at 26,97 %.

(213) First, the Commission considered under all circumstances that holding companies should provide a questionnaire reply in order to ascertain whether any subsidies have been provided at the level of the parent company that may relate to the exporting producer. Without a questionnaire reply, it is impossible to determine the full extent of the subsidies relating to the exporting producers.

(214) Second, for the claims relating to the actual control of CNBM over Jushi, the Commission referred to the reasoning developed in recitals (93) to (96) above concerning the relationship between Jushi and Taishan. On this basis, these claims were rejected.

(215) Third, in terms of capital increases, although it is true that the shareholding of CNBM has decreased in relative terms over time, it has actually increased in absolute terms over the period 2010 to 2018.

(216) Finally, the items mentioned in recital (208) above relate not only to Jushi and Hengshi, but also to Taishan. As a result, even if the Commission were to accept Jushi’s comments, this would not alter the Commission’s findings for the CNBM Group as such.

(217) The Commission thus concluded that it had to rely partially on facts available for its findings concerning CNBM, the parent company of the CNBM Group.

(218) Yunnan Yuntianhua Group Co., Ltd. failed to provide complete information in time about funds received via other equity instruments by certain shareholders of the company.

(219) Despite repetitive requests from the Commission, during and after the on-spot verification, the company failed to provide the solicited information. Therefore, the Commission notified the company in question that it would consider basing its findings partially on facts available pursuant to Article 28(1) of the basic Regulation (i.e. as far as the information related to other equity instruments was concerned). In the reply to the Commission, the company indicated that due to the official shutdown in China during the last week of January and the first week of February, it was not in the position to respond to the Commission’s request of information within the set deadline.

(220) Absent any additional evidence concerning the funds received via other equity instruments mentioned in recital (218) at this stage, the Commission continued to rely partly on facts available for its findings concerning these funds received via other equity instruments by certain shareholders of the company as detailed in Section 3.4.3.4 below.

(221) On the basis of the information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaires, the alleged subsidisation through the following subsidies by the GOC were investigated:(i) Preferential financing (e.g. policy loans, credit lines, bank acceptance drafts, export financing)(ii) Preferential Export credit insurance(iii) Government provision of goods and services for less than adequate remuneration (LTAR)Government provision of land and land-use rights for less than adequate remuneration; Government provision of raw materials for less than adequate remuneration. (iv) Revenue foregone through provision of power at reduced rates and Tax Exemption and Reduction programmesProvision of electricity at reduced rate Enterprise Income Tax (EIT) reduction for High and New Technology Enterprises; EIT offset for research and development; Dividend exemption between qualified resident enterprises; Exemption or waiving of real estate and land use taxes; Accelerated depreciation of equipment used by High-Tech enterprises (v) Grant ProgrammesGrants related to technological upgrading or transformation, such as e.g. promotion of R&D tasks under Science and Technology Support Plans, Promotion of Key Industry Adjustment, Revitalisation and Technology Renovation, Industrial Transformation and Upgrade of Made in China 2025 Funds, grants related to Intelligent Manufacturing; Environmental Protection grants, such as e.g. Special fund for energy-saving technology reform, the clean production technology fund, incentives for Environmental Protection and Resource Conservation; Corporate development grants; Famous Brand Programmes; Ad-hoc subsidies provided by the municipal/provincial authorities;

(222) According to the information provided by the two sampled groups of exporting producers, 36 financial institutions located within the PRC had provided financing to them. Of these 36 financial institutions, 29 were State-owned banksSee Section 3.4.1.2 for the cooperating State-owned banks and Section 3.4.1.4 for the names and the data concerning the non-cooperating State-owned banks. . The remaining financial institutions were either privately owned (four institutions), or the Commission was not able to determine whether they were State-owned or privately owned (three institutions). However, only one State-owned bank filled in the specific questionnaire, despite a request to the GOC that covered all financial institutions, which had provided loans to the sampled companies.

(223) EXIM provides export-contingent loans at preferential rates to Chinese companies that produce new- and hi-tech products, products with indigenous intellectual rights, self-owned brands, high value-added products and software products that are registered with the authorities for industry and commerceChinese Export-Import Bank 2017 Annual Report, p. 5. . According to the information available to the Commission, Chinese GFF producers qualify for export-oriented loans as new- and hi-tech products and/or as self-owned brands, given that several producers are recognized as National High-Tech Enterprises or have been awarded famous brand, top brand, etc. status.

(224) Furthermore, EXIM also assists exporters through export buyers’ credits. Export buyers’ credits are provided to foreign companies to finance their import of Chinese products, technologies and servicesChinese Export-Import Bank, page 33 .

(225) The Commission ascertained whether the State-owned banks were acting as public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. In this respect, the applicable test to establish that a State-owned undertaking is a public body is as followsWT/DS379/AB/R (US – Anti-dumping and Countervailing Duties on Certain Products from China), Appellate Body Report of 11 March 2011 , DS 379, paragraph 318. See also WT/DS436/AB/R (US — Carbon Steel (India)), Appellate Body Report of 8 December 2014 , paragraphs 4.9 - 4.10, 4.17 – 4.20 and WT/DS437/AB/R (United States – Countervailing Duty Measures on Certain Products from China) Appellate Body Report of 18 December 2014 , paragraph 4.92. : What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a

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

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

(228) Only one State-owned bank, namely EXIM, provided a questionnaire reply, which was verified on site.

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

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

(231) The Board of Supervisors of the key State-owned financial institutions is appointed according to the Interim Regulations of Board of Supervisors of Key State-owned Financial Institutions (State Council Decree No. 282). Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating State-owned bank’s business activities. In addition to these generally applicable indicia, the Commission found the following with respect to EXIM:

(232) EXIM was formed and operates in accordance with The Notice of Establishing Export-Import Bank of China issued by the State Council, as well as the Articles of Association of EXIM. According to its Articles of Association, the State directly nominates the management of EXIM. The Board of Supervisors is appointed by the State Council in accordance with the Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions and other laws and regulations, and it is responsible to the State Council.

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

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

(235) The Commission also found that State-owned financial institutions have changed their Articles of Associations in 2017 to increase the role of the China Communist Party (CCP) at the highest decision-making level of the banks.

(236) These new Articles of Association stipulate that:the Chairman of the Board of Directors shall be the same person as the Secretary of the Party Committee; the CCP's role is to ensure and supervise the Bank’s implementation of policies and guidelines of the CCP and the State; as well as to play a leadership and gate keeping role in the appointment of personnel (including senior management); and the opinions of the Party Committee shall be heard by the Board of Directors for any major decisions to be taken.

(237) This evidence shows that the Government exercised meaningful control over the conduct of this institution

(238) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk, where they provided loans to the GFF industry. The following regulatory documents have been taken into account in this respect:Article 34 of the Law of the PRC on Commercial Banks (Bank law); Article 15 of the General Rules on Loans (implemented by the People’s Bank of China) Decision No 40; Implementing Measures of the CBIRC for Administrative Licensing Matters for Chinese-funded Commercial Banks (Order of the CBIRC [2017] No. 1) Implementing Measures of the CBIRC for Administrative Licensing Matters relating to Foreign-funded Banks (Order of the CBIRC [2015] No. 4) Administrative Measures for the Qualifications of Directors and Senior Officers of Financial Institutions in the Banking Sector (CBIRC [2013] No. 3).

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

(240) With respect to EXIM, its public policy mandate is established in the notice of establishing EXIM as well as in its Articles of Association.

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

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

(243) Similarly, Decision No. 40 instructs all financial institutions to provide credit support specifically to encouraged projects. As already explained in Section 3.1 and more specifically in recital (166), projects of the GFF industry belong to the encouraged category. Decision No. 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations. The Commission also found that the CBIRC has far-reaching approval authority over all aspects of the management of all financial institutions established in the PRC (including privately owned and foreign owned financial institutions), such asAccording to the Implementing Measures of the CBIRC for Administrative Licensing Matters for Chinese-funded Commercial Banks (Order of the CBIRC [2017] No.1), the Implementing Measures of the CBIRC for Administrative Licensing Matters relating to Foreign-funded Banks (Order of the CBIRC [2015] No.4) and the Administrative Measures for the Qualifications of Directors and Senior Officers of Financial Institutions in the Banking Sector (CBIRC [2013] No.3). :approval of the appointment of all managers of the financial institutions, both at the level of headquarters and at the level of local branches. Approval of the CBIRC is required for the recruitment of all levels of management, from the most senior positions down to branch managers, and even includes managers appointed in overseas branches as well as managers responsible for support functions (e.g. the IT managers); and a very long list of administrative approvals, including approvals for setting up branches, for starting new business lines or selling new products, for changing the Articles of Association of the bank, for selling more than 5 % of their shares, for capital increases, for changes of domicile, for changes of organizational form, etc.

(244) The Bank law is legally binding. The mandatory nature of the Five Year Plans and of Decision No. 40 has been established above in Section 3.1. The mandatory nature of the CBIRC regulatory documents derives from its powers as the banking regulatory authority. The mandatory nature of other documents is demonstrated by the supervision and evaluation clauses, which they contain.

(245) Following definitive disclosure, the GOC claimed that none of the regulatory documents relied upon by the Commission were sufficient to show that meaningful control had, in fact, been exercised by the GOC on EXIM. More specifically, the GOC argued that Article 34 of the Chinese Commercial Banking Law is nothing more than a general statement without any practical implications. The GOC added that Article 34 should not be read in isolation, but in conjunction with Articles 4, 5, and 41 of the Bank law relating allegedly to the bank's autonomy, and the lack of interference by entities, individuals or governments. The GOC also requested to disregard Article 15 of the General Rules on Loans, since it is not mandatory. Finally, the GOC stated that Decision No. 40 of the State Council was not binding, and referred to Article 17 of this Decision, according to which all financial institutions are required to make lending decisions based on market principles.

(246) The Commission first recalled that, as mentioned in recital above, it considered that the Bank law and Decision No. 40 are mandatory. Furthermore, the findings of this investigation (as well as the Commission's findings in previous investigations concerning the same subsidy programmeSee for example the HRF, Tyres and E-bikes cases cited in footnote 7, respectively in Section 3.4.1.1.b, Section 3.4.1.1.b and Section 3.5.1.1. ) did not support the claim that banks do not take government policy and plans into account. The investigation rather showed that Article 15 of the General Rules on Loans was actually applied in practice, and that Articles 4, 5 and 41 of the Bank law were applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions. The findings of this investigation did not support the claim that banks do not take government policy and plans into account while making lending decisions. For example, the Commission found that the exporting producers benefit from similarly low interest rates through preferential lending.

(247) The Commission also noted that the Decision No. 40 of the state Council instructs all financial institutions to provide credit support only to encouraged projects and promises the implementation of other preferential policies on the encouraged projects. On the basis of the above, banks are required to provide credit support to the GFF industry. While Article 17 of the same Decision also asks the bank to respect credit principles, the Commission could not establish during the investigation that this was done in practice. Decision No. 40 hence confirmed the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations.

(248) On that basis, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the GFF industry.

(249) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete loans. During the verification visit, the cooperating State-owned bank maintained that in practice it had used sophisticated credit risk assessment policies and models when granting the loans at issue. However, as already indicated in recitals (187) to (190) above, no concrete examples relating to the sampled companies were provided. The cooperating State-owned bank refused to provide information, including its specific credit risk assessments, related to the sampled companies for regulatory reasons and contractual reasons even though the Commission had a written consent from the sampled companies waiving their confidentiality rights.

(250) In the absence of concrete evidence of creditworthiness assessments, the Commission therefore examined the overall legal environment as set out above in recitals (238) to (245), in combination with the behaviour of the cooperating State-owned bank with regard to the loans provided to the sampled companies. This behaviour contrasted with its official stance during the verification visit, as in practice it was not acting based on thorough market-based risk assessments.

(251) The verification visits revealed that, with the sole exception of certain loans in foreign currency, loans were provided to the two sampled groups of exporting producers at interest rates below or close to the People’s Bank of China (PBOC) benchmark interest rates, regardless of the companies’ financial and credit risk situation. Hence, the loans were provided below market rates when compared to the rate corresponding to the risk profile of the sampled exporting producers. In addition, the sampled companies had received revolving loans, which allow them to immediately replace the capital repaid on loans at the maturity date by fresh capital from new loans.

(252) The Commission also found that loans which should have been reported by the banks as not normal loans had not always been indicated as such in the national central credit register by the cooperating State-owned bank. The obligation to report such not normal loans exists in particular when loans had been restructured, when the debtor defaulted on its payments, or when revolving loans had been issued. Such occurrences were found for the two sampled exporting producers. According to the CBIRC’s Guidelines on risk-based loan classification, all of these instances should have been included in the central credit register. This lack of reporting by the financial institutions leads to a distorted picture of the company’s credit situation in the central credit register, as the register does not show the real creditworthiness of the company. As a result, even if a financial institution were to apply a market-based risk assessment, it would have done so based on inaccurate information.

(253) The Commission therefore concluded that the GOC has exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk concerning the GFF industry.

(254) The Commission established that the cooperating State-owned financial institution implemented the legal framework set out above in the exercise of governmental functions with respect to the GFF sector. Therefore, it was acting as public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(255) As set out in section 3.2 above, none of the other State-owned banks, which provided loans to the sampled companies, replied to the specific questionnaire. The CDB did not respond to the questionnaire, but was available for questions during the verification visit at the premises of MOFCOM. During this visit, the CDB stated that the statements it had made during a previous anti-subsidy investigation by the EU in 2012 were still valid, and that no major changes had occurred since then. The CDB did not provide any further detailed information on its governance structure, risk assessment or examples relating to specific loans to the GFF industry.

(256) Therefore, in line with the conclusions reached in recitals (182) to (199) above, the Commission decided to use facts available to determine whether those State-owned banks qualify as public bodies.

(257) In previous anti-subsidy investigationsSee HRF and Tyres cases cited in footnote 7, recital (132) and recital (211) respectively. , the Commission established that the following banks, which had provided loans to the sampled groups of exporting producers in the investigations at hand, were partially or fully owned by the State itself or by State-held legal persons: China Development Bank, China Construction Bank, Industrial and Commercial Bank of China, Bank of Communications, China Everbright Bank, Postal Savings Bank, China Merchants Bank, Shanghai Pudong Development Bank, China Industrial Bank, Shenyang Rural Commercial Bank, Bank of Shanghai, Ningbo Bank, China CITIC Bank, China Guangfa Bank, China Bohai Bank, Huaxia Bank, Hankou Bank, Hubei Bank, Huishang Bank, Dongying Bank, Bank of Tianjin, Bank of Kunlun, Shanghai Rural Commercial Bank, China Industrial International Trust Limited, Daye Trust Co., Ltd. and Sinotruk Finance Co., Ltd. Since no information has been provided indicating otherwise, the Commission maintained the same conclusion in the present investigation.

(258) Using publicly available information, such as the bank’s website, annual reports, information available in bank directories or on the Internet, the Commission furthermore found that the following banks that had provided loans or financial leasing to the two sampled groups of exporting producers were partially or fully owned by the State itself or by State-held legal persons:

(259) The Commission further established, absent specific information from the financial institutions at issue indicating otherwise, GOC ownership and control based on formal indicia for the same reasons as set out above in Section 3.4.1.2. In particular, based on facts available, managers and supervisors in the non-cooperating State-owned banks would appear to be appointed by the GOC and be accountable to the GOC in the same manner as in the cooperating State-owned bank.

(260) With regard to the exercise of control in a meaningful manner, the Commission considered that the findings concerning the cooperating financial institution could be considered representative also for the non-cooperating State-owned financial institutions. The normative framework analysed in Section 3.4.1.2 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner as for the cooperating State-owned bank, so that the analysis on the concrete application of the normative framework in Section 3.4.1.2 above applies to them in an identical manner.

(261) Moreover, the Commission observed that the majority of loan contracts which the Commission had obtained from the sampled companies had similar conditions and that the lending rates which had been agreed were similar and partly overlapped with the rates provided by the cooperating State-owned bank.

(262) The Commission therefore considered that the findings for the cooperating state-owned bank constituted the facts available under Article 28 of the basic Regulation for assessing the other State-owned banks, due to those similarities in loan conditions and lending rates.

(263) On that basis, the Commission concluded that the other State-owned banks, which provide loans to the sampled companies, are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(264) Following definitive disclosure, the GOC argued that the Commission based itself only on previous investigations and indicia of formal control to establish that the non-cooperating State-owned banks were acting as public bodies. No separate analysis was performed for each bank. In addition, since EXIM is a policy bank, its situation could not be transposed to commercial banks

(265) In this respect, the Commission recalled that in the absence of cooperation from the other State-owned banks, the Commission had to rely on facts available. The Commission concluded that the information from previous investigations, combined with formal indicia of control and the findings of the investigation itself regarding EXIM and regarding the actual conduct of the banks towards the exporting producers constituted the best facts available in this case. In any event, the GOC failed to put forward any evidence or argument to rebut the Commission's findings concerning the fact that the other State-owned banks which provided loans to the sampled companies are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation. The Commission thus maintained its position.

(266) In light of the above considerations, the Commission established that all State-owned Chinese financial institutions that provided loans or financial leasing to the two sampled groups of cooperating exporting producers are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(267) In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established that they would be considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3 (1)(a)(iv) of the basic Regulation for the same reasons, as set out in recitals (269) to (272) below. Thus, their conduct would be attributed to the GOC in any event.

(268) The Commission then turned to the remaining financial institutions. The following financial institutions were considered to be privately owned, based on the findings established in previous anti-subsidy investigationsSee HRF and Tyres cases cited in footnote 7. , and complemented by publicly available information: China Minsheng Bank, Sumitomo Mitsui Banking (China) Co., Ltd, Standard Chartered Bank, Ping An Bank. For the following financial institutions, in the absence of cooperation and in the absence of sufficient publicly available information the Commission could not ascertain whether they were State-owned or privately owned: Chongqing Runyin Financial Leasing Co., Ltd., Wuxi International Platinum Co., Ltd., Liangjiang Financial Leasing Co., Ltd., Taian Bank and Taian Daiyue Rural Commercial Bank Co., Ltd. Following a conservative approach, the Commission analysed the latter in the same manner as privately owned financial institutions and they are referred hereafter as privately owned financial institutions. The Commission analysed whether these financial institutions had been entrusted or directed by the Government of China to grant subsidies to the GFF sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(269) According to the WTO Appellate Body, entrustment occurs where a government gives responsibility to a private body and direction refers to situations where the government exercises its authority over a private bodyWT/DS/296 (DS296 United States – Countervailing duty investigation on Dynamic Random Access Memory (DRAMS) from Korea), Appellate Body Report of 21 February 2005 , para.116. . In both cases, the government uses a private body as a proxy to make the financial contribution, and in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement Appellate Body Report, DS 296, para. 116. . At the same time, paragraph (iv) does not allow Members to impose countervailing measures to products whenever the government is merely exercising its general regulatory powers Appellate Body Report, DS 296, para. 115. or where government intervention may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market Appellate Body Report, DS 296, para. 114 agreeing with the Panel Report, DS 194, para. 8.31. on that account. . Rather, entrustment or direction implies a more active role of the government than mere acts of encouragement Appellate Body Report, DS 296, para. 115. .

(270) The Commission noted that the normative framework concerning the industry mentioned above in recitals (238) to (245) applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the Bank Law and the various orders of the CBIRC cover all Chinese-funded and foreign-invested banks under the management of the CBIRC.

(271) Furthermore, the verification visits in the sampled companies revealed that the majority of loan contracts which the Commission had obtained from the sampled companies had similar conditions, and that the lending rates provided by the private financial institutions were similar and partly overlapped with the rates provided by the publicly owned financial institutions.

(272) In the absence of any divergent information received from the private financial institutions, the Commission concluded that, in so far as the GFF industry is concerned, all financial institutions (including private financial institutions) operating in China under the supervision of the CBIRC have been entrusted or directed by the State in the sense of Article 3(1)(a)(iv), first indent of the basic Regulation to pursue governmental policies and provide loans at preferential rates to the GFF industry.

(273) After definitive disclosure, one of the parties argued that the fact that each of the sampled groups of companies benefitted from different types of loans or financial leasing during the investigation period with variances in respect of e.g. maturity, collateral, guarantees and other attached conditions, as mentioned in recital (281) below, indicated that they are not being entrusted or directed by the State. This party also submitted that the overlap in rates by private and publicly owned banks showed that the publicly owned banks were providing loans on market terms, not the opposite. The Commission also tried to shift the burden of proof by stating that its conclusions applied [i]n the absence of any divergent information received from the private financial institutions. However, the Commission should have first established a prima facie case.

(274) In response to these claims, the Commission recalled that in the absence of cooperation from the banks, the Commission had to rely on facts available for the private banks. As such, it did not shift the burden of proof. Furthermore, since there was cooperation from only one State-owned bank, the Commission used the information from the cooperating party, which was deemed to be a public body, to compare it with the conditions offered by private banks, which were not cooperating. The fact that there was an overlap in rates shows that the private banks also provided loans below market terms, not the opposite. To follow the reasoning of the party would be equivalent to concluding that information based on facts available is more reliable than conclusions based on verified information. The fact that companies benefitted from different types of loans during the investigation period with different conditions attached to it, does not alter this. In any event, the party failed to put forward any evidence or argument to rebut the Commission's findings. These claims were thus rejected.

(275) In addition, the normative framework applying to all banks in China is much wider than only the two regulations governing the CBIRC, as shown in recital (238) above, and the entire set of regulatory documents is legally binding, as explained in recital (244) above, so that they amount to more than acts of mere encouragement. Moreover, verification visits in the sampled companies did not reveal any significant differences between loan conditions or rates provided by the private financial institutions, and those provided by publicly owned financial institutions.

(276) Following disclosure, the GOC submitted that the legislation invoked by the Commission has only guiding role, and a mere guiding role of the government is not sufficient for a finding of entrustment or direction to be made. In this context, the GOC highlighted that article 34 of the Bank Law was nothing more than a general statement without practical implications.

(277) Article 15 of the General Rules on Loans is also not a mandatory obligation but merely allows financial institutions to take state policies into account. Decision No. 40 is also not a binding document, and it explicitly mandates financial institutions to provide financial support according to the credit principles.

(278) The Commission disagreed with this view, since the normative framework applying to all banks in China is legally binding, as explained in recital (244) above, so that they amount to more than acts of mere encouragement or guidance by the government. Concerning Decision No. 40, the Commission already established in recital (247) above that Decision No. 40 instructs all financial institutions to provide credit support only to encouraged projects even though Article 17 of the same Decision also asks the bank to respect credit principles. The Commission thus maintained its position.

(279) In previous anti-subsidy investigations, the Commission already determined that domestic credit ratings awarded to Chinese companies were not reliable, based on a study published by the International Monetary FundIMF Working Paper Resolving China’s Corporate Debt Problem, by Wojciech Maliszewski, Serkan Arslanalp, John Caparusso, José Garrido, Si Guo, Joong Shik Kang, W. Raphael Lam, T. Daniel Law, Wei Liao, Nadia Rendak, Philippe Wingender, Jiangyan, October 2016, WP/16/203. , showing a discrepancy between international and Chinese credit ratings, combined with the findings of the investigation concerning the sampled companies. Indeed, according to the IMF, over 90 % of Chinese bonds are rated AA toLivingston, M. Poon, W.P.H. and Zhou, L. (2017). Are Chinese Credit Ratings Relevant? A Study of the Chinese Bond Market and Credit Rating Industry , in Journal of Banking & Finance, p.24. .

(280) In addition, foreign rating agencies, such as Standard and Poor’s and Moody’s, typically apply an uplift over the issuer’s baseline credit rating based on an estimate of the firm’s strategic importance to the Chinese Government and the strength of any implicit guarantee when they rate Chinese bonds issued overseasPrice, A.H., Brightbill T.C., DeFrancesco R.E., Claeys, S.J., Teslik, A. and Neelakantan, U. (2017). China’s broken promises: why it is not a market-economy , Wiley Rein LLP, p. 68. . Fitch for example clearly indicates, where applicable, that such guarantees are a key driver underlying its credit ratings of Chinese companiesFor a concrete example, see Reuters. (2016). Fitch Rates Shougang's USD Senior Notes Final A- https://www.reuters.com/article/idUSFit982112, (accessed on 21 October 2017 ). .

(281) The Commission also found further information to complement this analysis. First, the Commission determined that the State can exercise a certain influence over the credit rating market. According to two studies published in 2016, there were around 12 credit rating agencies active on the Chinese market, a majority of which are State-owned. In total, 60 % of all rated corporate bonds in China had been rated by a State-owned ratings agencyLin, L.W. and Milhaupt, C.J. (2016). Bonded to the State: A Network Perspective on China’s Corporate Debt Market . Columbia Law and Economics Working Paper No.543, p. 20; Livingstone, M. Poon, W.P.H. and Zhou, L. (2017). Are Chinese Credit Ratings Relevant? A Study of the Chinese Bond Market and Credit Rating Industry , in Journal of Banking & Finance. p. 9. .

(282) The GOC confirmed that, during the investigation period, there were 15 credit rating agencies active on China's bond market, among which 12 domestic rating agencies, including Shanghai Brilliance Credit Rating & Investors Service Co., Ltd, Dagong Global Credit Rating Co., Ltd, Golden Credit Rating International Co., Ltd, China Bond Rating Co., Ltd, CSCI Pengyuan Credit Rating Co., Ltd, Fareast Credit Rating Co., Ltd, China Chengxin Securities Rating Co., Ltd, United Credit Ratings Co., Ltd, Shanghai Credit Information Services Co., Ltd, China Securities Index Co., Ltd, Beijing North Joint Credit Evaluation Co., Ltd and Sichuan Dapu Credit Rating Limited Company. Most of the domestic rating agencies were State-owned. There were also 3 Sino-foreign joint venture credit rating agencies, namely China Lianhe Credit Rating Co. Ltd, S&P Global China Rating, and China Chengxin International Credit Rating Co., Ltd.

(283) Second, there is no free entrance on the Chinese credit rating market. It is essentially a closed market, since rating agencies need to be approved by the China Securities Regulatory Commission (CSRC) or the PBOC before they can start operationsSee Tentative Measures for the Administration of the Credit Rating Business Regarding the Securities Market Promulgated by Chinese Securities Regulatory Commission, Order of the China Securities Regulatory Commission [2007] No. 50, 24 August 2007 ; Notice of the People's Bank of China on Qualifications of China Cheng Xin Securities Rating Co., Ltd. and other Institutions Engaged in Corporate Bond Credit Rating Business, Yinfa [1997] No. 547, 16 December 1997 , and Announcement No. 14 [2018] of the People's Bank of China and the China Securities Regulatory Commission on Issues Concerning the Provision of Bond Rating Services by Credit Rating Agencies on the Interbank Bond Market and the Stock Exchange Bond Market. . The PBOC announced mid-2017 that overseas credit rating agencies would be allowed to carry out credit ratings on part of the domestic bond market, under certain conditions. However, during the investigation period, no foreign credit rating agency had been admitted yetSee Announcement of PBOC on Issues concerning the Credit Rating Business Carried out by Credit Rating Agencies on the Interbank Bond Market, effective on July 1, 2017 . . Nevertheless, in the meantime, foreign agencies did establish joint ventures with some local credit rating agencies, which provide credit ratings for domestic bond issues. However, these ratings follow Chinese rating scales and are thus not exactly comparable with international ratings, as explained above.

(284) Finally, a recent study performed by the PBOC itself confirms the Commission’s findings, stating in its conclusions that if the investment level of foreign bonds is set to international rating BBB-and above, then the domestic bond investment grade may be rated at AA-level and above, taking into account the difference between the average domestic rating and the international rating of 6 or more notches PBOC Working Paper No.2017/5, May 25,2017 , p. 28. .

(285) In view of the situation described in recitals (279) to (284) above, the Commission concluded that Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset. On this basis, even if some sampled companies were awarded a good credit rating by a Chinese rating agency, the Commission concluded that such ratings are not reliable. Those ratings were also distorted by the policy objectives to encourage key strategic industries, like GFF.

(286) In line with the findings in the HRF and tyres investigationsSee the HRF case cited in footnote 7 above (recitals 152 to 242) as well as the Tyres case quoted in the same footnote (recitals 243 to 294). , revolving loans are loans, which allow a company to replace the capital repaid on loans at the maturity date by fresh capital from new loans. Revolving loans are usually a sign of short-term liquidity problems of the borrower, and involve a greater risk exposure for the banks granting them. The existence of revolving loans in a given company was therefore considered an indication that the company is in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to short-term liquidity problems.

(287) Following definitive disclosure, the GOC claimed that revolving loans are not necessarily a sign of liquidity issues. This is clear from the websites of leading European banks. For instance, revolving credit lines and loans are a part of the standard business of banks such as INGhttps://www.ing.com.tr/en/for-your-business/loans/other-cash-loans/revolving-loan and BNP Paribashttps://companies.bnpparibasfortis.be/en/solution?n=revolving-credit and are not associated with higher interest rates.

(288) The Commission disagreed with the assessment made by the GOC. The Chinese authorities themselves consider revolving loans to be an additional factor of credit risk. As stated in the CBRC's Guidelines on risk-based loan classification, revolving loans should be reported at least as a concerned loanArticle X, point II of the CBRC's Guidelines on risk-based loan classification. . A loan falling under this category means that even though a borrower can pay the principal and interest of the loan now, there are some factors, which may negatively affect the repayment thereof.

(289) Revolving credit facilities do indeed exist in Europe, but their terms and conditions are very different from the Chinese revolving loans. Revolving credit facilities in the Union are basically credit lines, with a pre-determined maximum amount that can be withdrawn and repaid on several occasions during a pre-specified time period. In addition, such credit facilities entail an additional cost, be it a contractual margin on top of the usual short-term market ratesAlso the example of BNP Paribas provided by the GOC makes this point. , or a predetermined management fee. Furthermore, the example of BNP Paribas provided by the GOC also foresaw a fee for unused capital over the duration of the credit facility.

(290) On the other hand, the revolving loans found during the verification visits at the Chinese sampled companies did not have conditions different from other short-term loans. They were not labelled as being a credit line or a revolving credit facility and there were no extra fees or margins attached to it. At first sight, they appeared to be normal short-term loans. However, sometimes the purpose of the loan referred to repayment of loans. In addition,

(291) In the course of the investigation, the Commission found that certain sampled companies issued bonds with the specific purpose of debt repayments, namely loans. The Commission established that by restructuring their debt via this instrument, some companies could rearrange and defer their liabilities, as well as, obtain the funds without which they would not be able to meet their repayment obligations, evidencing therefore problems to raise funds.

(292) The use of bonds to that aim raises concerns on the ability of a given company to pay for its debts, therefore questioning not only its short-term liquidity, but also the solvency in the long term. The existence of bonds issued with the purpose of repayment of loans in a given company is therefore considered an indication that the company is in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing.

(293) As demonstrated in recitals (238) to (245), several legal documents, which specifically target companies in the sector, direct the financial institutions to provide loans at preferential rates to the GFF industry. These documents demonstrate that the financial institutions only provide preferential lending to a limited number of industries/companies, which comply with the relevant policies of the GOC.

(294) Following definitive disclosure, the GOC disputed the specificity conclusions on preferential lending. According to the GOC, Articles 4 and 34 of the Bank law merely set out general guidelines with respect to the conduct of commercial banks and do not mention to which companies or industries loans should be granted. Furthermore, Article 15 of the General Rules on Loans does not expressly and unambiguously restrict the availability of this specific subsidy to companies in the GFF sector. Decision No. 40 is not specific to an enterprise or industry but to certain encouraged projects, which is not synonymous. Moreover, Decision No. 40 is not mandatory, and in light of the extremely wide array of economic sectors and industries covered by Decision No. 40, it cannot be concluded that this documents explicitly limits the access of the alleged subsidy to certain enterprises.

