Analysis of anti-dumping investigation on hardwood plywood products imported from China to the EU

In October 2024, the European Commission (hereinafter referred to as 'the Commission') announced that it had received a request for an investigation into the application of trade remedies (PVTM) on hardwood plywood imported from the People's Republic of China (China)

Legal basis: pursuant to Article 11(3) of Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on dumped imports from non-member countries of the European Union ('hereinafter referred to as the Basic Regulation').

This article analyses the request for investigation and the process as follows:

1. Request for investigation

The request for investigation (Complaint) was filed on 27 August 2024 by the Greenwood Consortium (‘the complainant/requesting party’).

The request for investigation was filed on behalf of the EU hardwood plywood industry within the meaning of Article 5(4) of the Basic Regulation ([1]).

2. Scope of goods in the request for investigation

The allegedly dumped product is the product under investigation, originating from the People's Republic of China ('the country concerned'), currently classified under HS codes ex 4412 31, ex 4412 33 and ex 4412 34 (CN and TARIC codes are 4412 31 10 80, 4412 31 90 00, 4412 33 10 12, 4412 33 10 22, 4412 33 10 82, 4412 33 20 10, 4412 33 30 10, 4412 33 90 10 and 4412 34 00 10).

The product under investigation is plywood consisting of panels of wood other than bamboo and okoumé, each ply not exceeding 6 mm in thickness, with at least one outer ply of tropical or non-coniferous wood, of the species specified in subheadings 4412 31, 4412 33 and 4412 34, whether or not coated or surface-coated (hereinafter referred to as 'the product under investigation').

The CN and TARIC codes are provided for the convenience of interested parties only and do not affect any changes (if any) in the tariff classification under the HS code.

4. Grounds for consideration:

Allegations of dumping:

The Complainant considers that it is inappropriate to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of subparagraph (b) of Article 2(6a) of the Basic Regulation. In support of the allegations of significant distortions, the Complainant relies on information contained in the Commission's Working Paper on Significant Distortions in the Economy of China for the Purposes of Trade Remedy Investigations dated 10 April 2024 ([2]).

In particular, the Complainant considers that the production and sale of the product under investigation appear to be affected by the distortions referred to, inter alia, in the chapters on land, energy, capital, raw materials, and labor, as well as by distortions affecting the timber industry in particular.

In addition, the complainant relied on publicly available information, in particular the 14th Five-Year Plan for the Development of the Forestry and Grassland Industry (2021-2025), the FAO_China Country Report (2020), the 'Study on the Status of the Plywood Industry in China'([3]) and the Guiding Opinion of the State Administration of Forestry and Grassland on Promoting the High-Quality Development of the Forestry and Grassland Industry ([4]).

In practice, hardwood plywood is usually made from eucalyptus, oak, maple, rubber, etc. These are materials with outstanding strength and hardness, suitable for applications with high load-bearing capacity and long-term durability. With excellent mechanical properties, they are often used in construction projects and furniture manufacturing that require sturdiness. The surface of hardwood plywood has the advantage of being smooth and having few defects, has high aesthetic value, and is easy to paint to create beautiful and quality interior products.

The weight of hardwood plywood is heavier than that of softwood, so it is more solid and stable, but also makes transportation and installation more difficult. However, with good moisture resistance, hardwood plywood can be used in many different environmental conditions, including places with high humidity. The price of hardwood is higher, due to the quality of the product, suitable for projects that require high finishing and long-term use.

In the EU, hardwood plywood is often used in the production of high-end furniture such as cabinets, tables, chairs and other interior decoration products. In addition, this type of plywood is also used in high-end construction projects, making floors, partitions and decorative details that require high durability and precision.

The applicant also relied on additional publicly available evidence of distortions relating to the product under investigation and its raw materials ([5]), as well as the findings of the United States in its anti-dumping and countervailing investigations on hardwood plywood ([6]) and the findings of the EU in a number of recent anti-dumping investigations (i.e., those on okoumé plywood ([7]) and on glass fibre fabrics ([8]).

