application for continuation of anti …...chinese arw manufacturers may also be exporters of...

PUBLIC FILE VERSION

APPLICATION

FOR

CONTINUATION OF ANTI-DUMPING AND COUNTERVAILING MEASURES

ALUMINIUM ROAD WHEELS

exported from

THE PEOPLE’S REPUBLIC OF CHINA

6 October 2016

Public File Version 6 October 2016

Application for the continuation of anti-dumping measures – ARWs from the People’s Republic of China of 27

List of Attachments Confidential Attachment 1 Wholesale prices in China Non-confidential Attachment 2 Guo Ban Fa [2016] No. 56 Non-Confidential Attachment 3 Industry news Confidential Attachment 4 FOB prices Confidential Attachment 5 correspondence



APPLICATION UNDER SECTION 269ZHB OF THE CUSTOMS ACT 1901 FOR THE CONTINUATION OF A DUMPING AND/OR COUNTERVAILING DUTY NOTICE OR CONTINUATION OF AN UNDERTAKING

I hereby request, in accordance with section 269ZHB of the Customs Act 1901 (the Act) that the Minister:

continue a dumping duty notice, and continue a countervailing duty notice

in respect of the goods the subject of this application. I believe that the information contained in this application:

provides reasonable grounds for continuation of the anti-dumping measure; and

is complete and correct to the best of my knowledge and belief.

Signature: Name: Bill Davidson Position: Director Company: Arrowcrest Group Pty Ltd ABN: 71 007 521 280 Date 6 October 2016

X

X



1. Provide details of the name, street and postal address, of the applicant seeking the continuation.

The applicant seeking the continuation of anti-dumping and countervailing measures applicable to aluminium road wheels (ARWs) exported from the People’s Republic of China (China) is:

Arrowcrest Group Pty Ltd ABN 71 007 521 280 Trading as ROH Light Metal and ROH Wheels Australia 34 Burleigh Avenue Woodville North South Australia 5012 PO Box 2466 Regency Park South Australia 5942 Tel (08) 8468 4100

2. Provide details of the name of the contact person, including their position, telephone

number and facsimile number, and email address.

The contact details of personnel at Arrowcrest Group to assist with this application are as follows:

This application for continuation of anti-dumping and countervailing measures on aluminium road wheels exported from China has been prepared with the assistance of :

j

3. Provide the names, addresses, and telephone numbers of other parties likely to have an interest in this matter.

Arrowcrest is the largest manufacturer of ARWs in Australia. Dragway Performance Engineering Pty Ltd (Dragway) also manufactures ARWs and is a relatively smaller manufacturer of ARWs .



The contact details of personnel at Dragway to assist with this application are as follows:

Performance Wheels who supported the original application for measures in 2011 was wound up in 2015.

4. Provide details of the current anti-dumping measures the subject of this continuation

application, including :

Tariff classification;

The countries or companies specified;

Date of publication of the measure.

The goods covered by the anti-dumping and countervailing measures are aluminium road wheels (ARWs) for passenger motor vehicles including wheels used for caravans and trailers, in diameters ranging from 13 inches to 22 inches. The goods include finished or semi-finished ARWs whether unpainted, painted, chrome plated, forged or with or without tyres but excluding aluminium wheels for go-carts and all-terrain vehicles. The goods may be classified to the following subheadings in Schedule 3 of the Customs Tariff Act 1995 :

Table 1 : Relevant HTISC codes.

Tariff Sub-heading/stat code Description

8708.70.91.78 Road wheels of a kind used as components in passenger motor vehicles

8708.70.99.80 Road wheels other than of a kind used as components in passenger motor vehicles

8716.90.00.39 Road wheels for trailers and caravans

The goods the subject of the measures are imported from the People’s Republic of China (China). The measures were first introduced from 5 July 2012 by the then Minister for Home Affairs following consideration of Trade Measures Report No. 181 (Report No. 181). The measures were reviewed in 2015 - refer Report No. 263 dated 30 July 2015. The effect of the review was the publication of combined interim dumping duties (IDD) and interim countervailing duties (ICD) as shown in Table 2. The anti-dumping and countervailing measures are due to expire on 4 July 2017.