(295) In this respect, the Commission noted that, even though the Bank law and the General Rules on Loans do not specify GFF as such, they do refer to the State’s industrial policies, which are set out in the documents listed in Section 3.1 above. The Commission thus referred back to the documents that were listed and the conclusions that were reached in Section 3.1 above. In addition, it considered that references to the GFF industry are sufficiently clear as this industry is identified either by its name or by a reference to the product that it manufactures or the industry group that it belongs to. Moreover, the fact that the GOC supports a limited group of encouraged industries, which includes the GFF industry, makes this subsidy specific. The Commission thus maintained its conclusions.

(296) The Commission therefore concluded that subsidies in the form of preferential lending are not generally available but are specific within the meaning of Article 4(2)(a) of the basic Regulation. Moreover, there was no evidence submitted by any of the interested parties suggesting that the preferential lending is based on objective criteria or conditions in the sense of Article 4(2)(b) of the basic Regulation.

(297) The Commission then calculated the amount of the countervailable subsidy. For this calculation, it assessed the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company pays on the preferential loan and the amount that the company would pay for a comparable commercial loan obtainable on the market.

(298) In this regard, the Commission noted a number of specificities on the Chinese GFF market. As explained in Sections 3.4.1.1 to 3.4.1.7 above, the loans provided by Chinese financial institutions reflect substantial government intervention and do not reflect rates that would normally be found in a functioning market.

(299) The sampled groups of companies differ in terms of their general financial situation. Each of them benefitted from different types of loans or financial leasing during the investigation period with variances in respect of e.g. maturity, collateral, guarantees and other attached conditions. For those two reasons, each company had a different average interest rate based on its own set of loans received.

(300) The Commission assessed individually the financial situation of each sampled group of exporting producers in order to reflect these particularities. In this respect, the Commission followed the calculation methodology for preferential lending established in the anti-subsidy investigation on hot rolled flat steel products originating in the PRC, as well as in the anti-subsidy investigation on tyres originating in the PRCSee HRF case cited in footnote 7 above (recitals 152 to 244) and Tyres case also cited in footnote 7 (recital 236). and explained in the recitals below. As a result, the Commission calculated the benefit from the preferential lending practices for each sampled group of exporting producers on an individual basis, and allocated such benefit to the product concerned.

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

The term GOE is used in this Regulation in a broad sense, including all Ministries, Departments, Agencies and Administrations at central, regional or local level.

⟪TABLE:tbl_004⟫

(301) As mentioned in recitals (250) to (252) above, the Chinese lending financial institutions did not provide any creditworthiness assessment. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the CNBM Group were at market level.

(302) The exporting producers of the CNBM Group presented themselves in a generally profitable financial situation according to their own financial accounts. One of the exporting producers did not have any loans. However, the Commission noted that it financed 65 % of its purchases by a sort of preferential short-term financial instrument (bank acceptance drafts). As explained in Section 3.4.3.2 below, bank acceptance drafts are a type of debt instrument; therefore, their extensive use points to short-term liquidity issues. The second exporting producer made constant profits during the period 2016-2018, and had healthy financial indicators at first sight, such as a low debt-to-assets ratio. However, it appeared to have short-term liquidity problems for the following reasons: the company’s outstanding short-term debt represented almost 100 % of its turnover; it issued a bond to repay bank loans; it used a high amount of bank acceptance drafts to finance its purchases, and it used revolving loans, which suggests that the company may be in a more fragile financial situation than what the financial statements would suggest at first sight. The third exporting producer showed a similar picture, with a profitable situation, but an extensive use of bank acceptance drafts and a bond issued to repay bank loans.

(303) The first intermediate parent company, China Jushi, was profitable during the period 2016-2017 and the investigation period, but used bank acceptance drafts extensively to finance its purchases. Furthermore, the Commission established that some of the loans provided at the level of China Jushi were revolving loans, and that China Jushi had issued two bonds with the purpose of repaying bank loans. Revolving loans were also found in the second intermediate parent company, Sinoma Technology.

(304) As mentioned in recitals (207) to (217) above, the parent company CNBM did not cooperate. However, looking at its publicly available annual report for 2018, a similar picture emerges: the company has a high leverage, with a net debt ratio of 130 %, and a debt-to-assets ratio of 68 %. During the investigation period, the company concluded a debt-to-equity swap deal with State-owned banks, in order to improve its debt structure. Under such a deal, the company could convert part of its debt to State-owned banks into shares, and thus reduce the liabilities on its balance sheet.

(305) The Commission noted that the various companies in the CNBM Group were awarded ratings ranging between AA- and AA+ by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in recitals (279) to (285), the Commission concluded that this rating is not reliable.

(306) The Commission considered that the overall financial situation of the group corresponds to a BB rating, which is the highest rating that does no longer qualify as investment grade. Investment grade means that bonds issued by the company are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them.

(307) After definitive disclosure, the CNBM Group claimed that the Commission gave a joint credit rating to the entire CNBM Group based mainly on CNBM’s credit rating, even though the level of indebtedness of CNBM could not have a detrimental effect on China Jushi, for which it holds only a 27 % stake. In addition, CNBM could not transfer its debt liabilities to China Jushi since the companies in the group are separate legal entities with limited liability, meaning that the debts of shareholders or subsidiaries could not be transferred. Furthermore, since the CNBM Group considers that bank acceptance drafts are not equivalent to short-term loans they should also not be taken into account for the assessment of the companies’ credit rating.

(308) The Commission disagreed with these statements. As shown in recitals (301) to (304) above, the Commission has made an individual assessment of each of the companies within these groups. In the specific case of the CNBM Group, irrespective of the situation described at the level of CNBM, most of the companies reviewed showed a similar picture, including revolving loans, extensive use of bank acceptances, and bonds taken out to repay loans. In addition, contrary to what was stated by the company, debt was actually transferred between various companies in the group through intercompany loans. Therefore, the Commission decided to attribute a single credit rating to the group. Finally, as mentioned in Section 3.4.3.2 below, the Commission considered bank acceptance drafts as another type of financial instrument equivalent to a short-term loan, which can thus be used in the determination of the credit ratings. Hence, the company’s claims were rejected.

(309) The premium expected on bonds issued by firms with this rating (BB) was then applied to the standard lending rate of the PBOC in order to determine the market rate.

(310) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US BB rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the benchmark interest rates as published by the PBOC at the date when the loan was grantedIn case of fixed interest loans. For variable interest rate loans, the PBOC benchmark rate during the IP was taken. , and for the same duration as the loan in question. This was done individually for each loan provided to the company.

(311) Following definitive disclosure, several parties claimed that the use of a relative spread was flawed. All of them alleged that the Commission should have used an absolute instead of a relative spread between the US AA rated bonds and the US BB rated bonds. The following reasons were provided:(1) The level of the relative spread fluctuates with the level of the base interest rate in the US: the lower the interest rate level is, the higher the resulting mark-up will be.(2) The level of the resulting benchmark fluctuates according to the level of the PBOC benchmark rate to which it is applied. The higher the PBOC benchmark rate, the higher the resulting benchmark will be.(3) The absolute spread remains roughly stable over time, whereas the relative spread shows great variations.

(312) These issues were already presented in previous investigationCommission Implementing Regulation (EU) 2017/969 of 8 June 2017 imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China, (OJ L 146, 9.6.2017, p. 17 ), (HRF case), Commission Implementing Regulation (EU) 2018/1690 of 9 November 2018 imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163 (OJ L 283, 12.11.2018, p. 1 ) (Tyres case). . As can be seen from recitals (175) to (187) in the HRF case, and from recital (256) in the Tyres case, the Commission rejected these arguments on the following grounds.

(313) First, while the Commission recognised that commercial banks usually use a mark-up expressed in absolute terms, it observed that this practice seems mainly based on practical considerations, because the interest rate is ultimately an absolute number. The absolute number is however the translation of a risk assessment that is based on a relative evaluation. The risk of default of a BB-rated company is X % more likely than default of the government or a risk-free company. This is a relative evaluation.

(314) Second, interest rates reflect not only company risk profiles, but also country- and currency specific risks. The relative spread thus captures changes in the underlying market conditions, which are not expressed when following the logic of an absolute spread. Often, as in the present case, the country- and currency- specific risk varies over time, and the variations are different for different countries. As a result, the risk-free rates vary significantly over time, and are sometimes lower in the US, sometimes in China. These differences relate to factors such as observed and expected GDP growth, economic sentiment, and inflation levels. Because the risk-free rate varies over time, the same nominal absolute spread can signify a very different assessment of the risk. For example, where the bank estimates the company-specific risk of default at 10 % higher than the risk-free rate (relative estimation), the resulting absolute spread can be between 0,1 % (at a risk-free rate of 1 %) and 1 % (at a risk-free rate of 10 %). From an investor perspective, the relative spread is hence a better measure as it reflects the magnitude of the yield spread and the way it is affected by the base interest-rate level.

(315) Third, the relative spread is also country-neutral. For instance, where the risk-free rate in the US is lower than the risk-free rate in China, the method will lead to higher absolute mark-ups. On the other hand, where the risk-free rate in China is lower than in the US the method will lead to lower absolute mark-ups.

(316) On the third point, historical data showing the evolution of the absolute and relative spread over time were already analysed in the Tyres case. The Commission’s analysis found that the absolute spread is not as stable as alleged, but instead varies over time, from 1 % to 4,5 %. In addition, the relative spread followed exactly the same trend as the absolute spread over the past 23 years, i.e. when the relative spread increases the absolute spread also increases and vice versa. As for the alleged volatility of the relative spread, the magnitude of the changes were similar — the difference between the highest and the lowest figures was 530 % for the relative spread and 450 % for the absolute spreadTyres case cited in the previous, footnote, recital (256). .

(317) The GOC also objected to the use of an out-of-country benchmark as such. In this respect, the GOC noted that the Commission first should have looked for comparable commercial loans the exporting producers could actually obtain on the market. Otherwise, the benchmark should be based on positive evidence and reasoned explanations that all loans in the market concerned were distorted by government intervention such that no comparable loan existed on the domestic market.

(318) In this respect, as explained in Section 3.4.1.7 above, the Commission determined that domestic credit ratings awarded to Chinese companies were not reliable as such, and were also distorted by the policy objectives to encourage key strategic industries, like GFF. As a result, Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset, and the Commission had to look for a benchmark based on undistorted credit ratings. Furthermore, the Commission noted that the resulting interest rate of around 9 % for BB rated companies is not unreasonable in view of the fact that the yield of BB rated corporate bonds on the Chinese domestic market was 21 % at the end of the investigation periodDaily Report of China Onshore RMB Bond Market, 2018-07-20 , Bond Information Department, China Central Depository & Clearing Co. Ltd, p. 4. . Consequently, these claims were rejected.

(319) The GOC also claimed that the use of an out-of-country benchmark was inappropriate, as the benchmark did not make the necessary adjustments to reflect the prevailing conditions on the Chinese financial market, and that the Commission failed to take into account differences that existed in the size of the loans, the repayment terms and conditions and whether or not the loans were guaranteed, among other factors.

(320) The Commission disagreed with this view, since the PBOC benchmark rate is used as a starting point for the calculation. Furthermore, the use of the relative spread captures changes in the underlying country-specific market conditions, which are not expressed when following the logic of an absolute spread, as explained in the recital above. In addition, the Commission observed that it it not possible to include all factors of the individual risk assessment of a bank into the proxy. However, the Commission’s calculation methodology takes into account parameters of individual loans, such as the start date and the duration of the loan, as well as the variability of the interest rate. The GOC’s claims were thus rejected.

(321) As for loans denominated in foreign currencies in the PRC, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, BB rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(322) Furthermore, as explained in Section 3.4.2.1, the existence of revolving loans in a given company is considered an indication that the company is in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to short-term liquidity problems. Indeed, revolving loans are usually concluded for short durations. It is highly unlikely that a revolving loan would have a maturity of more than two years, and the evidence of the loans verified in the sampled companies supported this conclusion.

(323) Therefore, in order to take into account the increased risk exposure of the banks when providing short-term financing to companies with revolving loans, the Commission moved down one notch in the risk rating scale and adapted the relative spread calculation for all short-term financing of the concerned companies. The Commission thus made a comparison between US AA corporate bonds and US B (instead of BB) corporate bonds with the same duration. According to Standard & Poor's credit rating definitions, an obligor rated B is more vulnerable than the obligors rated BB, but the obligor currently still has the capacity to meet its financial commitments. Nevertheless, adverse business, financial, or economic conditions may impair the obligor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered to be appropriate to reflect the additional risk derived from the use of revolving loans as short-term financing.

(324) The Commission thus used this as the relevant benchmark for all short-term debt, including loans, with a maturity of 2 years or less provided to companies, which were making use of revolving loans.

(325) For the remaining loans with a maturity above 2 years and for companies that did not have revolving loans, the Commission reverted to the general benchmark awarding the highest grade of Non-investment grade bonds, as explained in recital (306).

(326) The Commission found that certain companies within the group issued bonds with the purpose of debt restructuring. In this case, as explained in Section 3.4.2.2, the Commission considered that the companies concerned are in a worse financial situation than what are the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing. Therefore in order to take into account the increased risk exposure, the Commission moved down one notch in the risk rating scale and adapted the relative spread calculation also for their long-term financing, including loans, by making a comparison between US AA corporate bonds and US B.

(327) Finally, since the parent company CNBM did not cooperate, the benefit for preferential lending at the level of CNBM was established by using the methodology explained in this section, applied to the publicly available information in the 2018 annual report of this company, such as outstanding liabilities, average cost of capital and average duration of borrowings.

(328) As mentioned in recitals (250) to (252) above, the Chinese lending financial institutions did not provide any creditworthiness assessment. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the Yuntianhua Group were at market level.

(329) The exporting producers of the Yuntianhua Group presented itself in a generally profitable financial situation according to its own financial accounts.

(330) However, the analysis of the short-term liquidity raises concerns for the two exporting companies since the short-term debts in the IP represent from 90 to over 100 percent of the companies turnover, with an increasing trend from previous year. The use of short-term debt is significant in both companies. Although one of the exporting producers has no loans during the IP, it financed most of its purchases, as well as part of other non-operative cost, through bank acceptance drafts, an instrument with a maturity, generally, lower than a year.

(331) CPIC, the first direct shareholder and key supplier for the exporting producers, was profitable during the IP. However, it decreased the return to equity from previous year. Furthermore, the company presents liquidity issues, since its short term debts represent 80 to 90 % of the total debt. The comparison of the company’s current assets to its current liabilities provides a current ratioThe current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations due within one year. The current ratio is expressed as the comparison of a company’s current assets to its current liabilities. with a low value, below 1, which raises concerns on its capacity to repay short-term debts. Similarly, the Commission established the extensive use of bank acceptance drafts to finance its purchases.

(332) Yunnan Yuntianhua Group Co., Ltd., the parent company of the Yuntianhua Group, involved in the supply chain of the product under investigation, was loss-making during the IP. The comparison of the company’s current assets to its current liabilities, through the current ratio below 1, raises serious concerns on its liquidity and its ability to repay short terms debts. Furthermore, the investigation revealed that the company issued bonds with the explicit purpose of debt repayment. The use of revolving loans was similarly established.

(333) The Commission noted that the Yuntianhua Group was awarded an AA rating by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in recitals (279) to (285) above, the Commission concluded that this rating is not reliable.

(334) The Commission considered that the overall financial situation of the group corresponds to a BB rating, which is the highest rating that does no longer qualify as investment grade. Investment grade means that bonds issued by the company are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them.

(335) The premium expected on bonds issued by firms with this rating (BB) was then applied to the standard lending rate of the PBOC in order to determine the market rate.

(336) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US BB rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the benchmark interest rates as published by the PBOC at the date when the loan was grantedIn case of fixed interest loans. For variable interest rate loans, the PBOC benchmark rate during the IP was taken. , and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(337) As for loans denominated in foreign currencies in the PRC, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, BB rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(338) Furthermore, as explained in Section 3.4.2.1, the existence of revolving loans in a given company is considered an indication that the company is in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to short-term liquidity problems. Indeed, revolving loans are usually concluded for short durations. It is highly unlikely that a revolving loan would have a maturity of more than two years, and the evidence of the loans verified in the sampled companies supported this conclusion.

(339) Therefore, in order to take into account the increased risk exposure of the banks when providing short-term financing to companies with revolving loans, the Commission moved down one notch in the risk rating scale and adapted the relative spread calculation for all short-term financing of the concerned companies. The Commission thus made a comparison between US AA corporate bonds and US B (instead of BB) corporate bonds with the same duration. According to Standard & Poor's credit rating definitions, an obligor rated B is more vulnerable than the obligors rated BB, but the obligor currently still has the capacity to meet its financial commitments. Nevertheless, adverse business, financial, or economic conditions may impair the obligor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the additional risk derived from the use of revolving loans as short-term financing.

(340) The Commission thus used this as the relevant benchmark for all short-term debt, including loans, with a maturity of 2 years or less provided to companies, which were making use of revolving loans.

(341) For the remaining loans with a maturity above 2 years and for companies that did not have revolving loans, the Commission reverted to the general benchmark awarding the highest grade of Non-investment grade bonds, as explained in recital (306).

(342) The Commission found that certain companies within the group issued bonds with the purpose of debt restructuring. In this case, as explained in Section 3.4.2.2, the Commission considered that the companies concerned are in a worse financial situation than what are the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing. Therefore in order to take into account the increased risk exposure, the Commission moved down one notch in the risk rating scale and adapted the relative spread calculation also for their long-term financing, including loans, by making a comparison between US AA corporate bonds and US B.

(343) The investigation showed that all sampled groups of exporting producers benefited from preferential lending during the investigation period. In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, the Commission considered preferential lending a countervailable subsidy.

(344) The subsidy amount established with regard to the preferential lending during the investigation period for the sampled groups of companies amounts to:

(345) The investigation showed that Chinese financial institutions also provided credit lines at preferential conditions in connection with the provision of financing to each of the sampled companies. These consisted of framework agreements, under which the bank allows the sampled companies to use various debt instruments, such as working capital loans, bank acceptance drafts, documentary bills, other forms of trade financing, etc., within a certain maximum amount.

(346) The purpose of a credit line is to establish a borrowing limit that the company can use at any time to finance its current operations thus making working capital financing flexible and immediately available when needed. The investigation showed that the two sampled exporting producers had credit line agreements with different banks that covered diverse short-term financing instruments with the purpose to finance operating expenses. Consequently, the Commission considered that in principle, all short-term financing of the sampled companies should be covered by a sort of credit line instrument, including bank acceptance drafts, which are issued on a regular basis to finance current operations.

(347) Therefore, the Commission compared the amount of the credit lines available to the cooperating companies during the investigation period with the amount of short-term financing used by these companies during the same period to establish whether all short-term financing was covered by a credit line. In case the amount of the short-term financing exceeded the credit line limit, the Commission increased the amount of the existing credit line by the amount actually used by the exporting producers beyond that credit line limit.

(348) Under normal market circumstances, credit lines would be subject to a so-called arrangement or commitment fee to compensate for the bank's costs and risks at the opening of a credit line, as well as to a renewal fee charged on a yearly basis for renewing the validity of the credit lines. However, the Commission found that all of the sampled companies benefited from credit lines provided free of charge.

(349) Following definitive disclosure, the GOC argued that the Commission’s claim that in normal market circumstances, credit lines are subject to commitment fees was unjustified in light of its own consideration in the Aircraft cases. According to the GOC, commitment fees only apply when the credit line is a committed credit line. However, the Commission did not establish that the credit lines in question were committed credit lines. The GOC recalled that in EC – Aircraft, the EU itself contended that the fact that the EIB did not charge commitment fees was justified because … (i) for openrate contracts (i.e. contracts where the rates are not fixed ex ante), there is no certainty as to the timing of the availability of funds, and the EIB does not commit to a precise interest rate .

(350) In response to this claim, the Commission noted that the argument of the EU in EC-Aircraft proceedings regarding commitment fees was not followed by the Panel in its ultimate findings. In particular, the Panel established that the lack of charging commitment fees by the EIB to compensate for the the EIB’s commitment to make funding available was more advantageous than a comparable loan from a commercial lender and conferred a benefitWT/DS316/R - European Communities and Certain Member States - Measures Affecting Trade in Large Civil Aircraft - Report of the Panel, 30 June 2010 , paras 7.739 and 7.801. . Therefore, this claim was rejected.

(351) In accordance with Article 6(d)(ii) of the basic Regulation, the Commission considered the benefit thus conferred on the recipients to be the difference between the amount that the company has paid as a fee for the opening or the renewal of credit lines by Chinese financial institutions and the amount that the company would pay for a comparable commercial credit line, which the company could obtain on the market.

(352) Following disclosure, several parties claimed that the Commission did not perform a specificity analysis for credit lines. Furthermore, the GOC reiterated its comments developed in Section 3.1 above, stating that GFF is not an encouraged industry and none of the documents referred to by the Commission in this regard show that the credit lines provided to the GFF industry are specific within the meaning of Article 2 of the SCM Agreement.

(353) The Commission did not make a separate specificity analysis as credit lines are intrinsically linked to other types of preferential lending such as loans, and thus follow the same specificity analysis as developed in Section 3.4.2.3 above for the loans. As a result, these claims were rejected.

(354) The appropriate benchmark for the arrangement fee was established at 1,5 % by reference to publicly available dataFees charged by HSBC UK: https://www.business.hsbc.co.uk/…/pdfs/en/bus_bnkg_price_list.pdf for opening similar credit lines in similar (but undistorted) situations. The amount of the arrangement fee is payable on a lump sum basis at the time of the opening of the credit line. Therefore, the Commission applied the benchmark to the amount of credit lines opened during the investigation period.

(355) For credit lines existing before the beginning of the IP and renewed during the IP, a renewal fee of 1,25 % was used as a benchmark following the same source. The amount of the renewal fee is payable yearly on a lump sum basis at the time of the renewal of the credit line. Therefore, the Commission applied the benchmark to the amount of credit lines renewed during the IP.

(356) After definitive disclosure, one of the parties commented that the costs pertaining to arrangement and renewal fees are commonly waived by banks in order to secure large commercial clients. The company further provided an example of a bank in the United States, which did not charge an arrangement fee and only charged a 0,25 % annual renewal fee for a committed credit line of between USD 100001 and USD 3 millionhttps://www.pnc.com/en/small-business/borrowing/business-lines-of-credit/secured-businessline-of-credit.html In addition, given that the United States is a much larger market than the United Kingdom and that the Commission relied on bond ratings from the United States to establish creditworthiness, such a benchmark was considered to be much more suitable than the UK benchmark for small businesses used by the Commission.

(357) The Commission noted that the allegation that the costs pertaining to arrangement and renewal fees are commonly waived by banks in order to secure large commercial clients was not substantiated by any evidence. Moreover, the Commission reviewed the benchmark proposed by the company and found that this benchmark specifically concerned lines of credit for small businesses with a maximum amount of USD 3 million, and more particularly related to short term working capital needs. On the contrary, the benchmark used by the Commission had a minimum limit of GBP 25000 but no upper limit, there were no limitations in terms of the use of the capital provided or the duration, and it was separate from another financial product mentioned in the same document, but specifically tailored to small businesses. The Commission’s own benchmark was thus more suitable for large size clients. In addition, the US bank providing the credit lines in the example chosen by the claimant was a bank operating exclusively on the US market, whereas HSBC (the benchmark used by the Commission) is a global bank, operating also on the Chinese market. There is no evidence available to the Commission indicating that HSBC waives the fees depending on the size of the customer. In this respect as well, the Commission’s benchmark thus seemed more appropriate. Consequently, the company’s claims were rejected.

(358) Bank acceptance drafts are a financial product aimed at developing a more active domestic money market by broadening credit facilities. It is a form of short-term financing that might reduce fund cost and enhance capital efficiency of the drawerSee website of the People’s Bank of China: https://www.boc.cn/en/cbservice/cncb6/cb61/200811/t20081112_1324239.html .

(359) Bank acceptance drafts can only be used to settle genuine trade transactions and the drawer must produce sufficient evidence in that respect, e.g. through purchase/sales agreement, invoice and delivery order etc. Bank acceptance drafts may be used as a standard means of payment in purchase agreements together with other means such as remittance or money order.

(360) The bank acceptance draft is drawn by the applicant (the drawer, which is also the buyer in the underlying commercial transaction) and accepted by a bank. By accepting the draft, the bank accepts to make unconditional payment of the amount of money specified in the draft to the payee/bearer on the designated date (the maturity date).

(361) In general, the bank acceptance contracts contain the list of the transactions covered by the amount of the draft with indication of the payment due date with the supplier and the maturity date of the bank acceptance draft.

(362) The Commission established that generally bank acceptance drafts are issued within the framework of a bank acceptance draft agreement specifying the identity of the bank, suppliers and buyer, the obligations of the bank and the buyer and detailing the value per supplier, the payment due date agreed with the supplier and the maturity date of the bank acceptance draft.

(363) The Commission also established that credit line agreements generally list bank acceptance drafts as possible use of the finance limit along with other short-term financial instruments such as working capital loans.

(364) Depending on the conditions established by each bank, the drawer might be required to make a small deposit in a dedicated account, make a pledge and pay acceptance commission. In any event, the drawer is obliged to transfer the full amount of the bank acceptance draft to the dedicated account at the latest at the maturity date of the bank acceptance draft.

(365) Once accepted by the bank, the drawer endorses the bank acceptance draft and transfers it to the payee, who is also the supplier in the underlying commercial transaction, as a payment of the invoice. Consequently, the payment obligation of the buyer (drawer) towards the supplier (payee) is cancelled. A new payment obligation of the buyer is created towards the accepting bank for the same amount (the drawer has the obligation to pay the bank in cash before the maturity of the bank acceptance draft). Therefore, the issuance of a bank acceptance drafts has the effect to replace the obligation of the drawer towards its supplier by an obligation towards the bank.

(366) The maturity of bank acceptance drafts varies depending on the conditions set by each bank and can go up to 1 year.

(367) The payee (or bearer) of the bank acceptance draft has three options before the maturity:wait until maturity to be paid in cash the full amount of the face value of the draft by the accepting bank; endorse the bank acceptance draft, i.e. use it as a means of payment for its liabilities towards other parties; or discount the bank acceptance draft with the accepting bank or another bank and obtain the cash proceeds against the payment of a discounting rate.

(368) The issuance date of the bank acceptance draft generally corresponds to the payment due date agreed with the supplier but can also be a date prior or posterior to the payment due date. The investigation found that, as far as the sampled companies are concerned, the issuance date was generally on or before the due date of the payment with the supplier and in some cases even after the payment due date. The Commission established that the maturity of the bank acceptance drafts of the sampled companies is in most cases from 6 months up to 12 months after the payment due date of the invoice.

(369) Regarding the accounting treatment of bank acceptance drafts, they are recognized as liabilities to the bank in the accounts of the drawers, i.e. the sampled exporting producers.

(370) The Credit Reference Center of the People’s Bank of China (CRCP) recognises bank acceptance drafts as unsettled credit provided by banks at the same level as loans, letters of credit or trade financing. It should also be noted that the CRCP is fed by the financial institutions, which grant various types of loans, and that such financial institutions have thus recognised bank acceptance drafts as liabilities to them. Furthermore, the bank acceptance agreements collected during the investigation provide that, should the buyer not make the full payment on the expiry date of the bank acceptance drafts, the bank would treat the amount unpaid as an overdue loan to the bank.

(371) Following definitive disclosure, one exporting producer from CNBM Group claimed that the CRCP does not recognise bank acceptance drafts as a liability towards the bank in the credit reports. This interested party referred to the note to the liabilities in the CRCP Credit Report where it is specified that The debt balance includes the unsettled advances, loans, class loans, trade financing, factoring, bills discounting, guarantees and third-party compensated debts, and the debts handled by asset management company at the time of statistics. It further added that in one of the group companies the Summary information in the credit report refers to a current balance of liability, which did not include the bank acceptance drafts amounts but only the loans amount.

(372) In this respect, the Commission points out that the credit reports list bank acceptance drafts in the Summary of unsettled credit information at the same level as loans, letters of credit, discounted bills, factoring or trade financing. The fact that bank acceptance draft are not counted in the debt balance or in the current balance of liability at the specific time when the report was issued does not affect their classification as credit, which is clearly recognized by the CRCP in the credit reports.

(373) As already mentioned in recital (358), bank acceptance drafts are a form of a short-term financing. In addition, as stated by the People’s Bank of China on its website, the bank acceptance draft can guarantee the establishment and performance of the contract between the buyer and the seller, as well as promote the capital turnover via the intervention of Bank of China's credit See footnote 71. . In addition, on its website DBS Bank advertises bank acceptance drafts as a means to improve working capital by deferring payments See website of DBS Bank: https://www.dbs.com.cn/corporate/financing/working-capital/bank-acceptance-draft-bad-issuance .

(374) The Commission found that bank acceptance drafts are largely used as a means of payment in commercial transactions as a substitute to a money order thus facilitating the cash turnover and the working capital of the drawer. From a cash point of view, the instrument de facto grants the drawer a deferred due date of payment of 6 months or 1 year because the actual cash payment of the transaction amount occurs at the maturity of the bank acceptance draft and not at the moment when the drawer had to pay its supplier. In the absence of such a financial instrument, the drawer would either use its own working capital, which has a cost, or contract a short-term working capital loan with a bank in order to pay its suppliers, which also has a cost. In fact, by paying with bank acceptance draft, the drawer uses the supplied goods or services for a period of 6 months to 1 year without advancing any cash and without bearing any cost. As an illustration of the use of bank acceptance drafts as a substitute of short-term loans, the Commission established that one of the sampled exporting producers did not have any loans. However, the bank acceptance drafts issued by this exporting producer during the IP represented 70 % of its operating cost. Similarly, bank acceptance drafts at the end of the IP accounted for more than 53 % of its total liabilities.

(375) Under normal market circumstances, as a financial instrument, bank acceptance drafts would imply a cost of financing for the drawer. The investigation showed that all the sampled companies that used bank acceptance drafts during the investigation period only paid a commission for the acceptance service provided by the bank, which varied between 0,05 % and 0,1 % of the face value of the draft. However, none of the sampled companies bore a cost for the financing via bank acceptance drafts by deferring the cash payment of the supply of goods and services. Therefore, the Commission considered that the investigated companies benefitted from financing in the form of bank acceptance drafts for which they did not bear any cost.

(376) Considering the above, the Commission concluded that the bank acceptance system put in place in the PRC provided all exporting producers a free financing of their current operations, which conferred a countervailable benefit as described in recitals (395) to (399) below, in accordance with Article 3(1)(a)(i) and 3(2) of the basic Regulation.

(377) Following definitive disclosure, both cooperating exporting producers made a comment that bank acceptance drafts do not constitute a loan or any other form of financial assistance and that the Commission made an incorrect assumption that the use of bank acceptance drafts has the same effect as of a short-term loan. They argued that the extended payment due date that the use of a bank acceptance draft implies is not an interest-free short-term loan granted by a bank, but rather an extension of the payment due date that the seller decides to grant. Yuntianhua Group claimed that the Commission did not demonstrate the existence of a financial contribution in case of bank acceptance drafts. Both cooperating exporting producers insisted that the bank acceptance drafts do not involve any financing because no money has been transferred from the bank to any party.

(378) One company from the CNBM Group argued that the bank’s acceptance is merely to facilitate transactions between unacquainted parties, in a way that the bank adds its own guarantee that the payment will be made when the maturity date is due. In addition, the bank acceptance draft does not change the date of payment as originally provided in the sales contract and therefore, a bank does not, by accepting a draft, provide a short-term loan. It further stated that the way the bank acceptance drafts are booked in the company’s internal ledgers does not alter the conclusion that bank acceptance drafts are not a kind of short-term financing. This party also claimed that since according to the sales contract, the seller only receives the payment in 6 months or 1 year, the buyer does not need to use its own working capital or contract a short-term loan in order to pay at sight, because the seller already accepts that the payment will be a deferred one.

