The European Commission has adopted definitive anti-dumping measures on imports of steel wind towers from China. The level of the anti-dumping duties ranges from 7.2% to 19.2%. One aspect of the Commission's reasoning relates to the involvement of the Chinese Communist Party (CCP) in the management of the companies under investigation. We set out that reasoning below.
The basic EU anti-dumping regulation explains that there are situations where domestic prices and costs in the exporting country cannot be used in the normal value calculation due to the existence in that country of "significant distortions," and describes one element that should be taken into account in this context as "state presence in firms allowing the state to interfere with respect to prices or costs":
(a) In case it is determined, when applying this or any other relevant provision of this Regulation, that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following rules.
(b) Significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:
— state presence in firms allowing the state to interfere with respect to prices or costs;
This element came up as part of the Commission's reasoning in the case as follows. In the decision adopting definitive measures, the Commission considered the "Existence of significant distortions," one aspect of which focused on "State presence in firms." The Commission noted that the Chinese government "is in a position to interfere with prices and costs through State presence in firms." Its reasoning on the role of the CCP as it relates to "state presence" in firms was as follows:
(62) As to the GOC being in a position to interfere with prices and costs through State presence in firms in the sense of Article 2(6a)(b), second indent of the basic Regulation, the following examples illustrate the above trend of an increasing level of intervention by the GOC through state presence inside the economic operators in wind towers sector. Many wind tower producers explicitly emphasise party building activities on their websites, have party members in the company management and underline their affiliation to the CCP. The investigation revealed party building activities in a number of wind towers producers, including the sampled exporting producer Chengxi Shipyard. According to the Articles of association of CSSC holding limited, which holds 100 % of Chengxi Shipyard’s shares, the role of the party committee is as follows: “Supervise and ensure the effective implementation of the Party and State policies in the company […], Sticking to the principle of cadres managed by the Party, in combination with the operational management principle of members of the Board of Directors selected in accordance with law, as well as with the principle of operational managers applying human rights in accordance with law, the Party organization ensures prearrangements and puts forward opinions and suggestions as regards the candidates to the Board of Directors or to Managing Director level, or, after completing comprehensive research, provides opinions and suggestions to Board of Directors and the General Manager on existing candidates, […], Research and discuss matters related to the company's reform, development and stability and to major operations and management […]” ( 34).
(63) Also, in case of CS Wind, the investigation established that there were efforts to increase the number of party members in the company: “The foreign-funded enterprise CS Wind Power Equipment (Lianyungang) Co., Ltd. has more than 150 employees and used to have only 5 party members. Through the “integration of the Party and the masses”, the company’s Party members have now reached more than 70”. ( 35)
(64) Fuchuan Yifan describes the role of the Party Committee in the following way: “Party members and various departments’ essential staff closely cooperate, give full play to the function of pioneer role model, actively consolidate the effective strengths of each department, encourage staff towards vanguard and excellence, consider breakthrough projects as starting points, focus on cohesion, overcome difficulties, showcase talents and skills so as to ensure an active role as regards the company’s cost reduction and efficiency gains, income increase and fundraising etc. and also to ensure that each project is duly completed in terms of quality and quantity” ( 36).
(65) Furthermore, party building activities were found in the sampled exporting producer Penglai Dajin and Shanghai Taisheng Wind Power Equipment.
(66) In addition, during the investigation the Commission established the existence of personal connections between wind towers producers and the CCP. The investigation showed presence of CCP members among the senior management in a number of companies manufacturing wind towers, including Chengxi Shipyard (the Chairman of the Board of Director and the General Director are both CCP members and at the same time hold the functions of the Secretary and Deputy Secretary of the Party Committee, respectively), Suzhou Titan (at least one member of the Board of Directors is a CCP member), Fuchuan Yifan (the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors are both CCP members and at the same time hold the functions of the Secretary and Deputy Secretary of the Party Committee, respectively), and Shanghai Taisheng Wind Power Equipment (the Chairman of the Supervisory Board is a CCP member).
Based on this and other factors, the Commission concluded that "prices or costs of the product concerned, including the costs of raw materials, energy and labour, were not the result of free market forces because they were affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation as shown by the actual or potential impact of one or more of the relevant elements listed therein." On that basis, and "in the absence of any cooperation from the [Chinese government]," the Commission concluded that "it is not appropriate to use domestic prices and costs to establish normal value in this case." Consequently, the Commission "proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, ... ."