Table 2 : Current IDD and ICD rates for ARWs from China.

Exporter Sizes Measure Effective

rate of duty

CITIC Dicastal Co Ltd formerly known as CITIC Dicastal Wheel Manufacturing Co Ltd

All Sizes IDD 8.4%

Ningbo Pilotdoer Wheel Co Ltd supplied directly through Shenzou Yuntong Co Ltd or Versus Wheels Pty Ltd

All Sizes IDD & ICD 19.9%

Zhejiang Yueling Co Ltd supplied directly through Rota Oriens Co Ltd or Hangzhou Tita Group Limited or Shenzhou Yuntong Co Ltd

All Sizes IDD & ICD 50.9%

Jiangsu Yaozhong Aluminium Wheels supplied directly or through Shanghai Arius Motor Co Ltd

All Sizes IDD only

(Floor Price)

N/A

Zhejiang Jinfei Kaida Wheel Co Ltd supplied directly or through Shenzhou Yuntong Co Ltd or Versus Wheels Pty Ltd or Saemie Corporation or TPI Trading Co Ltd or Jaffa Trading Co Ltd or TAP Worldwide LLC

All Sizes IDD & ICD 9%

Danyang Jingyi Aluminum Industry Co Ltd All Sizes IDD & ICD 0.0%

Residual exporters / suppliers All Sizes IDD & ICD 13.9%

All Other Exporters All Sizes IDD & ICD 50.9%

Zhejiang Shuguang Industrial Co Ltd also known as PDW International Subsidiary of Zhejiang Shuguang Industrial Co Ltd supplied directly or through Ningbo Etdz Holdings Ltd

All Sizes Exempt N/A



Table 3 lists the exporters and associated suppliers who are considered residual exporters/suppliers.

Table 3 : Residual exporters/suppliers.

Exporter Supplied by

Lianyungang City Gemsy Wheel Import & Export Co Ltd Qingdao Haoxin Private Ltd

Lioho Light Metal (Kunshan) Co Ltd Same

Shandong Hengyu Auto Parts Co Ltd Same

Sumec Wheels Co Ltd Sumec Machinery and Electric Co

YHI Advanti Manufacturing (Suzhou) Co Ltd YHI Manufacturing (Singapore) Pte Ltd

Zhejiang Autom Aluminum Wheel Co Ltd Same

Zhejiang Tailong Aluminum Wheel Co Ltd Zhejiang Tailong Technology Co Ltd or Shenzhou Yuntong Co Ltd

Zhejiang Xinghui Aluminum Wheel Co Ltd Same

YHI Manufacturing (Shanghai) Co Ltd Same

5. Provide a detailed statement setting out the reasons for seeking the continuation of the anti-dumping measures. An application must establish reasonable grounds for asserting that the expiration of the anti-dumping measure(s) might lead, or be likely to lead, to the recurrence of the material injury that the measure(s) are intended to prevent.

(i) The Goods – Aluminium Road Wheels

As indicated above, the goods the subject of this application are aluminium road wheels (ARWs) exported from China.

(ii) Application coverage

The coverage of the measures for ARWs extends to all exporters in China except for Zhejiang Shuguang Industrial Co Ltd. Part A – Will the dumping continue or recur ?

(iii) FOB prices are now lower than the dumped prices determined in Report No. 181.

There is no evidence that indicates that dumping has ceased. In fact Arrowcrest’s research has revealed that the average FOB export prices for ARWs from China to Australia in 2016 are the dumped prices determined in Report No. 181 when the measures were first applied in 2012. (See also Table 7, page 19.)

(iv) Dumping and subsidy margins determined in Report No. 181 and Report No. 263. The dumping and subsidy margins on ARWs from China were originally determined in Report No. 181, dated 12 June 2012.