(379) In this respect, the Commission pointed out that it did not establish that bank acceptance drafts constitute a loan. However, the Commission concluded that they have economic effects similar to short-term financing.

(380) As pointed out in recital (374), the Commission established that bank acceptance drafts are largely used as a means of payment in commercial transactions, as a substitute to a money order, thus facilitating the cash turnover and the working capital of the drawer. The Commission also found that from a cash point of view, the instrument defers the cash payment at the maturity of the bank acceptance draft. In fact, the supplier is paid with bank acceptance draft at the payment due date agreed in the contract, instead of cash. The cash payment at maturity is a payment by the drawer to the bank under the contractual relation created between the drawer and the bank in the framework of the bank acceptance draft. Suppliers can also endorse bank acceptance drafts to pay other providers (instead of cash). Therefore, as pointed out in recital (374), the use of bank acceptance drafts allowed the drawers to use the supplied goods or services for a period of 6 months to 1 year without advancing any cash and without bearing any cost. The Commission also reiterated that the People’s Bank of China presents bank acceptance drafts as an instrument that might reduce fund cost and enhance capital efficiency of the drawer as well as promote the capital turnover via the intervention of Bank of China's credit See footnote 73. and the DBS Bank advertises bank acceptance drafts as a means to improve working capital by deferring payments See footnote 75. . Furthermore, the GOC has not disputed the conclusion of the Commission that bank acceptance drafts are a form of financing. In addition, recently, the CBIRC issued a notice in which it states that in order to strengthen credit support to downstream enterprises in core enterprises, banking financial institutions may provide credit support for downstream enterprises to obtain goods and pay for goods by opening bank acceptance bills , domestic letters of credit, advance financing, etchttp://www.cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=895429&itemId=928 . This is yet another evidence showing that the GOC perceives the bank acceptance drafts as another form of credit support.

(381) The fact that there is no transfer of money from the bank to any party at the moment of the issuance of the bank acceptance draft does not alter the above reasoning and conclusions. As already explained, bank acceptance drafts, as put in place in the PRC, are a means of payment in commercial transactions that favour the drawers by facilitating their cash turnover and their working capital. From economic and financial point of view, the use of this instrument allows the drawer to pay its liabilities without using financial resources of the company and therefore, it constitutes a form of financing of its economic operations. Contrary to what the cooperating exporting producers claim, this financing is not granted by the supplier but by the bank. As explained in recital (365), once the bank acceptance draft is accepted by the bank and endorsed to the payee (i.e. the supplier) the payment obligation of the buyer (drawer) towards the supplier (payee) is cancelled. Indeed, the payee (supplier) is paid by bank acceptance draft at the moment agreed in the sales contract (i.e. the payment due date). This was further confirmed by the GOC during the verification visit, namely that once the company pays the supplier with the bank acceptance draft they no longer have an obligation in relation to the supplier but to the bank because the one who requested the bank acceptance draft to be issued will need to pay the bank in full on maturity date. Furthermore, as a means of payment, the bank acceptance draft can be used by the supplier to pay its own liabilities towards other parties. Therefore, the supplier does not grant an extension of the payment due date. On the contrary, the bank grants an extension of the actual cash payment of the transaction covered by the bank acceptance draft by 6 months or 1 year and thus allows the drawer to avoid any cost of financing.

(382) The Commission disagreed with the comment that since according to the sales contract, the seller only receives the payment in 6 months or 1 year, the buyer does not need to use its own working capital or contract a short-term loan in order to pay at sight. The Commission also disagreed with the statement that the way the sampled exporting producers book the bank acceptance drafts in their internal ledgers is irrelevant. In fact, as already mentioned above, bank acceptance drafts are a means of payment used by the drawer to honour its obligations towards the payee. The statement that the seller only receives the payment in 6 months or 1 year is factually incorrect because the seller receives the payment with bank acceptance draft at the payment due date agreed in the contract. As already pointed out in recital (374), bank acceptance drafts are stipulated as a means of payment in commercial transactions instead of a cash payment and this is agreed by both the seller and the buyer. However, the cash payment of the goods and services is deferred to the maturity date of the bank acceptance draft and this deferral is granted by the bank. As already explained in recital (365), when the seller is paid by bank acceptance draft the liability of the drawer towards the seller is cancelled and two new liabilities are created: a liability of the drawer towards the accepting bank and a liability of the accepting bank towards the seller (payee) or the bearer of the bank acceptance draft. Contrary to what is claimed, the way the sampled exporting producers book the bank acceptance drafts in their internal ledgers is an important element that shows that, from one side, the liability towards the seller is cancelled with the payment by means of bank acceptance draft and, on the other side, a new liability of the drawer towards the bank is created. This is an additional evidence that through the use of bank acceptance drafts as a means of payment, which is allowed by the bank that accepted the draft, the drawer does not need to pay in cash the supplier (payee) at the payment due date agreed in the contract. Rather the drawer is obliged to pay in cash to the bank at the maturity date of the bank acceptance draft, which is 6 months or 1 year later. This was further confirmed by the GOC during the verification visit as it stated that bank acceptance drafts are interesting to alleviate the burden on the company’s cash flow .

(383) The Commission also disagreed with the comment that by accepting the bank acceptance draft, the bank in a way merely adds its own guarantee that the payment will be made when the maturity date is due. First, as stated before, the bank acceptance draft is a means of payment, by which the drawer honours its liability towards the payee (the supplier). Therefore, the payment of the supplier by the drawer happens at the moment of the endorsement of the bank acceptance draft, while at maturity, the drawer honours its payment obligation towards the bank. Second, the bank acceptance draft cannot be classified merely as an additional guarantee of a future payment because the bank acceptance draft is a means of payment, acknowledged in the sales contracts, and the payment obligation of the drawer towards the supplier is cancelled by the payment with bank acceptance draft. The cash payment due to the bank at maturity is not an extension of the payment due date granted by the supplier, it is instead an obligation towards the bank. In addition, this was confirmed by the GOC during the verification visit where it stated that legally speaking the difference between the bank guarantee and the bank acceptance draft is that with the guarantee it is company A who is in the 1st line liable for the payment, whereas for bank acceptances, it is the issuing bank.

(384) Considering the above, the Commission reiterated its conclusion that in terms of their effects bank acceptance drafts are a form of a short-term financing in the way that they allowed the exporting producers to finance their purchases. The benefit provided to the cooperating exporting producers is the financing cost savings due to the fact that the use of financing through bank acceptance drafts was not remunerated.

(385) Considering that bank acceptance drafts effectively have the same purpose and effects as short-term working capital loans, and that they have been extensively used by the cooperating exporting producers to finance their current operations instead of using short-term working capital loans, they should bear a cost equivalent to a short-term working capital loan financing. This conclusion was further confirmed by the GOC during the verification visit where it stated that, regarding the choice for a company between bank acceptance draft and a short-term loan, it is up to the company to decide but by nature they are similar.

(386) In light of the above considerations, the Commission rejected the claims that bank acceptance drafts are not a form of short-term financing.

(387) Concerning specificity, as mentioned in recital (165), according to Decision No. 40, financial institutions shall provide credit support to encouraged industries.

(388) The Commission considered that bank acceptance drafts are another form of preferential financial support by financial institutions to encouraged industries such as the GFF sector. Indeed, as specified in Section 3.1 above, the GFF sector is among the encouraged industries and is therefore eligible for all possible financial support. No evidence was provided that any undertaking in the PRC (other than within encouraged industries) can benefit from bank acceptance drafts under the same preferential terms and conditions.

(389) Following definitive disclosure, CNBM Group claimed that the bank acceptance draft is a common commercial practice in the PRC available to all industries and that the only statutory limit to the user of a bank acceptance draft is indicated in Article 6 of Law of the People’s Republic of China on Negotiable Instruments, i.e. if a person having no capacity or limited capacity for civil acts signs a negotiable instruments, the signature shall be null and void. It also claimed that it is not the responsibility of exporting producers to rebut a presumption that an alleged subsidy program is specific and that it is the Commission’s responsibility to substantiate its determination of specificity on the basis of positive evidence, in particular by comparing the terms offered to the sampled companies with those offered to other Chinese companies. Finally, one company from CNBM Group asked the Commission to explain why a similar system in Canada, that the Commission has referred to in the e-bikes case, is not considered as a specific subsidy program, while it considers the system in the PRC as a specific subsidy.

(390) In this respect, the Commission referred to Recital (165) where it presented evidence that according to Decision No 40, financial institutions are required to provide credit support to encouraged industries. Bank acceptance drafts, as a form of financing, are part of the preferential financial support system by financial institutions to encouraged industries, such as the GFF industry.

(391) The Commission pointed out that it based its assessment regarding the specificity of the subsidy scheme on available governmental documents, such as plans and regulations, on encouraged industries. In this respect, the Commission noted that the GOC has clearly defined which industries are encouraged limiting the specific preferential financing benefits only to those ones. Therefore, even if a number of other industries specifically defined as encouraged also enjoy the same or similar preferential conditions as the GFF industry, this does not render preferential financing and in particular, bank acceptance drafts generally available to all industries.

(392) Furthermore, even if a form of financing could be in principle available to companies in all industries, the concrete conditions, under which such financing is offered to companies from a certain industry, such as the financing remuneration and the volume of financing, might make it specific. In fact, in the case of the cooperating exporting producers, as mentioned above, the Commission established that all of them benefitted from short-term financing through bank acceptance drafts without bearing any cost and that some of them benefitted from a substantial volume of bank acceptance drafts in comparison with other short-term financing such as short-term loans. There was no evidence submitted by any of the interested parties demonstrating that the preferential financing through bank acceptance drafts of companies in the GFF industry is based on objective criteria or conditions in the sense of Article 4(2)(b) of the basic Regulation.

(393) Regarding the comment about the bank acceptance drafts system in Canada, the Commission pointed out that according to Article 4(2) of the basic Regulation, the assessment of the specificity of a subsidy programme is made only with respect to the subsidies under investigation. Therefore, the Commission is not required to demonstrate that similar systems in other countries are also specific.

(394) Considering the above arguments, the claims of the cooperating exporting producers regarding specificity of the bank acceptance drafts were rejected.

(395) For the calculation of the amount of the countervailable subsidy, the Commission assessed the benefit conferred on the recipients during the investigation period.

(396) As already mentioned in recitals (358) and (373), bank acceptance drafts are a form of short-term financing that enhance the capital efficiency of the drawer by facilitating its working capital and meeting its cash needs as they are largely used as a means of payment in commercial transactions instead of cash. The Commission found that the sampled exporting producers used bank acceptance drafts to address their needs for short-term financing without paying a remuneration. In addition, as stated in recital (346), the Commission considered that all short-term financing of the sampled companies, including bank acceptance drafts, should be covered by a credit line. The benefit relating to credit lines was established in Section 3.4.3.1 above.

(397) The Commission thus concluded that bank acceptance drawers should pay a remuneration for the period of financing. For calculation purposes, the Commission considered that the period of financing started, either on the payment due date agreed with the supplier, in cases where the bank acceptance draft was issued before the payment due date, or on the date of the issuance of the bank acceptance draft in cases where the bank acceptance draft was issued on or after the payment due date. The period of financing was deemed to end on the maturity date of the bank acceptance draft.

(398) In accordance with Article 6(b) of the basic Regulation, the Commission considered that the benefit thus conferred on the recipients is the difference between the amount that the company had actually paid as remuneration of the financing by bank acceptance drafts and the amount that it should pay by applying a short-term financing interest rate.

(399) The Commission determined the benefit resulting from the non-payment of a short-term financing cost. In this respect, as mentioned in recital (358), bank acceptance drafts are a form of short-term financing. They effectively have the same purpose as short-term working capital loans. Therefore, the Commission considered that bank acceptance drafts should bear a cost equivalent to a short-term loan financing. Therefore, the Commission applied the same methodology as to short-term loans financing denominated in RMB, described in Section 3.4.2.4 above.

(400) Following definitive disclosure, one company from CNBM Group made a comment that as the bank acceptance draft is a credit provided by the seller to the buyer, the Commission should calculate the benefit in the context of the subsidy program provision of good and services for less than adequate remuneration (LTAR) and it should first determine whether the suppliers account for public bodies within the meaning of Article 2(b) of the basic Regulation.

Notice of initiation of an anti-dumping proceeding concerning imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (OJ C 68, 21.2.2019, p. 29 ).

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(401) As already explained in recitals (379) to (383), the Commission disagreed that bank acceptance drafts are a credit provided by the seller and concluded that bank acceptance drafts are a form of preferential financing provided by the bank to the drawer. Therefore, the above comment was rejected.

(402) Another company from CNBM Group claimed that the Commission should have deducted the actual payment term granted from the supposed period of bank financing.

(403) As explained in recital (397), the Commission had considered the payment due date agreed with the supplier in the calculation of the period of financing. In the case of the CNBM Group company that made the claim, the investigation showed that in practice the payment due date of the underlying invoices had either already expired when the corresponding bank acceptance drafts were issued, or that no link could be found between the invoices provided and the bank acceptance drafts. Consequently, this claim was rejected.

(404) One company from CNBM Group claimed that the Commission should deduct the fees actually paid by the sampled producers from the alleged benefit. In addition, Yuntianhua Group claimed that under Article 7(1)(a) of the basic Regulation, the Commission has to deduct any application fee or other costs necessarily incurred in order to qualify for, or to obtain, the subsidy.

(405) The Commission already noted in recital (375) that the cooperating exporting producers have paid a commission for the acceptance service provided by the bank, which varied between 0,05 % and 0,1 % of the face value of the bank acceptance draft. In fact, this commission, paid for the processing of the bank acceptance draft by the bank, is a distinct element from the financing granted by the bank, for which the cooperating exporting producers did not bear any cost. This fee is paid in order to cover the bank’s administrative costs of processing the bank acceptance drafts. The Commission countervailed only the financing part of the bank acceptance drafts (namely, the part equivalent to short-term financing); it did not analyse whether the acceptance commission also involved a countervailable subsidy. In any event, the impact of the fee on the subsidy amount ranges from 0,01 % to 0,04 %, depending on the exporting producer and therefore it is immaterial. Therefore, the Commission did not consider it necessary to analyse this claim in its merit and also to assess the countervailability of this benefit.

(406) One company from CNBM Group claimed that the basis for the calculation of the benefit should be reduced by the amount of the deposits that it made as a guarantee for the bank acceptance drafts.

(407) In this regard, as the Commission concluded in previous investigationsSee E-bikes case cited in footnote 7, recital 316 , it should first be noted that it is common practice for banks to request guarantees and collaterals from their clients when granting financing. Furthermore, it should be noted that such guarantees are used to secure that the exporting producer will bear its financial responsibility vis-à-vis the bank and not vis-à-vis the supplier. The investigation also revealed that these guarantees are not systematically requested by Chinese banks and are not always linked to specific bank acceptance drafts. In this respect, the alleged deposits do not amount to an advanced payment by the drawer to the banks but merely an additional guarantee requested at times by banks and which does not have any impact of the bank’s decision to issue the bank acceptance drafts with no additional borrowing interests for the drawer. Furthermore, they can take various forms including term deposits and pledges. The deposits bear interests in favour of the drawer, and therefore, do not represent a cost for the drawer of the bank acceptance draft. On this basis, this claim was rejected.

(408) One company from CNBM Group claimed that the Commission should exclude from its calculations the bank acceptance drafts issued to related parties since the extension of a payment term to a related party via a bank acceptance draft confers no benefit on the payee in terms of increased liquidity because it reduces the liquidity of the related counterparty by a commensurate amount.

(409) In this respect, the Commission recalls that as stated above, a bank acceptance draft is a means of payment and therefore, it does not have the effect of extending the payment due date agreed with the supplier but it has the effect to defer the cash payment. As a means of payment, the bank acceptance draft can be endorsed by the payee (supplier) to settle its liabilities towards other parties. Therefore, there is no commensurate decrease in liquidity of the related parties that received the bank acceptance draft. Consequently, the claim was rejected.

(410) Yuntianhua Group claimed that in the calculation of the bank acceptance drafts for some related companies, the Commission did not use the data as provided in the reply to the questionnaire.

(411) The Commission noted that the calculation was based on the last submission of data provided by the companies and verified during the on spot verification. The claim was therefore rejected.

(412) Finally, one company from CNBM Group made a specific claim regarding bank acceptance drafts issued by a related company to avoid double counting. The Commission rejected the claim. However, since the details of this claim are confidential, the Commission addressed it in a disclosure specific to the company concerned.

(413) The investigation showed that Chinese financial institutions discounted receivables to certain sampled companies in return for cash.

(414) Through this operation, financial intermediaries advanced to companies amounts of receivables before their due date. The companies received early funds by transferring the rights of future receivables to financial institutions after the deduction of fees and the applicable discount rates.

(415) The applicable discount rate should specifically compensate for the risk of default, which is highly influenced by the credit rating of the last entity liable to meet the payment obligation.

(416) The discounted receivables encountered during the investigation had different forms such as bills, bonds, factoring, bank acceptances and commercial acceptances. Each form operates under specific conditions and, similarly, they also involve different degrees of underlying risk. In the case of bank acceptance drafts, the last liable entity is the issuer of the bank acceptance, that is, a Bank. However, in other type of receivables e.g. bills, letter of credit the last liable entity would normally be a commercial company.

(417) Under normal market circumstances, the applicable discount rate should compensate for the bank's costs and risks. However, the Commission found that certain sampled companies might have been provided with preferential rates, which would confer a countervailable benefit.

(418) The benefit thus conferred on the recipients would be the difference between the discount rate applied by Chinese financial institutions and the discount rate applicable for a comparable operation on the market, for instance short-term loans.

(419) However, the information contained in the file does not allow discerning between the different applicable discount rates. Additionally the Commission estimated that the benefit conferred by this form of subsidisation was negligible in this investigation. Therefore, it decided not to countervail it.

(420) The Commission established on the basis of publically available information that CNBM had carried out during the investigation period a debt-to-equity swap for 4 billion RMB from Agricultural Bank of China (ABC) and Bank of Communications (COMM). As indicated in recitals (208) to (217) above, CNBM failed to provide a questionnaire reply and to cooperate with the investigation. Therefore, the Commission had to resort to facts available as far as its assessment on this transaction is concerned.

(421) ABC and COMM are both State-owned banks, considered public bodies and/or entrusted or directed according to Section 3.4.1.4 above. In addition, both ABC and COMM were found to be public bodies in previous anti-subsidy investigations or entrusted or directed to carry out functions normally vested in the governmentSee HRF and Tyres cases cited in footnote 7 above, recitls (96-140) and (178)-(218) respectively. . There is no evidence on the file of the current investigation, which would contradict those previous findings.

(422) The Commission considered that a bank would not convert its debt to equity under normal market conditions without further compensation. Indeed, equity is a much riskier instrument than debt, because there is no assurance that the bank will get its capital investment back. In addition, equity does not necessarily guarantee a return on investment contrary to an interest rate on a loan. The increased risk the banks undertake thanks to this debt-to-equity swap is supported by evidence of weak financial situation contained in the annual report of the company for the financial year 2018: the company has very high net debt ratio (between 120 %-145 %), the short term loans to be repaid within one year amount to double of the company’s annual gross profit, and overall liabilities represent 2/3 of its annual turnover. Finally, a press article on CNBM website specicifcallty indicated industrial policy objectives and the great importance of the strategic cooperation between CNBM and the two banks as a reason for the swap. In particular, the press article says that the swap will help CNBM to achieve the structural reform of the supply side as an industrial objective.

(423) In light of the above considerations, the Commission concluded that during the investigation period the debt-to-equity swap conferred a benefit to CNBM as it was provided at preferential conditions by public bodies or entities otherwise entrusted or directed by the State in pursue of industrial policy objectives.

(424) The Commission considered that the preferential financing through debt-to-equity swap is specific within the meaning of Article 4(2)(a) of the basic Regulation since the investors are entities, which operate under the guidelines of the State’s policies that list GFF as an encouraged industry. In any event, the information available points towards the granting of this ad hoc subsidy to CNBM, which makes the subsidy specific to an enterprise.

(425) In the absence of further evidence due to non-cooperation, the Commission did not have access to the agreements between CNBM and the banks. Thus, the Commission could not assess whether the significant risks the banks undertake have been somehow compensated. However, all the elements explained in recital (422) point to a difficult financial situation of CNBM and to the industrial objectives pursued with this transaction, supporting the conclusion that it did not have market logic reflecting the significant actual risks involved. Consequently, the Commission considered the transaction as equivalent to debt forgiveness, and treated it as a grant during the investigation period. Since the grant was taken completely in the investigation period, it was calculated on the basis of the total turnover of the entire group. This resulted in a subsidisation amount of 1,83 %.

(426) During the investigation period, a sampled company (Yunnan Yuntianhua Group Co., Ltd) benefited from funds provided by State controlled entities through special forms of equity injections.

(427) These funds were transferred in the form of equity increases that, however, did not automatically provide the investors with full shareholders rights. In this sense, the funds were transferred in exchange of a future equity share in the recipient company, which would become effective only after an undetermined period of time.

(428) The investigation established that when the company received the funds, they were booked as other equity instruments without the expected change on the share of company’s ownership. The investors, despite having transferred the funds, did not gain full access to shareholding rights, nor received any payment of interest in exchange. Only after an undetermined period of time, but usually longer than a year, and upon the approval of SASAC, part of the funds were transferred to paid-in-capital equity. Only at that moment in time, did the investors receive full shareholders’ rights.

(429) The Commission also established that the period between the capital injection and the conferral of shareholders’ rights could be longer than a year. In this regard, the Commission identified substantive amounts of equity injections that did not confer any shareholders’ rights during the entire investigation period.

(430) Consequently, in practice, until the shareholders’ rights are recognised, for a period longer than a year, the company has at its disposal funds in exchange of a future transfer of ownership but without incurring any cost.

(431) Under normal market circumstances, to compensate for the use of funds, a company would transfer a portion of the company’s ownership shortly after the funds had arrived, or it would register the funds as a debt. However, given the particular circumstances of these arrangements in this case, this hybrid form of financing is in fact closer to a classic interest-free shareholder loan for a long period of time than to an equity instrument.

(432) In light of the above considerations, the Commission considered that during the investigation period the company Yunnan Yuntianhua Group Co., Ltd., part of the Yuntianhua Group, benefited from access to substantive amounts of financing for a prolonged period, for which it did not bear any cost. Since this special form of equity injections in question did not automatically confer shareholders rights to the investors, the Commission considered that they had the effect similar to a loan at free interest.

(433) In order to determine whether the investors could be considered public bodies or entrusted or directed by the GOC, the Commission requested to Yuntianhua Group specific information about the shareholders that provided funds via other equity instruments. The investors were: Kunming Heze Investment Center; Yunnan Jinrun Zhonghao Investment Center; and Yunnan State-owned Enterprise Reform No.2 Equity Investment Fund Partnership (Fund for State-owned enterprise reform).

(434) The information requested by the Commission comprised corporate information, such as names of principal shareholders and the composition and rules of the board of directors of each investor. The Commission also enquired information about the investment policies of the said investors and further details about the specific transfers of funds via other equity instruments.

(435) Furthermore, the Commission contacted the GOC and solicited the same information as described in recital (434). The GOC answered that it did not have or hold information about specific companies and for all entities in China in which it may have a shareholding. Therefore, it refused to answer directly but deferred its answer to the one to be provided by the concerned sampled company.

(436) In the absence of a complete reply, in line with the recitals (218) to (220), the Commission decided to use facts available to determine whether those investors qualify as public bodies.

(437) Using publicly available information, such as, annual reports, information available in business directories or on the investors’ websites or publically available databases, the Commission found that the investors that had provided funds via other equity instruments to the Yuntianhua Group were partially or fully owned by the State.

(438) Concerning Kunming Heze Investment Center, the Commission established that more than 98 % of the shares ultimately held by the local government and SOEsSee: www.cfitc.com/; www.qixin.com/; http://hdcw.chd.com.cn/; www.chd.com.cn; www.gsxt.gov.cn/index.html . Specifically, among its shareholders, the Commission found more than 24 % of the shares held by the SOE Yunnan State Owned Capital Operations Ltd (Yunnan guoyou ziben yunying youxian gongsi). The Commission also found that more than 74 % of the shares of Kunming Heze Investment Center were held by China Fortune International (Huaxin International Trust), which is a financial company of the SOE China Huadian Group Co., Ltd. Moreover, Kunming Heze Investment Center is managed by an investment fund dedicated to invest in public provincial companies. In addition, in the entity and in the shareholders of the entity, the Commission found legal representatives and member of the boards, which held former executive position in Yunnan SASAC, as well as members of the CCPwww.qixin.com/; www.yngyzb.com/ynzb/index.do?url=display&id=935 .

(439) Concerning Yunnan Jinrun Zhonghao Investment Center,www.xin.baidu.com/; www.qichacha.com/ the Commission established that at least 46 % of the shares were ultimately held by the local government and SOEs. In particular, the Commission found among its shareholders ownership structure the China Construction Bank Trust and the Yunnan Province State-owned capital operations Jinrun equity investment fund management.

(440) Similarly, the Commission established that the Yunnan State-owned Enterprise Reform No.2 Equity Investment Fund Partnership (Fund for State-owned enterprise reform) owned by the SOE Yunnan Energy Investment Group.

(441) The Commission further established the existence of formal indicia of control by the State of those investors. In particular, in the absence of specific information indicating otherwise, the Commission considered that managers and supervisors in the State-owned companies owning the entities at issue are assumed to be appointed by and accountable to the State based on the conclusions reached in Sections 3.4.1.5 and 3.4.1.6.

(442) Moreover, as explained in recital (431) the Commission established that their operations did not follow a purely market logic and not reflect the actual market risks associated with the transactions investigated. Rather, in line with the governmental policies to encourage specific industries, as established in Section 3.1 above, those investors acted irrationally by supporting financially the exporting producer.

(443) In light of the above considerations, the Commission established that the State controlled entities that provided funds via other equity instrument to the Yuntianhua Group are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(444) In addition, even if the State controlled entities were not to be considered as public bodies, the Commission established that they would be considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3 (1)(a)(iv) of the basic Regulation for the same reasons, as set out in recital (269). Thus, their conduct would be attributed to the GOC in any event.

(445) The Commission considered that the preferential financing through equity injections is specific within the meaning of Article 4(2)(a) of the basic Regulation since the investors are entities, which operate under the guidelines of the State’s policies that list GFF as an encouraged industry. In any event, the information available points towards the granting of this ad hoc subsidy to Yunnan Yuntianhua Group Co., Ltd, which makes the subsidy specific to an enterprise.

(446) As explained in recital (432), the Commission considered that Yunnan Yuntianhua Group Co., Ltd. benefitted from substantive financing through equity injections, which had an effect similar to loan financing at free interest. Therefore, the Commission decided to follow the calculation methodology for loans as described above in Section 3.4.2. This means that the relative spread between US AA corporate bonds and the applicable US BB or US B corporate bonds with the same duration is applied to the benchmark interest rates published by the PBOC to establish a market-based interest for loans, which is then compared with the actual interest rate paid by the company in order to determine the benefit. This resulted in a subsidisation amount of 0,3 %.

(447) All of the sampled companies benefited from preferential financing in the form of bonds.

(448) In China, the players on the bond market are essentially the same entities as those, which are active on the loan market. Companies that want to issue bonds need to solicit the services of a financial institution, acting as an underwriter. Underwriters organize the issuance of bonds and propose the interest rates at which the bond will be presented to investors. These underwriters are the same State-owned banks that also provide the preferential loans discussed in Section 3.4.2 above. Furthermore, investors buying the bonds are also mainly Chinese (State-owned) banks, since more than 95 % of the total trading volume of bonds happens on the interbank marketGoldman Sachs Asset Management, Global Liquidity Management. (2015). FAQ: China’s Bond Market, first half 2015 . See also http://www.kwm.com/en/knowledge/insights/chinas-onshore-bond-market-open-for-business-20151216#ref-id-here (accessed on 16 November 2016 ). .

(449) As described in Section 3.4.1.1 above, these financial institutions are characterized by a strong State presence, and the GOC has the possibility to exercise a meaningful influence on them.

(450) The general legal framework, in which these financial institutions operate, and which was already described in Section 3.4.1 above, is also applicable to bonds. In addition, the following regulatory documents apply specifically to bonds:(1) Law of the People's Republic of China on Securities, revised and adopted at the 18th Meeting of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on October 27, 2005 , and effective as of January 1, 2006 (current version promulgated on August 31, 2014 ) (Securities Law);(2) Administrative Measures for the Issuance and Trading of Corporate Bonds, Order of the China Securities Regulatory Commission No.113, 15 January 2015 ;(3) Measures of the Administration of Debt Financing Instruments of Non-financial Enterprises on the Inter-bank Bond Market Issued by the People's Bank of China, Order of the People's Bank of China [2008] No. 12, 9 April 2008 ;(4) Regulations on the Administration of Corporate Bonds, issued by the State Council on 18 January 2011 .

(451) In line with the regulatory framework, bonds cannot be issued or traded freely in China. The issuance of each bond must be approved by various governmental authorities, such as the PBOC, the NDRC or the CSRC, depending on the type of bond and the type of issuer. In addition, according to the Regulations on the Administration of Corporate Bonds, there are annual quotas for the issuance of corporate bonds.

(452) Furthermore, according to Article 16 of the Securities Law, the public issuance of bonds should satisfy the following requirements: the investment of raised funds shall comply with the industrial policies of the State […] and the funds as raised […] shall be used for the purpose as verified. Article 12 of the Regulations on the Administration of Corporate Bonds reiterates that the purpose of the raised funds must comply with the industrial policies of the State.

(453) According to the Administrative Measures for the Issuance and Trading of Corporate Bonds, only certain bonds corresponding with strict quality criteria, such as an AAA credit rating, may be offered for public issuance. Most bonds will therefore be privately issued to so-called qualified investors, which have been approved by the CSRC, and which are essentially Chinese institutional investors.

(454) Finally, the interest rates on corporate bonds are not freely determined, since Article 18 of the Regulations on the Administration of Corporate Bonds states that, the interest rate offered for any corporate bonds shall not be higher than 40 % of the prevailing interest rate paid by banks to individuals for fixed-term savings deposits of the same maturity .

(455) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete issues of bonds. It therefore examined the overall legal environment as set out above in recitals (450) to (454), in combination with the concrete findings of the investigation.

(456) The verification visits revealed that bonds were usually issued by the two groups of sampled exporting producers at interest rates close to the People’s Bank of China (PBOC) benchmark interest rates, regardless of the companies’ financial and credit risk situation.

(457) In practice, interest rates on bonds are influenced by the credit rating, similar to loans. However, as described above in recitals (279) to (285), the local credit rating market is distorted and credit ratings are unreliable. This was illustrated by the fact that the bond prospectuses and credit rating reports for the bonds issued by the sampled companies did not correspond to the actual situation of the companies.

(458) In one case for example, the detailed bond prospectus warned that the profit levels of the company had been declining, that a significant portion of the net assets had been pledged for internal financing guarantees, that there was a high pressure created by short-term debt repayment, and that the company had foreseen some extensive capital-intensive projects even though it had already a high debt-to-assets ratio. Nevertheless, the report then concluded by providing a AA+ credit rating to the bond offering.

(459) In light of the above considerations, the Commission found that the Chinese financial institutions organizing the issuance of bonds for the sampled companies are public bodies or are entrusted or directed by the government within the meaning of Articles 3 and 2(b) of the basic Regulation as explained in Sections 3.4.1.5 and 3.4.1.6. Furthermore, a benefit was provided to the sampled exporting producers, since the bonds were issued at rates below the market rates corresponding to their actual risk profile.

(460) The Commission considered that the preferential financing through bonds is specific within the meaning of Article 4(2)(a) of the basic Regulation as the bonds cannot be issued without approval from government authorities, and the Securities Law of the PRC states that the issuance of bonds must comply with the State's industrial policies. As already mentioned in recitals (140) to (177), the GFF industry is regarded as key/strategic industry.

