14.5.2014

EN

Official Journal of the European Union

L 142/23

COMMISSION IMPLEMENTING REGULATION (EU) No 471/2014

of 13 May 2014

imposing definitive countervailing duties on imports of solar glass originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

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

Having regard to Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Community (1), and in particular Article 15 thereof,

Whereas:

A. PROCEDURE

1. Initiation

(1)

On 27 April 2013, the European Commission (‘the Commission’) announced the initiation of an anti-subsidy proceeding with regard to imports into the European Union of solar glass originating in the People’s Republic of China (‘PRC’ or ‘China’) by a notice published in the Official Journal of the European Union (the Notice of Initiation) (2).

(2)

The proceeding was initiated by the Commission following a complaint lodged on 14 March 2013 by EU ProSun Glass (the complainant) on behalf of producers representing more than 25 % of the total Union production of solar glass. The complaint contained prima facie evidence of subsidisation of solar glass and of material injury caused by it, which the Commission considered sufficient to justify the initiation of an investigation.

(3)

In accordance with Article 10(7) of Regulation (EC) No 597/2009 (the basic Regulation), the Commission notified the Government of the People’s Republic of China (‘GOC’) prior to the initiation of the proceeding that it had received a properly documented complaint alleging that subsidised imports of solar glass originating in the PRC were causing material injury to the Union industry. The Commission invited the GOC for consultations with the aim of clarifying the situation as regards the contents of the complaint and arriving at a mutually agreed solution.

(4)

The GOC accepted the offer of consultations which were subsequently held. During the consultations, no mutually agreed solution could be arrived at. However, the Commission took due note of comments made by the GOC regarding the schemes listed in the complaint. Following the consultations, submissions were received from the GOC.

2. Parallel anti-dumping proceeding

(5)

On 28 February 2013 the Commission announced the initiation of an anti-dumping proceeding concerning imports into the Union of solar glass originating in the PRC by a notice published in the Official Journal of the European Union (3).

(6)

On 27 November 2013 the Commission imposed a provisional anti-dumping duty on imports of solar glass originating in the PRC by Commission Regulation (EU) No 1205/2013 (4).

(7)

The injury analyses performed in the present anti-subsidy and the parallel anti-dumping investigation are based on the same definition of the Union industry, the same representative Union producers and the same investigation period and led to identical conclusions unless otherwise specified. This was considered appropriate in order to streamline the injury analysis and to reach consistent findings in both proceedings. For this reason, comments on injury aspects put forward in any one of these proceedings were taken into account in both proceedings.

3. Parties concerned by the proceeding

(8)

The Commission officially informed the complainants, the other known Union producers, the known exporting producers in the PRC, the known importers, suppliers, distributors, users and associations known to be concerned, and the authorities of the PRC of the initiation of the investigation. The Notice of Initiation invited all parties concerned by the investigation to contact the Commission and make themselves known.

(9)

Interested parties were given an opportunity to make their views known in writing and to request a hearing within the time limit set in the Notice of Initiation.

(10)

The complainants, exporting producers in the PRC, importers and the PRC authorities made their views known. All interested parties, who so requested and showed that there were particular reasons why they should be heard, were granted a hearing.

3.1. Sampling

(11)

The Commission announced in the Notice of Initiation that it might limit to a reasonable number the exporting producers in the PRC, the unrelated importers and Union producers that would be investigated by selecting a sample in accordance with Article 27 of the basic Regulation.

3.2. Sampling of Union producers

(12)

The Commission selected a sample of five companies out of the eight producers which came forward on the basis of the largest representative sales volume of the like product during the investigation period (IP).

(13)

Following the verification visits, the Commission decided to remove one of the five sampled companies, as that company was found not to be representative of the Union industry, because it was the only one of the eight producers which came forward that was in a start-up phase. Therefore, the Commission saw the risk that in the case of its inclusion, the injury indicators, in particular profitability, may not have given a fair representation of the state of the Union industry.

(14)

Consequently, the final sample consisted of four Union producers. Their production accounted for 79 % of the sales of the Union industry on the Union market during the IP. The sample was thus considered to be representative of the Union industry.

(15)

Three Union producers requested, on the basis of Article 29 of the basic Regulation, that their identities remained confidential. They claimed that disclosure of their identity could lead to a risk of significant adverse effects to their business activities. The Commission examined the reasons put forward and accepted their request. Given the limited number of producers in the Union, no other names were disclosed in the general disclosure document, as this would allow identification of the companies requesting anonymity.

(16)

The identity of the company Interfloat Corporation/GMB Glasmanufaktur Brandenburg GmbH (GMB/IF) was, however, already known publicly as it declared that it is one of the companies that support the complaint. The company was therefore named in the general disclosure document.

(17)

Also, in the non-confidential version of their comments on disclosure the complainant named three Union producers that had gone out of business (Guardian, AGC and Centrosolar Glass), and a fourth company that had significantly reduced production (Saint Gobain).

3.3. Sampling of exporting producers in the PRC

(18)

The Notice of Initiation requested all exporting producers in the PRC to make themselves known to the Commission and to provide the information specified in the Notice of Initiation within a given time period.

(19)

Nine exporting producers or groups of exporting producers provided the requested information and agreed to be included in the sample. The cooperating companies covered almost 100 % of the reported exports of solar glass to the Union during 2012.

(20)

In accordance with Article 27 of the basic Regulation, the Commission selected a sample of four exporting producers or groups of exporting producers based on the largest representative volume of exports of the product concerned that could reasonably be investigated within the time available. The selected sample accounted for 76 % of the total volume of exports to the Union of the product concerned in the investigation period.

(21)

In accordance with Article 27(2) of the basic Regulation the Commission informed all interested parties of the sample selected and they were invited to comment. No comments were received.

3.4. Individual examination

(22)

No exporting producer in the PRC requested individual examination under Article 27(3) of the basic Regulation.

3.5. Sampling of unrelated importers and users

(23)

Four unrelated importers replied to the sampling form attached to the Notice of Initiation, while two importers and twelve users replied to the questionnaire. In view of the low number of cooperating importers sampling was not necessary.

4. Questionnaire replies and verification visits

(24)

Questionnaires were sent to the GOC and to the sampled exporting producers, to the sampled Union producers, to all importers that had come forward, and to all users that had come forward. The GOC were also sent an Appendix to the questionnaire sent to them and were requested to forward it to state-owned commercial banks (‘SOCBs’) in the PRC that had lent funds to the sampled companies during the investigation period. The GOC stated that they had forwarded the Appendix to the banks concerned but had not received any replies.

(25)

Replies to the questionnaire were received from the four sampled Chinese exporting producers, from all sampled Union producers, two unrelated Union importers and 12 users.

(26)

The Commission sought and verified all the information provided by interested parties and deemed necessary for a definitive determination of subsidisation, resulting injury and Union interest. Verification visits were carried out as follows:

(a)

Exporting producers in the PRC:

—

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd; Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd (‘Flat Solar Group’)

—

Henan Yuhua Photovoltaic New Material Co., Ltd

—

Xinyi PV Products (Anhui) Holdings Ltd (‘Xinyi PV’)

(b)

Government of the PRC:

—

Ministry of Commerce, Beijing

—

China Banking Regulatory Commission, Beijing

(c)

Union producers

—

GMB/IF, Germany

—

[Confidential]

—

[Confidential]

—

[Confidential]

—

[Confidential]

(d)

Unrelated importers

—

Vetrad NV, the Netherlands

(e)

Users

—

Sunerg Solar SRL, Italy

—

Viessmann Faulquemont SAS, France

(27)

All interested parties were sent a disclosure document which contained the essential facts and considerations on the basis of which the Commission proposed to impose countervailing duties on solar glass originating in the People’s Republic of China. All parties were informed of the deadline within which they could comment on the disclosure.

(28)

The comments submitted by interested parties were considered and taken into account where appropriate.

(29)

The Government of China (‘GOC’) alleged that this disclosure document did not meet the standards set out in Articles 22.3 and 22.5 of the ASCM as it did not set out in sufficient detail the findings and conclusions of the investigating authority. However, the GOC provided no specific example of this alleged failure. Having reviewed the document carefully the Commission considers that the document contains sufficient information for the GOC to exercise its rights of defence.

(30)

Certain information could not be provided in the disclosure as it was business-confidential information, and this was disclosed only to the sampled exporting producers concerned. The sampled exporting producers were sent a confidential specific disclosure giving calculations and information on each scheme and benefit countervailed, and were given 25 days to comment.

5. Investigation period

(31)

The investigation of subsidisation and injury covered the period from 1 January 2012 to 31 December 2012 (‘investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2009 to the end of the investigation period (‘period considered’).

B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

(32)

The product under investigation is solar glass consisting of tempered soda-lime-flat-glass, with an iron content of less than 300 ppm, a solar transmittance of more than 88 % (measured according to AM1,5 300-2 500 nm), a resistance to heat up to 250 °C (measured according to EN 12150), a resistance to thermal shocks of Δ 150 K (measured according to EN 12150) and having a mechanical strength of 90 N/mm2 or more (measured according to EN 1288-3) (‘the product concerned’, commonly referred to as ‘solar glass’). The product concerned currently falls within CN code ex 7007 19 80.

2. Like product

(33)

The investigation has shown that the product concerned, the product produced and sold on the domestic market of the PRC, and the product produced and sold in the Union by the Union industry have similar basic physical, chemical, technical characteristics and uses. They are therefore considered to be alike within the meaning of Article 2(c) of the basic Regulation.

3. Product scope

(34)

An unrelated importer requested exclusion of horticultural glass for the construction of greenhouses from the scope of the investigation, arguing that such construction requires many different sizes of glass sheets whereas solar glass is produced in only certain fixed sizes. The importer also provided a certificate showing that part of its imports were of glass with iron content higher than 300 ppm. As a result, those imports are outside the product scope. With regard to the remaining part of its imports, the Commission considers that, despite the difference in size, those glass sheets may also be used as solar glass. For instance, in order to circumvent the duty, importers could order larger glass sheets than they need and then cut that glass only in the Union. Therefore, horticultural glass with iron content lower than 300 ppm is part of the product concerned.

(35)

Another unrelated importer argued that the furniture glass it imports (which is used for glass shelves, panel fillings, table tops, sliding door panels, top panels products, etc.) has the same or very similar technical characteristics as solar glass but requested its exclusion from the scope of the investigation as it has a different end use.