In Report No. 263, dated 30 July 2015, the Commissioner confirmed that ARWs from China continued to be exported at dumped and subsidised prices and that there had been changes to the normal values, export prices, NIP and amount of countervailable subsidies received by exporters of the goods. A comparison of the dumping and subsidy margins for 2012 and for 2015 confirms that :

exports of ARWs from China continue to be at dumped and subsidised prices; and

since measures were first introduced in 2012 the dumping and subsidy margins have increased.

Table 4 : Comparison of dumping and subsidy margins in 2012 and 2015.

Dumping margin Subsidy margin

Exporter 2012 2015 2012 2015

CITIC Dicastal 6.3% 15.14% <2% N/A

Pilotdoer 19.9% 25.6% 4.4% 11.0%

Jinfei Kaida 5.6% 11.5% 2.8% 5.4%

Zhejiang Yueling 9.9% 51.6% 5.1% 23.4%

Residual Exporters --- 14.1% --- 11.1%

Uncooperative and all other exporters

29.3% 51.6% 58.8% 64.8%

(v) Anti-dumping actions by other countries

In addition to Australia, anti-dumping measures currently apply to exports of ARWs from China in the following jurisdictions :

the European Union (EU); and

the Republic of India (India). The EU is currently reviewing an application for continuation of the anti-dumping measures applicable to exports of ARWS from China

1. The measures have been in place since 2010

2.

Anti-dumping measures in India have been in place since 2014

3.

Chinese ARW manufacturers may also be exporters of aluminium motorcycle wheels which are the subject of an anti-dumping investigation recently commenced in Argentina.

1 Expiry Review of the anti-dumping measures applicable to imports of certain aluminium wheels originating in the

People’s Republic of China (2015/C 355/06). R628. http://trade.ec.europa.eu/tdi/case details.cfm?id=2144 2 Council Regulation (EU) No 964/2010 of October 2010.

http://trade.ec.europa.eu/doclib/docs/2010/october/tradoc 146833.def.en.L282-2010.pdf 3 Notification No. 21/2015 – Customs (ADD).

http://pdicai.org/docs/Notification No 21 2015 Customs (ADD) 255201511122271.pdf



As noted in Report No. 263, “in making its market situation assessment for China, the Commission finds that

5:

the GOC continues to influence the upstream Chinese aluminium industry via broad macroeconomic policies, as well as implementing policies and taxation initiatives;

this influence is likely to have materially distorted competitive conditions and both directly affected the price and supply of the main raw material used in the manufacture of ARWs (primary aluminium and aluminium alloys A356 and A356.2);

as the primary and alloyed aluminium markets are upstream to the ARWs market, the aluminium costs incurred by Chinese ARW manufacturers during the review period do not reasonably reflect competitive market costs in terms of subs. 43(2)(b)(ii) of the Customs (International Obligations) Regulation 2015 (the International Obligations regulation).

This finding is consistent with the market situation finding made in the original Report No. 181. It is also consistent with the findings made in the aluminium extrusions review investigation No. 248 regarding the influence in the primary aluminium market.”

6

As a result, in Review Investigation No. 263, the Commission constructed normal values for selected exporters based on:

the cost to make of exported goods with the actual aluminium costs as incurred by exporters replaced with a more competitive benchmark cost substitute;

sales and general administrative expenses incurred through the domestic sale of like goods; and

a weighted average net profit, measured as a percentage mark-up on full cost to make and sell prior to substitution of aluminium costs, for each selected exporter.

The aluminium cost substitution was derived as follows:

three month LME contract prices for primary aluminium;

upwards adjustments to reflect trading fees based on the Major Japanese Ports (MJP) premium;

upwards adjustment to reflect the additional cost to produce A356 or A356.2 alloy (where applicable); and

(where applicable) upwards adjustment to reflect domestic delivery costs, based on exporters aluminium purchase price data.

Normal values for residual exporters were established using the weighted average normal value for like goods established for CITIC Dicastal, Jinfei Kaida and Pilotdoer. Normal values for uncooperative exporters were similarly established under subs. 269TAC(6) using the highest weighted average normal value for the review period (inclusive of an aluminium cost substitute) from CITIC Dicastal, Jinfei Kaida or Pilotdoer. It is Arrowcrest’s contention that a market situation for ARWs in China continues to prevail in 2015/16 and that normal values for Chinese exporters will again need to be determined on a constructed cost basis, with an aluminium cost substitution.