(461) Since bonds are in essence just another type of debt instrument, similar to loans, and since the calculation methodology for loans is already based on a basket of bonds, the Commission decided to follow the calculation methodology for loans as described above in Section 3.4.2. This means that the relative spread between US AA corporate bonds and US BB corporate bonds with the same duration is applied to the benchmark interest rates published by the PBOC to establish a market-based interest rate for bonds, which is then compared with the actual interest rate paid by the company in order to determine the benefit.

(462) As explained in recital (291), the Commission found that certain companies issued bonds with the purpose of debt restructuring. On these cases, as explained in Section 3.4.2.2, the Commission considered that the companies concerned are in a worse financial situation than what the financial statements would suggest at first sight, and that there is an additional risk related to its short and long-term financing. Therefore, in order to take into account the increased risk exposure, the Commission moved down one notch in the risk rating scale and adapted the relative spread calculation also for their financing, including bonds, by making a comparison between US AA corporate bonds and US B.

(463) The investigation showed that all sampled groups of exporting producers benefited from preferential financing in the form of bank acceptance drafts and bonds, and two of the sampled companies benefited from preferential financing the form of equity injections during the investigation period. In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, the Commission considered these types of preferential financing a countervailable subsidy.

(464) Concerning CNBM, since this company did not cooperate, the benefit for other types of preferential financing at the level of CNBM was established by using the methodology explained in each of the sections above, applied to the publicly available information in the 2018 annual report of this company, such as bond issuances, and outstanding amounts for notes payable.

(465) The subsidy amount established with regard to the preferential financing described above during the investigation period for the sampled groups of companies amounts to:

(466) The complainant alleged that Sinosure provides short-, medium- and long-term export credit insurance, investment insurance and bond guarantees, among other services, on a concessional basis to encouraged industries. According to a recent study undertaken by the Organisation for Economic Co-operation and Development (OECD), the Chinese hi-tech industry, of which the GFF industry is part, received 21 % of the total export credit insurance provided by SinosureOECD Study on Chinese export credit policies and programmes, page 7, para 32. . Furthermore, Sinosure has taken an active role in fulfilling the Made in China 2025 Initiative, guiding enterprises to use national credit resources, carrying out scientific and technological innovation and technological upgrading, and helping going out enterprises become more competitive in the global marketSee Sinosure website, Company profile, Supporting Made in China. .

(467) The two sampled groups of companies had outstanding export insurance agreements with Sinosure during the investigation period.

(468) As mentioned in recital (201) above, Sinosure failed to provide the supporting documentation requested concerning its corporate governance such as Articles of Association.

(469) In addition, as pointed out in recital (200), Sinosure did not provide more specific information about the export credit insurance provided to the GFF industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business.

(470) Therefore, the Commission had to complement the information provided by facts available.

(471) According to information provided in previous anti-subsidy investigationsSee Tyres case cited in footnote 7, recital 429. , Sinosure is a State-owned policy insurance company established and supported by the State to support the PRC's foreign economic and trade development and cooperation. The company is 100 % owned by the State. It has a board of directors and a board of supervisors. The Government has the power to appoint and dismiss the company’s senior managers. Based on this information, the Commission concluded that there is formal indicia of government control with respect to Sinosure.

(472) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of Sinosure with respect to the GFF industry. In this context, the Commission noted that the Export Catalogue of High and New Technology Products of China specifically lists glass fibre products, including GFF, as encouraged to be exportedExport Catalogue of High and New Technology Products, No 531 to 545. .

(473) Furthermore, according to the Notice on the Implementation of the Strategy of Promoting Trade through Science and Technology by Utilising Export Credit Insurance, Sinosure should increase its support for key industries and products by strengthening its overall support for the export of high and new technology products. It should treat industries such as new materials and other high and new technology industries listed in the Export Catalogue of High and New Technology Products of China, as its business focus and provide comprehensive support in terms of underwriting procedures, approval with limits, claims processing speed and rate flexibility. With regard to rate flexibility, it should give products the maximum premium rate discount within the floating range provided by the credit insurance company. As mentioned in recitals (148) and (162), the GFF industry is included in the more general category of new materials. Furthermore, the Annual Report of Sinosure for 2017 states that Sinosure has actively insured transactions of strategic emerging industries such as new materialsSinosure Annual Report 2017, p. 6. .

(474) On this basis, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of Sinosure.

(475) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete insurance agreements. During the verification visit, Sinosure maintained that in practice its premiums were market-oriented and based on risk assessment principles. However, no specific examples with respect to the GFF industry or the sampled companies were provided.

(476) In the absence of concrete evidence, the Commission therefore examined the concrete behaviour of Sinosure with regard to the insurance provided to the sampled companies. This behaviour contrasted with their official stance, as they were not acting based on market principles.

(477) After comparing the total claims paid with the total insured amounts, based on the data in the Sinosure’s Annual Report for 2017Sinosure Annual Report 2017, p. 20. , the Commission concluded that on average Sinosure would need to charge 0,26 % of the insured amount as a premium to cover the cost of the claims (without even taking into account overhead expenses). However, in practice, the premiums paid by the sampled companies were much lower than the minimum fee needed to cover operational costs.

(478) In addition, the Commission found that some of the exporting producers benefited from a partial or total refund of the export credit insurance premiums paid to Sinosure.

(479) Therefore, the Commission concluded that the legal framework set out above is being implemented by Sinosure in the exercise of governmental functions with respect to the GFF sector. Sinosure acted as a public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law. Furthermore, the sampled exporting producers received a benefit, since the insurance was provided at rates below the minimum fee needed for Sinosure to cover its operational costs.

(480) The Commission also determined that the subsidies provided under the export insurance programme are specific, because they could not be obtained without exporting and are thus export contingent within the meaning of Article 4(4)(a) of the basic Regulation.

(481) During the verification visit, Sinosure stated that there are five market players on the market and that it does not have information regarding its market share. However, according to information provided in a previous anti-subsidy investigation, for which the investigation period was 1 July 2016 to 30 June 2017 See Tyres case cited in footnote 7, recital 427. , Sinosure represented around 90 % of the domestic market for export insurance in the PRC at that time and hence had a predominant market position The Commission could not find a market-based domestic insurance premium. Therefore, in line with previous anti-subsidy investigations, the Commission thus used the most appropriate external benchmark, for which information was readily available, i.e. the premium rates applied by the Export-Import Bank (Ex-Im Bank) of the United States of America to non-financial institutions for exports to OECD countries.

(482) The refunds of export insurance premiums awarded during the investigation period were treated as a grant. Since there was no evidence of additional costs incurred by the companies for which an adjustment would be needed, the benefit was calculated as the full amount of the refund received in the investigation period.

(483) The subsidy amount established with regard to this scheme during the investigation period for the sampled exporting producers amounts to:

(484) Since the investigated groups of companies were vertically integrated, the main raw material suppliers have been included in the investigation by the Commission, and the subsidies received at the level of these related suppliers have been integrated into the calculations for each subsidy scheme.

(485) On the other hand, the Commission did not find sufficient evidence to substantiate the allegation of provision of goods for less than adequate remuneration by unrelated suppliers to the GFF producers.

(486) All land in the PRC is owned either by the State or by a collective, constituted of either villages or townships, before the land's legal or equitable title may be patented or granted to corporate or individual owners. All parcels of land in urbanized areas are owned by the State and all parcels of land in rural areas are owned by the villages or townships therein.

(487) Pursuant to the constitutional law of the PRC and the Land Law, companies and individuals may however purchase land use rights. For industrial land, the leasehold is normally 50 years, renewable for a further 50 years.

(488) According to the GOC, Article 137 of the Property Law of the People’s Republic of China stipulates that the land used for purposes of industry, business, entertainment or commercial dwelling houses, etc. or the land for which there are two or more intended users shall be transferred by means of auction, bid invitation or any other public bidding method. Furthermore, the GOC refers to Article 3 of the Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in Urban Areas. This Article provides that any company, enterprise, other organization and individual within or outside the People's Republic of China may, unless otherwise provided by law, obtain the right to the use of the land and engage in land development, utilization and management in accordance with the provisions of these Regulations.

(489) The GOC considers that there is a free market for land in the PRC, and that the price paid by an industrial enterprise for the leasehold title of the land reflects the market price.

(490) The land-use right provision in China falls under Land Administration Law of the People's Republic of China. In addition, the following documents also are part of the legal basis:(1) Property Law of the People's Republic of China (Order of the President of the People's Republic of China No. 62)(2) Land Administration Law of the People's Republic of China (Order of the President of the People's Republic of China No. 28)(3) Law of the People's Republic of China on Urban Real Estate Administration (Order of the President of the People's Republic of China No. 18);(4) Interim Regulations of the People's Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas (Decree No. 55 of the State Council of the People's Republic of China);(5) Regulation on the Implementation of the Land Administration Law of the People’s Republic of China (Order of the State Council of the People's Republic of China [2014] No. 653);(6) Provision on Assignment of State-owned Construction Land Use Right through Bid Invitation, Auction and Quotation (Announcement No. 39 of the CSRC);(7) Notice of the State Council on the Relevant Issues Concerning the Strengthening of Land Control (Guo Fa (2006) No. 31).

(491) According to Article 10 of the Provision on Assignment of State-owned Construction Land Use Right through Bid Invitation, Auction and Quotation, local authorities set land prices according to the urban land evaluation system, which is only updated every three years, and the government's industrial policy.

(492) During the verification visit, the GOC stated that in May 2019 the Ministry of Finance issued Guidelines on the usage of industrial land use to provide better information on LUR for market participants, and ensure supply in accordance with the need of the market. These Guidelines state that a level playing field is created and all market players have access on the same terms to industrial land. However, these Guidelines were not applicable during the investigation period and at the time of acquisition of the LUR by the sampled exporting producers.

(493) In previous investigations, the Commission found that prices paid for LUR in the PRC were not representative of a market price determined by free market supply and demand, since the auctioning system was found to be unclear, non-transparent and not functioning in practice, and prices were found to be arbitrarily set by the authorities. As mentioned in the previous recital, the authorities set the prices according to the Urban Land Evaluation System, which instructs them among other criteria to consider also industrial policy when setting the price of industrial land.

(494) The current investigation did not show any noticeable changes in this respect. For instance, the Commission found that, only some of the sampled exporting producers had gone through bidding or a similar public offering process for their LURs, even for the land use rights obtained recently. For most of the sampled companies, LURs were allocated by local authorities at negotiated prices.

(495) The Commission noted that there is also a dynamic land monitoring system in addition to the urban land monitoring system. In the expiry review on Solar Panels originating in the People’s Republic of ChinaCommission Implementing Regulation (EU) 2017/366, OJ L 56, 3.3.2017, p. 1 , (Solar panels), recitals 421 and 425. , the Commission found that these prices are higher than the minimum benchmark prices set by the urban land evaluation system and used by local governments, because the latter were updated only every three years, while the dynamic monitoring prices were updated quarterly. However, there was no indication of land prices being based on the dynamic monitoring prices. In fact, the GOC had confirmed during the investigation on solar panels that the urban land price dynamic monitoring system monitored the fluctuations of the price levels of land in certain areas (i.e. 105 cities) in the PRC and was designed to assess the evolution of land prices. However, the starting prices in biddings and auctions were based on the benchmarks established by the land evaluation system. This situation was still applicable during the IP. In addition, in this case, most of the sampled groups of companies received their plots of land through allocation.

(496) For the plots of land that were provided through bidding, the Commission found that in each case, there was only one bidder for the land, and the price paid corresponded to the starting price of the bidding process. In the absence of additional detailed information concerning the actual process of the auction, it was uncertain that the initial price was set independently and corresponded to the market value of the land-use right.

(497) Following definitive disclosure, the GOC claimed that in a bidding mechanism, the price eventually obtained does not only reflect the price at which a seller is willing to sell or the initial price at which a bid is made, but also reflects the price that purchasers are willing to pay and the price eventually reached through such mechanism thus reflects both demand and supply. If, after the bidding mechanism has been completed, the end price corresponded to the starting price of the bidding process , then this simply means that this is the price that reflects demand and supply at that moment in time. The Commission agreed with the GOC on the basic principles of bidding mechanisms described, but noted that such a mechanism can only work when there are several bidders for a certain piece of land. However, the Commission did not find a single instance in this investigation, or even in previous investigations, where there had been more than one bidder for the land, and where the interplay of demand and supply could thus have been observed. Consequently, this claim was rejected.

(498) Moreover, the Commission also found that some companies received refunds from local authorities to compensate for the prices, which they paid for the LURs. Furthermore, some of the LURs obtained by companies in the CNBM Group only had to be paid several years after the land had been put into use.

(499) The above evidence contradicts the claims of the GOC that the prices paid for LUR in the PRC are representative of a market price, which is determined by free market supply and demand.

(500) The findings of this investigation show that the situation concerning acquisition of LURs in the PRC is non-transparent and the prices were arbitrarily set by the authorities.

Commission Implementing Regulation (EU) 2020/492 of 1 April 2020 imposing definitive anti-dumping duties on imports of certain woven, and/or stitched glass fibre fabrics originating in the People’s Republic of China and Egypt (OJ L 108, 6.4.2020, p.1 ).

⟪TABLE:tbl_006⟫

(501) Therefore, the provision of land-use rights by the GOC should 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 (491) to (499) above, there is no functioning market for land in the PRC and the use of an external benchmark (see recitals (506) to (515) below) demonstrates that the amount paid for land-use rights by the sampled exporting producers is well below the normal market rate.

(502) In the context of preferential access to industrial land for companies belonging to certain industries, the Commission noted that the price set by local authorities has to take into account the government’s industrial policy, as mentioned above in recital (493). Within this industrial policy, the GFF industry is listed as an encouraged industrySee Section 3.1 above. . In addition, Decision No. 40 of the State Council requires that public authorities ensure that land is provided to encouraged industries. Article 18 of Decision No. 40 makes clear that industries that are restricted will not have access to land use rights. It follows that the subsidy is specific under Article 4(2)(a) and 4(2)(c) of the basic Regulation because the preferential provision of land is limited to companies belonging to certain industries, in this case the GFF sector, and government practices in this area are unclear and non-transparent.

(503) Following definitive disclosure, the GOC reiterated the comments provided on Section 3.1 above also in relation to LUR, stating that none of the documents referred to by the Commission have a direct link to GFF, and none of them restrict the allegedly preferential provision of LURs to certain enterprises. In addition, Decision No. 40 of the State Council does not mention that public authorities should ensure that land is provided to encouraged industries.

(504) In response, the Commission referred back to the arguments already developed in Section 3.1 above, highlighting that GFF is indeed an encouraged industry. Furthermore, Decision No. 40 of the State Council does mention in Article XII that The Guiding Catalogue for Industry Restructuring is an important reference for guiding the investment, government’s management of investment projects and the formulation and implementation of policies of tax, credits, land (emphasis added ) and import and export”. Furthermore, the introduction of the Decision No. 40 states that All departments concerned shall accelerate the steps in formulating and amending the relevant policies in tax, credit, land (emphasis added) and import and export, etc., and strengthen the coordination with industrial policies so as to further perfect the policy system of promoting the industrial restructuring. A contrario , Article XVIII of Decision No. 40 states that for industries falling into the limited category The departments governing investment shall not examine, approve or put on record, no financial institution may grant any loan, no other departments governing land management , city planning and construction, environmental protection, quality inspection, firefighting, customs, industry and commerce, etc., may go through relevant procedures (emphasis added). There is thus a clear link between the industrial policies for encouraged industries and the policy for the provision of land. The GOC’s claims were therefore rejected.

(505) Consequently, the Commission considered this subsidy countervailable.

(506) As in previous investigationsSee, amongst others, Council Implementing Regulation (EU) No 452/2011, OJ L 128, 14.5.2011, p. 18 (Coated fine paper ), Council Implementing Regulation (EU) No 215/2013, 15.3.2013, OJ L 73, p. 16 (Organic coated steel) , Commission Implementing Regulation (EU) 2017/366, OJ L 56, 3.3.2017, p. 1 , (Solar panels) , Commission Implementing Regulation (EU) 1379/2014, OJ L 367, 23.12.2014, p. 22 . ((Filament glass fibre) , Commission Implementing Decision 2014/918, OJ L 360, 17.12.2014, p. 65 (Polyester Staple Fibers ). and in accordance with Article 6(d)(ii) of the basic Regulation, land prices from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) were used as an external benchmarkUpheld by the General Court in Case T-444/11 Gold East Paper and Gold Huacheng Paper versus Council, Judgment of the General Court of 11 September 2014 ECLI:EU:T:2014:773. . The benefit conferred on the recipients is calculated by taking into consideration the difference between the amount actually paid by each of the sampled exporting producers (i.e., the actual price paid as stated in the contract and, when applicable, the price stated in the contract reduced by the amount of local government refunds/grants) for land use rights and the amount that should normally have been paid on the basis of the Chinese Taipei benchmark.

(507) The Commission considers Chinese Taipei as a suitable external benchmark for the following reasons:the comparable level of economic development, GDP and economic structure in Chinese Taipei and a majority of the provinces and cities in the PRC where the sampled exporting producers are based; the physical proximity of the PRC and Chinese Taipei; the high degree of industrial infrastructure in both Chinese Taipei and many provinces of the PRC; the strong economic ties and cross border trade between Chinese Taipei and the PRC; the high density of population in many of the provinces of the PRC and in Chinese Taipei; the similarity between the type of land and transactions used for constructing the relevant benchmark in Chinese Taipei with those in the PRC; and the common demographic, linguistic and cultural characteristics between Chinese Taipei and the PRC.

(508) Following the methodology applied in previous investigationsSee recital (499). , the Commission used the average land price per square meter established in Chinese Taipei corrected for inflation and GDP evolution as from the dates of the respective land use right contracts. The information concerning industrial land prices as of 2015 was retrieved from the website of the Industrial Bureau of the Ministry of Economic Affairs of Taiwanhttp://lvr.land.moi.gov.tw/login.action . For the previous years, the prices were corrected using the inflation rates and evolution of GDP per capita at current prices in USD for Taiwan as published by the IMF for 2015.

(509) After definitive disclosure, several parties claimed that Chinese Taipei was not a suitable external benchmark. One party suggested the use of India instead of Chinese Taipei for the following reasons:The industrial land prices were collected by a wide number of different industrial areas in the states of Bihar, Maharashtra and Tamil Nadu, These three states are highly industrialised and display a high level of economic development and industrial infrastructure similar to China These three states are geographically close to each other and to China, There are well-established economic ties and cross-border trade between India and China, The 22 cities have similar population densities as Chinese industrialised cities, Both China and India have vast vacant lands available for future use, unlike Taiwan that is confined on an isolated island Finally, data relating to industrial land prices are publicly available in India.

(510) However, the claim of this party ignored one crucial element in its analysis, namely the level of economic development of these provinces. According to public sources, the level of GDP per capita of these Indian provinces is far below that of the cities / provinces where the exporting producers are based. As a matter of fact, the GDP per capita of Maharastrahttps://en.wikipedia.org/wiki/Economy_of_Maharashtra , which is the highest of the three provinces quoted, amounted to only 3000 USD in 2018-2019 while the GDP level found for the Zhejiang province (used for comparison purposes by the claimant) amounted to 14907 USD in 2018https://en.wikipedia.org/wiki/Zhejiang . Considering the above and the factors listed in recital (507), this claim had to be rejected.

(511) Furthermore, the GOC submitted that in-country prices should be used in this case because private companies are also engaged in sub-letting or transferring LURs in China, and the GOC is thus not the only player on that market. In order to examine this claim, the Commission would need to establish first the nature and the size of the land market for private players compared to the government-led market as well as any possible interference by the central and local authorities in that allegedly privately operated land market. Furthermore, comprehensive and up to date data on the pricing of the transactions would need to be available. However, the GOC failed to provide any statistics or data to allow the Commission to examine the proposal, and the Commission could not find any publicly available data on the subject either. In addition, even if such information were to be received, it would only concern a secondary market of transfers, since there is only one player on the primary market (i.e. the original allocation of LUR is always performed by the GOC). Indeed, the primary market of original allocation for 50 years is different from rent in the secondary market, which normally should be for a much shorter period, or at least with different clauses for revaluation, termination, etc. Therefore, the Commission continued to rely on the information available for the primary market, which is the market under investigation in this case.

(512) The GOC also argued that in case the Commission would choose to proceed with an external benchmark, an adjustment should be made for the population density factor, which in turn affects the demand and consequently prices. Indeed, between 2015 and 2018, the population density in Chinese Taipei was 4,4 times higher than it was in China. Particularly, while the population density for China between 2015 and 2018 was approximately 147 people per square kilometer of land, the population density for Chinese Taipei was approximately 650 people per km2 of land in the same period. The land situation and the prices in these two countries are thus incomparable.

(513) However, the Commission noted that the GOC compared population density figures at the level of the entire country. Looking closer at population density of the actual locations of the exporting producers, it appears that population density figures are actually quite similar. For example, the population density of Zhejiang was 560 people per m2 in 2018, and the population density of Shandong was 640 people per km2 https://en.wikipedia.org/wiki/Zhejiang . Therefore, the Commission considered that no adjustment was warranted.

(514) The GOC also requested the Commission to provide additional information on the similarity between the type of land and transactions used for constructing the relevant benchmark, as mentioned in recital (507) above. The Commission highlighted in this respect that in both cases, the transactions concern industrial land of a certain size located in industrial areas.

(515) In accordance with Article 7(3) of the basic Regulation, the subsidy amount has been allocated to the investigation period using the normal lifetime of the land use right for industrial use land, i.e. 50 years. This amount has then been allocated over the total respective company turnover during the investigation period, because the subsidy is not contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(516) Following definitive disclosure, Yuntianhua Group claimed that there was a clerical error on the value used in a specific LUR contract. The Commission accepted the claim and corrected the value accordingly.

(517) Following definitive disclosure, the CNBM Group argued that one LUR contract should be removed because it had been received after the investigation period. In addition, the benefit for LUR purchased in 2018 should be calculated pro rata for the investigation period. Finally, the CNBM Group stated that for another plot of land, which had been purchased by a related company in 1998 and invested in the exporting producer in 2004, the Commission should have used the data of the 2004 transaction to calculate the benefit. The Commission dismissed the first claim, as the purchase contract for the LUR in question had already been signed in 2018, and ownership had thus passed to the company during the investigation period. The Commission accepted the second claim on the calculation pro rata, and adjusted the benefit calculation accordingly for all companies, which had purchased LUR in 2018. The last claim was rejected, since the transaction dating back to 2004 concerned an intercompany transfer, and thus did not reflect the real value at which the land was originally acquired by the group.

(518) Following the additional definitive disclosure, the CNBM Group asserted that the Commission should have used the date at which the plots of land were received as the starting point for the benefit calculation. However, as mentioned in the preceding recital, ownership of the land, with the corresponding rights and obligations, had already accrued to the company as of the date of the purchasing contract. In addition, the price of the land, on which the benefit calculation is based, was determined by the purchasing contract as well. The company’s claims were thus rejected.

(519) The subsidy amount established with regard to this subsidy during the investigation period for the sampled exporting producers amounts to:

(520) All sampled companies purchased their electricity.

(521) Regarding same of the sampled companies, the purchase prices of electricity followed the officially established price levels set at provincial level for large industrial clients. As found in previous investigationsRecital 182 of Council Implementing Regulation (EU) No 215/2013 of 11 March 2013 imposing a countervailing duty on imports of certain organic coated steel products originating in the People's Republic of China (OJ L 73, 15.3.2013, p. 16 ). Council Implementing Regulation (EU) No 451/2011 of 6 May 2011 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of coated fine paper originating in the People's Republic of China (OJ L 128, 14.5.2011, p. 1 ). , this level did not confer a specific advantage for these large industrial clients. However, the Commission established that investigated companies within the two sampled groups benefitted from reductions or refunds of part of their electricity cost in the form of grants.

(522) The Commission found that some key large industrial users of electricity are allowed to purchase electricity directly from power generators instead of buying from the grid, either by signing direct purchasing agreements or being qualified to participate in the Market-oriented electricity trading system. Some of the sampled companies had such direct electricity purchasing agreements or were qualified to participate in the Market-oriented electricity trading system during the investigation period. For most of the investigated companies, the prices received through such contracts/trading system were lower than the fixed prices set at provincial level for large industrial clients.

(523) The possibility to enter into such direct contracts or to be qualified to participate in the Market-oriented electricity trading system is currently not open to all large industrial consumers. At national level, the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System specifies for example that enterprises that do not conform to the national industrial policy and whose products and processes are eliminated should not participate in direct transactions. Several Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System (Zhong Fa [2015] No. 9).

(524) In practice, direct electricity trading is executed by the provinces. Companies have to apply to provincial authorities for approval to participate in the direct electricity pilot scheme, and they have to fulfil certain criteria.

(525) For example, in Shandong Province, the Notice on Amending the 2017 Direct Electricity Trading Rules of the National Energy Administration Shandong Supervision Office provides that users participating in direct electricity trading shall be confirmed according to 2017 access conditions approved by Shandong Economy and Information Technology Committee. To take part in direct electricity trading, the electricity selling enterprises shall put forward registration application to Shandong Electric Power Trading Center, and could participate in direct electricity trading after being reviewed and publicized by the Center. In that respect, a list of eligible enterprises that qualify to participate in the market-oriented electricity trading system is established and announced in a notice of the Shandong Economic and Information Technology CommissionFor example, Notice on Announcement of the List of Pilot Users of Direct Power Transaction in 2015 of the Shandong Economic and Information Technology Commission, L.J.X.D.L [2015] No.9 and Notice on Announcement of the List of Pilot Users of Direct Power Transaction in 2017 of the Shandong Economic and Information Technology Commission, L.J.X.D.L. [2017] No 117 .

(526) For certain companies, there is no actual market-based negotiation or bidding process, since the quantities purchased under direct contracts are not based on the real supply and demand. Indeed, power generators and power users are not free to sell or purchase all of their electricity directly. They are restricted by quantitative quotas, which are allocated to them by the local government.

(527) Furthermore, although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are actually issued by the State Grid Company. For instance the Notice on Amending the 2017 Direct Electricity Trading Rules of the National Energy Administration Shandong Supervision Office stipulates that, the State Grid Shandong Electric Power Company will charge the electricity direct trading charge and that the State Grid Shandong Electric Power Company shall issue VAT invoice to users, and power generation enterprises.

(528) Finally, all signed direct purchase contracts need to be submitted to the local government for the record.

(529) In 2018, the GOC issued the Circular of the National Development and Reform Commission and the National Energy Administration on Actively Promoting the Market-oriented Power Transactions and Further Improving the Trading Mechanism (Fa Gai Yun Xing [2018] No. 1027). However, the Commission notes that this legislation was issued during the investigation period and has not been implemented yet. Furthermore, although the Circular aims to increase the number of direct transactions on the electricity market it specifically mentions certain industries, including the building materials industry and high-tech industries, as supported and benefitting from liberalization of the electricity market. In particular, the Circular provides that supporting users with annual electricity consumption of more than 5 million kWh to conduct direct electricity transactions with power generation enterprises. In 2018, electricity generation plans for coal, iron and steel, non-ferrous metals, building materials and other four industries will be liberalized . In addition the Circular points out that supporting emerging industries with high added value, such as high-tech , internet, big data and high-end manufacturing industries, as well as enterprises with distinct advantages and characteristics and high technology content , to participate in transactions, free from voltage levels and power consumption restrictions.

(530) Therefore, the legislation provides for a selective application of direct transactions on the electricity market to certain industries such as the building materials and high-tech industries. This selective application has the result of applying cheaper prices for electricity by the State to companies from these industries.

(531) The Commission considered that the reduced electricity rate at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC (i.e. the operator of the grid) that confers a benefit to the companies concerned. The benefit for the recipients is equal to the electricity price saving, since the electricity was provided at rates below the normal grid price paid by other large industrial users that cannot benefit from the direct supply. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this scheme only to enterprises that conform with certain industrial policy objectives determined by the State and whose products or process have not been eliminated as not eligible.

(532) Thus, the Commission concluded that the subsidy scheme was in place during the investigation period and that it is specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation.

(533) Following disclosure, the GOC claimed that the Commission failed to show that the entities providing electricity at allegedly reduced rates, i.e. that power generators and state grid companies, are public bodies or are entrusted or directed by the government.

(534) In this respect, as explained in recitals (523) to (528), the Commission noted that the direct electricity trading system and the conditions under which companies are allowed to participate are established by the State and executed by the provinces. Indeed, companies have to obtain the approval of provincial authorities to participate in the direct electricity pilot scheme. Furthermore, as pointed out in recital (527), although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are issued by the State Grid Company. Considering that the direct electricity trading system is designed and controlled by the State through its implementation by provincial authorities, and that the State Grid Company issues the invoices, the Commission concluded that the negotiated reduced rates are provided by public bodies. Therefore, the claim of the GOC was rejected.

(535) Furthermore, the GOC considered that the Commission failed to show how the provision of electricity at allegedly reduced rates is specific within the meaning of Article 2 of the SCM Agreement. The GOC claimed that the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System, to which the Commission referred to, do not limit the access to this alleged subsidy to certain enterprises, since they are not mandatory but only a guideline. Furthermore, the GOC considered that the claim of the Commission about specificity is incoherent because on the one hand, the Commission stated that GFF is an encouraged industry and on the other hand, it stated that only some sampled companies were eligible for the direct electricity trading system.

(536) In this regard, as stated in recital (523), the possibility to enter into direct contracts or to be qualified to participate in the Market-oriented electricity trading system is currently not open to all large industrial consumers. Indeed, companies have to apply to provincial authorities for approval to participate in the direct electricity pilot scheme, and they have to fulfil certain criteria such being conform to the national industrial policy. The fact that the Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening the Reform of the Power System might not have de jure mandatory character is irrelevant because the investigation showed that only certain companies have received an approval to participate in the direct electricity trading system and thus benefitted from reduced electricity prices. Furthermore, the fact that companies are subject to specific approval in order to benefit from the reduced electricity prices also points to the specific character of this scheme. Therefore, these claims were rejected.

(537) Following definitive disclosure, one of the companies from CNBM Group contested the Commission’s conclusion that the fact that certain companies are approved to participate in the market oriented electricity system by purchasing electricity directly from electricity providers instead of via the State Grid, constitutes revenue foregone by the GOC. This interested party pointed out that Article 3 of the basic Regulation defines a subsidy as government revenue that is otherwise due is forgone or not collected and that since the GOC was explicitly not reselling any electricity to the exporting producers via the State grid, no revenue was due to the GOC for use of the State grid.

(538) The Commission disagreed with this claim. As already mentioned in recital (527), although prices are supposed to be negotiated directly between the power generators and the power user or through intermediary service companies, the invoices to the companies are always issued by the State Grid Company. Therefore, in recital (534) the Commission concluded that since the direct electricity trading system is designed and controlled by the State through its implementation by provincial authorities, and that the invoices are issued by the State Grid Company, the negotiated reduced electricity rates are provided by public bodies. Therefore, by selectively applying reduced electricity rates to certain industrial users, while the officially established prices generally applicable to all industrial users are higher, the State, through the intermediary of the State Grid Company, did not collect the revenue from electricity sales at the level of the officially established prices. This practice qualifies as government revenue that is otherwise due is forgone or not collected in the sense of Article 3 of the basic Regulation. Consequently, this claim was rejected.

(539) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total electricity price payable according to the normal grid rate and the total electricity price payable under the reduced rate.

(540) The subsidy amount established with regard to this scheme during the investigation period for the sampled exporting producers amounts to:

(541) According to the Law of the People's Republic of China on Enterprise Income Tax (EIT Law)Order No. 23 of the President of the People's Republic of China , high and new technology enterprises to which the State needs to give key support benefit from a reduced enterprise income tax rate of 15 % rather than the standard tax rate of 25 %.