Thus, in terms of Article 2(6a)(a) of the Basic Regulation, the dumping allegation is based on a comparison of normal value, which is based on the cost of production and sales reflecting the un-distorted price or benchmark, with the export price (ex-works) of the product under investigation when sold for export to the European Union.

The applicant considers that Türkiye (Türkiye) is an appropriate representative country for the for the purpose of establishing normal value. The margin of dumping calculated on this comparative basis is significant for the country concerned.

Based on the information available, the Commission considers that there is sufficient evidence under Article 5(9) of the Basic Regulation to show that, due to the “significant distortions” affecting prices and costs, the use of domestic prices and costs in China is inappropriate, and therefore warrants the initiation of an investigation under Article 2(6a) of the Basic Regulation.

Alleged injury and causation

The complainant has provided evidence that imports of the product under investigation from the country concerned have increased overall in absolute terms and in market terms.

The evidence provided by the complainant shows that the volume and price of the imports under investigation have had, among other consequences, a negative impact on the sales volumes and prices charged by the EU industry, resulting in a significant negative impact on the overall performance and financial position of the EU hardwood plywood industry.

The EU domestic plywood producers have been unable to increase their production. Data from the European Panels Federation shows that total EU plywood production fell by 2.5% from 3.2 million m3 in 2021 to 3.1 million m3 in 2022 and then fell by a further 15% to just 2.6 million m3 in 2023. In fact, EU production last year was at an all-time low, the lowest on record and about half the pre-COVID-19 production of nearly 5 million m3 per year.

Allegations of distortion of raw material prices

The complainant has provided sufficient evidence to suggest that there may be distortions in the prices of raw materials in China related to the product under investigation. According to the evidence in the complaint, raw materials from wood, in particular logs for the production of hardwood plywood, account for at least 17% of the production costs of the product under investigation. Based on a comparison of prices in representative international markets, in particular Turkish statistics, with prices in the relevant country, the complaint establishes that the distortion of raw materials appears to result in prices in China being significantly lower than those in representative international markets.

In Turkey, the main raw materials for the market include logs and sawn timber. These materials are sourced domestically and imported from various countries, depending on their availability and quality. The use of sustainable and renewable resources is a growing trend, with a focus on reducing the environmental impact of wood production.

The wood industry relies heavily on advanced machinery to process raw materials into finished products, including sawmills, plywood production lines and engineered wood production lines for engineered wood products. Inadequate calculation of the components of the price of the product may also result in the product being sold in the export market at a price lower than its actual domestic cost.

Therefore, pursuant to Article 7(2a) of the Basic Regulation, the investigation shall take into account the distortions alleged by the applicant to assess whether a duty lower than the margin of dumping is sufficient to remove the injury caused to the EU by the dumped imports. If, during the investigation, other deviations specified in Article 7(2a) of the Basic Regulation are found, the investigation may also take these into account.

After determining and informing the Member States that a complaint has been filed by the industry in the EU and that there is sufficient evidence to justify the initiation of a procedure, the Commission shall notify the initiation of an investigation pursuant to Article 5 of the Basic Regulation.

5. Further proceedings:

The investigation will determine whether the products under investigation originating in China are being dumped and whether the dumped imports are causing injury to the EU industry.

If the conclusion is affirmative, the investigation will consider whether the application of the measures is in the interests of the Union under Article 21 of the Basic Regulation. In determining whether Article 7(2a) applies, the investigation will also consider the Union interests test under Article 7(2b) of the Basic Regulation.

5.1. Review Investigation Period

The dumping and injury investigation will cover the period from 1 July 2023 to 30 June 2024 (the ‘investigation period’). The review of trends relevant to the injury assessment will cover the period from 1 January 2021 to the end of the investigation period (the ‘review period’).

5.2. Comments on the request and initiation of the investigation

All interested parties wishing to comment on the complaint (including the injury and causation issues) or any aspect of the initiation of the investigation (including the level of support for the complaint) must do so within 37 days of the date of publication of this Notice.

