15 Oct 2019
EU Court Annuls Anti-dumping Duties Imposed on Imports of Solar Glass Originating in Mainland China
In an anti-dumping case that is likely to be interest to traders with export interests in mainland China, the General Court of the European Union (“General Court”) has issued a judgment. The judgment annuls Commission Implementing Regulation 470/2014 of 13 May 2014 (“Regulation 470/2014”) imposing a definitive anti-dumping duty on imports of solar glass originating in mainland China.
Following a complaint lodged on behalf of producers said to be representing more than 25% of the total Union production of solar glass, on 28 February 2013 the European Commission (“Commission”) initiated an anti-dumping investigation concerning imports of solar glass originating in mainland China. After completing the different phases of the EU anti-dumping proceeding, the Commission issued Regulation 470/2014 whereby it imposed definitive anti-dumping measures against Xinyi PV Products (Anhui) Holdings Ltd (“Xinyi PV”) – in the form of an ad valorem duty of 36.1%.
Hong Kong traders might recall that 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 exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.
In the case of imports from non-market-economy countries, EU anti-dumping legislation provides that the normal value shall be determined, amongst others, on the basis of the price, or constructed value, in a market economy third country, or the price from such a third country to other countries, including the EU. However, EU anti-dumping legislation states that in anti-dumping investigations concerning imports from, among others, mainland China, the normal value shall not follow the criteria explained immediately above if it is shown that market-economy conditions prevail for a particular producer in respect of the manufacture and sale of the like product concerned. Exporters claiming that market economy conditions prevail in respect of the manufacture and sale of the like product concerned must apply for Market Economy Treatment (“MET”). They must submit sufficient evidence that the producer operates under market economy conditions and that its production costs and financial situation are not subject to significant distortions.
During the anti-dumping investigation concerning solar glass, the Commission concluded that all exporting producers claiming MET – including Xinyi PV – failed to demonstrate that they were not subject to significant market distortions. Consequently, the Commission did not grant market economy treatment to the exporting producers and selected Turkey as an appropriate analogue country for the determination of normal value.
Xinyi PV brought an action for annulment against the anti-dumping measures and, on 16 March 2016, the General Court rendered its judgment in favour of Xinyi PV, annulling the anti-dumping measures. The Commission brought an appeal against the judgment of the General Court and, on 28 February 2018, the Court of Justice of the European Union (“Court of Justice”) set aside the previous judgment, referring the matter back to the General Court. On 27 April 2018, Xinyi PV and the Commission then filed their written observations on the inferences to be drawn from the judgment of the Court of Justice for the outcome of the proceedings.
In its written observations, Xinyi PV claimed that the Commission had committed a manifest error in the assessment of the facts, and an error of law, by concluding that the distortions concerning its production costs and financial situation were significant. According to Xinyi PV, the tax incentives at issue did not make its production costs and financial situation subject to significant distortions. Xinyi PV argued that the tax incentives at issue represented merely 1.34% of its total cost of production and only 1.14% of its turnover.
According to the Commission, Xinyi PV did not dispute the fact that it had benefited from preferential tax treatment, and it contended that companies labelled as strategic by the government received favourable treatment from an income tax system. The Commission found that such treatment introduced significant distortions, as they completely changed the amount of pre-tax profits such companies needed to achieve in order to be attractive to investors.
By its judgment of 24 September 2019, the General Court found that the tax incentives at issue related to Xinyi PV’s financial situation from an eminently abstract point of view, unconnected to the manufacture and sale of the like product concerned. Furthermore, the General Court stated that the mere possibility that a preferential tax regime may attract investors in an undertaking’s capital is not enough to find that its financial situation is in fact significantly distorted. To conclude, the General Court found that it was for the Commission to clearly show the link between the choice to invest in Xinyi PV’s capital and the distortion of its financial situation, and not merely establish this in a general and theoretical manner.
Considering this was the final stage in an EU judicial proceeding, Hong Kong traders might be interested in knowing that the Commission was ordered to bear its own costs and to pay those of Xinyi PV, without a chance to further appeal the General Court’s ruling of 24 September 2019.