(542) The legal basis of this programme is Article 28 of the EIT Law and Article 93 of the Implementation Rules for the Enterprise Income Tax Law of the PRCRegulation on the Implementation of the Enterprise Income Tax Law of the People's Republic of China (Issued by Order No. 512 of the State Council on December 6, 2007 ; amended in accordance with the Decision of the State Council to Amend Some Administrative Regulations by Order No. 714 of the State Council on April 23, 2019 ) , as well as:Circular of the Ministry of Science and Technology, Ministry of Finance and the State Administration of Taxation on revising and issuing Administrative Measures for the Recognition of High-Tech Enterprises, G.K.F.H. [2016] No. 32; Notification of the Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation concerning Revising, Printing and Issuing the Guidance for the Recognition Management of High and New Tech Enterprises, GKFH [2016] No. 195; Announcement [2017] No.24 of the State Administration of Taxation on the Application of Preferential Income Tax Policies to High-tech Enterprises; and Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries (2011), issued by the NDRC, the Ministry of Science and Technology, the Ministry of Commerce and the National Intellectual Property Office.

(543) Companies, which can benefit from the tax reduction, are part of certain key high and new technology fields supported by the State, as well as the current priorities on high technology fields supported by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries. These guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

(544) In addition, in order to be eligible, the companies must satisfy the following criteria:keep a certain proportion of research and development expenses in comparison with their sales revenue; keep a certain proportion of income from high-tech technology/products/services in the enterprise's total revenue; and keep a certain proportion of technical personnel in the enterprise's total employees.

(545) Companies benefiting from this measure have to file their income tax return and the relevant annexes. The actual amount of the benefit is included in the tax return.

(546) The Commission considered that the tax offset at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned.

(547) The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this scheme only to enterprises that are operating in certain high technology priority areas determined by the State, such as some key technologies within the GFF sector.

(548) Following definitive disclosure, the GOC claimed that EIT privileges for High and New Technology Enterprises is not specific because the legislation, pursuant to which this program operates, clearly sets out objective criteria for eligibilityAdministrative Measures for the Determination of High and New Technology Enterprise. and these criteria are applied automatically, i.e. the authorities concerned do not have any discretion in providing this specific tax rate when the conditions for eligibility are met. The GOC refers to footnote 2 of the SCM Agreement according to which, eligibility criteria are considered objective if they are neutral, do not favour certain enterprises over others, are economic in nature and horizontal in application. The GOC considered that this is the case of the eligibility criteria for this preferential tax rate, since the access to this lower rate is open to all enterprises and does not favour certain enterprises over others because companies from all sectors, covering the entire economy are eligible to obtain a High and New Technology certificate. Furthermore, the GOC referred to the General Court’s judgment in Case T-586/14 Xinyi PV products v CommissionCase T-586/14, Judgment of the General Court (Fourth Chamber) of 16 March 2016 , Xinyi PV Products (Anhui) Holdings Ltd v European Commission, paras 70-71. , as it explained that: …those incentives were awarded by the competent authorities, not on a discretionary basis, but where their objective conditions for award were met, namely that the undertaking at issue belonged to the high-tech sector (…) In any event, it is apparent from Article 28 of the Corporate Income Tax Law of the People’s Republic of China and from Article 93 of the implementing regulation for that law that the tax incentives awarded to undertakings in the high-tech sector, such as the applicant, which is not disputed by the Commission, are only awarded if certain objective conditions are met, namely, inter alia, that the undertakings at issue operate in the new advanced technologies sector, that they are the holders of intellectual property rights, that their goods or services are in high-tech sectors which are specifically supported by the State, that research and development costs reach a certain percentage of the whole of their revenue and that the number of technicians represents a certain percentage of all the employees.

(549) The Commission disagreed with the view of the GOC for the following reasons. Chapter IV of the EIT Law contains provisions regarding Preferential Tax Treatment. Article 25 of the EIT Law, which stands as a chapeau for Chapter IV, provides that The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State . Article 28 of the law, which is also part of this Chapter, provides that the rate of enterprise income tax on high and new technological enterprises needing special support of the State shall be reduced to 15 %. Article 93 of the Implementation Rules for the Enterprise Income Tax Law clarifies that:The important high and new technology enterprises to be supported by the State as referred to in Clause 2 of Article 28 of the Enterprise Income Tax Law refer to the enterprises, which own key intellectual property rights and satisfy the following conditions: 1. Complying with the scope of the Key State Supported High and New Technology Areas; 2. The proportion of the research and development expense in the sales revenue shall be no less than the prescribed proportion; 3. The proportion of the income from high-tech technology/product/service in the enterprise's total revenue shall be no less than the prescribed proportion 4. The proportion of the technical personnel in the enterprise's total employees shall be no less than the prescribed proportion; 5. Other conditions prescribed in the Measures for the Administration of High-Tech Enterprise Identification.

(550) The above-mentioned provisions clearly specify that the reduced enterprise income tax rate is reserved to important high and new technology enterprises to be supported by the State which own key intellectual property rights and satisfy certain conditions such as complying with the scope of the Key State Supported High and New Technology Areas.

(551) As stated in recital (543), the high technology fields supported by the State are listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries and these guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

(552) Considering that the reduced enterprise income tax rate is reserved only to important high and new technology enterprises to be supported by the State, which comply with the scope of the Key State Supported High and New Technology, the Commission concluded that this measure does not apply on the basis of objective criteria or conditions which do not favour certain enterprises over others. This conclusion is further confirmed by the fact that the Key Priority Developmental Areas in the High Technology Industries are a selection of areas in the high technology industries according to the priorities at a certain point of time and are likely to be changed over time. Therefore, contrary to the COG’s claim, the legislation applicable to the reduced enterprise income tax rate does not establish objective criteria for eligibility.

(553) Regarding the findings of the Court Case T-586/14, the Commission observed that the judgment was set aside by the ECJ in C-301/16 PC-301/16 P European Commission v Xinyi PV Products (Anhui) Holdings Ltd, Judgment of the Court (Second Chamber) of 28 February 2018 . . Moreover, the statement made by the General Court was made in the context of Article 2(7) of the basic anti-dumping Regulation, and thus in a different context.

(554) In light of the above considerations, the Commission confirmed the specificity of the measure and rejected the claims of the COG.

(555) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total tax payable according to the normal tax rate and the total tax payable under the reduced tax rate.

(556) The amount of subsidy established for this specific scheme was 0,88 % for the Yuntianhua Group and 2,98 % for the CNBM Group.

(557) The tax offset for research and development entitles companies to preferential tax treatment for their R&D activities in certain high technology priority areas determined by the State and when certain thresholds for R&D spending are met.

(558) More specifically, R&D expenditures incurred to develop new technologies, new products and new crafts, which do not form intangible assets and are accounted into the current term profit and loss, are subject to an additional 50 % deduction after being deducted in full in light of the actual situation. Where the above-mentioned R&D expenditures form intangible assets, they are subject to amortization based on 150 % of the intangible asset costs.

(559) The legal basis for the programme is Article 30(1) of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC as well as the following notices:Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Science and Technology on Improving the Policy of Pre-tax Deduction of R&D Expenses. (Cai Shui [2015] No. 119); Announcement [2015] No. 97 of the State Administration of Taxation on Relevant Issues concerning Policies of Additional Pre-tax Deduction of Research and Development Expenses of Enterprises; Announcement 2017 No. 40 of the State Administration of Taxation on Issues Concerning the Eligible Scope of Calculation of Additional Pre-tax Deduction of Research and Development Expenses; and Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries (2011), issued by the NDRC, the Ministry of Science of Technology, the Ministry of Commerce and the National Intellectual Property Office.

(560) During previous investigationsSee HRF and Tyres cases cited in footnote 7 above, recitals 330 and 521 respectively , the Commission established that the new technologies, new products and new crafts , which can benefit from the tax deduction, are part of certain high technology fields supported by the State, as well as of the current priorities on high technology fields supported by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries.

(561) The Commission considered that the tax offset at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned. The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this measure only to enterprises that incur R&D expenses in certain high technology priority areas determined by the State, such as the GFF sector.

(562) Following definitive disclosure, the GOC submitted that the additional R&D expenses deduction program is not specific. The GOC made reference to Article 2.1(b) of the SCM Agreement, which provides that specificity shall not exist if the granting authority or the legislation, pursuant to which the granting authority operates, establishes objective criteria or conditions governing the eligibility for, and the amount of the subsidy, provided that (i) eligibility is automatic, (ii) that such criteria or conditions are strictly adhered to and (iii) that they are clearly spelled out in law, regulation or other official documents, so as to be capable of verification. In the GOC’s view, the legislation, pursuant to which this program operates, clearly sets out objective criteria for eligibility and these criteria are applied automatically. In other words, the authorities concerned do not have any discretion in providing this specific tax rate when the conditions for eligibility are met.

(563) The Commission referred to Chapter IV of the EIT Law, which contains provisions regarding Preferential Tax Treatment. Article 25 of the EIT Law, which stands as a chapeau for Chapter IV, provides that The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State . Article 30(1), which is also part of this Chapter, provides that research and development expenses incurred by Enterprises in the development of new technologies, new products and new crafts may be additionally deducted at the time of calculating taxable income. Article 95 of the Implementation Rules for the Enterprise Income Tax Law clarifies the meaning of R&D expenditures incurred for the purpose to develop new technologies, new products and new crafts laid down in Article 30(1) of the EIT Law.

(564) The above-mentioned provisions clearly specify that the additional deduction of R&D expenses is reserved to enterprises involved in the development of new technologies, new products and new crafts and engaged in industries or projects the development of which is specially supported and encouraged by the State

(565) As stated in recital (560), the high technology fields supported by the State, as well as the current priorities on high technology fields supported by the State are listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries. As specified in recital (543), these guidelines clearly mention manufacturing technology and key raw materials for glass, including GFF, as a priority area.

(566) Considering that the additional deduction of R&D expenses is reserved only to enterprises engaged in industries which are specifically supported and encouraged by the State, as listed in the Guidelines of the Latest Key Priority Developmental Areas in the High Technology Industries, the Commission concluded that this measure does not apply on the basis of objective criteria or conditions which do not favour certain enterprises over others (even not to all high and new technologies enterprises). This conclusion is further confirmed by the fact that the Key Priority Developmental Areas in the High Technology Industries are a selection of areas in the high technology industries according to the priorities at a certain point of time and are likely to change over time. Contrary to the COG’s claim, the legislation applicable to the additional deduction of R&D expenses does not establish objective criteria or conditions governing the eligibility. Therefore, the Commission confirmed the specificity of the measure and rejected the claims of the COG.

(567) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total tax payable according to the normal tax rate and the total tax payable after the additional 50 % deduction of the actual expenses on R&D.

(568) The amount of subsidy established for this specific scheme was 1,06 % for the Yuntianhua Group and 0,17 % for the CNBM Group.

(569) The EIT Law offers income tax preferences to Enterprises engaged in industries or projects the development of which is specifically supported and encouraged by the State and in particular, exempt from tax the income from equity investment, such as dividends and bonuses, between eligible resident enterprises.

(570) The legal basis for the programme is Article 26(2) of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC.

(571) The Commission found that some companies in the sampled groups received an exemption from tax of dividend income between qualified resident enterprises.

(572) In the reply to the questionnaire, the GOC claimed that this scheme does not constitute a subsidy because it relates to the profit after tax and the exemption is to avoid double taxation, thus it does not confer a benefit. The GOC further claimed that the scheme is not specific as it is generally and uniformly applied based on objective criteria since all resident companies in the PRC are qualified to invest in other resident companies and be exempted from the tax.

(573) In this regard, reference is made to Article 25 of the EIT, which is part of the same Chapter as Article 26(2); i.e. Chapter IV Preferential Tax Policies and stands as a chapeau for this chapter. Such Article provides that The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State . Furthermore, Article 26(2) specifies that the tax exemption is applicable to income from equity investments between eligible resident enterprises , which appears to limit its scope of application to only certain resident enterprises.

(574) On this basis, in line with conclusions in previous anti-subsidy investigationsSee Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People’s Republic of China (OJ L 16, 18.1.2019, p. 5 ). , it is considered that such preferential tax policy is limited to certain industries and projects, i.e. industries which are specifically supported and encouraged by the State such as the GFF industry, and therefore specific. The evidence on file also showed that the companies that benefited from this scheme had a New and High technology certificate. Based on the above, the claims of the GOC had to be rejected.

(575) The Commission considers that this scheme is a subsidy under Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned. The benefit for the recipients is equal to the tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this exemption only to qualified resident enterprises which have the major support of, and the development of which is encouraged by, the State.

(576) The Commission has calculated the amount of the subsidy by applying the normal tax rate to the dividend income that has been deducted from taxable income.

(577) The amount of subsidy established for this specific scheme was 0,02 % for the Yuntianhua Group and 2,10 % for the CNBM Group.

(578) According to Article 32 of the EIT law, where accelerated depreciation of fixed assets of an enterprise is really necessary due to technological advancement or other reasons, the number of years for the depreciation may be lessened or the accelerated depreciation method may be adopted.

(579) The legal basis for the programme is Article 32 of the EIT Law, along with the Implementation Rules for the Enterprise Income Tax Law of the PRC as well as the following notices:Notice of the Ministry of Finance and the State Administration of Taxation on the Policies of Deduction of Equipment and Appliances for Enterprise Income Tax Purposes (Cai Shui [2018] No. 54); Notice of the Ministry of Finance and the State Administration of Taxation on Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2014] No. 75); and Notice of the Ministry of Finance and the State Administration of Taxation on Further Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2015] No. 106)

(580) According to the Notice on the Policies of Deduction of Equipment and Appliances for Enterprise Income Tax Purposes (Cai Shui [2018] No. 54), where the unit value of a piece of equipment or appliance newly purchased by an enterprise during the period from January 1, 2018 to December 31, 2020 does not exceed RMB five million, the enterprise is allowed to include such value in the cost and expenses of the current period on a lump-sum basis for deduction upon calculation of its taxable income, and is no longer required to calculate depreciation on an annual basis. This legislation is not industry specific.

(581) As regards assets with unit value above 5 million RMB, the Notice on Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2014] No. 75) and the Notice on Further Fine-tuning the Enterprise Income Tax Policies Applicable to Accelerated Depreciation of Fixed Assets (Cai Shui [2015] No. 106) continue to apply. According to theses notices, fixed assets purchased by companies in 10 key industries may opt for the accelerated depreciation method.

(582) The Commission established that, during the investigation period, the sampled companies have not applied accelerated depreciation for assets with unit value that exceeds 5 million RMB. Therefore, since those assets did not fall under Notice Cai Shui [2014] No. 75 and Notice Cai Shui [2015] No. 106, the Commission found that the exporting producers did not benefit from countervailable subsidies.

(583) The Commission considered that the exporting producers did not benefit from countervailable subsidies under this programme.

(584) An organization or individual using land in cities, county towns and administrative towns and industrial and mining districts shall normally pay urban land use tax. Land use tax is collected by the local tax authorities where the land is used. However, certain categories of land, such as land reclaimed from the sea, land for the use of government institutions, people's organizations and military units for their own use, land for use by institutions financed by government allocations from the Ministry of Finance, land used by religious temples, public parks and public historical and scenic sites, streets, roads, public squares, lawns and other urban public land are exempted from the land use tax.

(585) The legal basis for this programme is:Provisional Regulations of the People's Republic of China on Real Estate Tax (Guo Fa [1986] No. 90, as amended in 2011); and Interim Regulations of the People's Republic of China on Urban Land Use Tax (Order of the State Council of the People's Republic of China [2013] No. 645).

(586) One of the sampled groups of companies benefited from refunds of the payment of land use taxes by the local Land Use Bureau, even though they did not fall under any of the exempted categories as set by the national legislation above.

(587) The Commission considers that the tax exemption at issue is a subsidy within the meaning of either Article 3(1)(a)(i) or Article 3(1)(a)(ii), and Article 3(2) of the basic Regulation because there is a financial contribution in the form of either direct transfer of funds (refund of the tax paid) or revenue foregone by the GOC (the non-paid tax) that confers a benefit to the companies concerned. The benefit for the recipients is equal to the amount refunded/tax saving. This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the companies received a tax reduction although they did not fit into any of the objective criteria mentioned in recital (584).

(588) Following definitive disclosure, the GOC submitted that the Commission failed to demonstrate that the exemption from land use tax is specific because the companies received a tax reduction although they did not fit into any of the objective criteria mentioned in recital (584), i.e. the criteria established by law to benefit from this exemption .

(589) In this respect, as explained in recital (584), the Commission observed that the rule established by law is that an organization or individual using land in cities, county towns and administrative towns and industrial and mining districts shall normally pay urban land use tax. The exception to this rule is that certain categories of landSuch as land reclaimed from the sea, land for the use of government institutions, people's organizations and military units for their own use, land for use by institutions financed by government allocations from the Ministry of Finance, land used by religious temples, public parks and public historical and scenic sites, streets, roads, public squares, lawns and other urban public land. are exempted from the land use tax. The investigation showed that the land used by the cooperating exporting producer, which benefitted from the land use tax exemption, does not fall under any of the categories of land that are exempted from land use tax by law. Therefore, it cannot be concluded that these exporting producers fitted into any of the objective criteria established by the regulations on land use tax. Consequently, the measure exempting these exporting producers from land use tax is specific within the meaning of Article 4(2)(a) of the basic Regulation. The claim was thus rejected.

(590) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was considered to be the refunded amount during the investigation period.

(591) The amount of subsidy established for this specific scheme was 0,17 % for CNBM Group.

(592) The total subsidy amount established with regard to all tax schemes during the investigation period for the sampled exporting producers was as follows:

(593) The sampled companies benefited from a variety of grants related to R&D, technological upgrading and innovation, such as e.g. promotion of R&D tasks under the Science and Technology Support Plans, promotion of investments for Key Industry Adjustment, Revitalisation and Technology Renovation, etc.

(594) According to the Guiding Opinions on Promoting Enterprise Technology Renovation (at 3.2), central and local governments are called upon to further increase the amount of financial support and increase investment with a focus on industrial transformation and upgrading in key areas and critical issues of technology renovation. Furthermore, authorities should continuously innovate and improve fund management methods, flexibly carry out multiple types of support and raise the usage efficiency of fiscal funds.

(595) The Industry Revitalization and Technology Renovation Work Plan implements the above mentioned Guiding Opinions in practice by setting up special funds for promoting technological progress and technological transformation projects. These funds include investment subsidies and loan discounts. The use of the funds must be in line with national macroeconomic policies, industrial policies and regional development policies.

(596) The grants provided under this program confer subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation i.e. a transfer of funds from the GOC in the form of grants to the producers of the product concerned.

(597) The Commission also determined that these subsidies are specific within the meaning of Article 4(2)(a) of the basic Regulation because only companies operating in key areas or technologies as listed in the guidelines, administrative measures and catalogues that are published on a regular basis are eligible to receive them and GFF is among the eligible sectors. In any event, the grants found are company specific.

(598) The benefit was calculated as the amount received in the investigation period, or allocated to the investigation period, where the amount was depreciated over the useful life of the fixed asset to which the grant was related. The Commission considered whether to apply an additional annual commercial interest rate in accordance with section F.a) of the Commission’s Guidelines for the calculation of the amount of subsidyOJ C 394, p. 6, 17.12.1998 . . However, such an approach would have involved a variety of complex hypothetical factors for which there was no accurate information available. Therefore, the Commission found it more appropriate to allocate amounts to the investigation period according to the depreciation rates of the related fixed assets, in line with the calculation methodology used in previous casesSuch as e.g. Council Implementing Regulation (EU) 452/2011, OJ L 128, 14.5.2011, p. 18 (Coated fine paper ), Council Implementing Regulation (EU) 2013/215, 11.3.2013, OJ L 73, p. 16 (Organic coated steel ), Commission Implementing Regulation (EU) 2017/366, OJ L 56, 3.3.2017, p. 1 , (Solar panels ), Commission Implementing Regulation (EU) 1379/2014, OJ L 367, 23.12.2014, p. 22 . (Filament glass fibre ), Commission Implementing Decision 2014/918, OJ L 360, 16.12.2014, p. 65 (Polyester Staple Fibers ). .

(599) The two sampled groups of companies benefited from a variety of grants related to environmental protection and reduction of emissions, such as e.g. incentives for Environmental Protection and Resource Conservation, Promotion of synergistic resource utilization, Incentive funds for energy conservation projects, Promotion of Energy Management Demonstration Centres, grants related to Air Pollution Improvement Projects, incentives for circular economy projects.

(600) The energy saving, conservation and emission program confers subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation i.e. a transfer of funds from the GOC in the form of grants to the producers of the product concerned.

Commission Implementing Regulation (EU) 2017/969 of 8 June 2017 imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China (OJ L 146, 9.6.2017, p. 17 ) (HRF case), Commission Implementing Regulation (EU) 2018/1690 of 9 November 2018 imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163 (OJ L 283, 12.11.2018, p. 1 ) (Tyres case) and Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People's Republic of China (OJ L 16, 18.1.2019, p. 5 ) (E-bikes case).

⟪TABLE:tbl_007⟫

(601) The Commission also found that this subsidy program is specific within the meaning of Article 4(2)(a) of the basic Regulation since only companies operating in key technologies or in the production of key products as listed in the guidelines and catalogues that are published on a regular basis are eligible to receive them. In particular, the MIIT document of 2015 specifically mentions the building material industry, which includes GFF, as an industry for specific incentives related to energy conservation.

(602) The benefit was calculated in accordance with the methodology described in recital (598) above.

(603) In its complaint, the complainant provided evidence, which showed that the GFF industry in the PRC may receive various one-off or recurring grants from different levels of government authorities, i.e. local, regional and national.

(604) The investigation revealed that the two sampled groups of companies received significant one-off or recurring grants from various government levels resulting in the receipt of benefits during the investigation period. The sampled companies had already reported some of these grants in their respective questionnaire replies, while others were found during the verification visits. The GOC has disclosed none of them in its questionnaire reply.

(605) These grants were given to the companies by national, provincial, city, county or district government authorities and all appeared to be specific to the sampled companies, or specific in terms of location or type of industry. The level of legal detail for the exact law, under which these benefits were granted, if there was any legal basis for them at all, was not disclosed by all sampled companies. However, the Commission was sometimes given a copy of a document issued by a government authority, which accompanied the grant of funds (referred to as the notice).

(606) Given the large amount of grants contained in the complaint and/or found in the books of the sampled companies, only a summary of the key findings is presented in this Regulation. Evidence of the existence of numerous grants and the fact that they had been granted by various levels of the GOC was initially supplied by the two sampled companies. Detailed findings on these grants were provided to the individual companies in their specific disclosure documents.

(607) Examples of such grants were patent funds, science and technology funds and awards, business development funds, export promotion funds, grants for industry quality increase and efficiency enhancement, municipal commerce support funds, foreign economic and trade development fund, production safety awards, support funds provided at district or provincial level, interest discounts on loans for imported equipment.

(608) These grants constitute subsidies within the meaning of Article 3(1)(a)(i) and (2) of the basic Regulation as a transfer of funds from the GOC in the form of grants to the producers of the product concerned took place and a benefit was thereby conferred.

(609) These grants are also specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation given that from the related documents provided by the cooperating exporting producers they are limited to certain companies or specific projects in specific regions and/or the GFF industry. In addition, some of the grants are contingent upon export performance within the meaning of Article 4(4)(a). These grants do not meet the non-specificity requirements of Article 4(2)(b) of the basic Regulation, given that the eligibility conditions and the actual selection criteria for enterprises to be eligible are not transparent, not objective and do not apply automatically.

(610) In all cases, the companies provided information as to the amount of the grant, and from whom the grant was received. The companies concerned also mostly booked this income under the heading subsidy income in their accounts and had had these accounts independently audited. This has been taken as a positive evidence of a subsidy that conferred a benefit.

(611) Therefore, the Commission decided that the verified findings represented a reasonable indicator of the level of subsidisation in this respect. As those grants share common features, they were awarded by a public authority and were not part of separate subsidy programme, but individual grants to this encouraged industry, the Commission assessed them together.

(612) The benefit was calculated in accordance with the methodology described in recital (598) above.

(613) No financial contribution was received by the sampled exporting producers from the remaining grant programmes mentioned in Section 3.3(v) above during the investigation period.

(614) Following definitive disclosure, the GOC submitted that the Commission failed to demonstrate that the various grants related to technological upgrading, renovation or transformation, environmental protection and ad hoc grants provided by municipal/regional authorities that the sampled companies allegedly received are specific. According to the GOC, the Commission failed to point out any specific provision explicitly mandating the granting of benefits to the GFF industry and thus failed to meet the requirement set out by the Panel in EC – Aircraft, according to which, finding of specificity requires the establishment of an explicit limitation of the alleged subsidy only to certain enterprises , that …does not make the subsidy sufficiently broadly available throughout the economy and that a limitation must …distinctly express all that is meant, leaving nothing merely implied or suggested.

(615) The GOC further submitted that with respect to ad hoc grants provided by municipal/regional authorities, the Commission failed to provide any argument or evidence of the specificity of these grants but merely stated that they …appeared to be specific to the sampled companies, or specific in terms of location or type of industry. According to the GOC, the mere appearance of specificity cannot constitute sufficient evidence that a measure is, in fact, specific.

(616) In this regard, the GOC recalled that, as held by the Appellate Body in US – DRAMs (CVD), the Commission is required to …provide a reasoned and adequate explanation for its conclusions and to ensure that the underlying rationale behind those conclusions be set out in the investigating authority's determination. The GOC stressed that the Commission's reference to the fact that the companies concerned mostly booked this income under the heading subsidy income does not qualify as a reasoned and adequate explanation.

(617) The GOC further noted that the mere fact that a subsidy is granted by a regional authority does not make it specific and referred to the Appellate Body held in US – CVD (China) that a subsidy available to all enterprises in a region will not be specific if the granting authority in that region is a regional government.

(618) The Commission has already demonstrated the specificity of grants in recitals (597), (601) and (609) above. Indeed, only companies operating in key areas or technologies as listed in the guidelines, administrative measures and catalogues are eligible. Furthermore, the cooperating exporting producers provided grants-related documents, such as legal documents and granting notices, which demonstrated that the grants have been provided to companies belonging to certain specified industries or sectors and/or involved in specific industrial projects encouraged by the State. Therefore, the Commission reiterated its conclusion that these grants are only available to certain enterprises and are not broadly available throughout the economy. In addition, the investigation showed that the eligibility conditions of these grants were not clear and objective and they did not apply automatically; consequently, they did not meet the non-specificity requirements of Article 4(2)(b) of the basic Regulation.

(619) Regarding ad hoc grants, the GOC did not provide any further evidence backing its claim that they are non-specific. Consequently, the Commission reiterated that on the basis of the evidence at its disposal it concluded that these grants do not meet the non-specificity requirements of Article 4(2)(b) of the basic Regulation.

(620) In the light of the above, the Commission rejected the claims of the GOC.

(621) Since the parent company CNBM did not cooperate, the benefit for grants provided at the level of CNBM was established by using the methodology explained in Sections 3.8.1 to 3.8.3 above, based on the publicly available information in the 2018 annual report of this company, such as amounts recorded under government subsidies, government funding and other income.

(622) The total subsidy amounts established with regard to all grants during the investigation period for the sampled exporting producers were as follows:

(623) Based on the information available at this point of the investigation, the Commission calculated the amount of countervailable subsidies for the sampled companies in accordance with the provisions of the basic Regulation by examining each subsidy or subsidy programme, and added these figures together to calculate a total amount ofCIF) value of the same exports per tonne.

(624) Following the definitive as well as the additional definitive disclosures, the CNBM Group claimed that by calculating the total benefit in percentage based on the subsidy amounts for the exporting producers taken together and applying this total benefit in percentage to the value of GFF exported to the EU by both exporting producers taken together, the Commission wrongly allocated the alleged subsidies received by one of the exporting producers (Jushi Group) to the turnover of both exporting producers taken together (Jushi Group and Hengshi). This inflated the subsidy rate of the group. According to the CNBM Group, the Commission should first have calculated the subsidy amount per unit exported to the EU separately per company. Only then should the subsidy amount of each company be combined for the purposes of calculating a joint subsidy rate.

(625) As mentioned in recital (97) above, the Commission recalled that in order to ensure that measures can be enforced effectively, particularly to avoid channelling exports through a related company with the lowest duty, it is the Commission's practice to establish the relationship between exporting producers through the criteria laid down in Article 127 of the Union Customs Code Implementing Act. Moreover, the calculation of the amount of countervailable subsidies on the basis of the product concerned exported into the Union implies that, when companies are related, since money is fungible, they can use those benefits for the product concerned indistinctly, and thus, regardless of the exporting producer in particular. In this case, since Henghsi and Jushi Group both manufacture and export the product concerned, and since Jushi Group also produces the main raw material which is used in the product exported by Hengshi, the amount of countervailable subsidies granted upon them should take into account the fact that, because of their relationship, they are capable of channelling those benefits to the product concerned exported to the Union as they see fit. Consequently, the benefits granted to those exporting producers with respect to the product concerned should result in one single amount for the group.

(626) The methodology proposed by the CNBM disregards this fact, and would lead to erroneous results. As an example, one can take the case of two related GFF producers (companies A&B), where all subsidies would be granted to company A, and none to company B. It is further assumed that company A sold its entire GFF production domestically to B, and B re-exported all of A’s products on top of all of its own products. According to the calculation methodology proposed by CNBM, this scenario would result in a 0 % amount of subsidisaton, since the subsidy amount per unit exported to the EU would be 0 for A, and since subsidies granted to A could not be allocated to the products exported by B. The Commission thus rejected the claim of the CNBM Group.

(627) The CNBM Group also submitted that the Commission made various errors when establishing a pass through of subsidies between related companies. First, the Commission wrongly summed up percentage values containing different denominators, since subsidy amounts allocated over Jushi Group’s turnover were added with subsidies amounts allocated over Jushi and Hengshi’s combined turnover.

(628) Second, the Commission determined that subsidies received by China Jushi and Zhengshi Holding Group were passed through to the exporting producers on the basis of investments in subsidiaries. However, there is no basis under which an existing shareholding ipso facto passed through any alleged benefit to Jushi Group. Second, the Commission should not only have taken into account China Jushi’s long-term equity investments in its subsidiaries, but also in its associate and joint ventures. Third, if the Commission wanted to carry out a pass-through analysis, the Commission would in any event have had to allocate the alleged subsidies that China Jushi received over China Jushi’s total turnover. Fourth, if the presumption would be that a parent company passes on all of the subsidies received to its subsidiaries, Jushi Group must have passed on all of its subsidies to its own subsidiaries. Therefore, the Commission would have to calculate a 0 % subsidy rate for Jushi Group.

(629) Third, following the additional definitive disclosure, the CNBM Group submitted that the Commission did not demonstrate how the subsidies allegedly received by Zhengshi Holding benefited the exports of GFF to the Union. Without a link between the subsidies allegedly provided by the government and the production and exportation of the product concerned, it could thus not be shown that the exported product benefited from those subsidies. In this context, the CNBM Group noted that, as explained by Zhengshi Holding in its questionnaire response, its main business is to purchase raw materials for a related company, which is a stainless steel producer. Furthermore, Zhengshi Holding had a significant turnover amount, which should have been used as an allocation key instead.

(630) Fourth, the benefit allegedly passed through to Jushi Group was based on Jushi Group’s shareholding in Hubei Hongija, although Hubei Hongjia is a provider of input materials for the GFF producers.

(631) Fifth, the allocation key for Jushi Hong Kong was based on the turnover and assumed that all sales were made to Jushi Group.