5.3. Dumping determination procedure

Exporters of the product under investigation from the country concerned (China), including those that did not cooperate in the investigation leading to the entry into force of measures, are invited to participate in the Commission investigation.

Exporting producer means any company in the country concerned that produces and exports the product under investigation to the Union market, directly or through third parties, including any related company involved in the production, domestic sale or export of the product under investigation.

5.3.1. Investigation of Exporting Producers in China

a) Sampling Procedure and Some Notes

Given the large number of exporting producers in China involved in this process and in order to complete the investigation within the statutory time limit, the Commission may limit the number of exporting producers to a reasonable number by selecting a sample (this procedure is also referred to as ‘sampling’). Sampling will be carried out in accordance with Article 17 of the Basic Regulations.

In order for the Commission to decide whether sampling is necessary and, if necessary, to select a sample, all exporting producers or representatives acting on their behalf, including those who have not cooperated in the investigation leading to the measures subject to the current review, are requested to provide the Commission with information on their companies within 7 days of the publication of this Notice. This information must be provided via TRON.tdi at the following address: https://tron.trade.ec.europa.eu/tron/tdi/form/R825_SAMPLING_FORM_FOR_EXPORTING_PRODUCER.

Exporting manufacturers in China will be required to provide detailed information on the precise activities of the company and all related companies (listed and clearly stating their relationship to the company) involved in the manufacture and/or sale (export and/or domestic) of the product under investigation. Such activities may include, but are not limited to, the manufacture of upstream inputs used in the manufacture of the product, the purchase of the product under investigation or the manufacture of the product under subcontracting arrangements, or the processing or trading of the product under investigation. They will also be required to provide detailed information on the type of relationship involved.

In order to obtain the information necessary for the selection of the sample of exporting producers, the Commission shall also contact the competent authorities of the country concerned and may contact any known exporting producer associations in that country. Where necessary, the exporting producers shall be selected on the basis of the largest representative production, sales or exports which can be investigated in a reasonable time. All exporting producers, the competent authorities of the country concerned and the exporting producer associations shall be informed by the Commission, through their competent authorities, as appropriate, of the enterprises selected for inclusion in the sample.

Once the Commission has received the information necessary for the selection of the sample of exporting producers, the Commission shall inform the parties concerned of its decision. Exporters sampled shall submit completed questionnaires within 30 days of notification of the decision to include them in the sample, unless otherwise specified.

The Commission shall add a note to the file for inspection by interested parties reflecting the selection of the sample. Any comments on the selection of the sample must be received within 3 days of notification of the decision to include them in the sample.

b) Individual dumping margins for exporting producers not included in the sample

Without prejudice to the applicability of Article 18 of the Basic Regulation, enterprises that have agreed to participate in the sample but have not been selected by the Commission shall be considered to have cooperated.

Pursuant to Article 17(3) of the Basic Regulation, cooperating exporting producers not included in the sample may request the Commission to establish their individual dumping margins. Exporting producers wishing to request individual dumping margins must complete the questionnaire and return the completed questionnaire within 30 days of notification of the selection of the sample, unless otherwise provided.

A copy of the questionnaire for exporting producers is available for inspection by interested parties and on the Directorate General for Trade’s website https://tron.trade.ec.europa.eu/investigations/case-view? caseId=2753. The Commission will consider whether non-sampled cooperative exporting producers may be granted individual duties under Article 9(5) of the Basic Regulation.

However, non-sampled cooperative exporting producers requesting individual dumping margins should be aware that the Commission may still decide not to determine their individual dumping margins if, for example, the number of cooperative exporting producers, including those sampled, to be investigated is so large that such a determination would be unduly burdensome and would prevent the timely completion of the investigation.

5.3.2. Additional procedures relating to significant market “distortion” in the country concerned

Under the terms of this Notice, all interested parties are invited to state their views, submit information and provide supporting evidence in relation to the application of Article 2(6a) of the Basic Regulation. Unless otherwise provided, this information and supporting evidence must reach the Commission within 37 days of the publication of this Notice.

