On 14 June 2019, the German customs authorities informed the Commission that the invoices of Siancity, a trader related to ABC Shanghai, systematically included a declaration certifying that that the imported peroxosulphates had been produced by the company ABC Shanghai, and therefore the consignments were cleared for free circulation in Germany under the TARIC additional code A820.

On 2 September 2019, the French customs authorities informed the Commission that they had received an invoice dated 3 June 2019 from Siancity, including a declaration certifying that the imported peroxosulphates had been produced by the company ABC Shanghai.

As mentioned in recital (11), on 19 November 2019, the Commission received questionnaire replies from ABC Shanghai and its two related companies, i.e. Siancity and Hongguan (hereafter ‘ABC Group’ and/or ‘ABC Shanghai and its related companies’). The ABC Group also submitted, on the same day, a more detailed explanatory note, with some detailed preliminary comments on the initiation of this anti-circumvention proceeding.

Before and in 2017, ABC Shanghai, which is located in Shanghai, was producing the product concerned. In February 2017, one of the shareholders of ABC Shanghai acquired 20 % shareholding in Hongguan by contributing both cash and ABC Shanghai’s production facilities. Hongguan is located in Fujian province, about 900 km from Shanghai. Since then, ABC Shanghai and Hongguan are related companies. The latter had been set up in November 2009 and was restructured into a joint stock company in December 2016. Due to a series of enactments and modifications of the environmental protection laws, including an enactment to relocate dangerous chemical enterprises located in urban and residential areas, the controlling shareholder of ABC Shanghai was compelled to cease the production at its premises in Shanghai. It relocated the production to its related company Hongguan in Fujian province. ABC Shanghai ceased ‘officially’ its production on 31 December 2017 and became a trading company from 1 January 2018 onwards. ABC Shanghai moved all its production facilities from its premises in Shanghai to the premises of its related company Hongguan in 2018. Since 2018, Hongguan produced and sold its peroxosulphates to ABC Shanghai, which in its turn is selling to its customers, including its related company Siancity, which is exporting the product under investigation to the Union market. ABC Shanghai’s decision and action were allegedly not meant to evade the measures in force.

ABC Shanghai was the legal entity specifically identified as an exporting producer in all regulations imposing anti-dumping duties on peroxosulphates originating in the PRC. It is subject to an anti-dumping duty rate of 0 %, applicable to imports under company-specific TARIC additional code A820.

Furthermore, the original investigation as well as the two expiry review Regulations, referred to in recitals (1), (2) and (4) provided that the application of any individual duty rate – including the 0 % duty rate of ABC Shanghai – would be conditional upon the presentation of a valid commercial invoice, bearing a declaration that the product concerned was manufactured by (company name and address) (TARIC additional code).

Following the initiation of the present anti-circumvention investigation, ABC Shanghai informed the Commission, for the first time, on 19 November 2019, that it did not itself manufacture anymore the product under investigation since it ceased its production at the end of 2017. Nevertheless, as mentioned below in recital (39) and on the basis of the statements referred to in recital (40) below, ABC Shanghai still exported at least more than 85 % of the total Chinese import volumes of the product under investigation in 2018 and the RP respectively.

Moreover, as part of its questionnaire reply, Siancity submitted on 19 November 2019 three invoices issued in 2018 to Union importers. These three invoices bear a declaration that the legal entity ABC Shanghai with the TARIC additional code A820, subject to 0 % duty rate, was the manufacturer of the product under investigation covered by the invoice, i.e. peroxosulphates.

The declarations on these three invoices, which led to the application of the 0 % anti-dumping duty rate, were incorrect. As mentioned in recital (22), ABC Shanghai ‘officially’ ceased its production at the end of 2017. It was, therefore, not the manufacturer of the peroxosulphates covered by the three invoices. Those imports should have been declared under the TARIC additional code for ‘all other companies’ and should have been subject to an anti-dumping duty rate of 71,8 %, that is, the anti-dumping duty rate applicable to all other companies not specifically having an individual anti-dumping duty rate.

Based on the above, the Commission concluded that ABC Shanghai and its related companies intentionally concealed the fact that the legal entity ABC Shanghai was not anymore manufacturing the product under investigation as from 2018, as well as the other significant changes in its group structure, to continue to be able to benefit from ABC Shanghai’s individual anti-dumping duty rate of 0 % for imports of product manufactured by its related company Hongguan. That practice constitutes ‘channelling’, as ABC Shanghai’s 0 % individual duty rate is used to ‘channel’ products produced by another company to the Union without paying the otherwise-applicable duty rate on those products.

ABC Shanghai and its related companies have not put forward any evidence that would demonstrate the existence of any due cause or economic justification for this practice other than the potential to avoid the levying of anti-dumping duties on exports of peroxosulphates produced by Hongguan to the Union.

Following disclosure, ABC Shanghai repeated that ‘such change was exclusively propelled and driven by environment requirements, which compelled ABC Shanghai to relocate its entire production facilities outside Shanghai to a different place’. Its decision to relocate was thus necessary for continuing commercial operations and not as a means to circumvent the duty. It also observed that ABC Shanghai is a company run by a private person who had no knowledge of anti-dumping law, circumvention or any reporting obligation to the Commission.

The Commission rejected these arguments.

First, the change in 2018 cannot be qualified as a mere relocation. ABC Shanghai was the legal entity specifically identified as an exporting producer in the regulation imposing anti-dumping duties on peroxosulphates originating in the PRC. In 2017, one of the shareholders of ABC Shanghai bought shares of an existing company (Hongguan), already producing the product concerned. From early 2018 onwards, ABC Shanghai’s production equipment had been moved to this different legal entity (Hongguan). Therefore, Hongguan became the manufacturer of the product under investigation and ABC Shanghai the trader.