(632) Sixth, the Commission provided no explanation as to how the alleged benefits received by CNBM were passed through to Jushi Group and Hengshi. The Commission should have proceeded in the same way as it did concerning Jushi Group’s related companies and carried out a pass-through analysis based on sales. If the Commission insists that a pass through analysis between related entities would be unnecessary (quod non), then the subsidies received should have been allocated over the total turnover of all companies in the purported corporate group.

(633) In order to respond to these comments, the Commission first explained how subsidies in the various related companies of the CNBM Group were aggregated. For each related company, the Commission first determined the amount of subsidies received. The Commission then used an allocation key to determine which part of these subsidies were linked to the exporting producers. For example, for providers of materials, inputs or assets used in the production process, this allocation key was based on the part of the turnover of these providers with the exporting producers. The allocation key was then applied to the subsidy amount received. The resulting allocated subsidy amount was added to the subsidy amount of the exporting producers. Finally, the total subsidy amount of the exporting producer (including subsidy amounts allocated from related companies) was divided by the turnover of the exporting producer to calculate a percentage of subsidization, i.e. a subsidy rate.

(634) As a result, concerning the first point claimed by the CNBM Group, there was in fact no addition of percentage values containing different denominators: there was only an an allocation and subsequent addition of subsidy amounts. Only one denominator was used in the end to calculate the subsidy percentage.

(635) Concerning the holding companies China Jushi and Zhengshi Holding Group mentioned in the second point above, the allocation key was indeed based on the part of the exporting producer in the investments made by the holding company. In the case of holding companies, allocation keys based on turnover are often meaningless, as the core business of such companies is not to sell goods or to provide inputs, but to invest.

(636) The case of China Jushi is unique in this respect, because the company combines several functions. On one hand, it acts as the central purchasing entity for most raw materials used by the exporting producers in the group. On the other hand, it resells the finished goods of the exporting producers on the domestic market. On top of this, China Jushi exercises some headquarter functions as a parent company, such as e.g. a central financing function for the exporting producers or providing the administrative building for the management functions of the Jushi Group. As such, using turnover as an allocation key is not possible, because it would result in circular reference. Indeed, a certain percentage of the subsidies would have to be allocated to the exporting producers based on the sales of materials to the producers, but subsequently also a certain part of the subsidies of the producers would have to be re-allocated to China Jushi based on the sales of finished goods to China Jushi.

(637) Since China Jushi was at the same time also the main investor of Jushi Group, and was exercising some functions, which are typical for holding/parent companies, the Commission considered that an allocation based on investments would better represent the reality of the links between China Jushi and the exporting producer. However, the Commission acknowdged that investments in associated companies and joint ventures should also have been taken into account, and adapted the allocation key accordingly.

(638) Following the additional definitive disclosure, the CNBM Group added that China Jushi’s main business is that of a trading company, based on its actual business activities, its audited accounts, and its large income from trading activities. Circular issues should not be an issue, since they also arise for intercompany transactions between the exporting producer and other related companies. Moreover, the Commission did not demonstrate that China Jushi had significant investment activities, or that there were specific headquarter activities, financing activities or financial transfers which would suggest that China Jushi was funnelling its subsidies to its subsidiaries. On the contrary, the exporting producer actually paid dividends to China Jushi in the investigation period. Furthermore, the Commission did not demonstrate that there was any link between the subsidies received by China Jushi and the production and exportation of the product concerned. Finally, since China Jushi is also the parent company of the other Jushi companies which it controls through its 100 % ownership of Jushi Group, it must be presumed that subsidies were not only transferred to Jushi Group but also to its many other subsidiaries.

(639) The Commission disagreed with the analysis made by the CNBM Group. China Jushi indeed had a large turnover from trading activities, as already described in recital (636) above. However, China Jushi also had significant investment activities, as shown in its asset, income and cash flow accounts. In fact, 94 % of its operating profits were derived from income on investments. In addition, as already mentioned, China Jushi was also exercising some functions, which are typical for holding/parent companies, such as a central financing activity. For example, the Commission noted that the purpose of one of the bonds issued by China Jushi was to repay bank loans of the issuer and its subsidiary Jushi Group . Furthermore, the investigation found that loans were taken out on behalf of China Jushi and of its subsidiaries , and in one case, the repayment of the capital of a loan issued to China Jushi was to be made by its subsidiary Jushi Group. Therefore, the Commission maintained its position with regards to the use of investment as an allocation key. At the same time, these transactions also showed that there is a clear link between the subsidies received by China Jushi and the production and exportation of the product concerned. Finally, the fact that Jushi Group also has some subsidiaries is irrelevant as such, since investments were not used as an allocation key at the level of the exporting producer. The company’s claims were thus rejected.

(640) Concerning Zhengshi Holding, the Commission agreed with the fact that Zhengshi Holding’s turnover mainly consists of the re-sales of purchased raw materials to its related steel producer, a company which is not linked in any way to GFF or to this investigation. However, the Commission also found that Zhengshi Holding holds the land use rights for a plot of land, which is used by another related company subject to this investigation. In this respect, there is a clear link between the subsidies received by Zhengshi Holding and the production and exportation of the product concerned. Since the sales of Zhengshi Holding are completely disconnected from the existing link with the GFF production, and since Zhengshi Holding is at the same time also a holding company with significant investment activities, as shown in its asset, income and cash flow accounts, the Commission considered that an allocation based on its investments would better represent the reality of the links between Zhengshi Holding and the GFF producer. Nevertheless, when reviewing the subsidies for preferential financing received by Zhengshi Holding, the Commission noticed that it had made an error in its assessment, since all of the financing had been clearly earmarked for the benefit of the stainless steel production. The calculation of the benefit was thus adapted accordingly.

(641) Concerning Hubei Hongjia, the allocation key should indeed have been on sales of the materials produced by Hubei Hongjia. The allocation key was therefore changed accordingly. Concerning Jushi Hong Kong, the Commission also accepted the company’s comments, and changed to a more precise allocation key, namely the proportion of the goods sold by Jushi Hong Kong, which were purchased from Jushi Group.

(642) Following the additional definitive disclosure, the CNBM Group asserted that if there were no sales from Jushi Hong Kong to Jushi Group, then Jushi Hong Kong should have been excluded. The Commission reminds that Jushi Hong Kong is the related trader of the exporting producer Jushi Group, and is as such exporting the GFF produced by Jushi Group. Since there is a direct link between the subsidies received by Jushi Hing Kong and the exportation of the product concerned, it makes sense to use the proportion of exports sourced from Jushi Group (compared to the exportation of products coming from other sources) as an allocation key. The Commission therefore did not accept this claim.

(643) On the last point, relating to the pass through of the subsidy amounts of CNBM, the Commission recalls that CNBM did not cooperate in the investigation, and that a determination of the amount of subsidies had to be made based on facts available. Under these circumstances, the Commission decided that the most reasonable approach would be to calculate the subsidies received by CNBM in proportion of the total consolidated turnover of the corporate group. In fact, the Commission thus used the calculation methodology proposed by the CNBM Group itself. This claim was thus rejected.

(644) In accordance with Article 15(3) of the basic Regulation, the total subsidy amount for the cooperating companies not included in the sample was calculated on the basis of the total weighted average amount of countervailing subsidies established for the cooperating exporting producers in the sample with the exclusion of negligible amounts as well as the amount of subsidies established for items which are subject to the provisions of Article 28(1) of the basic Regulation. However, the Commission did not disregard findings partially based on facts available to determine those amounts. Indeed, the Commission considers that the facts available used in those cases did not affect substantially the information needed to determine the amount of subsidisation in a fair manner, so that exporters who were not asked to cooperate in the investigation will not be prejudiced by using this approachSee also, mutatis mutandi , WT/DS294/AB/RW, US — Zeroing (Article 21.5 DSU), Appellate Body Report of 14 May 2009 , paragraph 453. .

(645) Given the high rate of cooperation of Chinese exporting producers and the representativeness of the sample also in terms of subsidy eligibility, the Commission set the amount for all other companies at the level of the highest amount established for the sampled companies. The all other companies amount was applied to those companies which did not cooperate in the investigation.

(646) On the basis of the information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaire, the alleged subsidisation through the following subsidies by the GOE were investigated:(i) Preferential policy loans, credit lines, other financing, insurance and guarantees;(ii) Revenue foregone through Direct Tax Exemption and Reduction programmesEIT privileges for Enterprises located in a Special Economic Zone; (iii) Revenue foregone through Indirect Tax and Import Tariff ProgrammesValue Added Tax (VAT) exemptions and import tariff rebates for the use of imported equipment; VAT exemptions and import tariff waivers for imported input materials used in exported finished goods; (iv) Government provision of goods and services for less than adequate remuneration (LTAR)Government provision of power for less than adequate remuneration; Government provision of land for less than adequate remuneration.

(647) The alleged subsidisation in Egypt concerns two related companies in the China-Egypt Suez Economic and Trade Cooperation Zone (SETC-Zone). The zone covers an area of 7,34 km2 , which is divided into a starting area of 1,34 km2 and an expansion area of 6 km2 .

(648) This special economic zone was set up together by China and Egypt, and its history goes back to the 1990s. At that time, the then Egyptian President visited China's special economic zones, and expressed the wish to draw on China’s experience concerning such zones, in order to establish a similar setup in Egypt. As a result, in 1997, the Prime Ministers of China and Egypt signed a memorandum of understanding, in which the two countries agree to cooperate in developing the free economic zone in the north of the Gulf of Suez, by sharing the Chinese experience in establishing special economic zones, participating in modernizing the studies relating to the zone and encouraging relevant business sector in China to provide contributions for the projects to be established within the zone Memorandum of Understanding Between the Arab Republic of Egypt and the People's Republic of China, April 18th , 1997 .

(649) In the wake of this agreement, China appointed Tianjin Teda Investment Holding Co., Ltd. (Tianjin TEDA), an SOE under the Tianjin Municipal Government, to undertake the task on the Chinese side. Tianjin TEDA then joined the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the Egypt China Joint Venture Company (ECJV), in order to develop and construct the economic zone. The Chinese side held 10 % of the shares of the ECJV, and the Egyptian side 90 %. In 1998, the corresponding land in the Northwest Gulf of Suez Zone was transferred from the Suez Governorate to the ECJV. However, after that, the project did not advance much for several yearsReport of the State Council Development and Research Center, The sustainable development experience in the China-Egypt Suez Economic and Trade Cooperation Zone, 6 August 2019 (State Council Report) .

(650) In 2002, the wider area of 20 km2 , in which the SETC-Zone was located, the Northwest Gulf of Suez Economic Zone, was officially classified as a special economic zone (SEZone) by the GOECfr. Presidential Decree No. (35) of the Arab republic of Egypt, Dated 15/2/2003 . As such, the provisions of the Egyptian Law No. 83/2002 on Economic Zones of a Special Nature (Law 83/2002) were now also applicable to the SETC-Zone.

(651) A new impetus started in 2006, when China decided to further encourage the Go Global Policy for Chinese companies to invest abroad. In this context, MOFCOM proposed the establishment of so-called overseas trade and cooperation zones , and the SETC-Zone became one of the first of 18 officially approved zonesTEDA 10 Years Summary Report (2008-2018), p. 4. . At the Beijing Summit of the Forum on China-Africa Cooperation in 2006, Chinese president Hu Jintao announced that three to five overseas economic and trade cooperation zones will be established in African countries in the next three years .State Council Report, see also footnote 104.

(652) In 2007, MOFCOM organized a tender to appoint developers for the second batch of officially approved overseas trade and economic cooperation zones. Tianjin TEDA won the bid for the SETC-Zone. In October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund to set up China-Africa TEDA Investment Co., Ltd. (China-Africa TEDA), as the main Chinese investment entity in the cooperation zone. China-Africa TEDA united with the ECJV to create a new company, called Egypt TEDA Investment Co. (Egypt TEDA) in order to drive the development of the SETC-Zone in Egypt. This time, the Chinese side held 80 % of the shares, and the Egyptian side (represented by the ECJV) 20 %. After the company was formally established in 2008, work in the zone advanced rapidly. On 7 November 2009 , the then Prime Ministers of the two countries inaugurated the starting area, and listed the SETC-Zone as an important cooperation project of economy and trade between the two countriesTEDA 10 Years Summary Report (2008-2018), p. 11. . By the end of 2011, all the infrastructure in the starting area had been completedState Council Report, cfr footnote 104. .

(653) In 2012, after the civil unrest in Egypt, President Morsi paid a State visit to China, during which he referred to the Zone as a key project of the bilateral cooperation between the two countries, and hoped that more and more Chinese enterprises would invest in Egypt through the zone and through subsequent projects, and thus participate in Egypt’s Recovery programTEDA 10 years Summary Report (2008-2018), p. 53. .

(654) In 2013, Egypt TEDA and the Egyptian authorities signed a contract for the land of the 6 km2 expansion area. As of 2013, the overseas trade and economic cooperation zones, such as the SETC-Zone, have also been further developed under the umbrella of the Belt and Road Initiative. Overseas parks have thus become an important carrier for the going out investments of Chinese companies. As a result, especially since 2013, the SETC-zone has been included in almost all important cooperation texts between the two governmentsState Council Report, cfr footnote 104. .

(655) In 2014, Egypt launched the Suez Canal Corridor Development Plan. In the context of this Plan, the SE Zone was officially incorporated into the wider Suez Canal Economic Zone (SCZone) in 2015, comprising the whole area around the Suez Canal of 461 km2 . The entire area is now considered as an economic area of special nature in accordance with Law 83/2002 and amendments thereofDecree of the President of the Arab Republic of Egypt No.330 of the year 2015 On the establishment of the Suez Canal Economic Zone, August 19th, 2015 . .

(656) In December 2015, President Sisi paid a visit to China, where he declared Egypt’s acceptance of President Xi Jinping’s offer to cooperate in the One Belt, One Road initiative and to further develop projects in Egypt. On 21 January 2016 , the two Presidents officially inaugurated the SETC-zone expansion project for the expansion area of 6km2 . During the State visit of Xi Jinping in Egypt, the two governments also signed the Agreement between the Ministry of Commerce of the People’s Republic of China and the General Authority for the Suez Canal Economic Zone of the Arab Republic of Egypt on the Suez Economic and Trade Cooperation Zone of 21 January 2016 (the Cooperation Agreement). The Cooperation Agreement further clarified the significance and legal status of the SETC-ZoneReport of the State Council Development and Research Center, The sustainable development experience in the China-Egypt Suez Economic and Trade Cooperation Zone, 6 August 2019 . .

(657) During the verification visit at the GOE, the latter confirmed that this Cooperation Agreement codified established practice in the zone since 2006. The main purpose of the Cooperation Agreement was thus to provide a clear written framework for this cooperation and to formalize it within the framework of the One Belt, One Road initiative, including the GOC’s support to companies abroad. However, no further details were provided on the preparatory works of the Cooperation Agreement despite explicit requests from the Commission.

(658) According to the Cooperation Agreement, the governments jointly develop the SETC-Zone. They do so in line with their respective national strategies (Belt & Road Initiative for China on the one hand, and the Suez Canal Corridor Development Plan for Egypt on the other hand). For that purpose, the GOE provides the land, the labour and certain tax breaks, whereas the Chinese companies operating in the zone run the production facility with their assets and managers. Compensating for a lack of Egyptian funds, the GOC also supports this project by making the necessary financial means available to Egypt TEDA and to the Chinese firms operating in the SETC-Zone.

(659) The GFF producers operating in the SETC-Zone, Jushi Egypt and Hengshi Egypt, are incorporated under Egyptian law and have been established by Chinese parent companies (Jushi China and Hengshi China). The parent companies of the GFF producers are related and the ultimate parent company of these two companies is owned by the State-owned assets Supervision and Administration Commission (SASAC). They have received approval from relevant Chinese government authoritiesBy the National Development and Reform Commission (NDRC) and by the Ministry of Commerce (MOFCOM). for setting up a subsidiary in Egypt. The daughter companies are financed with funds coming from China, they are using input materials and equipment imported from China, they are directed by Chinese managers and they are using Chinese know-how. They produce GFF in Egypt, which is exported to the EU from the SETC-Zone.

(660) In order to ensure the smooth implementation of the above-mentioned Cooperation Agreement, the two governments also established a three-level consultation mechanism. In this context, the General Authority for the Suez Canal Economic Zone of the Arab Republic of Egypt and the Tianjin Municipal Commission for Commerce of the People’s Republic of China signed a Cooperation Agreement on Establishment of the Administration Commission for the China-Egypt Suez Economic and Trade Cooperation Zone for the first-level inter-governmental consultations. At the second level, the Suez Economic and Trade Cooperation Management Committee was set up to ensure discussions at technical level between China Tianjin Municipality Government’s competent administration departments and the Egypt Suez Canal Economic Area Authority’s relevant competent departments. Regular meetings of these Commissions have taken place since 2017. At the third level, Egypt TEDA and the relevant Egyptian counterparts report the problems and difficulties arising to the governmental levels above.

(661) The Commission requested the GOE in its questionnaire, in the deficiency letter, and during the verification visit to provide certain information relating to the Suez Economic and Trade Cooperation Zone in Egypt. Those information requests included among others questions on the legal and institutional framework, and the existence of intergovernmental agreements between China and Egypt.

(662) The GOE provided in this context the 2016 Agreement between the Ministry of Commerce of the PRC and the General Authority for the Suez Canal Economic Zone of the Arab Republic of Egypt on the Suez Economic and Trade Cooperation Zone. However, the Commission is still missing information relating to any previous agreements, memoranda of understanding or other documents signed between the GOC and the GOE in relation to the SETC-Zone. For example, the Commission found publicly available references to a 1997 Memorandum of Understanding between the Government of the People’s Republic of China (GOC), represented by Premier Li Peng and the GOE, represented by Prime Minister Kamal alGanzouri, on the establishment of a free trade zone in Egypt.

(663) The Commission is also missing documentation relating to the implementation of the 2016 Agreement, and the consultation mechanisms put into place by the GOE and the GOC. As an example, the Commission found publicly available references to a Cooperation Agreement on Establishment of the Administration Commission for China-Egypt Suez Economic and Trade Cooperation Zone, signed by the General Authority of the Suez Canal Economic Zone and the Tianjin Commission of Commerce of the PRC. Furthermore, a joint management committee of the China-Egypt TEDA Suez Economic and Trade Cooperation Zone was formally established in April 2017. In July of 2017, the Intergovernmental Coordination Committee was established and held its first joint meeting. The Commission did not receive written documentation concerning the meetings held under these various consultation mechanisms, except for one meeting held by the Administration Commission.

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

(665) The Commission also requested the GOC in its questionnaire, in the deficiency letter, and during the verification visit to provide information relating to overseas investment in general, to overseas economic and trade cooperation zones in general, and more specifically to the SETC Zone in Egypt. Those information requests included among others questions on the legal and institutional framework for overseas economic and trade cooperation zones approved by the Chinese Ministry of Commerce, the existence of intergovernmental agreements between China and Egypt, as well as the role and the functioning of various Chinese State-owned entities in the SETC Zone.

(666) The GOC reiterated several times that it considered the requests of the Commission to be inconsistent with Articles 1, 2, 4, 11.2 and 11.3 of the SCM Agreement as well as Articles 2, 3, 4, 10(2) and 10(3) of the Regulation (EU) 2016/1037 (the basic Regulation), among other provisions, and therefore did not reply to any of the questions asked by the Commission. The Commission disagreed. In view of its involvement in the operations within the SETC-Zone and agreements with the GOE, the Commission considered that the GOC should have engaged also in this part of the investigation in order to provide further clarity.

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

(668) Therefore, the Commission informed the GOE and the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation for companies located in the SETC-Zone. The GOE and the GOC objected and stressed that they had fully cooperated with the Commission. However, the Commission considered that information about the precise collaboration between the two governments in the set-up and administration of the SETC-Zone was crucial for the legal assessment of the case as explained in the next Section 4.2.3. Unfortunately, it had only received two relevant documents after the respective verification with the consequence that it could not verify the authenticity thereof. Moreover, it could not engage in any follow-up discussion with the GOE about significant details, which could shed light on the extent and, degree of cooperation between the two governments in the zone.

(669) Therefore, the Commission applied Article 28 of the basic Regulation and relied on facts available with respect to these points.

(670) The operation of the SETC-Zone constitutes a close cooperation between the GOE and the GOC within the territory of the exporting country. The governments of Egypt and China have pooled their resources to provide the companies manufacturing in the SETC-Zone with favorable conditions that confer benefits to them. This pooling of resources via such close cooperation serves a common purpose and benefits a common beneficiary (Jushi Egypt and Hengshi Egypt).

(671) In its comments of 7 August 2019 , the GOC stated that the Commission cannot legally investigate the Chinese part of this close cooperation, i.e. the alleged financial contributions by Chinese banks to the companies operating in Egypt. Under Article 1.1(a) of the SCM Agreement, a subsidy only exists where there is a financial contribution by a government – or a public body – within the territory of the WTO member. Thus, according to the GOC, any alleged direct transfer of funds by a financial institution operating in China to producers/exporters of GFF in third countries cannot be attributed to China or considered a financial contribution given by the GOC GOC, Comments of 7 August 2019 , § 72. . In the GOC’s view, the Commission itself had supported a territorial limit of subsidization in the HRF case, when it declared that there must be a financial contribution by a government or a public body within the territory of the subsidizing country under recital 5 of the Basic RegulationHRF case cited in footnote 7, recital 396. . Moreover, the context of Article 1.1(a)(1) of the SCM Agreement, such as Articles XVI GATT, 2.1 and 2.2. SCMA on specificity, Article 14 SCMA on benefit calculations, Article 25.2 SCMA on notification requirements all contain references that the beneficiary should be located in the territory of the subsidizing WTO Members; in the same vein, also Section 10 of China’s Accession Protocol requires the country to notify any subsidy granted or maintained on its territory GOC, Comments of 7 August 2019 , §§ 74-84. . Finally, the negotiating history of the Agreement demonstrates – in the GOCs view – that payments given by a government outside its territory would not be covered by the agreement.

(672) The Commission observed that these comments tackle the question of whether the GOC is accountable under the SCM Agreement for granting subsidies for the production of goods overseas, which are exported to third WTO members. However, they do not speak to the separate question whether, in specific cases, the government of the exporting country is accountable under the SCM Agreement for having actively sought, acknowledged and adopted such subsidies for the benefit of the products made therein.

(673) The Commission was therefore entitled to verify whether the resources provided to Jushi and Hengshi Egypt can be qualified as countervailable subsidies granted by the GOE within the meaning of Articles 2, 3 and 4 of the basic Regulation.

(674) According to Article 3(1)(a) of the basic Regulation, a subsidy exists if there is a financial contribution by a government in the country of origin or export. Similarly, Article 1.1(a)(1) of the SCM Agreement states that a subsidy shall be deemed to exist if there is a financial contribution by a government or any public body.

(675) The GOE has provided to the two companies land and offered several tax breaks. These subsidies are thus operated and granted directly by the government of Egypt.

(676) However, ever since the conclusion of the MoU in 1997, the GOE has actively sought to support the zone not only directly by the provision of land and tax breaks but also indirectly, through agreed assistance of the Chinese government for the development of the SETC-Zone in its territory. Indeed, under the terms of the MoU, the GOE expressly encourag(ed) relevant business sector in China to provide contributions for the projects to be established within the zone. Following the visit of President Morsi to China in August 2012, the SETC Zone received unprecedented attention and support from the Egyptian government TEDA 10 Years Summary Report, p. 41. . Under Article 1 of the Cooperation Agreement 2016, both sides agreed to develop the zone in accordance with (…) existing laws and regulations of the two countries . Article 1 of the legislation implementing the Cooperation Agreement further specifies that The Management Committee [responsible for coordinating and handling daily work of the Cooperation Zone] is established in line with multilateral and bilateral agreements and existing laws and regulations signed or participated by the People’s Republic of China and the Arab Republic of Egypt . Under Article 4 of the Cooperation Agreement, both sides promise support and facilitation for the construction, business facilitation and operation of the Cooperation Zone. For that purpose, Egypt has agreed that China designates it as overseas trade and cooperation zone . China confirmed in Article 4(1) of the Cooperation Agreement that the zone in question is entitled to relevant policy support and facilitation provided by the Chinese Government for overseas economic and trade cooperation zones . In addition, in Article 5 of the Cooperation Agreement the GOC explicitly committed that it shall support the zone by, among others, encouraging relevant financial institutions to provide financial facility for companies and investments in the zone. Finally, under Article 7 of the same Agreement, both GOE and GOC committed themselves that any existing or future laws, which grant more favourable treatment than the Cooperation Agreement, shall prevail over the latter. The GOC’s preferential financing for the two GFF producers in the zone are the result of those engagements and should be seen in that context.

(677) The joining forces by the GOE and the GOC served several purposes.

(678) For the Egyptian side, as expressed at the highest political levelComments of President Morsi during his visit to China from August 2012, TEDA 10 Years Summary Report, p. 47 & 53; Comments of President Sisi during his visit to China in December 2016, TEDA 10 Years Summary Report (2008-2018), p. 94. , the aim was to attract Chinese investments, know-how and capital in order to promote the economic development of the Suez Canal Area and create jobs. According to the 2022 Egyptian Perspective Long-Term Planning, published by the Planning Department of Egypt in November 2013, the SETC-Zone will play a great role for Egypt’s industry upgrade, earning foreign exchange through export, creating taxation, and solving unemploymentTEDA 10 Years Summary Report (2008-2018), p. 59 .

(679) For the Chinese side, the motivation was different. From the perspective of the companies itself, Egypt has certain advantages in terms of lower labour costs and shorter delivery times to main markets, such as the EU. In addition, as mentioned in the bond prospectus issued by Jushi China in 2014: trade protective barriers have increased the market prices of China’s fiberglass exports in disguise, which has a negative impact on Jushi Group’s fiberglass exports. … after the launch of Jushi Egyptian Glass Fiber Co., Ltd. in 2013, the product demand of the above three regions will be met by Jushi Egypt. The above three regions will not impose anti-dumping duties on Jushi Egyptian products, and the impact of anti-dumping policies on Jushi Group will be greatly reduced. The preliminary pricing principle of Jushi Egyptian fiberglass products for the customers in the above three regions is to share the tariff savings with the customers and to enjoy the savings of anti-dumping duties and shipping costs in full by the issuer . Indeed, since 2011Council Implementing Regulation (EU) No 248/2011 of 9 March 2011 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain continuous filament glass fibre products originating in the People’s Republic of China (OJ L 67, 15.3.2011, p. 1 ). and the end of 2014Commission Implementing Regulation (EU) No 1379/2014 of 16 December 2014 imposing a definitive countervailing duty on imports of certain filament glass fibre products originating in the People’s Republic of China and amending Council Implementing Regulation (EU) No 248/2011 imposing a definitive anti-dumping duty on imports of certain continuous filament glass fibre products originating in the People’s Republic of China (OJ L 367, 23.12.2014, p. 22 ). imports of GFR (the main input for making GFF, representing around 70 % of its manufacturing costs) originating in China have been subject to anti-dumping and countervailing duties in the EU and the EU is one of the three regions that is referred to in the bond prospectus.

(680) From the perspective of the GOC, according to MOFCOM’s 13th Five-Year Plan for the Development of Foreign Trade, one of the main tasks under this plan is to enhance the trade cooperation with countries along the One Belt and One Road initiative in order to promote and expand exports of, among others, high-tech products, such as GFF. The plan contains the following statement: Stabilize exports of advantageous products such as labor-intensive products to the aforesaid countries, seize the opportunities of constructing infrastructure for such countries, and impel exports of large-sized complete sets of equipment, technologies, standards and services. Adapt to the trend of transformation and upgrade of industries of these countries, and accelerate exports of electromechanical and high-tech products. … Intensify the expansion of emerging markets, and after comprehensively considering economic scale, growth speed, resource endowment, risk degree and other factors, select several emerging markets for primary expansion. Expand exports of advanced technical equipment, and promote exports of high-quality, high-grade and comparatively advantageous industries and products Envisaged measures to achieve these tasks include the development of State-level economic and technological development zones and various parks .

(681) As expressed in one article, Under the government departments’ guidance in the framework of the One Belt, One Road, and in connection with the host country strategy at the highest level, overseas cooperation zones have become a vehicle to implement the One Belt, One Road and international production capacity cooperation Annual Report on Development in Africa, No.19 (2016-2017, Yellow Books of Africa, p. 13. .

(682) Overseas zones thus serve several strategic objectives for China. First, they could help increase demand for Chinese-made machinery and equipment. Second, by producing overseas and exporting to Europe or North America, Chinese companies would be able to avoid trade frictions and barriers imposed on exports from China. Third, they could assist China’s efforts to boost its own domestic restructuring and move up the value chain at homeD. Brautigam & Xiaoyang Tang; Going Global in Groups: Structural transformation and China’s Special Economic Zones overseas, World Development Vol. 63, 2014, pp. 78–91. .

(683) It follows from the above that the Egyptian government was expecting and welcoming Chinese financing for the close cooperation within the SETC-Zone, in order to boost the development of one of its poorest regions. The Chinese government was hoping that Chinese companies could operate outside Chinese territories and expand their exports under the One Belt, One Road initiative (possibly to avoid being caught by trade defence measures).

(684) Under these circumstances, the Commission considered that the term by the government in Article 3(1)(a) of the basic Regulation should include not only measures directly emanating from the GOE but also those measures by the GOC which can be attributed to the GOE on the basis of the available evidence.

(685) As the Appellate Body (AB) held in the US-Gasoline caseWT/DS2/AB/R – US – Reformulated Gasoline , Appellate Body Report adopted on 20 May 1996 , p. 17. , WTO law cannot be read in clinical isolation from general international law. In particular, general international law principles thus form part of the WTO legal order, which is not a self-contained regimeSee in detail J. Pauwelyn, The Role of Public International Law in the WTO – How far can we go?, American Journal of International Law (2001), pp. 535 and following; Graham Cook, Digest of WTO Jurisprudence on Public International Law Concepts and Principles (CUP 2015). . In line with Article 3.2 DSU and Article 31(3) (c) of the Vienna Convention on the Law of Treaties (VCLT), [a]ny relevant rules of international law applicable in the relations between the parties must be taken into account in the assessment of the context of the terms of a treaty.

(686) These rules include customary international lawWT/DS379 – United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, Appellate Body Report adopted on 11 March 2011 , §§308; M.E. Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties (Martinus Nijhoff, 2009), p. 433. , which are by definition binding on all WTO members, including Egypt, China and the European Union. An important branch of customary international law is the rules on State responsibility, which have been codified by the International Law Commission (ILC Articles on the Responsibility of States for Internationally Wrongful Acts)International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts, November 2001, Supplement No. 10 (A/56/10), chp.IV.E.1. in accordance with its mandate under Article 13(1) (a) of the UN-Charter.

(687) The rules in the ICL Articles are also relevant within the meaning of Article 31(3) (c) VCLT because they provide guidance for the interpretation of the notion of attribution, i.e. when certain acts or omission can be attributed to one State, even when those acts or omissions do not emanate from that State directly. In this respect, the notion of attribution becomes relevant to interpret the terms by the government in the chapeau of Article 1.1(a)(1) of the SCM Agreement, and more in particular, to determine the correct attribution of a conduct in a situation of cooperation between two States with respect to subsidies, as in the case at handWT/DS379/AB/R, paras. 304 – 322. .

(688) The ILC Articles can thus be used to interpret the terms by the government in the chapeau of Article 1.1(a)(1)of the SCM Agreement in order to attribute the conduct (granting of a subsidy) to the GOE, even in cases where the financial contribution has not been made directly by the GOE.

(689) In this respect, the Commission noted that Article 11 of the ILC Articles provides, in particular, that conduct which is not attributable to a State under the preceding articles shall nevertheless be considered an act of that State under international law if and to the extent that the State acknowledges and adopts the conduct in question as its own . The commentary of the ILC to Article 11 explains that instances of the application of the principle [of State attribution through acknowledgement and adoption of behavior] can be found in judicial decisions and State practice International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, November 2001, Supplement No. 10 (A/56/10), p. 52, recital 3 to Article 11. . As recalled in recital 6 of the same commentary, it is required that a State identifies the conduct in question and makes it its own .