(36)

However, on the basis of the evidence provided, it seems that most of the glass imported by that unrelated importer does not share all the technical characteristics of solar glass as described above. In particular, six types of the imported glass have iron content much higher than 300 ppm, while one type of the imported glass has iron content lower than 300 ppm but their solar transmittance is significantly lower than the minimum 88 % required to be defined as solar glass.

(37)

The importer argued that even though those types of glass do not fulfil one of the technical characteristics of solar glass as described above, they comply with the primary classification for solar glass, i.e. ‘tempered soda-lime-flat-glass’. However, the Commission considers that only those types of glass which fulfil all the technical characteristics of solar glass fall within the scope of the investigation. Consequently, all types of glass mentioned above and imported by this particular importer fall outside the scope of the investigation.

(38)

For reasons of legal certainty, it should be made clear that any type of horticultural and furniture glass which fulfils the technical characteristics set out in recital 32 remains within the scope of the product concerned as they can be used as solar glass.

(39)

After disclosure, the same importer argued that since solar glass that can also be used as furniture glass was not excluded from the scope, this results in administrative burden and delays for companies. This is allegedly caused by the fact that companies are required to send test reports to Customs Authorities in the Union every time the Customs Authorities question if the goods being imported are subject to the measures.

(40)

The Commission considers that those types of glass should not be excluded from the scope of the investigation, because solar glass can potentially have horticultural and furniture use. In order to ensure adequate protection of the Union industry against the injurious effect of the subsidies that are countervailed, loopholes that may allow for circumvention should be avoided. The positive effect of adequate protection outweighs the negative effect of the additional administrative burden arguably suffered by the importer concerned.

(41)

The same importer also argued that float glass should be excluded from the product scope since it has a different production process than rolled glass which is perceived by the importer as the only type of solar glass. The importer stated that float glass home furnishing products cannot be used as solar glass and therefore should be excluded from the scope of the investigation. However, float glass cannot be excluded from the scope of the investigation as it complies with all the technical characteristics set out above. Confidential documents provided by interested parties during the investigation have shown that float glass can be used as solar glass and it is produced by both the Union industry and the Chinese exporters. This is confirmed by publicly available information on the internet (5). Float glass therefore remains within the scope of the investigation.

C. SUBSIDY

1. Introduction

(42)

The complainant alleged that the PRC is subsidising its solar glass industry. The complaint contains prima facie evidence for several subsidy practices included in both legislation and a number of policy and planning documents which are the basis for state support of the sector.

(43)

The Commission reviewed and analysed the documents mentioned in the complaint as well as additional documents submitted by the GOC and by sampled exporting producers in the course of the investigation and found that many of these documents show that the solar glass industry in the PRC receives preferential treatment in many areas.

(44)

The GOC has included the solar glass industry amongst ‘key’ industries in the 12th Five Year Plan (6). The GOC has also issued a specific policy paper, ‘The 12th Five Year Plan for the Solar Photovoltaic Industry’ which establishes glass as a key focus ancillary material for the photovoltaic (PV) industry for which domestic production is required. The Plan requires that government will support industry development and technological innovation and attract funds to the industry.

(45)

Following disclosure the GOC challenged the Commission’s citation of the 12th Five Year Plan in the context of solar glass. This was rejected as the Plan specifically mentions solar glass, in chapter 9, column 6, regarding ‘Key fields of development of manufacturing’. The 12th Five Year Plan clearly sets out the GOCs priorities for the period it covers, and one of those priorities is the manufacture of solar glass.

(46)

Following disclosure the GOC challenged the Commission’s reading of the ‘12th Five Year Plan for the Solar PV Industry’, stating that it did not support the Commission’s conclusions. However this challenge was rejected, as it clearly contradicts information received from other GOC departments. During the visit to the GOC, the Ministry of Industry and Information Technology (‘MIIT’) explained themselves that solar glass is covered by this plan which focusses strongly on improving quality, as good quality solar glass was vital for the encouragement of the solar PV industry.

(47)

The importance of innovation and new materials in general is noted in the ‘12th Five Year Industrial Technology Innovation Programme’ (7) intended to implement the Five Year Plan and also the ‘Long term Science and Technology Development Plan’ (8). Its strong focus on technological innovation includes the development of new materials. In that context, there is also a specific reference to solar glass.

(48)

Following disclosure the GOC challenged the Commission’s conclusions, saying that solar glass was not mentioned in either of these documents. The Commission notes that both these documents are designed to offer special assistance to high technology enterprises, as was discussed in recitals 401 and 402 of Council Implementing Regulation (EU) No 1239/2013 (9) (‘the solar panels Regulation’), where the same arguments were made by the GOC. Both documents implement the 12th Five Year Plan and the plan for the Solar PV Industry, and assist high and new technology enterprises, which includes many solar glass manufacturers.

(49)

The ‘Decision No 40 of the State Council on Promulgating and Implementing the “Temporary Provisions on Promoting the Industrial Structure Adjustment”’ (which, together with the attached ‘Temporary Provisions on Promoting the Industrial Structure Adjustment’ are referred to as ‘Decision No 40’) states that the GOC will actively support the development of new energy industries and expedite the development of solar energy (10); instructs all financial institutions to provide credit support only to encouraged projects (the category in which the solar glass projects belong); and promises the implementation of ‘other preferential policies on the encouraged projects’ (11).

(50)

Following disclosure the GOC disputed the Commission’s reading of both Article 5 and Article 17 of the ‘Temporary Provisions on Promoting the Industrial Structure Adjustment’. The GOC stated that Article 5 does not mention solar glass. However as it mentions the encouragement of solar energy, which requires solar glass, the Commission considers that this includes solar glass within the ambit of the Temporary Provisions.

(51)

The GOC then challenged the Commission’s understanding of Article 17, which, while stating that only encouraged industries should receive credit support, orders that this should be done ‘according to the credit principles’ rather than on a preferential basis.

(52)

No evidence was found in the inspection of the sampled companies, or during the visit to the GOC, that this provision was complied with. The banks concerned did not cooperate with the investigation to allow this provision to be tested or verified. In fact, the investigation has shown that certain enterprises benefit from the preferential lending policies. The Commission therefore rejects the assertion of the GOC that lending to the solar glass industry was done ‘according to the credit principles’. The key point remains that all financial institutions shall provide credit to encouraged industries, which includes the manufacture of solar glass, and that that support is de facto provided on preferential terms.

(53)

In 2011 the National Development and Reform Commission (NDRC), gave a recommendation to the State Council to revise the programme in Decision No 40. The State Council issued ‘Decision No 9 of the State Council on Promulgating and Implementing the Guidance Catalogue for the Industrial Structure Adjustment’ (‘Decision No 9’). This document ‘actively encourages’ the GOC and public agencies to ‘guide the development of relevant industries, optimise the upgrading of the industrial structure.’ Point 12(2) of Decision No 9 mentions specifically the encouragement of ‘ultra-clear float glass for solar energy industry’ production.

(54)

The National Outline for the Medium and Long-term Science and Technology Development (2006 – 2020), adopted by the GOC, promises to ‘give the first place to policy finance’, ‘encourage financial institutions to grant preferential credit support to major national scientific and technological industrialisation projects’, to ‘Encourage financial institutions to improve and strengthen financial services to high-tech enterprises’ and to ‘implement the preferential tax policies to promote the development of high-tech enterprises’.

(55)

Solar glass production falls under the description of a high technology enterprise, as is shown by the number of manufacturers with New and High Technology status and is a new industry, both in China and in the Union. In this context the Commission would also point out that one of the sampled companies received a specific grant from the National Development and Reform Commission (NDRC) to reward them for their innovation in the field of solar glass, clearly showing the GOC’s interest in this high technology sector.

(56)

The complainant has claimed that the alleged subsidies consist of the schemes listed in Section C.2 below. Following the inspection of the sampled companies in the PRC, and a visit to the GOC, the Commission analysed these schemes, where sampled companies received a benefit during the investigation period.

2. Other identified subsidy schemes

(57)

During the inspection of the sampled companies, analysis of their internal records brought to light subsidies from provincial, city, county or district government authorities. These subsidies had not been listed specifically in the complaint. On the basis of the information at the Commission’s disposal, it is unclear whether these are ad hoc subsidies or local subsidy programmes. However, the local nature of these schemes means that the complainants could not reasonably be expected to be aware of the details of those subsidies and therefore there is no direct mention of these subsidies in the complaint.

(58)

The Commission offered additional consultations with the GOC regarding these other subsidies that are company or location specific; that were found in the records of the sampled companies during the verification visits; and not listed in the complaint. These consultations were offered by the Commission to ensure due process during the investigation. The GOC declined this offer claiming that such an offer would not be in line with the Agreement on Subsidies and Countervailing Measures (ASCM).

(59)

The Commission considers that these other subsidies are closely connected to the types of measures and practices alleged in the complaint and the Notice of Initiation These measures involve the same kind of financial contribution and benefit with respect to the product concerned and thus fall under the definition of ‘subsidy practice or practices to be investigated’ which Article 22.2 (iii) of the ASCM requires to be specified in the Notice of Initiation. The schemes mentioned in the Notice of Initiation are not exhaustive, which is shown by the wording ‘the subsidies consist, inter alia, of …’ in section 3. The Commission therefore concluded that these additional subsidies fall under the scope of this proceeding.

(60)

Following disclosure the GOC disputed the Commission’s reading of the ASCM and stated that their opinion was that the Commission had no legal basis on which to countervail a specific subsidy to one sampled exporting producer, even if that subsidy was directly linked to the subsidy practice identified by the complainants. The Commission does not agree with the GOC’s interpretation of the ASCM on that point. Where the complainants have identified a subsidy practice, and along with examples of national schemes, local benefits are found within the same subsidy practice, the Commission considers that it has the right to countervail any benefits found. In particular, this applies where the mechanics, the nature and the effects of the benefits found are the same as other schemes already identified in the complaint and the Notice of Initiation.

3. Non-cooperation and use of facts available

(61)

The Commission notified the GOC on 18 December 2013 that it would consider the use of facts available due to the lack of a response from the SOCBs to whom the GOC sent the Appendix provided to them.

(62)

The GOC responded on 26 December 2013 and disagreed with the proposed use of Article 28 against the ‘allegedly state-owned banks’ but did not dispute the fact that the banks had not submitted a reply to the questionnaire. The GOC also did not dispute the fact that these banks were state-owned. Therefore, the Commission had no option but to use the best facts available as far as information which was supposed to be provided by the SOCBs is concerned.