In particular, the Commission invites all interested parties to state their views on the inputs and Harmonized System (HS) codes provided in the complaint, to suggest an appropriate representative country and to provide the identity of the producers of the product under investigation in those countries.

Pursuant to paragraph (e) of Article 2(6a) of the Basic Regulation, the Commission shall, as soon as practicable after initiation, notify the parties to the investigation of the relevant sources, including, where appropriate, the selection of an appropriate representative third country, which the Commission intends to use for the purposes of determining normal value under Article 2(6a) by means of a note in the file for inspection by interested parties. The parties to the investigation shall have 10 days to comment on the note, pursuant to paragraph (e) of Article 2(6a).

With a view to the ultimate purpose of selecting an appropriate representative third country, the Commission shall consider whether such third countries are at a similar level of economic development as the country concerned, whether there is production and sale of the product under investigation in such third countries and whether relevant data are available.

In cases where more than one representative third country is represented, the Commission shall, where appropriate, give priority to countries that provide adequate levels of social and environmental protection. According to the information available to the Commission, a suitable representative third country may be Turkey.

Producers in China shall provide information on the materials (raw and processed) and energy used in the manufacture of the product under investigation within 15 days of the publication of this Notice. This information must be provided via TRON.tdi at the following address: https:// tron.trade.ec.europa.eu/tron/tdi/form/AD717_INFO_ON_INPUTS_FOR_EXPORTING_PRODUCER_FORM.

In addition, any factual information submitted for the purpose of determining costs and prices pursuant to subparagraph (a) of Article 2(6a) of the Basic Regulations must be submitted within 65 days of the publication of this Notice.

5.3.3. Investigation of Unrelated Importers

This section covers only importers unrelated to the exporting producer. Importers related to the exporting producer must complete Annex I of the questionnaire for such exporting producers.

Data provided by unrelated importers may also be used in connection with aspects of this investigation other than the determination of dumping.

Unrelated importers of the product under investigation are invited to participate in this investigation, but due to the large number of unrelated importers participating in this process and in order to complete the investigation within the statutory time limit, the Commission may limit the number of unrelated importers to a reasonable number by sampling (this process is also referred to as 'sampling'). Sampling will be carried out in accordance with Article 17 of the Basic Regulation.

In order for the Commission to decide whether sampling is necessary and, if so, to select the sample, all uninvolved importers or representatives acting on their behalf are requested to provide the Commission with information about their companies on request.

The Commission may also contact any known importers' associations. If necessary, importers may be selected on the basis of the largest representative sales volume of the product under investigation in the EU that can reasonably be investigated within the time available.

Once the information necessary for selecting the sample has been received, the Commission will notify the interested parties of its decision on the sample of importers. The Commission will also add a note reflecting the selection of the sample to the file for inspection by interested parties. Any comments on the selection of the sample must be received within 3 days of notification of the sample decision.

In order to obtain the information that the Commission considers necessary for its investigation, the Commission shall provide questionnaires to the sampled uninvolved importers. Such parties shall submit a completed questionnaire within 30 days of notification of the decision on the sample, unless otherwise provided.

5.4. Procedure for determining injury and investigating EU producers

The determination of injury is evidence-based and includes an objective examination of the volume of dumped imports, the impact on prices in the EU market and the subsequent impact of those imports on the EU industry. In order to determine whether the EU industry has suffered injury, EU producers are invited to participate in the Commission's investigation.

Due to the large number of EU producers involved and in order to complete the investigation within the statutory time limit, the Commission has decided to limit the number of EU producers to a reasonable number by selecting a sample (this procedure is also referred to as 'sampling'). The sampling is carried out in accordance with Article 17 of the Basic Regulation.

The Commission has provisionally selected a sample of EU producers. Interested parties can find detailed information in the dossier; they are also invited to comment on the provisional sample. In addition, other EU producers or representatives acting on their behalf who consider that there are reasons to be included in this sample are invited to contact the Commission within 7 days of the publication of this Notice. All comments on the provisional sample must be received within 7 days of the publication of this Notice, unless otherwise provided. The Commission will inform all EU producers and their associations of the final enterprises selected for inclusion in the sample. The EU producers selected for inclusion in the sample will be required to submit a completed questionnaire within 30 days of notification of the decision to include them in the sample, unless otherwise specified.