(690) From the inception of the project in 1997, the Egyptian government made Chinese financing of Jushi Egypt and Hengshi Egypt part of its own policy for the zone. President Morsi publicly welcomed Chinese investment and capital during his visit to China in August 2012, and the Planning Department of Egypt acknowledged in November 2013 that the Chinese financed SETC-Zone will play a great role for Egypt’s industry upgrade. On another visit to China in December 2014, President Sisi expressed that the proposal from President Xi Jinping of jointly establishing the One Belt and One Road provided a significant opportunity for Egyptian recovery and Egyptian party was ready for active involvement and giving support. Egyptian party wished to cooperate with China in developing the projects of Suez Canal Corridor, Suez Economic and Trade Cooperation Zone and so on, and attract Chinese enterprises to invest in Egypt TEDA 10 Years Summary Report (2008-2018), p. 94. .

(691) The characteristics of the Chinese One Road One Belt initiative are public knowledge. Articles 30 to 36 of the Guiding Opinions of the State Council on the Promotion of International Production Capacity and Equipment Manufacturing Cooperation of 13 May 2015 list all the policy support that companies going abroad can receive. They include fiscal and tax support policies, concessional loans, financial support through syndicated loans, export credits, and project financing, equity investment, and finally export credit insurance. Article 31 thereof refers to concessional loans which shall support enterprises to participate in the export of large-scale complete sets of equipment, project contracting and large-scale investment projects. In practice, this policy has led to numerous preferential financing by banks or the specifically set-up Silk Road Fund under Article 35 of the Guiding Opinions, as recently established by the Commission in another caseCommission Implementing Regulation (EU) 2018/1690 of 9 November 2018 imposing definitive countervailing duties on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries and with a load index exceeding 121 originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2018/1579 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China and repealing Implementing Regulation (EU) 2018/163 (OJ L 283, 12.11.2018, p. 1 ), Recitals 409-412. .

(692) As the Presidents of Egypt were no doubt aware that the Chinese One Belt and One Road initiative involves heavy State financing through preferential financing and other financial instruments, there was hence a clear act of acknowledgment and adoption at the highest political level of such financing support from the GOC by jointly setting up the SETC-Zone with China.

(693) The fact that Egypt acknowledged and adopted Chinese preferential financing is further sustained by the text of the 2016 Cooperation Agreement. As laid down in Article 1 of the Cooperation Agreement, Egypt explicitly accepted that China may apply its laws with respect to operators in the SETC-Zone or relating to operations in the SETC-Zone. For that purpose, the Egyptian government was also in agreement that China designated the SETC-Zone as an overseas investment area under its laws. Since overseas investment areas are a vehicle of the One-Road One Belt initiative as noted in recital (681), and since this initiative uses preferential financing as a tool as described in recital (691), such designation in Article 4 of the Cooperation Agreement where China also confirmed that the zone in question is entitled to relevant policy support and facilitation provided by the Chinese Government for overseas economic and trade cooperation zones , had the consequence that Jushi Egypt and Hengshi Egypt became eligible to ask for preferential lending from Chinese policy banks and preferential export insurance terms. Egypt also signed off to Article 5, according to which the Chinese Government shall also support the Cooperation Zone by encouraging relevant financial institutions to provide financing facility for …investment projects located within the Cooperation Zone, provided that the lending conditions and the loan use requirements are met . As already found in a previous investigation, the Chinese preferential financing is not operated by clearly prescribed funding programs with strict eligibility criteria, but rather by the identification at the highest level of a number of encouraged industriesCommission Implementing Regulation (EU) 2018/1690, Recital 377. . The official designation of the SETC-Zone in Egypt as overseas investment area for Chinese companies in the aftermath of a common agreement between the two Presidents and the encouragement in Article 5 fits perfectly well into the usual Chinese pattern of activating preferential financing by its policy banks.

(694) The Chinese preferential measures in favour of the Chinese entities established in Egypt were thus identified and made its own by Egypt.

(695) Moreover, Egyptian officials were continuously present in the three level implementation mechanism mentioned in recital (660). The task of the implementation mechanism is to coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels under Article 2(V) of the Implementing Agreement. Article 2(4) of the same document mandates the officials to try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in a smooth manner . This records the shared understanding of Egypt and China that the Chinese side is not providing money at market rates, which Jushi Egypt and Hengshi Egypt could have received from international market investors, but proactively provides State incentives, which is another word for benefits or preferences.

(696) By implementing this provision, Egypt has also expressed its full endorsement of the Chinese preferential financing for the benefit of the GFF producers in the zone. In view of the partial non-cooperation of both governments (see Section 4.2.2) on this crucial aspect of the investigation, the Commission could not establish more details in this respect; however, the evidence available points to the fact that the two governments cooperated as described above for the benefit of the GFF’s exporting producers located in the zone.

(697) It follows from the evidence that the financial contributions in the form of preferential financing from Chinese public bodies to Jushi and Hengshi Egypt can be attributed to the GOE as the government of the country of origin or export under Article 3.1 (a) of the basic Regulation. The evidence showed that the GOE endorsed the preferential financial support to the GFF producers in the zone by the GOC in line with the agreed commitments to develop and support the economic activities within the zone.

(698) In this context, the Commission further noted that the possibility for governments to provide a financial contribution indirectly through private bodies is neither exogenous to the basic Regulation nor the SCM AgreementSee Article 3(1)(a)(iv) of the basic Regulation and Article 1.1(a)(1)(iv) of the SCM Agreement. . Indeed, in cases where governments entrust or direct private bodies into a particular conduct, a key issue is that there must be a demonstrable link between the government act and the conduct of the private bodyAppellate Body Report, US – DRAMs , (WT/DS296/AB/R), para. 112. . Similarly, in this case, there is a clear and explicit link between the affirmative actions taken by China in order to provide the agreed financial support to the GFF’s exporting producers and the GOE.

(699) Consequently, the Commission considered that the preferential financing granted by the GOC to the GFF’s exporting producers in the zone amount to financial contributions by the GOE in the sense of Article 3(1)(i) of the basic RegulationIncidentally, the facts at issue may also be considered from the angle of Article 16 of the ILC Articles. The close cooperation between the GOE and the GOC not only resulted in acknowledgment and adoption of Chinese acts by the GOE, but also served to potentially circumvent actual and potential duties imposed by the EU on Chinese exports of the product concerned made from Egypt. .

(700) The Commission then considered whether these financial contributions attributable to the GOE would confer a benefit on Jushi and Hengshi Egypt under Article 3(2) of the basic Regulation. It recalled that these two companies were operating in Egypt and incorporated under Egyptian law. Hence, it was in principle appropriate to inquire whether these recipients of the financing received better terms than they would have received on the Egyptian financial market. The Commission verified this point and was satisfied that this was the case by a high margin.

Idem.

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(701) However, the Commission also took into consideration the exceptional circumstances of this case. As noted in recital (659), the exporting producers are related to Chinese mother companies, who are ultimately held by SASAC. Chinese public bodies granted the preferential financing after negotiation and signature of the relevant documents in China, and the recipients received them directly or indirectly through the channel of their mother company in China (inter-company loans). Moreover, as laid down in Article 1 of the Cooperation Agreement, the Egyptian government accepted that those entities receive preferential support, thus including cheap loans in line with Chinese law, i.e. under Chinese conditions. The Chinese public bodies provided such financing in line with Article 5 of the Cooperation Agreement according to the preferential financing policies implemented in China as detailed in Section 3.4. As explained in recital (657) above, these provisions of the Cooperation Agreement codified prior established practice.

(702) The Commission therefore concluded that the adoption and acknowledgement by the Egyptian government of the financial contributions from the Chinese public bodies to Jushi and Hengshi Egypt included also the benefit element thereof. It hence established market rates for the preferential financing and calculated the benefit accordingly (see below Section 4.3). It noted that this reasonable approach resulted in lower subsidy amounts than the ones derived from applying a hypothetical Egyptian benchmark.

(703) Concerning the third point on specificity, the Commission examined whether these subsidies were specific as required by Articles 4(2) through (4) of the basic Regulation.

(704) By way of acknowledgment and adoption, the GOE was the granting authority with respect to the preferential financing. In particular, the GOE has acknowledged and adopted the designation by the GOC of the SETC Zone as an overseas investment territory under Article 4 of the Cooperation Agreement and endorsed the fully-fledged implementation thereof by, inter alia, the GOC’s provision of preferential financing.

(705) These subsidies were limited to companies operating in the Suez Canal area (of which the SETC-Zone is a part). Consequently, the Commission concluded that they were regional subsidies within the meaning of Article 4(3) of the basic Regulation and falling within the jurisdiction of the granting authority in accordance with Articles 4(2) through (4) of the basic Regulation.

(706) In conclusion, the Commission found that both the subsidies granted to companies operating in the SETC-Zone directly by Egypt (provision of land, tax breaks) as well as the subsidies granted indirectly through the GOC’s preferential financing are countervailable under Articles 2-4 of the basic Regulation. The latter are attributable to Egypt by virtue of the acknowledgment and adoption of the GOC’s measures by Egypt as its own, for example through the Cooperation Agreement, the close cooperation and the various levels of cooperation mechanisms. The financial contributions also conferred benefits and were specific. The Commission examined all the relevant subsidies in more details below.

(707) Upon disclosure, the GOE contested these findings by making five points: First, it was impossible under international law to attribute sovereign acts of the Government of China to the Government of Egypt. Second, the Commission had disregarded its own basic Regulation, according to which the granting authority must be based within its own territory. Third, the attribution of Chinese acts to Egypt also violated WTO law, which could not be interpreted in light of Article 11 of the ILC Articles on State Responsibility. Fourth, Article 11 of the ILC Articles was not even applicable to the facts at hand. Fifth, the financial contributions to Jushi and Hengshi China did not meet the requirements of specificity under Article 3 of the basic Regulation.

(708) The GOC equally took issue with the Commission’s treatment of loans provided by Chinese financial institutions to Egyptian companies located in the SETC-zone and intra-company loans between companies located in Egypt and their parent as countervailable subsidies. It first argued that a subsidy could not be created for China and then lumped on to Egypt, as this would countervail legitimate foreign investment. The GOC considered next that the text, context, object and purpose of the SCM Agreement does not permit the stretching of the scope of a government or public body to a third country. Third, the GOC argued that Article 11 of the ILC Articles on State Responsibility could not be relied on as relevant context as it did not relate to the same subject matter as Article 1.1(a)(1) of the SCM Agreement. Even if Article 11 of the ILC Articles was relevant, there would be a clear inconsistency with Article 1.1(a)(1) of the SCM. In that case, the GOC maintains as its fourth point, the latter would prevail over the former as lex specialis .

(709) At the outset, the Commission observed that neither the GOC nor the GOE made any comment on the accuracy of the facts regarding the cooperation between these two governments as described in Section 4.2.1 above.

(710) The Commission noted that the objections from the GOE and the GOC partially overlapped and partially invoked separate arguments. The Commission analysed the overlapping points together and tackled the remaining arguments made by each government one by one.

(711) In the GOC’s opening view, it argues that the Commission had been unable to establish a Chinese financial contribution in the context of companies operating in Egypt. It was thus creating a subsidy by the GOC which it could later on lump on Egypt, trying to legalize this technique by virtue of wrongfully applying Article 11 of the ILC Articles to a situation, where there was no countervailable subsidy from China in the first place. By this impermissible construction, the EU would start tackling legitimate foreign investment.

(712) The Commission observed that this political argument is based on two questionable legal premises: First, Chinese action must satisfy all the criteria of a subsidy under the SCM Agreement to trigger liability. Second, if this is not the case, the SCM Agreement does not allow the countervailing by the EU of any support received by companies operating in Egypt. However, this argument mixes a factual and a normative dimension. As explained before, the GOE expected and welcomed the (fact of) preferential lending by Chinese financial institutions to the companies in Egypt, and acknowledged and adopted as its own such preferential lending. Whether or not such preferential lending triggered (from a normative point of view) also the international responsibility of China for a breach of the SCM Agreement is irrelevant. In other words, the Commission attributed Chinese conduct (namely, the granting of the preferential lending) to the GOE and not wrongful acts. Therefore, the Commission rejected the GOC’s first claim that it had to first show that the GOC had handed out a subsidy within the meaning of the SCM Agreement, and failing to do so had erroneously created a GOC subsidy for the benefit of the exporting producers of the product concerned.

(713) The GOE stressed in its first point the principle of sovereignty in international law. From its perspective, an act can only be attributed to a State when that act is vested with authority of that State. Therefore, acts of entities vested with Chinese authority are only attributable to the Chinese State. In the hearing of 18 March 2020 , the GOE specified its reasoning by citing the example of military forces of one state stationed with the consent of another state in the latter’s territory. In the view of the GOE, any action of the invited military forces could only be attributed to the invited state, but would not trigger the responsibility of the host State.

(714) The Commission rejected this claim. The principle of sovereign equality in international law, as enshrined in Article 2(1) of the UN-Charter, prohibits that one State exercises its powers on the territory of another State against the will of the territorial State. However, States are free to authorize action of another State within their territory. Action of the invited State on the territory of the host State may then become attributable to the host State. In the example mentioned by GOE during the hearing, this rule follows directly from Resolution 3314 (XXIX) of the UN General Assembly of 1974 on the definition of aggression, which is widely regarded as codification of customary international law. Under Article 3 lit. (f) of that Resolution, aggression by one State against another State is defined not only as direct attacks through its own State organs, but also as the action of a State in allowing its territory, which it has placed at the disposal of another State to be used by that other State for perpetrating an act of aggression against a third State. Clearly, if Cuba had allowed the Soviet Union to attack the United States with Russian missiles from Cuban territory in 1962, this would have triggered the international responsibility of Cuba for acts of aggression against the United States. Accordingly, international law recognizes the possibility to attribute action of an invited State to the host State and even sanctions the host State for doing so, if the action of the invited State harms a third State.

(715) Second, the GOE and the GOC argued that there is no room for attributing conduct of the Chinese government to Egypt under the EU’s basic Regulation. The definition of government under Article 2(b) of the basic Regulation was expressly linked to the territory of the granting authority. The words within the territory in that provision were aimed at providing legal security and could not be interpreted away in light of WTO or international law.

(716) Article 2(b) of the basic Regulation provides: Government means a government or any public body within the territory of the country of origin or export. The Commission agreed with the GOE that this provision covers action of the government from whose territory the subsidized products are exported to the European Union. This is the case here. The product under consideration is manufactured in Egypt and exported from Egypt to the European Union. The government of Egypt is situated on the territory of Egypt. However, Article 2(b) of the basic Regulation does not speak to the separate question which action the government may authorize on its territory and acknowledge as its own. Just like with the notion of public body, the notion of government is open to interpretation, taking into account its context, object and purpose. Thus, the actions attributable to the government of the country of origin or export may not only be actions directly emanating from such a government but also actions imputable to such a government. This is further confirmed by the terms in Article 3(1)(a) of the basic Regulation when referring to a financial contribution by a government. For the same reasons, the arguments by the GOE invoking several provisions of the SCM Agreement (e.g. Articles 1.1(a)(1), 13, 18.1(a) and footnote 63) are of no avail. While it is true that the basic Regulation must be interpreted, as far as possible, in the light of the corresponding provisions of the SCM Agreement Case T-300/16 Judgment of the General Court (First Chamber, Extended Composition) of 10 April 2019 . Jindal Saw Ltd and Jindal Saw Italia SpA v European Commission ECLI:EU:T:2019:235, para 101; also T 67/14 Viraj Profiles v Council, judgment of 11 July 2017 , not published, EU:T:2017:481, para 88. , these provisions do not argue against the proposition that a financial contribution may be provided by another state which the territorial government acknowledges and adopts as its own.

(717) Consequently, the second claim of the GOE and the GOC derived from the alleged strict notion of territoriality under Article 2(b) of the basic Regulation and Article 1.1(a)(1) of the SCM Agreement was rejected.

(718) The GOE’s third objection related to the significance of the ILC’s Articles on State Responsibility in this respect. In its view, there is no authority to rely on Article 11 of the ILC Articles since the Appellate Body in US – Anti-Dumping and Countervailing Duties (China)WT/DS379/AB/R, Appellate Body Report, US – AD and CVD (China), para 309. had only referred to Articles 4, 5 and 8 thereof. In a similar vein, the GOC argued that Article 11 of the ILC Articles and 1.1(a)(1) SCMA did not concern the same subject matter, as required by Article 31(3)(c) of the Vienna Convention on the Law of Treaties. Even assuming that the Article 11 of the ILC Articles was relevant, Article 1.1(a)(1) SCMA would be in any case lex specialis and prevail.

(719) The Commission rejected this claim. There is no ground for the assertion that only certain principles of customary international law, as enshrined in Articles 4, 5 or 8 of the ILC Articles on State Responsibility, are relevant for the interpretation of WTO rules, but not others. The WTO Appellate Body has always applied the concepts of general customary law, which were relevant to assess the facts at issue. Next to the rules on attribution, the principles of estoppel or good faith are also part of the WTO legal order, for example. In the present case, the Government of Egypt has not contested the factual circumstances of having invited, acknowledged and facilitated the implementation of Chinese preferential financing to companies operating in Egypt. For this set of circumstances, interpretative guidance can be drawn from Article 11 of the ILC Articles, which has also been referred to in international investment jurisprudenceMondev International Ltd. v. United States of America (ICSID Additional Facility Case No. ARB(AF)/99/2), Award of 11 October 2002 , para. 115 and note 47. . Article 11 of the ILC Articles is hence a relevant rule of international law within the meaning of Article 31(3)(c) of the Vienna Convention on the Law of Treaties for interpreting the notion of by the government in the SCMA. It follows that there is also no room for applying the notion of lex specialis . This is a conflict rule, when two rules of international law contain conflicting normative answers governing the same facts. This is not the case here, as Article 11 of the ILC Articles does not say the opposite of Article 1.1(a)(1) of the SCM Agreement, but helps to draw a proper line when attributing conduct from one government to another one, which acknowledges and adopts such a conduct as its own.

(720) According to the GOE’s fourth objection, Article 11 of the ILC Articles is not applicable to the facts at issue. Under this Article, a State may assume responsibility for conduct as a successor State following the acquisition of land. A government may also acknowledge private conduct of its citizens as its own. However, the Article does not foresee that a State adopts acts of a foreign sovereign as its own.

(721) The Commission also rebutted this objection. The title of Article 11 of the ILC Articles is conduct acknowledged and adopted by a State as its own, with no qualification as to the author of the original act. Next to the UN General Assembly in Resolution 3314 (XXIX) of 1974 (see recital (714) above) also the International Court of Justice has affirmed the freedom of States to adopt foreign acts as their ownICJ, Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro , judgment of 27 February 2007 , para. 414. In that case, the International Court of Justice started from the premise that it was legally possible for the Federal State of Serbia and Montenegro to acknowledge and adopt acts of genocide committed by the organized military forces of the Republik Srpska, the de facto Serbian State on the territory of Bosnia Herzegovina during the civil war in that country from 1991 to 1995. It found, though, that such acknowledgment and adoption had not occurred in practice. . International practice thus does not support Egypt’s view that attribution under Article 11 of the ILC Articles is confined to cases of territorial succession or the Government acknowledging and adopting private wrongful acts on the State’s own territory.

(722) In its fifth objection, the GOE maintained that the financial contributions by the GOC to entities in Egypt were not specific. It referred to the basic Regulation, according to which, the recipient of the financial contribution must fall within the jurisdiction of the granting authority. In its view, the wording granting authority does not mean an acknowledging and adopting authority . In addition, in past investigations, the granting authority for Chinese entities was always the Chinese government. The GOE concluded that the financial contribution of the GOC cannot be specific since enterprises located in Egypt are not within the jurisdiction of China. Similarly, as part of its second objection, the GOC maintained that jurisdiction under Article 2.2 of the SCM Agreement should be assessed within the context of a State’s territorial jurisdiction.

(723) The Commission reiterated that it considered the GOE as the granting authority by virtue of its adoption and acknowledgment of the Chinese preferential lending. As Jushi Egypt and Hengshi Egypt are operating in the Special Economic Zone, they fell also within the jurisdiction of the Government of Egypt. The receipt of this financial support was also specifically restricted to the companies operating in this zone, and therefore specific.

(724) Even if it was necessary to show that the GOC had exercised jurisdiction over these companies before the GOE could adopt the Chinese conduct on its own, quod non , the result would not change. By signing Articles 1 and 4(1) of the Cooperation Agreement, the GOE had agreed that the companies operating in the Zone would be receiving relevant policy support and facilitation provided by the Chinese government for overseas economic and trade cooperation zones and that developing of the zone would be done in accordance with the laws of both countries. In addition to exercising its own territorial jurisdiction, the GOE therefore also allowed China to provide specific aid for companies only located in overseas economic and trade cooperation zones . Therefore, this claim is rejected.

(725) In conclusion, the Commission reaffirmed its finding that the GoE acknowledged and adopted as its own the support for capital investment, the loans for Jushi Egypt and the provision of land by TEDA Egypt and thus provided specific subsidies within the meaning of Articles 2-4 of the basic Regulation.

(726) In 2012 and 2016 respectively, CDB and EXIM granted two loans to Jushi Egypt for a total amount of 200 million USD. The first loan was used to finance the start-up of the plant and the second loan corresponded to an expansion project for an additional production line.

(727) The Commission first ascertained whether these banks were public bodies within the meaning of Articles 3 and 2 (b) of the basic Regulation. The Commission thus sought information about State ownership as well as formal indicia of government control in the State-owned banks. The Commission also sought information about whether the GOC exercised meaningful control over the conduct of the State-owned banks with respect to their lending policies and assessment of risk. As mentioned in Sections 3.4.1.1 and 3.4.1.4 above, both EXIM and CDB are Chinese State-owned banks and there are formal indicia of control of the GOC over these banks. Furthermore, in Sections 3.4.1.3 and 3.4.1.5. above, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors, appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the State-owned banks whenever it was providing loans to the GFF industry.

(728) In addition to the general legal framework set out in Section 3.4.1.1 above, the following legal context applied to the loans provided by EXIM and CDB to Jushi Egypt.

(729) China-Africa TEDA and EXIM signed a strategic cooperation MOU on 6 November 2009 , putting forward a package plan with a total amount of up to 6 billion RMB to carry out overall strategic cooperation in overseas trade and economic cooperation zones.

(730) On 7 November 2009 , six African cooperation zones of economy and trade, among which the SETC-Zone, signed the Joint Meeting Pact between the Chinese Overseas (African) Economy and Trade Cooperation Zones and the China Africa Development Fund (CADF), a subsidiary of CDB.

(731) Furthermore, in 2013, MOFCOM issued a Notice on Aspects related to the China Development Bank support to the establishment and development of overseas economic and trade cooperation zones. According to this Notice, MOFCOM and CDB will provide policy support for investment and financing for enterprises and enterprises entering the zone in eligible cooperation zones . CDB will clarify the basic conditions for priority financing in the cooperation zone in accordance with the requirements of the Ministry of Commerce and the Ministry of Finance , and CDB will selectively support the projects under construction and cooperation projects that MOFCOM has paid close attention to with the host governments of the cooperation zone .

(732) Article 4 of the Cooperation Agreement between China and Egypt 2016 states that the Chinese Government identifies the Cooperation Zone as China’s overseas economic and trade cooperation zone. The Cooperation Zone … is entitled to relevant policy support and facilitation provide by the Chinese Government for overseas economic and trade cooperation zones . In addition, according to article 5, the Chinese Government shall also support the Cooperation Zone by encouraging relevant financial institutions to provide financing facility for …investment projects located within the Cooperation Zone, provided that the lending conditions and the loan use requirements are met .

(733) Article 2(IV) of the Cooperation Agreement on the Establishment of a Management Committee for China-Egypt Suez Economic and Trade Cooperation Zone implementing the above-mentioned agreement, further specifies that the Management Committee established between the relevant functional departments of Tianjin People’s Government and the General Authority for Suez Canal Economic Zone shall try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in a smooth manner and article 2(V) adds that it shall coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels .

(734) The Commission established that all State-owned Chinese financial institutions, including EXIM and CDB, implemented the legal framework set out above in the exercise of governmental functions with respect to the GFF sector. Therefore, they were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(735) In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established that they would be considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in Section 3.4.1.6 above.

(736) As noted in recital (700), the Commission considered that, in principle, for the beneficiaries located in Egypt, it would be appropriate to inquire whether these recipients of the loans received better terms than they would have received on the Egyptian financial market. The Commission verified this point and confirmed that the amount of subsidisation would be higher when using comparable borrowing rates in Egypt (18,3 %)Statistics of the Central Bank of Egypt: Average interest rates on EGP Loans for the year 2018, based on the weighted average interest rates for a sample of banks whose deposits represent around 80% of total deposits of the banking system and calculated on a monthly basis, see https://www.cbe.org.eg/en/EconomicResearch/Statistics/Pages/MonthlyInterestRatesHistorical.aspx ). However, in view of the exceptional circumstances mentioned in recital (701), the Commission calculated the amount of the countervailable subsidy taking into account the fact that the recipients obtained the preferential financing in China. For this calculation, the Commission assessed the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company pays on the preferential loan and the amount that the company would pay for a comparable commercial loan obtainable on the market.

(737) As mentioned in Section 3.4.2.4 above, the Commission decided to establish the market rates for the preferential loans of EXIM and CDB with respect to hypothetical benchmarks for Chinese market investors in accordance with Article 6(b) of the basic Regulation. At the verification visit at GOC, the Commission found that one of the banks extending the financing to Jushi Egypt specifically considered the country risk linked to the investment in Egypt in the pricing of the financing. Because of lack of cooperation, no further details were provided by this bank(s). Therefore, the Commission decided to use the same calculation methodology as for other loans denominated in foreign currencies, and issued by Chinese financial institutions in the PRC, and added the risk premium linked to the investment in Egypt as follows.

(738) According to the calculation methodology described in Section 3.4.2.4 above, the Commission thus first established the credit rating of Jushi Egypt, reflecting the financial situation of the company. As mentioned in recital (306) above, the Commission considered that the overall financial situation of the Jushi Group corresponds to a BB rating, which is the highest rating that does no longer qualify as investment grade. This analysis was further refined in recitals (749) and (750) below. In view of the existence of revolving loans and debt forgiveness, the Commission concluded that the use of US B (instead of BB) corporate bonds would be more appropriate to determine the market-based benchmark.

(739) In line with other loans denominated in foreign currencies and issued by Chinese financial institutions in the PRC, B rated corporate bonds issued in USD during the investigation period were thus used to determine an appropriate benchmark.

(740) Indeed, all other loans provided by Chinese financial institutions were granted to Chinese companies located in the domestic Chinese market. Jushi Egypt on the contrary is located in a country which was subject to civil and political unrest, as well as various terrorist attacks at the time when the loans were granted, and thus has a credit risk different from Chinese companies related to the external conditions prevailing in the country itself. As a result, the Commission added a mark-up to the benchmark rate established for the Chinese sampled companies, in order to integrate the country risk into the market rate.

(741) The premium related to country risk was determined based on the OECD classification of country risk for export credits, as well as the corresponding minimum premium rate set by the OECDFor further details see Arrangement on Officially Supported Export Credits, January 2019, TAD/PG(2019)1 and Country Risk Classifications of the Participants to the Arrangement on Officially Supported Export Credits. . The country risk for loans provided by EXIM bank was established at 2,37 % and 2,44 % for loans provided by CDB.

(742) Following final disclosure, Jushi Egypt claimed that the Commission should have used two offers provided by an Egyptian bank in 2013 and 2016 to the company as a benchmark for calculating the benefit on loans. The Commission reviewed these offers, but decided that they were not representative of a comparable commercial loan, which the firm could actually obtain on the market.

(743) The Commission found that the offers do not provide any description of the actual financial product offered to the company, but refer to an interest rate for the provision of credit facilities in general. As such, it is impossible for the Commission to determine whether the offer actually refers to a loan as such or to other financial products, such as e.g. the opening of a credit line, trade financing (letters of credit, bills of exchange, factoring, etc…). Even if the offer were considered to relate to a loan, other crucial information is missing, such as the duration of the alleged loan offered by the bank, and the extent of the credit facilities offered (i.e. the maximum amount that the bank would be willing to extend to the company). In this respect, the Commission noted that the loans provided by CDB and EXIM were long-term loans for major fixed assets projects, amounting to several hundreds of million USD. Therefore, the Commission considered that it could not use the proxy provided by Jushi Egypt.

(744) Finally, the Commission observed that even if the Commission would take into account the benchmark provided by the company, it would not result in any significant change in the benefit calculation, since the proposed rate of the Egyptian bank was in line with the base rate established by the Commission for the benchmark, corresponding to a USD loan provided by a Chinese bank to a domestic (Chinese) BB-rated customer. Thus, if anything, those loans confirmed that Jushi Egypt indeed benefit from lower interest rates compared to market benchmarks. Therefore, the company’s claim was rejected.

(745) Over the period 2014-2018, Jushi (China) provided a series of inter-company loans to Jushi Egypt for a total amount of 260 million USD.

(746) The Commission found, however, that Jushi (China) had itself financed these intercompany loans via external financing from Chinese financial institutions. In other words, rather than Jushi Egypt getting the loans directly from the Chinese banks, Jushi (China) obtained the preferential financing from these institutions and then allocated the benefit of those loans to its manufacturing activities in Egypt (Jushi Egypt). This is confirmed by Jushi China’s income tax statement, where the interest income from Jushi Egypt’s loan under the heading overseas income is set off against the interest paid by Jushi (China) on its external financing. Moreover, the official documents relating to the start-up and expansion projects in Egypt, such as for example the government approvals from the National Development and Reform Commission (NDRC) and MOFCOM and the various feasibility studies, indicate that two thirds of the Egyptian project are financed via external financing (as opposed to self-generating revenue by the company). The loans provided directly by EXIM and CDB mentioned in Section 4.3.1.1 above, are not in themselves sufficient to provide the total amount of external financing needed to develop the manufacturing

(747) Since all of these loans can in essence be assimilated to loans provided by the GOC to a Chinese company, which then allocates the benefits to its manufacturing activities elsewhere, the Commission decided to treat these loans as any other domestic Chinese loan to a Chinese GFF producer. In this context, as mentioned in recital (266) above, the Commission found that all State-owned Chinese financial institutions that provided loans to Jushi (China) and Jushi Egypt were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(748) The Commission then calculated the amount of the countervailable subsidy. In this respect, the Commission noted that the nominal interest rate charged by Jushi (China) to Jushi Egypt was 7,5 %. However, none of the financing provided to Jushi (China) had such a high interest rate. In fact, the average interest rate charged to Jushi (China) during the IP amounted to 4,4 %. This is again confirmed by Jushi (China’s) income tax statement, in which the financing cost deducted from the taxable income corresponded to an interest rate of 4,3 %. The Commission thus compared the average interest rate that Jushi (China) pays on the outstanding amount of the intercompany loan during the IP with the rate that the company would have to pay for a comparable commercial loan obtainable on the market, in line with the calculation methodology developed in Section 3.4.2.4 above.

(749) The Commission furthermore found that during the investigation period, Jushi Egypt did not honour its debt repayment schedule to the parent company. Indeed, 91 million USD, which was supposed to have been repaid to Jushi (China) during 2018, was still outstanding at the end of the investigation period. In addition, the Commission found several instances in which the funds received via Jushi (China) were provided to repay the outstanding capital on the loans with EXIM and CDB.

(750) In order to take into account the increased risk exposure of the banks highlighted by the existence of revolving loans and debt forgiveness, the Commission thus decided to moved down one notch in the risk rating scale and to use US B (instead of BB) corporate bonds to determine the market–based benchmark, in line with recital (339) above.