(63)

After disclosure the GOC challenged the use of Article 28 to replace the information that was requested in the Appendix sent to the SOCBs. The Commission does not dispute that information was provided by the GOC in this investigation and the Commission analysed it and took it into account where necessary. However when neither the GOC, nor the SOCBs, nor the companies could provide information, for example on credit worthiness, the Commission had to use ‘facts available’ under Article 28 of the basic Regulation.

(64)

As regards the other subsidies not specifically mentioned in the Notice of Initiation by reference to a particular programme, and found during the verification visits of the sampled exporting producers, the Commission has used all the evidence available to reach its conclusions. Those subsidies found were falling under the types of measures and practices described in the Notice of Initiation, and the Commission offered the GOC further consultations on these subsidies without the offer being taken up. The Commission considers that those subsidies are closely connected to the types of measures and practices alleged in the complaint and the Notice.

(65)

After disclosure the GOC challenged the Commission’s conclusions as regards the subsidies found during the inspection of the sampled companies and for other points regarding subsidy schemes. The Commission would like to clarify that it did not apply Article 28 in these cases. Where cooperation was good but information simply could not be provided – for example the exact legal basis for a one-off subsidy payment – then the evidence provided by the company concerned was used to reach a conclusion as to whether this was a countervailable subsidy or not.

(66)

The GOC also alleges that the Commission did not provide enough information in the disclosure when it used best facts available under Article 28 of the basic Regulation. This allegation in fact refers to the use of the conclusions of previous investigations where the same subsidy was investigated. Where this is the case the Commission has referred to the exact recitals of the Regulation concerned and summarised the arguments found.

(67)

The GOC notes that the disclosure document does not describe particular one-off subsidies found at the sampled companies in any great detail. This has been done specifically to protect the business confidential information provided by the sampled companies to the Commission, and no further non-confidential summary is possible. Full confidential disclosure was made to each individual sampled exporting producer. Where the legal basis was provided by the sampled exporting producer then this was noted in the disclosure back to the company. In any case, when the GOC was offered consultations on these subsidies, it was also given an opportunity to provide further relevant information, which it did not do.

4. Schemes investigated

(68)

The Commission sent questionnaires to the GOC and the sampled exporting producers, requesting information on the following schemes that allegedly involved the granting of subsidies to the solar glass industry:

—

preferential lending to the solar glass industry:

—

credit lines and low-interest policy loans granted by SOCBs and public development banks (12)

—

export credit subsidy programmes

—

export guarantees

—

State-funded insurance for green technologies (‘Green express’)

—

financial advantages from the granting of access to offshore holding companies

—

loan repayments by Government

—

grant programmes:

—

‘Famous Brands’ and ‘China World Top Brands’ subsidies

—

Funds for Outward Expansion of Industries in Guangdong Province

—

Government provision of goods and services for less than adequate remuneration:

—

provision of antimony

—

provision of power

—

provision of land use rights

—

direct tax exemption and reduction programmes:

—

income tax exemptions or reductions under the Two Free/Three Half Programme

—

income tax reductions for foreign invested enterprises (‘FIEs’) based on geographic location

—

local income tax exemptions and reductions for ‘productive FIEs’

—

income tax reductions for FIEs purchasing Chinese-made equipment

—

tax offset for R & D at FIEs

—

preferential corporate income tax for FIEs recognised as High and New Technology Industries

—

tax reductions for High and New Technology Enterprises involved in designated projects

—

preferential income tax policy for enterprises in the North-East Region

—

Guangdong Province tax programmes

—

dividend exemption between qualified resident enterprises

—

indirect tax and import tariff programmes:

—

VAT exemptions for use of imported equipment

—

VAT rebates on FIEs’ purchases of Chinese-made equipment

—

VAT and tariff exemptions for purchases of fixed assets under the Foreign Trade Development Programme

—

Other subsidies and other subsidy programmes (including provincial, city, county or district government authority programmes).

5. Preferential policy loans, other financing, guarantees and insurance

5.1. Preferential loans

(a) Introduction

(69)

The Commission sent to the GOC an Appendix to be forwarded to the SOCBs, public development banks and privately owned financial institutions that lent money to the companies sampled during the investigation period. The GOC informed the Commission that they did so but they did not receive a reply. As set out above, the Commission has therefore advised the GOC that due to this lack of cooperation, it will apply Article 28 and use facts available to reach its conclusions on this point.

(b) Legal basis

(70)

The following legal provisions provide for preferential lending in China: The Law of the PRC on Commercial Banks (the banking law), The General Rules on Loans promulgated by the People’s Bank of China (PBOC) on 28 June 1996 and Decision No 40 of the of the State Council as referenced above.

(c) Findings of the investigation

(71)

Previous anti-subsidy investigations against the PRC have concluded that the banking system in China is dominated by state-owned banks, or banks where the State has a controlling interest in terms of shareholding. Both are referred to as ‘SOCB’s’. The Commission also found that SOCBs are exercising governmental authority. The Commission found no evidence that the situation had changed. As noted in recital 161 of the solar panels Regulation, which is the latest investigation covering this subject, the five largest SOCBs (Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and ICBC) represent more than 50 % of the banking sector in terms of balance sheet sum.

(72)

Based on the use of facts available, including facts established in the solar panels Regulation, the conclusion remains that SOCBs are public bodies within the meaning of Article 2(b) of the basic Regulation, as was set out in detail in recitals 158 to 168 of the solar panels Regulation.

(73)

Following disclosure the GOC disputed this conclusion stating that the Commission had not set out the reasons why they considered that SOCBs were public bodies. The Commission rejects this allegation as the reasons why SOCBs are public bodies is set out in recitals 158 to 168 of the solar panels Regulation and the GOC provided no information that would contradict those best facts available. In summary:

(a)

SOCBs hold the highest market share and are the predominant players on the market in the PRC;

(b)

On the basis of facts available SOCBs are controlled by the government by means of ownership and administrative control of their commercial behaviour including limits on interest rates they can offer;

(c)

The banking law and other laws and Regulations require banks to lend according to the needs of the national economy, provide credit support to encouraged projects, and give priority to new and high technology enterprises.

(74)

The conclusions in these recitals are recent, as they were only published at the end of 2013, and were published in the full knowledge of the change in July 2013 to the policy on floors of interest rates in China.

(75)

As in previous investigations, the Commission attempted to verify the role played by the GOC and in particular the central bank, the People’s Bank of China (PBOC) in the financial markets and the banking sector in relation to the lending to the solar glass industry. Whereas cooperation from the GOC and the PBOC was in general satisfactory, the PBOC did not provide the full text of the ‘Circular on the issues about adjusting interest rates on deposits and loans’ (YinFa (2004) 251) which sets interest rate floors and ceilings for loans and deposits. For commercial bank lending (both SOCBs and privately owned commercial banks) and public development bank lending, the Circular only sets a floor. For preferential loans and loans for which the GOC has adopted specific regulations, the circular provides that the interest rates are not allowed to float upwards. The precise upper limit is set in the specific regulations applicable to those loans.

(76)

During the Commission’s verification visit, the PBOC stated that the document could not be provided as it was not available publicly on their website. A search of the internet however found a copy of the Circular, and a translation in English, in a package of documents given to the Australian authorities by the GOC some years ago (13). In the absence of an official copy directly from the GOC, the Commission has taken this version as a true and complete copy of the Circular concerned.

(77)

The Circular shows that the PBOC influenced the setting of interest rates for loans granted during the IP by SOCBs in the PRC. The GOC explained that in July 2013 the PBOC abolished both the floor and the ceiling for lending interest rates. This was noted but as this was after the end of the investigation period it does not affect the conclusion set out here. In any case the floor on interest rates that was current during the investigation period is not the sole argument as to why the Commission considers SOCBs as public bodies. The conclusions in recitals 158 to 168 of the solar panels Regulation still apply regardless.

(78)

Following disclosure the GOC made several comments on the Circular ‘YinFa (2004) 251’ without giving an explanation as to why the full text of this Circular was not provided to the Commission, and without confirming whether the text given to the Australian authorities, and found by the Commission, was accurate. As was previously found in the solar panels investigation, the Circular clearly sets out the instructions of the PBOC to banks as regards lending. As stated in previous investigations, the content of this Circular is important in understanding the role the GOC and PBOC play in the direction of banks and lending.

(79)

The Commission’s conclusion remains as was previously found in the solar panels Regulation, namely first that Article 34 of the banking law requires banks in the PRC to carry out their loan business according to the needs of the national economy. The needs of the national economy are laid down in the 12th Five Year Plan.

(80)

Following disclosure the GOC disputed the Commission’s interpretation of Article 34 of the banking law, stating that ‘this sentence is ambiguous and provides no explicit guidance to the banks to act in a certain manner. No document describes the needs of the national economy, whether it be the 12th Five Year Plan or any other Regulation/Decision’.

(81)

This differs from the GOC’s interpretation of Article 34 in the solar panels investigation, where it described it as ‘neutral’. The Commission disagrees with the assessment of the GOC. The Commission considers, and the GOC has not demonstrated otherwise, that the policies regarding the national economy are set out in the 12th 5 Year Plan and the specific plan for the PV industry, and that financial institutions are encouraged to lend to encouraged industries such as solar glass.

(82)

The GOC has drawn the Commission’s attention to other articles of the Banking Law, namely Articles 4, 5 and 7, which should ensure that loans are made without interference and after a credit assessment. The Commission acknowledges that these Articles exist but notes that the GOC, the banks and the sampled companies concerned were unable to demonstrate that loans were made without interference – given the preferential lending to the solar glass industry – and with a credit assessment – as despite requests no loan agreements or risk assessments, including credit ratings, were provided as exhibits or found linked to any loan provided to any sampled exporting producer.

(83)

Second, banks are required to provide credit support to encouraged industries under Decision No 40 and Decision No 9, which have the force of law. The GOC confirmed during the inspection of the Ministry of Commerce that solar glass is an encouraged industry. This is in line with the Industrial Restructuring Guidance Catalogue of 2011, which was provided by the GOC in its questionnaire reply and which classifies solar glass in the encouraged category.

(84)

Decision No 40 provides guidance to all financial institutions in the form of binding instructions on the promotion and support of encouraged industries, and the solar glass industry constitutes an encouraged industry.

(85)

Following disclosure the GOC disputed the Commission’s assessment of the impact of Decision No 40 and the Regulations attached, and Decision No 9. The Commission restates that its assessment of both Decision No 40 and the Regulations attached is that they set out the needs of the national economy. They set out a strategy for government and for the financial sector and in particular direct lending by financial institutions to encouraged industries such as solar glass.