5 P.25.

6 Report No 263, Appendix B : Market Situation. P.65~96.



Five year plans (FYP) The Commission has continued to find evidence, for example in the 12

th FYP, of “continued

commitment by the GOC to developing overarching policies and objectives aimed at exercising influence and in some cases control over aluminium or other sectors.” “primary and alloyed aluminium prices in China are lower than they would otherwise be compared with if markets operated in a competitive environment without GOC intervention.”

7

Arrowcrest notes that the Commission’s recent analysis of aluminium markets in Asia

8 does not

resile from this position. Guo Ban Fa [2016] No. 56 The GOC State Council has recently released guidance on “the promotion of central enterprises restructuring and reorganization directs (to) uphold the public ownership dominant position of state-owned economy (and) to increase policy support. “All departments should study the introduction of fiscal, financial, human resources, science and technology, salary distribution, performance evaluation and other supporting policies, and to effectively implement preferential tax policies to create a favorable environment for the central enterprises restructuring and reorganization. “To give full play to the role of various types of funds, actively and steadily introducing various types of social capital to participate in and support of the central corporate restructuring and reorganization”.

9

Arrowcrest submits that Guo Ban Fa [2016] is further evidence of the continuing commitment of the GOC to develop overarching policies and objectives aimed at exercising influence and control over aluminium and other sectors. Taxation and tariff policies There is no evidence to suggest that the GOC’s export tariffs and taxation policies have not continued to cumulatively lead to increased supply and associated reduced prices of primary or alloyed aluminium in China. The International Aluminium Journal reports that “Chinese aluminium taxes and rebates are: 15% export tax on primary aluminium; no export tax on aluminium bars, rods and alloy; 8% VAT rebate on extruded profiles; 13% VAT rebate on tube and pipes as well as on plate, sheet, strip and foil.”

10

In Report No. 263, the Commission concluded that “the continued lack of VAT rebates for primary aluminium or bauxite are (also) likely to discourage the exportation of these products. Hence the Commission continues to view that the GOC’s export tariffs and taxation policies have cumulatively led to increased supply and associated reduced prices of primary aluminium in China.”

11

7 Report No. 263, Appendix B: Market Situation. P.59~85.

8 Analysis of Steel and Aluminium Markets Report to the Commissioner of the Anti-Dumping Commission, August

2016 9 See Confidential Attachment 2.

10 A long way to recovery, Volume 91, December 2015. P.19.

11 P.77.



GOC intervention in the coal industry According to the International Institute for Sustainable Development, “China is supporting the coal industry through the provision of billions of dollars’ worth of subsidies to consumers and producers” and that “in the electricity sector, coal remains the dominant fuel.” “Producer subsidies to coal have a number of impacts on downstream sectors. First, the subsidies reduce the effective cost of production, thereby increasing supply. The increased supply creates a downward pressure on prices and an upward pressure on consumption.”

12

GOC intervention in energy pricing Information obtained by the Commission as part of the review into aluminium extrusions suggests that the primary aluminium industry receives local and provincial government assistance for electricity. The Commission found that electricity was reported to represent at least 40 percent of the CTM for primary aluminium.

13

More recently, according to the International Aluminium Journal, “there is speculation that the government will reduce the grid power rate by year-end (2015), translating into a cost reduction of about ¥300/ton (USD47/t) for smelters.”