A copy of the questionnaire for EU producers is available for inspection by interested parties on the DG Trade website (https://tron.trade.ec.europa.eu/investigations/case-view?caseId=2749).

5.5. Procedure for assessing the EU's interests in the event of alleged distortion of raw materials

In the event of distortion of raw materials as defined in Article 7(2a) of the Basic Regulation, the Commission shall conduct an examination of the EU's interests in accordance with Article 7(2b) of that Regulation.

Interested parties are invited to provide all relevant information that would enable the Commission to determine whether it is in the EU's interests to set the level of the measure under Article 7(2a) of the Basic Regulation. In particular, interested parties are invited to provide all information on the availability of stockpiling capacities in China, competition for raw materials and the impact on the supply chain of hardwood plywood products by EU companies. In the absence of cooperation, the Commission may conclude that the application of Article 7(2a) of the Basic Regulation is in the EU's interests.

In all cases, a decision will be taken, pursuant to Article 21 of the Basic Regulation, on whether the application of anti-dumping measures is in the interests of the EU. Union producers, importers and their representative associations, users and their representative associations, trade unions and consumer organisations are invited to provide the Commission with information concerning the interests of the EU.

Information relevant to the assessment of the interests of the Union must be provided within 37 days of the publication of this Notice unless otherwise provided. This information may be provided free of charge or by completing a questionnaire prepared by the Commission. A copy of the questionnaires, including the questionnaire for users of the product under investigation, is available for inspection by interested parties in the file and on the website of DG Trade https:// tron.trade.ec.europa.eu/investigations/case-view?caseId=2753. Information submitted pursuant to Article 21 of the Basic Regulation will only be considered if it is supported by factual evidence at the time of submission.

5.6. Interested parties

Pursuant to Article 127 of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for the implementation of certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code, two persons shall be considered to be related if:

(a) they are officers or directors of the other's enterprise;

(b) they are legally recognised partners in business;

(c) they are employers and employees;

(d) a third party directly or indirectly owns, controls or holds 5% or more of the outstanding voting shares or equity interests of both parties;

(e) one of them directly or indirectly controls the other;

(f) both are directly or indirectly controlled by a third party;

(g) jointly control a third party directly or indirectly; or

(h) are members of the same family (OJ L 343, 29.12.2015, p. 558).

Pursuant to Article 5(4) of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code, ''person'' means an individual, a legal entity and any association of non-legal entities.

In order to participate in the investigation, interested parties, such as exporting producers in China, EU producers, importers and their representative associations, consumers and their representative associations, trade unions and consumer organisations, must demonstrate that there is an objective link between their activities and the product under investigation.

Exporting producers, Union producers, importers and representative associations that have provided information in accordance with the prescribed procedures shall be considered interested parties if there is an objective link between their activities and the product under investigation.

Other parties shall only be able to participate in the investigation as interested parties from the moment they identify themselves and provided that there is an objective link between their activities and the product under investigation. Being considered interested parties shall not affect the application of Article 18 of the Basic Regulation.

5.7. Failure to cooperate

In the event that any interested party refuses access or fails to provide the necessary information within the prescribed time limit, or significantly impedes the investigation, provisional or final conclusions, affirmative or negative, may be drawn on the basis of the facts available, in accordance with Article 18 of the Basic Regulation.

Where it is found that any interested party has provided false or misleading information, it may be disregarded or treated on a case-by-case basis.

If an interested party fails to cooperate or only partially cooperates and the findings are therefore based on the facts available under Article 18 of the Basic Regulation, the outcome may be less favourable to that party than if it had cooperated.

However, the exception to this is that if the interested party demonstrates that the failure to respond electronically is due to force majeure or would result in an unreasonable additional burden or expense, it will not be considered “non-cooperation”. In this case, the interested party must immediately contact the Commission to find an appropriate form of cooperation.