(86)

The GOC were asked to clarify the legal status of a Decision of the State Council such as Decision No 40. Their only reply was that it is a Regulation issued by the State Council and does not form part of Chinese law. However they provided no evidence to substantiate that argument. The view taken by the GOC is in contradiction with publicly available information, which describes the State Council as the highest administrative authority with administrative rule-making power. According to those sources, Decisions of the State Council are legally binding rules. (14) On the basis of the facts available, the Commission therefore takes the view that Decision No 40 and implementing Decisions attached to that Decision, such as Decision No 9, are administrative Regulations, and as such part of Chinese law.

(87)

The Commission therefore confirms the analysis in recital 191 of the solar panels Regulation, which concludes that Decision No 40 and Decision No 9 are legally binding for other public bodies and economic operators.

(88)

The Commission also analysed whether privately-owned banks in China are entrusted and/or directed by the GOC to provide preferential loans to solar glass producers, within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(89)

Article 34 of the banking law applies also to privately owned banks in China. The GOC and interested parties have not provided any evidence that the conclusion on the legal situation reached in recital 174 of the solar panels Regulation, namely that the GOC instructs them in the same manner as state-owned banks, ceases to apply. Article 34 of the banking law states that banks are instructed to ‘carry out their loan business upon the needs of national economy and the social development and with the spirit of state industrial policies’ (15). In these circumstances, as set out in recital 188 of the solar panels Regulation, the lending strategy of both SOCBs and privately owned banks is decided by the GOC.

(90)

Following disclosure the GOC disputed the conclusion that they entrust or direct private banks in the PRC and disputed in particular the weight that the Commission has given to Article 34 of the banking law, stating that ‘what constitutes the “needs of national economy” is open to interpretation and obviously differs depending on the person/body scrutinising the provision’.

(91)

It is notable that the GOC, in disagreeing with the Commission’s interpretation, did not present their own interpretation of their own law.

(92)

However the Commission need only refer to the findings in previous investigations, and to the facts available in this case, to reassert the conclusion that the needs of the national economy are set out in the Plans and Regulations issued by the PRC and Article 34 requires banks to lend in line with these descriptions of the national economy, which includes encouraging the production of solar glass.

(93)

The finding remains therefore that the GOC entrusts and directs private banks to lend to encouraged industries in line with Article 34 of the Banking Law.

(94)

The Commission therefore concludes that in the case of loans provided by SOCBs in the PRC, there is a financial contribution to solar glass producers in the form of a direct transfer of funds by the government as set out in Article 3(1)(a)(i) of the basic Regulation.

(95)

The same evidence also shows that SOCBs (as well as privately owned banks) are entrusted or directed by the government and this consequently means that a financial contribution exists as set out in Article 3(1)(a)(iv) of the basic Regulation.

(96)

With regard to specificity, the Commission notes that the GOC directs preferential lending to a limited number of industries and the solar glass industry, as part of the PV sector, is one of them, as is set out in detail in recital 172 of the solar panels Regulation. The GOC has included the solar glass industry amongst ‘key’ industries in the 12th Five Year Plan. Decision No 40 states that the GOC will actively support the development of new energy industries and expedite the development of solar energy. All financial institutions are instructed to provide credit support only to encouraged projects, the category in which the solar glass projects belong. That decision also promises the implementation of ‘other preferential policies on the encouraged projects’.

(97)

Following disclosure the GOC disputed the finding of specificity and in particular the Commission’s reading of the 12th Five Year Plan, stating that it ‘has no legal value as it is not a binding document’. The Commission disagrees with this statement, and notes that the GOC made the same claims in previous investigations, which were also not accepted. The 12th Five Year Plan states that it was ‘deliberated and approved by the National People’s Congress, and it has the effect of law.’

(98)

The Commission therefore concludes that the subsidies in form of preferential lending are not generally available and are therefore specific in the meaning of Article 4(2)(a) of the basic Regulation.

(99)

A benefit exists to the extent that government loans, or loans from private bodies entrusted or directed by the government, are granted on terms more favourable than the recipient could actually obtain on the market.

(100)

As in previous investigations the Commission attempted to verify the credit risk assessments carried out by the banks that lent money to the sampled companies during the IP. No evidence was provided by the companies as to their credit rating, and the banks did not cooperate with the investigation. The Commission was therefore unable to see any evidence that loans to solar glass companies were based on a risk assessment, and the interest rate set as a result of such exercise.

(101)

In the absence of any information provided by the GOC, the exporting producers or the banks, the Commission relied on facts available to establish whether preferential lending in the PRC did in fact confer a benefit on the sampled exporting producers who had loans from banks in the PRC.

(102)

The Commission, as in the solar panels investigation, started with the officially published central bank interest rates from the PBOC for loans in Chinese Renminbi Yuan (CNY). The average interest rate over the investigation period was 6,26 %.

(103)

The Commission then adjusted the interest rate of the PBOC to take account of the credit risk of the companies concerned. However they did not provide any independent credit ratings or similar information that would allow the Commission to calculate a credit rating. In any event, the Commission has established in previous investigations that credit ratings of Chinese firms are distorted by government support and that there is no evidence of any meaningful risk assessment of loan recipients. The Commission has therefore taken the same methodology as the solar panels investigation and considered all of the companies concerned as having a non-investment grade ‘BB’ rating as defined by the Bloomberg credit rating company.

(104)

The premium on bonds issued by companies with BB ratings against bonds issued by companies with AAA ratings (which the PRC has on its bonds), as recorded by Bloomberg, was then added to the average lending rate of the PBOC during the IP. The result was a benchmark interest rate for the IP, for loans to the sampled companies in CNY, of 10,37 %.

(105)

By comparing this benchmark interest rate to the actual interest rate charged during the IP to the companies concerned the Commission concluded that loans are granted to the solar glass industry at below-market terms and conditions.

(106)

Following disclosure the GOC disputed the Commission’s choice of benchmark and the conclusions that the Commission has drawn from the comparison between the benchmark and the actual interest paid.

(107)

The comparison between the benchmark and the actual interest paid clearly shows that the sampled exporting producers that borrowed from Chinese banks, in CNY, paid less than the normal commercial interest rates for companies in their financial position.

(108)

Second, the Commission was indeed aware that the PBOC lifted the floor on lending in July 2013 and mentioned it in the disclosure document. However this does not change the conclusion that the GOC interferes in the lending behaviour of banks in China, in particular through the application of Decision No 40 and the attached Regulations, and the provisions of Article 34 of the Banking Law.

(109)

Third the Commission only calculated a benchmark for loans made in CNY, as the sampled exporting producers did not have loans in EUR or USD from Chinese banks.

(110)

Finally the GOC requested more information as to why the Commission considered that the sampled exporting producers would be credit rated BB. The reason that BB credit rating was chosen was because the Commission received no evidence that any credit rating was calculated for any sampled exporting producer because of the lack of cooperation from the banks concerned. The BB credit rating is also not adverse inference, and in fact works in favour of the sampled companies concerned, as it is the best non-investment grade on the financial markets.

(111)

Under the terms of Article 28 the Commission was obliged to use best facts available, which were taken from the conclusions of the solar panels Regulation, which used a BB credit rating for the companies sampled there. This was considered reasonable in this case and no evidence was received after disclosure that the sampled companies were given a different credit rating by the banks concerned.

(d) Conclusion

(112)

On the basis of the findings of the investigation, the Commission concludes that the solar glass industry in China benefited from preferential loans in the IP, both from state-owned banks and from private banks. The financing of the solar glass industry constitutes a subsidy within the meaning of the basic Regulation as there is

(a)

a financial contribution by government as set out in Article 3(1)(a)(i);

(b)

entrustment and direction by government as set out in Article 3(1)(a)(iv); and

(c)

a benefit is thereby conferred as required by Article 3(2).

(113)

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

(114)

Following disclosure the GOC challenged the use of findings from previous investigations to reach conclusions on subsidisation in this case, and in particular alleged that the Commission was over-reliant on the findings of the solar panels Regulation.

(115)

This allegation was rejected. As previously noted, given the lack of cooperation from the banks in the PRC the Commission was forced to use the provisions of Article 28 and best facts available. The solar panels investigation is the most recent, and contains the most up-to-date findings on subsidisation in China. Solar panels are not the same product as solar glass, but they are both in the same new energy sector and are covered by the same government planning documents. In the absence of other information, therefore, the use of findings in the solar panels investigation as ‘best facts available’ is appropriate. The GOC also alleged that significant changes had taken place between the solar panels investigation and this one, in particular the lifting of the floor on interest rates by the PBOC in July 2013. This allegation was rejected as the conclusions from the solar panels investigation refer to that investigation period, just as this investigation refers to its own investigation period. In both cases the lifting of the floor took place after the end of both investigation periods and therefore does not affect the use of Article 28 and the findings of the solar panels investigation as best facts available.

(116)

All but one of the sampled companies received loans from both SOCBs and private banks. One company was financed solely via its offshore parent company and no lending was made by banks established in the PRC.

(117)

Following disclosure one sampled company disputed the conclusion of the Commission, and stated that the Commission did not ask the company to provide their independent credit rating. However the Commission asked the company to provide all information regarding the loans that it received, but the company did not provide an independent credit rating. If the company had such information then given the allegations in the complaint and the information requested in the questionnaire it should have provided it. And in particular given the information in the disclosure document, if it had an independent credit rating it should have provided it immediately. This argument is therefore rejected.

(e) Calculation of the subsidy amount

(118)

Article 6(b) of the basic Regulation provides that the benefit on preferential loans should be calculated as the difference between the amount of interest paid and the amount that would be paid for a comparable commercial loan which the firm could obtain on the market. As stated, with the absence of any meaningful risk assessment, the Commission established a market benchmark for comparable commercial loans.

(119)

The benefit was calculated for the IP as the difference between the interest actually paid during the IP, and the interest that would have been paid using the benchmark.

(120)

The subsidy margins calculated for the sampled exporting producers based on this methodology are as follows:

Preferential loans

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

0 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

6,2 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

2,5 %

Henan Yuhua New Material Co., Ltd

4,8 %

5.2. Other preferential lending schemes

(121)

No benefits had been received by the sampled exporting producers under export credit subsidy programmes, credit lines, export guarantees, the ‘Green Express’ programme or as benefits through access to offshore holding companies during the IP.