14

On 31 December 2015, Baotou Aluminium (Group) Co., Ltd reported on its website that China’s National Development Reform Commission had “decided to cut the country’s coal-fired power tariff and general commercial and industrial electricity prices. National coal-fired electricity price per kilowatt-hour down to about 3 cents, reduced amplitude with general business sales price, the price adjustment since January 1, 2016. The price adjustment is to implement the Central Economic Work Conference to productivity, reduce costs, reduce the burden on enterprises, the latest move to promote structural optimization.” In May 2016, the Wall Street Journal reported that the largest producer of aluminium in China, the state-owned Aluminum Corporation of China, (Chalco), had “said in October one of its units would shut down a roughly 500,000-ton-per-year smelter in the far-western Gansu region as it struggled to make profits. Then Gansu officials slashed the plant’s electricity bill by 30%. “We’re in full production now with 380,000 tons of capacity” said a company sales manager”

15, which is

equivalent to around 34 million ARWs “Another company, Yunan Aluminium Co., obtained nearly 500 million yuan ($77 million) in subsidies since late 2015, securities filings show. In the first half of 2015, the company says its production of alumina – the starting material for smelting aluminium metal – jumped 40%, even as revenue sank amid weakening prices.”

16

Arrowcrest submits that these reports confirm that the GOC continues to intervene in pricing the input costs of energy for aluminium and alloyed aluminium in China, such that prices for aluminium products from China, including ARWs, are lower than they should otherwise be.

12

Coal and Renewables in China GSI Report, October 2015. 13

SEF 263, P.100. 14

A long way to recovery, Volume 91, December 2015. P.18. 15

China continues to prop up its ailing factories, adding to global glut. 9 May 2016. www.wsj.com/articles/chinese-exports-surge-amid-overcapacity-at-home-1462746980

16 Id.



GOC Stockpiling In Report No. 263, the Commission concluded that “the cumulative impact of (stockpiling)...would have led to an overall increase in the supply of aluminium, and an associated drop in the cost of aluminium products.”

17

In Report No. 148, the Commission “understood that the State Bureau of Material Reserve (SBMR)...continues to exert influence on the Chinese primary aluminium market” by stockpiling and selling primary aluminium when it considers necessary. Moving forward to December 2015, The International Aluminium Journal reports that six companies including “state giants like Aluminium Corporation of China (Chinalco) and the State Power Investment Corporation” “are currently establishing a joint venture to stockpile aluminium – starting with at least one million tonnes”.

18

In its recent analysis report, the Commission also notes that “continuing stockpiling of aluminium – financed by interest payments from the Strategic Reserves Bureau – will occur in 2016, with as much as one million tonnes of aluminium being purchased at 12,500 RMB (which is higher than the current LME price).

19

On the basis of the available evidence Arrowcrest submits that as a result of continuing GOC intervention in the aluminium industry, including via stockpiling, it is likely that aluminium in China continues to be sold at below cost. Chinese aluminium smelters operating at a loss In Report No. 263 the Commission found that:

1. domestic aluminium is sold below the cash cost of production; and 2. Chinese smelters are operating at a loss.

20

In December 2015, The International Aluminium Journal reported that “at a price level of ¥10,000/t (ton), around 90% of China’s primary aluminium smelters are operating at a loss, according to consultancy AZ China. Nonetheless, the local governments want smelters to operate despite losses for social and employment reasons. Analysts remain skeptical that China’s aluminium producers will close capacity, even as they make losses.”

21

17

P.78. 18

Sunrise in the East, Volume 92, March 2016. P.19. 19

Analysis of Steel and Aluminium Markets Report to the Commissioner of the Anti-Dumping Commission, August 2016. P.56.

20 Report No. 263. P.83.

21 A long way to recovery, Volume 91, December 2015. P.18.



“For example, there have been increasing reports in recent times of so-called ‘zombie’ companies in aluminium manufacturing. These companies are financially unviable, or unable to repay debts, but are being supported and prevented from bankruptcy by local governments, in the hope a recovery in aluminium prices would allow them to return to profitability. “The Commission found in its aluminium road wheels investigation that the impact of Chinese Government influences on supply are extensive, complex and manifold.”

23

Conclusion on market situation In Report No. 263, the Commission found that “the various influences exerted by the GOC over the primary aluminium sector (results in) downwards price impact on the price of primary aluminium”, and “SHFE prices were below production costs during the review period”.

24

“Direct intervention by the GOC in the form of taxes, tariffs, export licences and other measures for the primary and alloyed aluminium sectors, are likely to have impacted the supply and price of ARWs through the reduction of input prices through the impact of the reduced price of aluminium, which is the main cost of production. Reduced costs of production would, all other things being equal, lead to increased supply in the market as producers are able to supply more product at any given price. In this case, the market price would be (higher) than without the distortionary government policies that depressed primary aluminium prices.”