(751) All the elements concerning this financing described above in this section clearly show that Jushi (China) allocated all the benefits from the preferential financing received from the Chinese financial institutions to Jushi Egypt. In addition, after Jushi Egypt did not honour the debt repayment schedule towards Jushi (China), this latter company did not adjust the interest rate accordingly and did not take any measures to reflect the real risk of the intercompany loan, whose amount kept increasing over the years. For all these reasons, the benefit thus calculated was attributed to Jushi EgyptFor the sake of clarity, the Commission confirmed that the loans received by Jushi (China) the benefits of which were ultimately allocated to Jushi (Egypt) were not accounted for in the amount of subsidisation established for Jushi (China). .

(752) Following definitive disclosure, Jushi Egypt claimed that, contrary to what was stated in the footnote in the preceding recital, the Commission countervailed the loans attributed to Jushi Egypt both in Jushi (China) and in Jushi Egypt. This is factually incorrect, since the benefit calculated on the intercompany loan allocated to Egypt was deducted from the benefit on loans calculated for Jushi (China), as can be seen in Annex 2.3 of the specific disclosure provided to the Chinese company. Therefore, the claim was rejected.

(753) Jushi Egypt also argued that the Commission should not have downgraded Jushi Egypt’s credit rating from AA to B based on the fact that Jushi Egypt did not honour its repayment schedule to its parent company or that, in some instances, Jushi Egypt’s parent company repaid loans on its behalf. The fact that Jushi Egypt’s corporate group decided that it was better for another entity in the group to bear the costs so as to preserve cash flow in another entity does not indicate that this other entity would not have honoured its obligation had this obligation been towards a banking institution. In addition, Jushi Egypt argued that the Commission downgraded Jushi Egypt by four notches, from AA to B, even though recital (750) above stated that Jushi Egypt would only be moved down one notch in the risk rating scale.

(754) First, the Commission noted that it did not find any credit rating awarded by any external party to Jushi Egypt, and that Jushi Egypt did not provide any evidence to this end either. Jushi Egypt therefore never had an AA credit rating as a starting point. The Commission thus had to determine Jushi Egypt’s credit rating using the facts available in the case. In view of the significant amount of the intercompany loans from the parent company, as well as the fact that Jushi Group had operated as a guarantor for the loans from CDB and EXIM, the Commission determined that Jushi Egypt’s credit rating was closely linked to the rating of its parent company, which had been set at BB, as mentioned in recital (306) above. This BB credit rating was thus the starting point for the Commission.

(755) Second, as explained in recital (750) above, the Commission decided to move down one notch in the rating scale, i.e. from BB to B, in view of the lack of repayment of its liabilities over the years. Indeed, the Commission noted that although the loans to CDB and EXIM were repaid according to schedule, the total liabilities of the company actually increased over the years. As such, Jushi Egypt replaced external debt by intragroup debt, but did not actually honour its liabilities towards the banking institutions itself. Contrary to the statements of Jushi Egypt, there are also indications that the company would not have been able to honour its obligations if all of its creditors had been external banking institutions. For example, although the company was loss-making in the years 2015 and 2016, and had a negative equity in 2016, it still made large capital repayments to CDB, totalling 54 million USD (around 546 million EGP) in these years. The company would thus not have been in a position to honour its external obligations without financial support from the parent company.

(756) In view of the above considerations, the Commission rejected these claims.

(757) The subsidy amounts found for preferential financing through loans from Chinese policy banks, directly or via the parent company Jushi (China), are thus confirmed, and amounted to 4,87 % for Jushi Egypt.

(758) In addition to the direct loans and intercompany loans, Jushi Egypt needed to cover its financial needs also by increasing its capital.

(759) Previous investigations found that substantial subsidies were received at the level of the parent companies of Chinese groups to support foreign investment under the Belt & Road Initiative, in the form of grants, preferential financing and equity injections. This was notably the case in the recently concluded anti-subsidy investigation on Tyres (the Tyres case)See the Tyres case cited in footnote 7 above, Section 3.7. .

(760) During the investigation period, Jushi Egypt benefited from grants channelled by CNBM, a State-controlled entity, through equity injections, specifically via paid-in capital.

(761) In 2012, there was a significant shareholders’ contribution of 42,6 million USD for the founding of Jushi Egypt. Since then, the capital of Jushi Egypt significantly increased up to 162 million USD until the investigation period. At the end of the IP, the capital of Jushi Egypt was approximately four times larger than in 2012.

(762) Jushi Egypt is fully owned by Jushi Group, which is fully owned by China Jushi. The principal shareholder of China Jushi is CNBM holding, which continuously held more than 25 % of its shares since 2010

(763) In parallel to the increase of capital in Jushi Egypt, the participation of CNBM in the capital structure of China Jushi has increased in a similar order of magnitude. Specifically, CNBM increased sixfold its paid-in capital contribution into China Jushi from 2010 to the end of 2018, i.e. during the IP, from 154 million RMB (23,3 million USD) in 2010 to 944 million RMB (142,8 million USD) in 2018.

(764) This similar trend and magnitude in the increase of capital in both Jushi Egypt and China Jushi strongly suggests that CNBM raised funds in order to increase the capital of Jushi Egypt through China Jushi up to the IP.

(765) In addition to the paid-in capital increases, there have been substantive amounts of funds transferred from CNBM to China Jushi and Jushi Group through other types of capital accounts.

(766) In order to determine the nature of the transfers and the circumstances in which the ownership capital within the companies concerned evolved, the Commission sought to have access to the relevant information originated in CNBM. However, as explained in Section 3.2.2, CNBM did not cooperate with the investigation. In the absence of any reply from CNBM, and following the application of the provisions of Article 28 of the basic Regulation, the Commission had to rely partially on facts available for its findings concerning CNBM. In particular, the Commission had to use facts available in order to identify the source of financing of the capital provided by CNBM to Jushi Egypt inter alia via China Jushi.

(767) To reach this conclusion, the Commission established the existence of a clear commitment from CNBM to invest overseas in encouraged industries. In this respect, CNBM advertises itself as an active practitioner of the Belt & Road Initiative in its annual report, on its website, and on site in the plants. For example, it undertook 312 cement projects in 75 countries and regions globally, more than 60 fiberglass projects, the implementation of 33 investment projects, the construction of 5 overseas warehouses, operated 14 overseas building materials supermarket chains, and managed more than 30 factories globally Information panel at the entrance of the Jushi Egypt plant. .

(768) More specifically, within the context of GFF, CNBM established Jushi Egypt in 2012, a vertically integrated producer of GFF in Egypt, and a subsidiary of the Chinese exporting producer Jushi. In the subsequent years, several important investment projects were undertaken to expand the production capacity of Jushi Egypt. Furthermore, in 2015, CNBM established Hengshi Egypt, a subsidiary of the Chinese exporting producer Hengshi. This non-vertically integrated producer of GFF in Egypt sources its main raw materials from its related company, Jushi Egypt. In addition, according to publicly available information, contracts have been signed to establish a new company related to Taishan (another one of the exporting producers in the CNBM Group) in Egypt in the near future.

(769) Furthermore, China Jushi has established a number of overseas production and trading subsidiaries in South Africa, South Korea, Italy, Spain, France, Canada, India, Singapore, Japan, USA and Hong Kong. In 2016, the CNBM Group raised over 5 billion RMB (USD 747,38 million) for its globalization strategy in the 13th five years plan (2016 to 2020), among which the Egyptian projects mentioned above, as well as a USD 300 million investment in a factory in the USA, for production starting in 2018China Jushi Online News Center, as well as article Jushi plans to establish a factory in India, JEC Composites News, 4 Aug 2016 , http://www.jeccomposites.com/knowledge/international-composites-news/jushi-plans-establish-factory-india (last accessed on 3 February 2020 ). . In India, the plan is to put up a manufacturing facility with a capacity of 100000 tonnes by mid-2020. Further plans for a GFF facility in Turkey were also well underway during the investigation period.

(770) All of these overseas projects fit within the wider context of China’s going out policy. In this respect, Song Zhiping, the Chairman of CNBM, stated for example: The signing of the Jushi US project is a milestone in the strategic development of China Jushi’s globalization, and in the meantime a critical step forward in its pursuit for higher goals. It also has a referential significance for the globalization of CNBM and even of China’s building materials industry as a whole .

(771) Furthermore, as mentioned in recital (148) above, the Made in China 2025 Roadmaphttps://www.cae.cn/cae/html/files/2015-10/29/20151029105822561730637.pdf identifies 10 strategic sectors, which include GFF. For these key industries, the plan Made in China 2025 explicitly mentions in its Chapter 3.9 that China will:(a) Support enterprises to perform mergers, equity investment and venture capital investment overseas. (b) Actively participate in and promote international industrial cooperation and implement major strategic plans like the Silk Road Economic Belt and the 21st-Century Maritime Silk Road to accelerate building interconnected infrastructure with surrounding countries and deep industrial cooperation. (c) Make use of opening up along borders and build a number of overseas manufacturing cooperation parks in eligible countries. (d) Encourage the overseas transfer of high-end equipment, advanced technology and strong industry .

(772) In another interview, Song Zhiping mentioned that from the enterprise point of view, CNBM paid special attention to the national Belt and Road related policies, and that Belt and Road is really a once-in-a-lifetime opportunity for China's building materials group . He also pointed out that going out is linked to financial cooperation, it only works when we combine finance, sovereign fund cooperation, buyer's credit, financial leasing and other ways, have a mutual cooperation going out . Along the same line, Song Zhiping further stated that International capacity cooperation must be combined with the Belt and Road national policy, especially the country's financial policy. We used to make simple investments, borrowing money and lending investments, and that's not going to be massive. I would like to adopt a model similar to that of China's Guoxin Holdings, where companies contribute 10 per cent and the state foreign exchange reserves contributes 90 per cent. We need to change our old reliance on loans and look for new financing business models and organizational models. I think we should give full play to the country's current strong financial advantages, raise the establishment of building materials investment funds, mobilize more capital to participate in investment, to support building materials enterprises to go out .

(773) This vision is supported by the Chinese government, as can be seen in a speech given by Xiao Yaqing, director of the State Council's SASAC at a conference organized by CNBM: central enterprises are the backbone of the national economy, and should be closely integrated with the Belt and Road national strategy, making use of advantageous production capacity, highlighting key areas, and promoting international production capacity and equipment cooperation. They take the lead in creating a new business card for the going out of the country”…. In recent years, China Building Materials and China Materials Group have accelerated the pace of going out, they have achieved outstanding results, and restructuring of the group to lead the internationalization of China's building materials industry is of great significance…. After the reorganization, the new company's initial planned investment projects in countries along the Belt and Road, will amount to an investment of more than 90 billion yuan Xiao Yaqing: to build a going out national new business card after the reorganization of the enterprise, Source: Sina Finance Author: Sina Finance Published: 2016-08-29 . .

(774) As explained in recital (93) the investigation revealed that CNBM Building is a Chinese State-owned enterprise owned directly and indirectly by CNBM Parent, which is in turn wholly owned by SASAC. SASAC is the key vehicle through which the Chinese government controls in several ways State-owned enterprises as a means to implement its government policies and plans rather than to follow a market logic in its business operationsSee among others the Commission Staff Working Document on significant distortions in the economy of the People’s Republic of China for the purposes of trade defence investigation, SWD(2017) 483 final/2 of 20.12.2017 , available at: https://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156474.pdf. . Without prejudice to the conclusion on the public body nature of CNBM within the meaning of Article 3 of the basic Regulation, on the basis of all of the above evidence it can be concluded that CNBM and the Jushi Group at large pursue industrial and governmental policies including with regard to the Belt and Road initiative and the going out policies in the production and export of the product concerned.

(775) It is in this context that CNBM received a financial contribution from the government in order to implement these policies, including to fund its investment in Egypt for the production of the product concerned. Due to the complete non-cooperation of the CNBM and of the GOC on this point, the Commission was unable to identify the actual source of financing and substantiate in detail whether this financial contribution was made by SASAC or by the Silk Road Fund (SRF) as the vehicle to implement the Belt and Road strategy. However, on the basis of the facts available pursuant to Article 28 of the basic Regulation the Commission concluded that both SASACThe evidence substantiating the conclusion on the public body nature of SASAC can be found inter alia in Section 5 of the Commission Staff Working Document SWD (2017) 483, see previous footnote. and the SRFThe evidence substantiating the conclusion on the public body nature of the SRF can be found inter alia in the Tyres case, as quoted in footnote 7 above, in particular Section 3.7 recitals (341) through (360) of that Regulation. are considered public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation when providing the financial contribution to CNBM. In any event, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted or directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic RegulationSee also recital (358) of the tyres regulation. .

(776) Likewise due to the lack of cooperation, based on all the above evidence on the funding under the Belt and Road initiative of projects outside of China including Egypt, as well as on the findings in the Tyres case, the Commission concluded that CNBM received a financial contribution in the form of grants that were then used for successive capital contributions to increase the capital available to Jushi Egypt for its operations in Egypt.

(777) In the absence of further evidence provided by CNBM, and based on the publicly available evidence, the Commission decided to countervail the successive capital increases of Jushi Egypt as equity injections supported by the State, with the aim of setting up and expanding the production facilities of CNBM in Egypt. Such support would equally fall under the items agreed upon between China and Egypt in the Cooperation Agreement to set up the SETC-Zone, attributed to Egypt for the same reasons explained in recital (706) above and can thus be allocated to the products exported from Egypt.

(778) The Commission then analysed whether the financial contribution provided by GOC via SASAC and/or the SRF conferred a benefit to Jushi Egypt. Once again, due to the non-cooperation of CNBM the Commission had to base its findings on the provisions of facts available according to Article 28 of the basic Regulation.

(779) The body of evidence in subsection (b) above has shown that the mandate and objective of both SASAC and the SRF is to implement governmental policies and plans, including by providing financial support and funding for the encouraged sectors among which GFF in order to enact the going-out strategy. SASAC and the SRF do not follow market principles and behaviour when providing funding, but operate to implement the respective government policies. A notable example of their operations delinked from a market perspective was found in the Tyres case, where the SRF had provided a grant to the group parent company for an acquisition of a subsidiary in the EU. Furthermore, in the Tyres case the Commission established that such projects followed a similar patternSee Tyres case cites in footnote 7. . It is thus reasonable to assume that CNBM, as a major central SOE, would follow the same pattern and would benefit from similar subsidies.

(780) The Commission further noted that the amount of successive parallel capital increases of Jushi Egypt received via China Jushi corresponded approximately to the amount of the funding gap for the investment project in Egypt left after the funding via the preferential financing as described at Section 4.3 above. As explained above in recitals (763) to (766), the successive magnitude and scale of capital increases of CNBM into Jushi Group and China Jushi substantially mirrored the capital increases into Jushi Egypt precisely to close this funding gap. This was fully coherent with the purpose of the functioning and funding of SASAC and the SRF, as also explicitly stated by CNBM representatives and SASAC and SRF officials.

(781) Based on the evidence on file and in accordance with Article 28 of the basic Regulation, the Commission concluded that the financial contribution provided by SASAC and/or the SRF conferred a benefit within the meaning of Article 3(2) of the basic Regulation.

(782) As explained in recitals (207) to (217) above, the parent company of CNBM failed to provide a response to the questionnaire reply. Therefore, it was impossible to verify the subsidies received at the level of the parent company in connection with the group’s foreign investments related to the product concerned, and to determine an accurate benefit amount.

(783) The Commission therefore resorted to facts available in application of Article 28 of the basic Regulation to the determine the subsidy amount conferred by the financial contribution by SASAC or the SRF in the form of grants. As explained above, the Commission found parallel capital increases in the various group companies in China and ultimately channelled to Jushi Egypt in the same magnitude and over the same period. Because CNBM received these funds from SASAC and/or SFR earmarked for the investment in Egypt under the Belt and Road Initiative and the going out policy, it was used simply to channel those funds all the way down to Jushi Egypt without keeping any benefit to itself, as this would be inconsistent with the earmarking. The fact that the amount of the funding gap in the Egyptian investment of Jushi Egypt by and large corresponded to the amount of the capital increases further confirms this.

(784) In order to determine the amount of funds channelled by CNBM to Jushi Egypt as equity injections, the Commission analysed and traced the successive increases in equity in the companies concerned, namely Jushi Egypt, Jushi Group and China Jushi of which CNBM is the main shareholder.

(785) When following the trail of funds, the Commission examined not only the increases in paid-in capital, but also the increases in other equity instruments. Specifically, substantive amount of funds were discovered in the form of capital surpluses in the intermediate companies China Jushi and Jushi Group. With regard specifically to these intermediate companies, the Commission noticed that in certain equity increases the amount of funds transferred to these companies were larger than the amounts the company would later register under paid-in capital. The company would therefore have access to these funds without the expected change on the share of company’s ownership. By taking into consideration the equity injections via paid-in capital and the amounts found under other type of capital accounts, such as capital surplus, the Commission could determine that more than 87 % of the equity of Jushi Egypt could have been imputable to CNBM. The total amount of the benefit to the recipient using this approach would therefore be 142,8 million USD.

(786) However, due to the limited access to more detailed information, the Commission could not determine the exact origin of all these funds, and it thus could not establish with a sufficient standard of likelihood that the all amounts contained in other capital accounts of Jushi Egypt, were channelled and transferred by CNBM.

(787) Therefore, the Commission adopted a more prudent approach, focusing exclusively on the evolution of the paid-in capital amounts that matched the standard of likelihood as to their source from CNBM. More specifically, the Commission simply took into consideration the increase of paid-in capital of CNBM in China Jushi since 2010 and parallel development of capital increases into Jushi Egypt since 2012. As a result, the Commission considered that 51 % of the equity in Jushi Egypt (or 82,7 Million USD) was provided by CNBM through the financial contribution received from SASAC or the SRF.

(788) Once the full amount of the grants were established, the Commission proceeded to calculate the benefit conferred to Jushi Egypt during the investigation period according to Articles 6 and 7 of the basic Regulation. The benefit of the grants via equity increases should be allocated to the IP considering the amortization period of equity, which is not a fixed asset and therefore would normally be subject to the allocation provisions under Article 7(4) of the basic Regulation.

(789) Due to the absence of cooperation from CNBM, the Commission did not have any further information on any specific agreement concerning the use of the grant linked to the equity investments with SASAC or the SRF. In the tyres case, the Commission amortised the grant amount over a period of seven years because this was in line with the average investment duration of SRF investment and with another concurring loan taken out for that transactionRecital (418) of the Tyres Regulation. . However, in the absence of cooperation and specific shareholders agreement in this case, the Commission decided to follow a conservative approach and decided to use the average useful life of the assets of Jushi Egypt on the assumption that the funding was used to fill the gap for the investment project in line with Article 7(3) in conjunction with Article 7(4) of the basic Regulation, which provides that a different amortisation period can be used if the circumstances so justify. On this basis, the Commission used an amortization period of twelve years. This resulted in a subsidisation amount of 1,65 %.

(790) Following definitive disclosure the CNBM group claimed that the Commission failed to demonstrate that the equity is attributable to CNBM and more specifically, that it did not originate from China Jushi or Jushi Group’s profits. In this line the company also claimed that the Commission failed to explain why funds were given by CNBM every year to China Jushi since 2010 but that funds only passed on to Jushi Group and Jushi Egypt during some of those years. Similarly, it argued that the Commission failed to establish that the support for capital investment is attributable to any public body and, as a result, it cannot constitute a subsidy. Finally, CNBM Group requested that, should the Commission maintain its approach, it must disclose how it considers that there is any pattern between the support for capital from CNBM to China Jushi and that between Jushi Group and Jushi Egypt.

(791) Firstly, concerning the origin of the funds, the Commission noted that the company did not provide any additional evidence to substantiate the claim. The Commission nonetheless, has analysed further the accounts of the concerned companies to identify whether increases in equity were sourced by their profits. The Commission observed that none of the increases in equity were originated from the profits or retained earnings accounts. The Commission, nonetheless, has identified that certain equity increases of China Jushi taking place in the years 2012 and 2016 could be attributed to capital reserves. However, the company has not provided information on the origin of the funds of the capital reserve accounts. Furthermore, the investigation established that one of the companies of the CNBM Group had received and booked government subsidies under the capital reserves account. The Commission therefore concluded that undistributed profit or retained earnings are not the attributable source of the funds used for the equity increases in Jushi Egypt since 2012.

(792) Secondly, concerning the moment when the funds were transferred to Jushi Group and Jushi Egypt, the Commission noted that the CNBM Group has not provided any further evidence to substantiate or explain its equity increases scheduling. Similarly, the Commission noted that in addition to the time lags on equity transfers from company to company, equity increases also respond to the different capital requirements in Jushi Egypt linked to the investments over the period analysed.

(793) Thirdly, concerning whether the origin of the funds supporting the capital increase can be attributable to a public body, the Commission noted in recital (775), that, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted or directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation

(794) Finally, regarding the disclosure on the establishment of the pattern between the support for capital from CNBM to China Jushi and between Jushi Group and Jushi Egypt, the Commission noted that this information was provided. Recitals (758) to (789) explained in detail the findings and the methodology used to calculate the subsidy amount. Similarly, in the specific disclosure, the company was provided with complete information concerning the evidence at the Commission’s disposal and its analysis regarding the capital support from CNBM to China Jushi and for Jushi Group to Jushi Egypt.

(795) Following all the above-mentioned arguments, the Commission rejected these claims.

(796) CNBM Group also claimed that the Commission failed to establish the amount of the benefit and must demonstrate why each provision of equity capital is not in line with the usual investment practice.

(797) The Commission recalled that during the investigation the case team sought to have access to the relevant information in CNBM. However, as explained in Section 3.2.2, CNBM did not cooperate with the investigation and the Commission had to rely on facts available for its findings concerning CNBM. Moreover, recitals (778) to (781) described how the benefit is established. In essence, it explains that SASAC and SRF did not follow market principles when providing funding, but operated to implement the respective government policies. The Commission therefore rejected the claim.

(798) CNBM Group further argued that it cannot be considered that all funds provided by CNBM originated from public bodies. As a result, the Commission cannot conclude that the entirety of the alleged capital support from CNBM to China Jushi constitutes a subsidy. Therefore, the company argued that the benefit cannot be higher than the subsidy rate found for CNBM in China, multiplied by the amount of capital support. CNBM Group also claimed that the Commission failed to calculate the benefit as it did not consider that the support for capital investment from CNBM came in exchange of shares and, thus, dividends.

(799) First, the Commission noted that the company has not provided any additional evidence to substantiate the claim. Similarly, the Commission recalls that CNBM did not cooperate with the investigation and the Commission had to rely on facts available for its findings concerning CNBM. In this respect, The Commission recalled that the subsidy rate found for CNBM in Sections 3.4 and 3.8 above was based on loans and grants visible in the publicly available audit report of CNBM, and thus it limited its findings in a very prudent manner only to certain subsidies within specific subsidy schemes, which could be easily identified and which are not related to the subsidy scheme at hand. Therefore, if anything the Commission erred on the side of caution.

(800) Finally, the Commission noted that the investigation does not discuss whether the funds transferred from CNBM were done in exchange of shares. On the contrary, the investigation established that CNBM received financial contributions from the government in order to implement its policies, and that these financial contributions were received in the form of grants that were then used for capital contributions to finance the operations of Jushi Egypt.

Annexes to Section 6 of the consolidated version of the complaint.

⟪TABLE:tbl_009⟫

(801) Following all the above-mentioned arguments, the Commission rejected the claim.

(802) The CNBM Group further asserted that the Commission failed to take into account the value of the EGP at the time when the support for capital investment took place. As the EGP substantially devaluated in late 2016, this, in turn, artificially inflated Jushi Egypt’s benefit under this scheme. The Commission acknowledged that the EGP substantially devaluated in 2016. It also noted that the successive capital increases were indeed recorded in Jushi Egypt’s financial statements during the IP at the historical exchange rates. Following the methodology used in Jushi Egypt’s financial statements, the Commission therefore adapted the exchange rate for the provision of capital accordingly.

(803) Finally, the CNBM Group claimed that the benefit of the support for capital investment should not be allocated over time. The company argued that there is no evidence that links the capital investments received by Jushi with the acquisition of fixed assets.

(804) The Commission noted that no further evidence has been provided to support the claim. In addition, the Commission recalled that the set-up of a new production plant involves the acquisition of fixed assets. Furthermore, the investigation collected substantive evidence that since the establishment of Jushi Egypt, the company has engaged in the acquisition and construction of fixed assets. The Commission therefore rejected the claim.

(805) During the investigation period, Jushi Egypt also benefited from an export credit insurance with Sinosure in the framework of an agreement signed by Jushi China, which covered also exports made by Jushi Egypt. The premium to be paid for exports from Egypt did not differ from the premium requested for exports from the PRC.

(806) As mentioned in Section 3.5 above, Sinosure is owned by the Chinese Government, which exercises meaningful control and hence constitutes a public body. In any event, it is entrusted or directed by the GOC. Furthermore, Section 3.5 above already established that the premiums paid by the GFF producers in China were based on preferential terms. The fact that the premium requested for exports from Egypt does not differ from the premium for exports from China clearly shows that country risk was not taken into account by Sinosure when determining its price for the export credit insurance, and that the findings applicable to the exports from Jushi China also apply to Jushi Egypt.

(807) Consequently, the Commission concluded that Sinosure was a public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law or was entrusted or directed by the GOC. Furthermore, a benefit was provided to the Jushi Egypt, since the insurance was provided at rates below the minimum fee needed for Sinosure to cover its operational costs.

(808) The Commission also determined that the subsidies provided under the export insurance programme are specific, because they could not be obtained without exporting and are thus export contingent within the meaning of Article 4(4)(a) of the basic Regulation.

(809) However, without prejudice to a finding of countervailability of this programme, given that the potential resulting countervailable benefit would be insignificant, the Commission decided not to assess this programme further.

(810) No benefit was found for the provision of electricity for less than adequate remuneration since electricity rates are set at national level in Egypt, and the exporting producers pay the usual rate for industrial users within a certain voltage range.

(811) No benefit was found for the provision of gas for less than adequate remuneration. Rates for gas are set for certain industrial sectors, but the exporting producers fall within the residual category of industrial users, which does not benefit from the lowest rate. Hence, there is no specificity, and no benefit.

(812) The legal bases of this programme are:Law No. 83/2002 on Economic Zones of a Special Nature (Law 83/2002) Decree of the President of the Arab Republic of Egypt on Law No. 27/2015 Amending some Provisions of Law of Economic Zone of Special Nature issued by Law No. 83/2002 (Law 27/2015) Law No. 8 of 1997 On Investment Guarantees and Incentives (Law 8/1997) Investment Law as Enacted by Law No. 72 of 2017 The Prime Minister's Draft Resolution No. (2310) of 2017 Concerning issuing the Executive Regulations of Investment Law Issued by virtue of Law No. 72 of 2017.

(813) According to Article 5 of the Law 83/2002, as amended in 2015, in the SCZone, the ownership of land shall be vested in the Authority within the zone . Since 2015, it is not possible anymore to purchase the full ownership of land from the General Authority. Currently, the General Authority only provides usufruct rights of the land to the Main Development Company (MDC), an Egyptian developer. The MDC then puts the usufruct of the land up for bidding to sub-developers such as TEDA. These sub-developers subsequently rent out the land to the companies located in the zone.

(814) However, when Jushi Egypt started to build its plant in 2011, it was still possible to acquire full ownership of land from the Egyptian authorities. At the time, Jushi Egypt bought a plot of land from TEDA. TEDA in turn bought this plot in 1998 through its predecessor, the Egypt China Joint Venture Company, from the Suez Governorate at an extremely low price (less than 1 USD/m2 ), and without any bidding procedure. Following the initial purchase in 1998, TEDA invested in basic infrastructure to make the undeveloped desert land viable for industrial projects.

(815) In this respect, the Commission ascertained whether the ECJV and TEDA were public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. The Commission thus sought information about State ownership as well as formal indicia of government control in these entities. It also analysed whether control had been exercised in a meaningful way.

(816) First, the Commission found that ECJV and TEDA were related entities, and that they were both fully State-owned. Indeed, as mentioned in recital (649) above, Tianjin TEDA is an SOE under the Tianjin Municipal Government, which formed a joint venture with the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the ECJV, in order to develop and construct the economic zone. The Chinese side held 10 % of the shares of the ECJV, and the Egyptian side 90 %Report of the State Council Development and Research Center, The sustainable development experience in the China-Egypt Suez Economic and Trade Cooperation Zone, 6 August 2019 (State Council Report). . Furthermore, as mentioned in recital (651) above, in October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund, a subsidiary of the CDB, to set up China-Africa TEDA Investment Co., Ltd. (China-Africa TEDA), as the main Chinese investment entity in the cooperation zone. China-Africa TEDA united with the ECJV to create a new company, TEDA, in order to drive the development of the SETC-Zone in Egypt. This time, the Chinese side held 80 % of the shares, and the Egyptian side (represented by the ECJV) 20 %.

(817) The Commission further established the existence of formal indicia of control by the State of those investors. Since both entities are fully State-owned, the Chinese and Egyptian governments formally have full control over them. In particular, in the absence of specific information indicating otherwise, the Commission considered that managers and supervisors in the entities at issue are assumed to be appointed by and accountable to the State as is the case for State-owned companies in those countries.

(818) The initial allocation of the land to the ECJV for a purchase price of less than 1 USD/m2 in accordance with the applicable legal framework thus certainly involved a financial contribution by the GOEArticle 38(bis A) of the Law 83/2002, as amended in 2015; Article 20(bis) and Article 28 of Law 8/1997. . The subsequent transfer of land between the ECJV and TEDA was in fact a transaction between related companies, based on a transfer price involving the same actors on both sides of the transaction.

(819) Finally, concerning the sale of the land by TEDA to Jushi Egypt, the Commission noted that the majority shareholder of TEDA, owning 75 % of the shares, is the China Africa TEDA Investment Company, who also holds the majority of the seats on the Board of Directors of TEDA. The ultimate controller of the China Africa TEDA Investment Company is the CDB, which has already been designated as a public body in recital (257) above. Furthermore, according to the information provided by TEDA in the questionnaire reply, the business activity of the China Africa TEDA Investment Company consists of investments in various projects within and outside the country (i.e. China)…Such projects are subject to approval in accordance with the law and may be subject to business activities after the approval of the relevant departments . This wording refers to the approvals required from MOFCOM and the NDRC for any Chinese outward investment, and shows that the China Africa TEDA Investment Company carries out the GOC’s industrial policies by investing in industrial projects approved and encouraged by the GOC. TEDA itself describes its vision and mission as follows: Vision: becoming an investment and operation player of an international industrial park supporting China, starting from Egypt, and facing Africa and even the whole world. Mission: pushing forward Chinese enterprises going outside, then pushing forward the internalization process of Chinese enterprises TEDA 10 Years Summary Report (2008-2018), p. 4. . TEDA also extensively refers in its publications to the attention, motivation and support from MOFCOM and Tianjin Municipal Government in the execution of its activities.

(820) In light of the above considerations, the Commission established that the state controlled entities that provided land to Jushi Egypt are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation. Indeed, the actions taken by TEDA under the direct control of the GOC and in the context of the GOE-GOC close cooperation can be attributed to the GOE as explained before in Section 4.2.3.1 as part of the set of preferential support to the GFF producers in Egypt.

(821) In addition, even if the State-controlled entities were not to be considered as public bodies, on the basis of the evidence in recitals (815) to (820) as well as the evidence relating to the close cooperation between the GOC and the GOE, the Commission established that they would be considered entrusted or directed by the GOC and the GOE to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation. Thus, their conduct would be attributed to the GOE in any event.

(822) Following definitive disclosure, both the GOE and the exporting producers stated that the Commission cannot consider that conducts of Chinese public bodies or private bodies entrusted or directed by the GOC constitute subsidies under the basic Regulation, as these conducts are not attributable to the government of the country of origin or export.