6. Grant programmes

(122)

No benefits had been received by the sampled companies from ‘Famous Brands’ or ‘China World Top Brands’ programmes during the IP.

6.1. Specific grant programmes and grants

(a) Introduction

(123)

The sampled companies received significant one-off grants from various government authorities at many levels of government resulting in the receipt of a benefit during the IP. These were found during the verification of the companies concerned and were not disclosed in the questionnaire replies of the companies concerned nor were they disclosed in the questionnaire reply of the GOC, as requested. The complaint alleged that producers of solar glass received these one-off grants from provincial and local government bodies and that these conferred a benefit as the monies were received without adequate consideration (16). The Notice of Initiation also sets out that ‘grant programmes’ are a subsidy practice used to support the solar glass industry.

(b) Legal basis

(124)

These grants were given to the companies by national, provincial, city, county or district government authorities, and all appeared to be specific to the companies concerned, 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 usually not disclosed although the Commission was often but not always given a copy of a document issued by a government authority which accompanied the grant of funds.

(c) Findings of the investigation

(125)

One sampled company received grants during the IP from the Economic Development Zone within which it is located. These grants were calculated by the Economic Development Zone at 20 % of any taxes paid by the company to local tax authorities, and covered corporate income tax, land use tax, and dividend income tax, amongst others.

(126)

Another sampled company received a large grant in the IP from the local government to cover the fees required for the connection of the company to the electricity supply, which they would otherwise have paid themselves. This was granted to the company ‘to support large companies established in the region’.

(127)

Another sampled company received a direct grant of 25 million CNY from the National Development and Reform Commission (NDRC) fund for Industrial Adjustment for the production of high tech solar glass. This direct grant from the State was received in 2006 and the company apportioned 10 % of the grant over the next 10 years. 2,5 million CNY was therefore taken as the benefit during the IP.

(128)

The same company also had booked in its accounts for 2012 other grants from the local tax bureaux and other local government bodies. The company stated that most of these grants were not in fact direct transfers of money from these bodies to the company, but reimbursements of sums previously paid by the company to the government. As no satisfactory evidence could be provided, the Commission cannot accept this explanation.

(129)

Another sampled company received a direct grant of 15 million CNY before the IP from the local government and the company apportioned 10 % of the grant over the next 10 years. The grant was paid to the company for the development of the photovoltaic industry (which includes the solar glass sector), the accelerated construction of the advanced manufacturing base in the local industrial zone, and smooth implementation of major projects.

(130)

The same company received also several other grants prior to the IP and allocated a proportion of the grant to the IP. However no details regarding the nature of these grants were provided by the company and in the absence of such information, facts available were used to arrive at a conclusion. The Commission has concluded in the absence of other facts available, that these grants are specific to this company; and that the amount of grant allocated to the IP should be considered as a benefit.

(d) Conclusion

(131)

The GOC was invited to give further information and to enter into consultations regarding these grants, but declined to do so. On the basis of the evidence collected with regard to the receipt of these grants by the sampled companies and in the absence of any other information, the Commission has considered these grants to be a subsidy 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.

(132)

These grants are also specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation given that they appear to be limited to certain companies or specific projects in specific regions, granted to meet the one-off requirements of the sampled companies. 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. Further, there is no evidence that the grants belong to an overarching subsidy programme.

(133)

Following disclosure the GOC challenged the Commission’s authority to investigate these grants and the Commission’s analysis of the partial information available to it. However the Commission has carefully analysed the business-confidential information made available by the companies concerned and where there is evidence both of a benefit and that the grant was specific, the grant has been countervailed.

(134)

In all cases the companies provided information as to the amount of the grant, and from whom the grant was made, even if in certain cases the company had no document to prove the legal basis on which the grantor had provided the grant. 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 positive evidence of a subsidy that conferred a countervailable benefit.

(135)

One sampled company also disputed the Commission’s authority to investigate and countervail these company-specific grants for the same reasons. For the same reasons the Commission rejects their argument and restates its position that it has the authority to investigate these grants and countervail them when appropriate.

(e) Calculation of the subsidy amount

(136)

The table below shows the calculation of benefit for these grants set out above, with the benefit taken as the amount received in the investigation period, or booked for the investigation period, where the amount was depreciated by the company concerned.

Other Grant programmes

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

1,1 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

2,9 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

1,1 %

Henan Yuhua New Material Co., Ltd

3,0 %

7. Direct tax exemption and reduction programmes

7.1. The ‘two free, three half’ programme for foreign invested enterprises

(a) Introduction

(137)

The ‘two free, three half’ programme entitles foreign invested enterprises (‘FIEs’) to pay no corporate income tax for the first two years, and to pay only 12,5 % rather than 25 % for the next three years.

(b) Legal basis

(138)

The legal basis of this programme is Article 8 of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises (the ‘FIE Tax Law’) and Article 72 of the Rules for the Implementation of the Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises According to the GOC this programme was terminated under Article 57 of the Enterprise Income Tax Law (EIT Law) of 2008 with a transition period until the end of 2012. The law therefore makes clear that there would be a benefit under this scheme in the tax year 2012.

(c) Findings of the investigation

(139)

This ‘two free, three half’ scheme conferred benefits on companies during the financial year 2012, after which, according to the GOC, the scheme has been withdrawn.

(140)

One of the sampled companies was a foreign owned enterprise which used this tax scheme during the IP. They received a corporate tax rate of 12,5 % rather than the full rate of 25 %, which was stated on their corporate tax return for 2012 and in their annual accounts.

(141)

The Commission disclosed these findings to interested parties, and received comments from the GOC stating that under the Notice of Transition (17) all benefits under this scheme would cease in 2012. The GOC stated that therefore should countervailing duties be imposed, no duties could be imposed as regards the benefit received under this scheme by one sampled company during the IP. This argument is accepted, as for this sampled company, in the particular circumstances of this case, the Commission has no evidence of any continuing benefit.

(d) Conclusion

(142)

Although the ‘two free, three half’ scheme has been countervailed in previous Regulations, for this one sampled company the Commission will not impose a duty to countervail the benefit found during the IP, as the Commission has no evidence that for this one sampled company the scheme or any variant of it would be in force on the date that the duties are imposed.

7.2. High and New Technology Enterprises

(a) Introduction

(143)

This programme allows companies that can show that they meet a certain set of criteria to be recognised as a ‘High and New Technology Enterprise’ to receive a reduction to 15 % on their corporate income tax, as compared to the standard rate of 25 %.

(b) Legal basis

(144)

The legal basis of this programme are Article 28(2) of the Enterprise Income Tax Law of 2008 (the EIT law), along with the ‘Administrative Measures for the Determination of High and New Technology Enterprises’ (Guo Ke Fa Huo [2008] No 172); and Article 93 of the Regulations on the Implementation of Enterprise Income Tax Law, along with the Notice of the State Administration of Taxation on the issues concerning the Payment of Enterprise Income Tax by High and New Technology Enterprises (Guo Shui Han [2008] No 985).

(c) Findings of the investigation

(145)

This scheme applies to High and New Technology Enterprises recognised as such by the GOC. To be eligible for this scheme enterprises shall have core independent intellectual property rights and must meet the following requirements which are set out in the legal basis and summarised as follows:

(a)

their production is included in the scope of the products in the ‘High-Tech Fields with Key State Support’;

(b)

their total expenses for R & D shall account for 3-6 % of total sales income;

(c)

their income from high and new technology products shall account for over 60 % of the total sales income;

(d)

the personnel engaged in R & D shall account for 10 % of the total staff;

(e)

the other requirements set by the ‘2008 Administrative Measures for High and New Tech Enterprises’ are met.

(146)

Some but not all of the companies sampled were found to be using this scheme, and thereby only paying 15 % corporate income tax rather than 25 %. These companies had applied to be New and High Technology Enterprises and received official notification that they had met the criteria of the scheme and would therefore be entitled to complete their corporate tax returns accordingly.

(d) Conclusion

(147)

As in the previous solar panels investigation recitals 322 to 326, the Commission considers that this scheme 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.

(148)

This subsidy is specific as defined in Article 4(2)(a) of the basic Regulation since it is limited to the enterprises receiving the certification of High and New Tech Enterprises and complying with all the requirements of the 2008 administrative measures. The sampled companies concerned received such certification. Eligibility is not automatic and no objective criteria were established by the legislation or the granting authority.

(149)

After disclosure the GOC challenged the Commission’s conclusions, maintaining that the eligibility criteria were objective and apply equally to all companies in the PRC. The Commission does not agree with the GOC’s reading of the laws and implementing measures, which show that the programme is limited to certain sectors and enterprises supported by the GOC on the basis of criteria that do not appear objective or neutral, such as that their production is included in the scope of the products in the ‘High-Tech Fields with Key State Support’.

(150)

Eligibility is also not automatic but depends on the grant of a High and New Technology Enterprise certificate, which is released after a discretionary procedure by the competent authority.

(151)

The Commission therefore considers this subsidy as countervailable.

(e) Calculation of the subsidy amount

(152)

The Commission has calculated the amount of countervailable subsidy as the difference between the amount of tax normally paid during the IP and the amount of tax actually paid during the IP by the companies concerned.

High and New Technology Enterprises

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

0 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

0 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

0,4 %

Henan Yuhua New Material Co., Ltd

1,8 %

7.3. Exemption from tax of dividend income between qualified resident enterprises

(a) Introduction

(153)

The complaint alleged that exporting producers of solar glass were receiving subsidies from another direct tax exemption scheme, namely an exemption from tax of dividend income between qualified resident enterprises (18).This falls under the general subsidy practice of exemptions and/or reductions of direct income tax as set out in the Notice of Initiation.

(b) Legal Basis

(154)

The legal bases of such tax exemption of dividend income are Articles 25-26 of the EIT Law and Article 83 of the Regulations on the Implementation of Enterprise Income Tax Law.

(c) Findings of the investigation

(155)

The Commission found that one sampled company received an exemption from tax of dividend income between qualified resident enterprises. This company applied directly to the local taxation bureau for the deduction of the dividends obtained by equity investments from the taxable income.

(d) Conclusion

(156)

The Commission considers that this 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 company concerned. The benefit for the recipient is equal to the tax saving.

(157)

In the disclosure document the Commission had stated that this subsidy scheme is specific under Article 4(2)(a) of the basic Regulation as the legislation limits access to this scheme to enterprises that are resident in the People’s Republic of China and that have made investments in other resident enterprises.