25

Arrowcrest has found no evidence to suggest that the GOC no longer influences the Chinese aluminium industry (as determined in recently published Report No. 263), or that production levels and prices for aluminium in China are now determined by normal market forces of supply and demand. Arrowcrest submits that the available information confirms that the GOC continues to play a significant distorting role in the aluminium industry in China by applying policies that continue to influence the raw material input aluminium used in the manufacture of ARWs. The independent information confirms that a market situation for ARWs continues to prevail in China in 2015/16 and that normal values must be determined on a constructed cost methodology as applicable in Report No.’s 181 and 263. Aluminium benchmark cost substitution Arrowcrest submits that, as a result of continued GOC influence and intervention in the Chinese aluminium industry, domestic prices for pure aluminium and alloyed aluminium remain materially distorted and unsuitable for normal value purposes. Arrowcrest further submits that replacement of Chinese domestic prices for pure aluminium and alloyed aluminium with a benchmark cost is necessary to provide a fair and reasonable reflection of competitive market costs not influenced by the GOC. The suitable benchmark cost substitute should be derived using the methodology applied in Report No. 263.

26

To this end, Arrowcrest provides 3-month forward contract LME pricing data for pure aluminium together with the associated MJP premiums at Confidential Attachment 3.

23

Id P.54-55. 24

P. 82. 25

Id. P. 84. 26

P.85-90.



Compounding the gravity of the situation, Harbor Intelligence predicts that “China will produce about 39 million tons of aluminium by 2020, more than 75% increase from 2010.”

29

For ARWs, according to data from the China Association of Automobile Manufacturers, China exported 322,990 metric tonnes of aluminium alloy wheels globally from January through May 2016 alone.

30 (At an average finished weight of around 11kg per wheel this equates to around 29 million

wheels in just five months.) The following graph depicts exports of ARWs from China to global destinations, in metric tonnes shipped, for the period Jan’15 to June’16.

31 (At an average 11kg per wheel this equates to around

107 million ARWs over eighteen months.)

29

Aluminium prices rangebound, as US Appeals Court Rejects Price-Fixing Claims, http://www.economiccalendar.com/2016/08/09/aluminum-prices-rangebound-as-us-appeals-court-rejects-price-fixing-claims .

30 Aluminium Insider 15 July 2016. http://aluminiuminsider.com/argentina-opens-anti-dumping-probe-over-

chinese-aluminium-alloy-wheel-imports/ . 31

See Confidential Attachment 4.



Additionally, the magnitude of the dumping margins, recently affirmed in Report No. 263, has increased since measures were first introduced in 2012. Arrowcrest considers that this is clear evidence of the extremity of the dumping the exporters are willing to pursue in order to preserve their share of the Australian market.

The Commission should therefore conclude that dumping would continue if the measures were allowed to expire. Part B – Will subsidisation continue ? Arrowcrest notes that from the Commission’s recent analysis of Asian steel and aluminium markets, the Commission considers that “(t)he Chinese government offers a variety of subsidies to domestic aluminium manufacturers” including:

Government purchases of aluminium stocks

raw material subsidies, such as discounted alumina pricing and subsidised energy prices (including for electricity and coal)

favourable lending terms

capital support and grants

logistical support

subsidised land and infrastructure “Primary and alloyed aluminium is a major cost component in fabricated aluminium. For example, the Commission found that the cost of primary and alloyed aluminium inputs averaged 61 per cent across certain exporters of aluminium road wheels. The Commission considers that lower prices for these inputs would either reduce the price of manufactured aluminium products (to the extent the lower costs are passed on) or increase the profitability of these products (which would provide an incentive for increased production).”

34

Additionally, Arrowcrest submits that the subsidy programs confirmed as continuing in Report No. 263, indicate that the GOC continues to also provide a broad range of countervailable subsidies to ARW manufacturers in China, as shown in Table 8 below.

