23 Jan 2019
Chinese Producers of Solar Glass Challenge Anti-dumping Duties Before the General Court
On 16 January 2019, the General Court of the European Union (the “General Court”) held a hearing for the annulment of the anti-dumping duties imposed by the European Commission on glass for photovoltaic panels originating in mainland China. The core issue is whether a tax break of 10% granted to Xinyi PV – the applicant in the case before the General Court – and to other Chinese producers of such product, constitutes an unfair intervention that – pursuant to anti-dumping rules – allows the Commission to discard the information regarding costs and prices provided by the importers for the purposes of calculating if dumping has occurred.
On May 2014, the Commission imposed an anti-dumping duty of up to 36.1% on imports of glass for photovoltaic panels originating in mainland China. On August 2015, and following the contention that Chinese companies had absorbed the tariffs, the Commission increased the duty to 75.4%.
According to anti-dumping rules, a product is considered to be dumped, – i.e. introduced into the commerce of another country at less than its normal value – if the export price of the product is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country. This rule finds an exception when there is evidence that the government where the exporting company is located substantially determines domestic prices or that there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market in the ordinary course of trade.
During the proceedings, the Commission argued that “the tax incentive provided to solar-glass producers lead to cheaper capital”, stressing that the “tax break allowed Xinyi PV and peer companies to attract more investment” which led to “market distortion”. Xinyi PV rebutted this argument, claiming that the Commission “wrongly concluded that the effects of the tax break were “significant”, an element that played a key role in deciding to reject Xinyi PV’s prices and costs for determining the normal value of the dumped goods”. Xinyi PV maintained that “there is no indication that the company was able to attract investment more easily” as a result of the tax break.
Furthermore, the Commission contended that the 10% tax incentive was proof of State intervention in the sector. The Court had previously considered that the Commission was right to presume that such tax regime was evidence that companies in mainland China do not operate under normal market conditions. Xinyi PV, however, submitted that such an approach would impose the burden on Chinese producers to refute such presumption. Xinyi PV further argued that the Commission had acted illegally in using “any speculative and theoretical impact on the financial situation of the company in the future.” Against this argument, the Commission responded that “the measure distorted the cost in capital.”
When the Justices of the General Court inquired of the Commission if similar State aid mechanisms could be found in the EU, the Commission answered that “the EU could grant state aid to individual firms, but with certain conditions demonstrably linked to objectives of common interest.”
This litigation has a longstanding history. The first judgment was issued by the General Court in 2016, was annulled last year by the Court of Justice of the EU and sent back to the General Court for review, where the proceedings currently stand.
The General Court is yet to issue its final ruling where it will determine if the anti-dumping investigation and the imposition of the duty are compliant with the basic anti-dumping rules. Hong Kong traders of glass for photovoltaic panels will be required to pay the anti-dumping duty upon the importation of such products into the EU. However, should the General Court rule against the Commission, the ruling will have a retroactive effect, meaning that any duty levied by the Commission must be returned to the importers.