(158)

Following disclosure the GOC disputed these conclusions, stating that the exemption of tax from dividend income between qualified resident enterprises cannot be deemed to be specific as Article 26(3) of the EIT Law provides that such exemption from tax of dividend income is also available to non-resident enterprises. In addition, the GOC states that the eligibility criteria are objective and apply to all resident enterprises irrespective of industry, product or geographical location.

(159)

Whereas it is true that the EIT law submitted by the GOC in this proceeding states in Article 26(3) that such exemption of tax from dividend income is also available to non-resident enterprises, the Commission remains however of the view that this subsidy scheme is specific. Indeed, Article 25 of the EIT law confirms that this tax exemption is reserved to industries and projects encouraged by the State. Thus, only encouraged industries and projects can have access to this scheme. As explained above in section 5.1(c), the solar glass industry is an encouraged industry.

(e) Calculation of subsidy amount

(160)

The Commission has calculated the amount of the subsidy as the difference between the amount of tax normally collected during the IP and the amount of tax actually paid by the company concerned.

Dividend income tax schemes

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

0 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

0 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

5,8 %

Henan Yuhua New Material Co., Ltd

0 %

7.4. Other direct tax exemption schemes and reduction programmes

(a) Introduction

(161)

Apart from the schemes assessed in sections 7.1 – 7.3, the Commission did not find any evidence of benefits conferred on the sampled companies by other direct tax exemption schemes and reduction programmes listed above in section C(4). However, during its inspections the Commission found two other corporate tax schemes included in the accounts of one sampled company, namely R & D expenses offsets and refunds of housing property tax and land use tax. These also fall under ‘direct tax exemption and reduction schemes’ as outlined in the Notice of Initiation, as measures whereby the amount of corporate income tax paid has been lowered by the tax authority, or where the tax authority has refunded corporate income tax already paid. The R & D expenses tax offset is also linked to the ‘tax offset for R & D at FIEs’ scheme listed above under section C(4).

(b) Legal Basis

(162)

The legal basis for the R & D expenses tax offset is Article 30 of the Chinese EIT law.

(163)

For the refunds for housing property tax and land use tax, the exact law under which these benefits were granted was not disclosed although the Commission was given a copy of a Circular issued by the provincial government authority which accompanied the exemption.

(c) Findings of the investigation

(164)

The Commission found that one sampled company received R & D expenses offsets and refunds for housing property tax and land use tax. The document issued by the provincial government authority limits the refunds to newly established high and new technology enterprises.

(d) Conclusion

(165)

Regarding the R & D expenses offsets, the Commission considers that this subsidy scheme is specific given that Article 30 has to be read together with Article 25 of the EIT law which states that this tax exemption is reserved to industries and projects encouraged by the State. Thus, only encouraged industries and projects can have access to this scheme. As explained above in section 5.1(c), the solar glass industry is an encouraged industry.

(166)

The refunds for housing property tax and land use tax were specific in terms of location and type of industry. The GOC was invited to provide more information on these tax schemes in the request for further consultations but declined to do so. Therefore, the Commission has proceeded on the basis of evidence collected with regard to the application of these schemes to the sampled company and in the absence of any other information available.

(167)

After disclosure the GOC challenged the Commission’s findings stating that the Commission had not disclosed any positive evidence as to the specificity of these schemes in the disclosure document. A disclosure containing detailed information on the specificity of these schemes was made only to that company and no comments were received from that company. The Commission has also put more information on the specificity of these schemes in the recitals above.

(168)

The Commission considers that these schemes are subsidies 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 company concerned. The benefit for the recipient is equal to the tax saving.

(e) Calculation of subsidy amount

(169)

The Commission has calculated the amount of the subsidy as the difference between the amount of tax normally collected during the IP and the amount of tax actually paid by the company concerned.

Corporate tax schemes

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

0 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

0 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

0,7 %

Henan Yuhua New Material Co., Ltd

0 %

8. Indirect tax and import tariff programmes

(170)

The Commission did not find any benefit conferred on any sampled company for the indirect tax and import tariff programmes listed above in Section C(4).

9. Government provision of goods and services for less than adequate remuneration

9.1. Provision of antimony; provision of electricity

(171)

No benefit was found linked to the purchase of antimony or electricity by the sampled companies during the IP.

9.2. Provision of land use rights

(a) Introduction

(172)

As also set out in recitals 354 to 370 of the solar panels Regulation, companies cannot purchase land outright in the PRC, but only purchase a land use right (LUR) from local authorities.

(b) Legal basis

(173)

The Land Administration Law of the PRC states that all land belongs to the people, and cannot be bought or sold, but sets out the conditions by which land use rights can be sold to businesses by bidding, quotation or auction.

(c) Findings of the investigation

(174)

In principle a system of auction would allow the market to judge the price of a particular land use right, and therefore the price would be set independently. However, during the Commission’s visit the GOC stated that in any case they set floor prices for each grade of land (land is graded from 1 to 15 based on the quality of the land parcel) below which the price for the land use right cannot fall.

(175)

The GOC also controls the supply of land, by restricting by quota the area of land for which land use rights can be sold for industrial or residential purposes, by province and by year.

(176)

In any case, for each and every land use right purchase by the sampled exporting producers, the Commission found no evidence of an auction process that independently set the price of the land use right. The company awarded the land either bid the starting price, or 5 CNY per square metre more than the starting price, and, as it was the only bidder, it was awarded the land use right.

(177)

Following disclosure the GOC challenged the Commission’s findings and stated that there was a true auction procedure in the sale of land use rights to industry in the PRC.

(178)

The GOC first alleged that there was a true system of auction because all the government was doing was fixing the starting price, like any auctioneer. This argument is rejected, as an auction normally involves the starting price being fixed by an independent auctioneer after an independent valuation, which is not the case here, as the owner of the land use right is also the auctioneer.

(179)

The GOC then states that the floor prices are there to ensure that the final price does not fall below ‘the basic market value’ for the land use right. No evidence was provided to support this statement, which is in itself circular, as the amount of money paid for the land use right (which the government has fixed) is supposed to be the market price (on which the floor is then based).

(180)

The GOC then stated that the fact that there were no other bidders at the auction ‘cannot be the basis for the assumption that the LUR was actually not auctioned’. In fact the conclusion from this evidence is exactly the opposite. The GOC, despite requests, has not provided evidence of one single land use right being priced by competitive auction, and therefore the effect of the process is that the government sets the price and the company pays this price. While multiple bidders may not be an absolute requirement in every instance in order to establish the existence of a market-based system, the complete lack of multiple bidders, which was found to be the case with regard to all sampled companies, is a strong indication of the absence of true market prices.

(181)

In the case where one sampled company paid 5 CNY per square metre more than the price set by the government, the company stated to the Commission that they were told to do so by the competent authority simply to make it look as if an auction had taken place. The Commission therefore cannot take this fact as positive evidence that a market for land use right sales exists in the PRC.

(182)

In effect therefore the sampled companies paid the price set by the GOC. As also set out in the solar panel Regulation (at recitals 361 to 370), the land use right is provided at less than adequate remuneration when compared to a market benchmark, which is set out in section (e) below.

(d) Conclusion

(183)

The Commission concludes that 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 conferring a benefit upon the companies. As the investigation did not reveal the existence of a functioning market for the sale of land use rights in the PRC the use of an external benchmark (see section (e) below) demonstrates that the amount paid for land use rights by the sampled exporters is below the market rate.

(184)

The subsidy is specific under Article 4(2)(a) and 4(2)(c) of the basic Regulation because Decision No 40 of the State Council requires that public authorities ensure that land is provided to encouraged industries, of which solar glass is one. Article 18 of Decision No 40 makes clear that industries that are ‘restricted’ will not have access to land use rights.

(185)

The situation concerning land in the PRC is also discussed in the IMF Working Paper which confirms that the provision of LUR to Chinese industries does not respect market conditions (19).

(186)

The GOC disputed the finding of specificity stating that the restrictions in Decision No 40 cannot be used to prove a specific granting of a benefit. This argument is rejected as the effect of Decision No 40 is to grant land use rights to encouraged industries. Solar glass production is an encouraged industry and therefore the provision of land use rights for solar glass manufacturers is included in the provisions of Decision No 40.

(187)

One sampled company also disputed the Commission’s findings, stating that there was a functioning market in China for land use rights. However their assessment of the land use right process in China does not result in their conclusion. They were still unable to show that LURs are independently valued; that they are sold by an independent auction; that the price of the LUR is set by the market as the result of a competitive bidding process and that any price is undistorted by government support.

(188)

The sampled company then stated that despite the fact that the Commission should have found that there was a functioning market, and therefore no subsidy, the Commission should compare the price of the company’s LUR to a benchmark, namely the prices of LUR in the province in which the company was located. Given that the Commission has established that there is no appropriate market benchmark in that province, this argument was rejected.

(e) Calculation of the subsidy margin

(189)

The benefit is the difference between the price paid for the land use right, and an appropriate external benchmark. As in the solar panels Regulation, this external benchmark is the market price for land in the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei).

(190)

Following disclosure the GOC disputed the use of Chinese Taipei as a benchmark and requested more information as to why Chinese Taipei was suitable. As was explained in recital 467 of the solar panels Regulation, the Commission considers Chinese Taipei as a suitable external benchmark for the following reasons:

(a)

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;

(b)

the physical proximity of the PRC and Chinese Taipei;

(c)

the high degree of industrial infrastructure in both Chinese Taipei and many provinces of the PRC;

(d)

the strong economic ties and cross border trade between Chinese Taipei and the PRC;

(e)

the high density of population in many of the provinces of the PRC and in Chinese Taipei;

(f)

the similarity between the type of land and transactions used for constructing the relevant benchmark in Chinese Taipei with those in the PRC; and

(g)

the common demographic, linguistic and cultural characteristics between Chinese Taipei and the PRC.

(191)

Taking all these factors into account, the Commission concluded that land use right prices in the PRC, if market conditions prevailed, for the sampled exporting producers, would be very similar to land prices in Chinese Taipei.

(192)

One sampled company suggested that if an external benchmark was to be taken, then the GDP of the province in which they were located should be taken into account and the benchmark should be ‘current land prices in Egypt, Armenia, Guatemala, Congo, Mongolia or Indonesia’ as these countries were at a ‘similar degree of development’. This argument was rejected for the following reasons:

(a)

The level of economic development is not the only factor listed above as to why Chinese Taipei was a suitable benchmark;

(b)

the company referred to the province where it was located, rather than the city, which has a much higher GDP per capita than the province surrounding it; and

(c)

they advanced no arguments, other than GDP, as to why any of the other external benchmarks would be more appropriate than Chinese Taipei.