Second, ABC Shanghai had received Market Economy Treatment (‘MET’). Granting such treatment depended largely on the economic situation of the production plant at the legal entity in Shanghai. It can neither be assumed, nor has it been demonstrated, that the same conditions exist at the factory of Hongguan in the Fujian province. Therefore, Hongguan could not be treated as having taken over ABC Shanghai’s duty rate, which was based on an MET finding.

Third, the application of its individual duty rate was conditional upon the presentation of a valid commercial invoice, bearing a declaration that the product concerned was manufactured by the legal entity ABC Shanghai. However, the legal entity ABC Shanghai was still identified as the manufacturer of the product under investigation on the import documentation provided to the customs authorities in the EU despite the fact that it was not the legal entity actually having manufactured the goods from early 2018 onwards. Consequently, the duty rate applicable to goods manufactured by ABC Shanghai was wrongfully applied to imports that had, as a matter of fact, been produced by a different legal entity and should have been subject to a higher duty rate.

Fourth, with regard to the argument that the private person running the operations of ABC Shanghai did not have any knowledge of anti-dumping law, the Commission recalled that intention is not a legal requirement to establish the existence of circumvention pursuant to Article 13(1) of the basic Regulation. In any case, the repeated declarations from Siancity to the EU customs authorities that ABC Shanghai was the exporting producer seem to indicate an understanding that only ABC Shanghai would profit from the 0 % duty. It will be for the appropriate authority in the EU to investigate whether there has been customs fraud concerning the declarations on the invoices from the ABC Group.

The Commission therefore maintained its finding that ABC Shanghai and its related companies had not put forward evidence that would demonstrate the existence of any due cause or economic justification for declaring ABC Shanghai as the manufacturer of imports of the product concerned other than avoiding the levying of a higher anti-dumping duty rate on its exports of peroxosulphates to the Union.

Company-specific data are available in the 14(6) database, set up pursuant to Article 14(6) of the basic Regulation (‘the 14(6) database’). This database gathers, among others, the data reported each month to the Commission by Member States on imports of products subject to anti-dumping measures also including company specific TARIC additional codes. The Commission therefore used data from the 14(6) database to identify the change in the pattern of trade by comparing exporting producers with different level of duties for the purpose this investigation. That data is in line with the non-verified data which were received as part of the questionnaire reply on 19 November 2019 (see recital 11).

The import volumes of the product under investigation accounted for more than 85 % of the total Chinese import volumes of the product concerned to the Union during the investigation period, including the RP, as reported by the 14(6) database.

The volume of total imports from the PRC increased systematically during the years 2016 until 2018. Moreover, despite a small decrease of import volumes during the RP compared to the year 2018, those values are still significantly higher than the ones during the years 2016 and 2017. As mentioned in recital (38), the import volumes of the product under investigation accounted for more than 85 % of the total Chinese import volumes of the product concerned to the Union during the investigation period.

As explained in sections 2.3.2 and 2.3.3, the exporting producer ABC Shanghai ceased its production at the end of 2017, and became a trader from 2018 onwards. Moreover, its related company Hongguan became the manufacturer of the product under investigation in early 2018.

Nevertheless, imports to the Union of the product under investigation attributed to the legal entity ABC Shanghai, were still made during 2018 and the RP after it had ceased production. The import volumes during 2018 and the RP under this TARIC additional code (A820) were at higher levels than during the years 2016 and 2017, when ABC Shanghai was still the manufacturer of the imported peroxosulphates into the Union. In parallel, imports under the TARIC additional code for ‘all other producers’ A999 decreased during the investigation period.

Following disclosure, ABC Shanghai argued that its change of pattern and sales was legitimately justified due to the imposed environment rules, and that it did had no other options than to relocate.

The Commission rejected this claim. As explained above in recital (32) the events of 2018 cannot be qualified as a simple relocation of the production facilities but constituted a change of the corporate structure after which another legal entity produced the product under investigation. In addition, the original investigation had established a duty rate of 0 % in respect of the legal entity ABC Shanghai, which had been based on market economy treatment for that particular entity only (see recital 33 above). ABC Shanghai should therefore have informed the Commission of this change to allow it to examine the consequences, if any of that change for the application of anti-dumping measures to imports of the product under investigation by the new production company. However, ABC Shanghai chose not to do so.

Article 13(1) of the basic Regulation requires that the change in the pattern of trade stems from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty. The practice, process or work includes, inter alia, the reorganisation by exporters or producers of their patterns and channels of sales in the country subject to measures in order to have their products exported to the Union through producers benefiting from an individual duty lower than that applicable to the products of the manufacturers.

As explained in section 2.3, the Commission found that ABC Shanghai and its related companies engaged in circumvention through channelling. Although Hongguan did not have its own company-specific additional code, it started to export large volumes of the product concerned from 2018 onwards into the Union under ABC Shanghai’s company-specific TARIC additional code.

The import volumes into the Union under ABC Shanghai’s company-specific TARIC additional code (A820) represent more than 85 % of the total import volumes into the Union during 2018 and the reporting period, as reported by the 14(6) database. However, the legal entity ABC Shanghai was not the producer of those import volumes, but Hongguan was.

The changes in trade flows to the Union constitute a change in the pattern of trade between the related companies Hongguan (the manufacturer of the product under investigation from 2018 onwards) and ABC Shanghai (the manufacturer of the product under investigation until the end of 2017) in the country subject to measures and the Union, which stems from a practice, process or work for which the investigation did not bring to light any due cause or economic justification other than the avoidance of the residual or the higher duty in force on peroxosulphates originating in the PRC.

In light of the considerations above, the Commission established that channelling practices of the product under investigation were taking place.