(193)

Another sampled company suggested following disclosure that the use of Chinese Taipei was not suited to the economic conditions in the particular province in which they were located, but did not suggest an alternative. Given the lack of alternative benchmark suggestions, the use of Chinese Taipei is confirmed.

(194)

Average land prices in Chinese Taipei for 2012 were taken from the Industrial Bureau of the Ministry of Economic Affairs and adjusted backwards for inflation and GDP growth to fix a benchmark price for land in each calendar year. As land use rights are valid for 50 years and depreciated on this basis, the benefit in the IP will be 1/50 of the difference between the benchmark price and the actual price paid.

(195)

The subsidy rate established for provision of land at less than adequate remuneration (‘LTAR’) is as follows:

Provision of land at LTAR

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

2,1 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

8,0 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

2,3 %

Henan Yuhua New Material Co., Ltd

7,1 %

10. Conclusion on subsidisation

(196)

The Commission has calculated the amounts of countervailable subsidies in accordance with the provisions of the basic Regulation for the investigated companies scheme by scheme, and added these figures together to calculate a total subsidy amount for the whole company for the IP.

(197)

To calculate the overall subsidy margins below, the Commission first calculated the percentage subsidisation, being the subsidy amount over total company turnover. This percentage was then used to calculate the subsidy allocated to exports of the product concerned to the Union during the IP.

(198)

The subsidy amount per square metre of product concerned exported to the Union during the IP was then calculated, and the margins below calculated as a percentage of the CIF value of the same exports per square metre.

(199)

Following disclosure the GOC commented that the Commission did not take into account the dumping margins calculated in the parallel anti-dumping proceeding when publishing the subsidy margins at the time of disclosure, and that the Commission only dealt with the issue of ‘double-counting’ when calculating the duty to be imposed.

(200)

The GOC requested that when subsidisation was found to cause dumping, that the margin calculations should reflect this, as well as the duty calculations.

(201)

Given that the measures in this case are limited by the injury margin, such manipulation would not change the actual duties imposed. The Commission therefore did not consider it necessary to address the substance of these claims.

Company Name

Subsidy margin

Xinyi PV Products (Anhui) Holdings Ltd

3,2 %

Zhejiang Hehe Photovoltaic Glass Technology Co., Ltd

17,1 %

Zhejiang Jiafu Glass Co., Ltd; Flat Solar Glass Group Co., Ltd; Shanghai Flat Glass Co., Ltd

12,8 %

Henan Yuhua New Material Co., Ltd

16,7 %

D. INJURY

1. Definition of the Union industry and Union production

(202)

Eight producers that manufactured the like product in the Union during the IP came forward following initiation. The Commission is not aware of any other Union producers of the like product. The Commission therefore considers that those eight producers constitute the Union industry within the meaning of Article 9(1) of the basic Regulation and will be referred to as ‘the Union industry’.

(203)

All available information concerning the Union industry, including information provided by the complainant, macroeconomic data provided by the Union industry’s association (Glass for Europe) and the questionnaire responses of the sampled Union producers were used in order to establish the total Union production for the IP. For the sampled Union producers, the data was cross-checked with the questionnaire replies. On this basis, the total Union production was estimated to be around 21 734 000 square metres during the IP.

(204)

After disclosure, the GOC noted differences between the data quoted in the disclosure document and the one contained in the complaint concerning the Union industry. It further argued that this indicates the lack of objective and credible evidence and makes the conclusions reached by the Commission questionable.

(205)

The differences established by the GOC between the complaint data and the disclosure document are caused by the fact that all data relating to the sampled Union producers was verified on-spot and, when necessary, was updated. As the sample represents 79 % of the total sales of the Union industry on the Union market, the Commission cannot accept the argument that the evidence used was not an objective and credible basis on which the Commission reached its conclusions.

2. Determination of the relevant Union market

(206)

None of the sampled Union producers’ production was destined for captive use. Consequently there was no need to make a distinctive analysis of captive sales.

3. Union consumption

(207)

Union consumption was established on the basis of the volume of the total Union sales on the Union market of all Union producers, that is excluding their exports, plus imports from the PRC and imports from other third countries. The establishment of Union consumption was based on data provided by the complainant and Glass for Europe and, when possible, cross-checked with the sampled Union producers’ questionnaire replies.

(208)

Union consumption developed as follows:

Table 1

Union consumption (1 000 m2)

2009

2010

2011

IP

Total Union consumption

16 596

28 239

33 993

27 412

Index

100

170

205

165

Source: Glass for Europe, the complainant and Union producers’ questionnaire replies.

(209)

In the period considered, total Union consumption increased by 65 % between 2009 and 2011, but decreased in the IP compared to 2011. Consumption in 2012 remained significantly above the level of 2009 though. This is mainly due to the increase in consumption of the end products, in particular solar modules (see Section E.2.3 below).

4. Imports from the country concerned

4.1. Volume and market share of the subsidised imports from the country concerned

(210)

Since solar glass is imported in the Union under CN code 7007 19 80 – Other — Laminated safety glass, which covers other products not subject to the present investigation, Eurostat could not be used to determine import volumes and values. Import volumes and values were based on data provided by the complainant and Glass for Europe. Subsidised imports into the Union from the country concerned developed as follows:

Table 2

Import volume (1 000 m2) and market share

2009

2010

2011

IP

Volume of imports from the PRC (1 000 m2)

1 200

2 050

6 150

8 350

Index

100

171

513

696

Market share

7,2 %

7,3 %

18,1 %

30,5 %

Index

100

100

250

421

Source: Glass for Europe and complaint.

(211)

Over the period considered, subsidised import volumes of the product concerned to the Union increased considerably by 596 %. This led to a significant increase of the market share of the imports from the PRC of the product concerned on the Union market (increase from 7,2 % to 30,5 %).

(212)

The Union consumption has also increased until 2012. In 2012, when the Union market shrank, Chinese exporting producers could nevertheless still increase their total volume of imports.

(213)

After disclosure, the GOC argued that the Commission has used highly inflated data, while Chinese export statistics arguably showed much lower exports in the IP compared to the import volume stated in the disclosure document and requested an explanation how these volumes have been calculated.

(214)

The Commission first observes that the export statistics submitted by the GOC — including all types of tempered glass — are more than 2,5 times lower than what the statistics from Eurostat show for the entire CN code ex 7007 19 80 for 2012. Consequently, it cannot consider them as reasonably reliable.

(215)

The Commission based its calculations on the information provided by the complainant and Glass for Europe. This data is available in the non-confidential file. The Commission cross-checked this information with the verified data provided by the sampled exporting producers and by the other cooperating exporting producers. As mentioned in Section A3.3 above, the cooperating exporting producers covered almost 100 % of the reported exports of solar glass to the Union during 2012. Consequently, the Commission has no reasons to believe that the information on which it based its findings is incorrect. In addition, the GOC did not provide any evidence to substantiate its claim.

4.2. Prices of the subsidised imports from the country concerned and price undercutting

(216)

The average price of subsidised imports into the Union from the country concerned developed as follows:

Table 3

Import prices (EUR/m2)

2009

2010

2011

IP

PRC

6,02

6,10

4,96

4,38

Index

100

101

82

73

Source: Complainant and questionnaire replies of the Chinese exporting producers.

(217)

The average import price for the product concerned dropped over the period considered. The average import price decreased by 27,2 % from 6,02 EUR/m2 in 2009 to 4,38 EUR/m2 in the IP.

(218)

In order to determine price undercutting during the IP, the weighted average sales prices per product type of the sampled Union producers charged to unrelated customers on the Union market, adjusted to an ex-works level, were compared to the corresponding weighted average prices per product type of the imports from the sampled Chinese producers to the first independent customer on the Union market, established on a CIF basis, with upward adjustments, namely 0,40 EUR/m2 for custom clearance, handling and loading costs and 3 % import duty. Those adjustments increase the price, depending on the product control number, by 7 % to 15 %, that is to say, a weighted average of 11 %.

(219)

The price comparison was made on a product type-by-product type basis for transactions at the same level of trade, duly adjusted as set out in the recital above, and after deduction of rebates and discounts. The result of the comparison, when expressed as a percentage of the sampled Union producers’ turnover during the IP, showed a weighted average undercutting margin per company between 10,6 % and 26,7 % of the prices of the sampled Union producers by the subsidised imports of the product concerned.

5. Economic situation of the Union industry

(220)

In accordance with Article 8(5) of the basic Regulation, the examination of the impact of the subsidised imports on the Union industry included an evaluation of all economic factors and indices having a bearing on the state of the Union industry during the period considered.

(221)

As explained in Section A.3.2 above, sampling was used for the examination of the possible injury suffered by the Union industry.

(222)

For the purpose of the injury analysis, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission analysed the macroeconomic indicators for the period considered on the basis of the data provided by Glass for Europe and the complainant relating to all Union producers. The Commission analysed the microeconomic indicators on the basis of the sampled Union producers’ questionnaire responses.

(223)

For the purpose of this investigation, the following macroeconomic indicators were assessed: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the subsidy margin and recovery from past subsidy.

(224)

The following microeconomic indicators were assessed: average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments and ability to raise capital.

(225)

One exporting producer claimed that the Commission has failed to conduct the injury analysis in line with Article 8(1) and Article 8(4) of the basic Regulation as it conducted the injury analysis on the basis of two separate and allegedly inconsistent sets of data, that is to say the macro- and microeconomic injury indicators. It further contends that the alleged inconsistency of the analysis based on the two sets of data casts serious doubts on the appropriateness, fairness and objectivity of the overall injury picture.

(226)

The same party quoted a number of prior investigaitons where allegedly the Union institutions defined in an inconsistent way different sets of data as belonging either to macro or micro data.

(227)

The Commission cannot accept this claim. This is a methodology applicable in sampling cases in order to analyse the situation of the Union industry and to take into consideration not only the trends displayed by the sample but also those by the Union industry as a whole. All the factors prescribed by Article 8(4) of the basic Regulation were considered in the analysis. The conclusion on injury is also drawn on the basis of them all. Accordingly, the injury analysis was conducted in line with Article 8(1) and Article 8(4) of the basic Regulation.

6. Macroeconomic indicators

6.1. Production, production capacity and capacity utilisation

(228)

The total Union production, production capacity and capacity utilisation developed as follows over the period considered:

Table 4

Production, production capacity and capacity utilisation

2009

2010

2011

IP

Production capacity (1 000 m2)

39 000

44 611

48 511

54 615

Index 2009

100

114

124

140

production volume (1 000 m2)

17 540

29 245

31 245

21 734

Index

100

167

178

124

Capacity utilisation

45 %

66 %

64 %

40 %

Index

100

146

143

88

Source: Complainant and Union producers’ questionnaire replies.

(229)

Production of the Union industry increased over the period considered in line with consumption. Already at the beginning of the period considered, the Union industry had excess production capacity. Due to the fast growth of Union consumption, that excess capacity shrank until 2011, as Union production capacity – although growing – grew less rapidly than Union consumption. Production capacity kept growing in 2012, whereas Union consumption declined. Production grew from 2009 until 2011 and then dropped by 30 % in the IP. Due to the existing capacities, the Union industry could rapidly ramp up production to meet the strong growth in Union demand until 2011. At the same time, as a reaction to the growth observed from 2009 until 2011, the Union industry added further capacity, which partially only came into production in the IP. That resulted in a sharp decline in capacity utilisation in the IP, compared to previous years.

(230)

Even if during the period considered the Union industry expanded its capacity in response to an increased consumption, the Union industry’s production levels increased at a lower rate than the consumption and the capacity utilisation after a substantial increase in the first three years of the period considered, decreased during the investigation period, which coincided with an increased market share of the subsidised imports from the country concerned and the unfair competition encountered by the Union industry’s main user customers in the solar panels sector due to Chinese dumping and subsidisation established in that sector as well.

6.2. Sales volume and market share

(231)

The Union industry’s sales volume and market share developed as follows over the period considered:

Table 5

Sales volume and market share

2009

2010

2011

IP

Sales volume (1 000 m2)

14 696

25 303

26 556

18 039

Index

100

172

181

123

Market share

88,6 %

89,6 %

78,1 %

65,8 %

Index

100

101

88

74

Source: Glass for Europe, the complainant and Union producers’ questionnaire replies.

(232)

During the period considered the Union industry’s sales volume increased by 22,7 %. However, in the context of an increase in Union consumption by 65 %, this was translated into a decrease of the Union industry’s market share from 88,6 % in 2009 to 65,8 % during the IP, that is to say, a decrease by 25,7 % over the period considered. The Union industry’s sales grew much less than the subsidised imports from the country concerned. Consequently, the Union producers could not fully benefit from the growing consumption and thus their market share decreased during the period considered.

6.3. Growth

(233)

The growth of the Union industry is reflected in its volume indicators such as production, sales and in its market share, when compared with developments in consumption. Despite an increase in consumption during the period considered the market share of the Union producers did not grow in line with consumption. The market share of the Union industry declined over the period considered. During the same period, the market share of the imports from the PRC increased by 321 %. The fact that the Union industry could not grow in line with market growth had an overall negative impact on its economic situation.

6.4. Employment and productivity

(234)

Employment and productivity developed as follows over the period considered:

Table 6

Employment and productivity

2009

2010

2011

IP

Employment — Full time equivalent (FTE)

565

792

932

857

Index

100

140

165

152

Productivity (1 000 m2/FTE)

31

37

34

25

Index

100

119

108

82

Source: Complainant and Union producers’ questionnaire replies.

(235)

Overall, employment increased by 52 % between 2009 and the IP. However, the increase took place in the period until 2011 when it reached its peak of 932 Full time equivalent (FTE) and subsequently decreased to 857 FTE during the IP. Productivity increased only slightly in 2010 and in 2011 compared to 2009. This is partially due to the fact that the production of the like product is highly automated and requires a small number of personnel. However, during the IP it decreased by 24,4 % in comparison with 2011. This was a result of the decrease by around 30 % in production, which negatively impacted the capacity utilization, during the same period.

(236)

Therefore, employment decreased during the IP, responding to the trend in the Union production of the like product during the IP.

6.5. Magnitude of the subsidy margin and recovery from past subsidy

(237)

All subsidy margins are significantly above the de minimis level. Given the volume and prices of imports from the country concerned, the impact of the magnitude of the actual margins of subsidy on the Union industry can be considered substantial.

(238)

Since this is the first anti-subsidy investigation regarding the product concerned, recovery from past subsidy is not an issue in the assessment.

7. Microeconomic indicators

(239)

As indicated above, the microeconomic indicators are analysed on the basis of the questionnaire responses provided by the sampled Union producers. For the majority of the sampled Union producers 2009 was the year when they made their initial investments and started the production of the like product. Although the majority of sampled Union producers were in the glass business before, all companies had to invest in solar glass dedicated facilities, which are completely independent from normal glass production, because the purity and the iron content of the glass is very different, as well as overall quality. In addition, the glass needs to be tempered which is not the case for ordinary glass. Finally, coating is also added. Thus, all the indicators analysed below are significantly influenced by this start-up phase in 2009. In order to show the trends without the distortive impact of the start-up phase of the sampled companies, indexes are also shown from 2010.

7.1. Prices and factors affecting prices

(240)

The average sales prices of the sampled Union producers to unrelated customers in the Union developed as follows over the period considered:

Table 7

Average sales prices in the Union

2009

2010

2011

IP

Average unit selling price on the Union market (EUR/m2)

10,64

9,07

8,91

8,20

Index 2009

100

85

84

77

Index 2010

117

100

98

90

Unit cost of production (EUR/m2)

13,13

8,38

8,44

9,34

Index 2009

100

64

64

71

Index 2010

157

100

101

112

Source: Union producers’ questionnaire replies.

(241)

Unit sales prices fell continuously throughout the period considered, but the decrease in prices was particularly pronounced during the IP when they dropped by 7,9 % in comparison with 2011, by 9,5 % in comparison with 2010 and by 23 % in comparison with 2009. The decline in sales prices of Union producers was slower than the trend observed for the sales prices of the imported products from the country concerned. For example, the drop in Chinese prices was 11 % between 2011 and 2012, while Union prices dropped by 8 % during the same period.

(242)

Despite the big difference between the Union industry’s average unit selling price and the Chinese import prices, as explained in Section D.4.2 above, the actual undercutting based on a comparison per product type was much lower, i.e. between 10,6 % and 26,7 % during the investigation period. This is due to the fact that not all product types that were produced by the Union industry were exported by the sampled Chinese exporting producers.

(243)

Following disclosure, the GOC argued that the Commission has not taken into account the difference in the product types exported by the Chinese exporting producers and those sold by the Union producers while assessing the average Chinese prices. The mentioning of the fact that there was a big difference between the average selling price of the Union industry and the average selling price of the Chinese exporting producers allegedly led to a distorted presentation of the facts because of the gap between the Union sales prices and Chinese import prices.

(244)

As indicated above, the Commission made a detailed comparison per product type for the purpose of undercutting which is undeniably part of the injury analysis. In addition, it clearly indicated the cause of the differences: the fact that not all product types produced by the Union industry were produced by the Chinese exporting producers. Consequently, it cannot be argued that the Commission made a misleading and distorted presentation of the facts.

(245)

The unit cost of production increased by more than 10 % between 2011 and the IP, while it remained relatively stable between 2010 and 2011. The cost of production generally followed the trend of the sales price between 2009 and 2011. The increase in the unit cost of production in 2012 was due to decrease in production volume.

(246)

The GOC also claimed that the decrease in the average unit selling price during the period considered was caused, among others, by the achieved production efficiencies. In addition, the increase of the unit cost of production in 2012 was arguably not caused by the decrease in production volume but by the increase in production capacity.

(247)

Indeed, the efficiency gains during the 2009-2011 period reduced the unit cost of production and thus contributed to the decrease in the unit selling price. However, the Commission established that during the IP the average selling price level fell way below the average unit cost of production, thus covering only 88 % of the latter. At the same time, the increase of production capacity of the sampled companies could not have caused the rise in their unit cost of production. Indeed, their production capacity increased only by 2,6 % between 2011 and 2012, while their average unit cost of production increased by 10,6 % during the same period. Consequently, these claims are rejected.

7.2. Labour costs

(248)

The average labour costs of the sampled Union producers developed as follows over the period considered:

Table 8

Average labour costs per employee

2009

2010

2011

IP

Average costs per employee (EUR)

45 232

44 503

48 288

50 615

Index 2009

100

98

107

112

Index 2010

102

100

109

114

Source: Union producers’ questionnaire replies.

(249)

Between 2009 and the IP, the average labour costs per employee continuously increased, overall by 12 %. However a major increase by 4,8 % took place between 2011 and the IP. The overall increase of labour costs can be partly explained by costs incurred by some Union producers linked to the idling of plants between 2011 and the IP, in other words, the need to pay employees despite the fact that they were actually not working.

7.3. Inventories

(250)

Stock levels of the sampled Union producers developed as follows over the period considered:

Table 9

Inventories

2009

2010

2011

IP

Closing stocks (1 000 m2)

1 540

1 875

1 657

1 778

Index 2009

100

122

108

115

Index 2010

82

100

88

95

Source: Union producers’ questionnaire replies.

(251)

Stocks increased by 7,3 % between 2011 and the IP and by 15 % between 2009 and the IP, while they dropped by 11,6 % between 2010 and 2011.

(252)

After disclosure, the GOC claimed that the trends in stocks are irrelevant since their increase in absolute and relative terms was very low.

(253)

Given the price developments, it is not rational for a producer to keep high stocks, because their value reduces rapidly. Union producers would therefore be expected to hold limited stocks for the like product. Therefore, the increase in stocks for the like product between 2011 and the IP, although quite limited, is a relevant indicator in establishing if the Union industry suffered material injury. The high volume of stocks in absolute terms in 2010 has to be seen against the background that sales were much higher in that year than in the IP.

7.4. Profitability, cash flow, investments, return on investments and ability to raise capital

(254)

Profitability, cash flow, investments and return on investments of the sampled Union producers developed as follows over the period considered:

Table 10

Profitability, cash flow, investments and return on investments

2009

2010

2011

IP

Profitability

–20,3 %

8,3 %

8,2 %

–14,5 %

Index 2009

100

241

240

129

Index 2010

– 244

100

99

– 174

Cash flow (1 000 EUR)

–21 550

29 574

33 425

6 200

Index 2009

100

337

355

229

Index 2010

–73

100

113

21

Investments (1 000 EUR)

46 087