Table 8 : Subsidy programs for ARWs from China.35

Prog no.

Program name Program type

Countervailable in respect of ARWs ?

1 Aluminium provided by government at less than fair value Provision of goods

Yes

4 Preferential income tax for hi-tech enterprises Tax Yes

5 Preferential tax policies for Western Development “Go West” strategy

Tax Yes

13 Preferential tax policies for enterprises transferring technology Tax Yes 14 Preferential tax policies for enterprises making little profits Tax Yes

21 Grants for encouraging the establishment of headquarters and regional headquarters with foreign investment

Grant Yes

29 Patent award of Guangdong Province Grant Yes

31 Exemption of tariff and import VAT for imported technologies and equipment

Tax Yes

35 Matching funds for international market development for SMEs Grant Yes 36 Innovative Experimental Enterprise Grant Grant Yes

34

Analysis of Steel and Aluminium Markets Report to the Commissioner of the Anti-Dumping Commission, August 2016. P.55.

35 Report No. 263. P.32~33.



37 Special support fund for non-State owned enterprises (NSOEs) Grant Yes 38 Venture investment fund for hi-tech industry Grant Yes 39 Superstar Enterprise Grant Grant Yes

40 One-time awards to enterprises whose products qualify for “Well Known Trademarks of China” or “Famous Brands of China”

Grant Yes

41 Technology assist Grant Yes 42 Export subsidies Grant Yes 43 SME Assist Grant Yes

44 Assistance for closing down small thermal power units in Zhejiang Province

Grant Yes

46 Government incentive for the top taxpayer of the year – Qinhuangdao City

Grant Yes

47 Financial Support from China Postdoctoral Science Foundation Grant Yes 48 Foreign Trade Public Service Platform Development Fund Grant Yes 50 Patent Application Fee Subsidy Grant Yes 51 Enterprise Development Grant Yes 53 New product Trial Production Grant Yes 56 Patent grants Grant Yes 57 Government quality award Grant Yes 58 Award to open economy Grant Yes 59 Assistance to importer & exporter fair trade program Grant Yes 60 Assistance fund for import Grant Yes 61 Award for the growth of local income tax (live longer) Grant Yes 62 Refund of local water conservancy fund Grant Yes 63 Award for IPO Grant Yes

Additional subsidies In this continuation application for ARWs, Arrowcrest requests the Commission to review the existence and application of additional subsidies, including:

interest free loans and the provision of electricity at less than adequate remuneration36

; and

subsidy programs for aluminium extrusions that may also be countervailable with respect to ARWs, as described in Tables 9 and 10 below.

Table 9 : Subsidy programs for aluminium extrusions from China.

37

Prog no.



3 Provincial Scientific Development Plan Fund Grant

4 Export Brand Development Fund Grant

7 Research & Development (R&D) Assistance Grant Grant

9 Training Program for Rural Surplus labour Force Transfer Employment

Grant

21 Tariff and VAT Exemptions on Imported Materials and Equipment Tax 47 Preferential tax policies for high and new technology enterprises Tax

48 Provincial Government of Guangdong tax offset for R&D Tax 56 PGOG special fund for energy saving technology reform Grant 58 Development assistance grants from the ZHTDZ Grant

36

See also Report No. 237 Silicon Metal - People’s Republic of China. P.43. 37

Anti-Dumping Commission Report No. 287 Certain Aluminium Extrusions exported from the People’s Republic of China, 28 September 2015. P.39~40.



Table 10 : Other subsidy programs for aluminium extrusions from China.38

Prog no.



- Policy Loans to Chinese Aluminium Extrusion Producers (Trade Financing)

Policy Loan

- International Market Exploration Fund (SME Fund) Grant

- Export Rebate for Mechanic, Electronic and High-Tech Products Grant

- Expanding Production and Stabilizing Jobs Fund of Jiangsu Province

Grant

- Assistances for R&D Projects under Funds of Nanning Municipality for Foreign Trade Development

Grant

- Import and Export Credit Insurance Supporting Development Fund for Changzhou

Grant

- Special Fund for External Economy Grant

- Export Increase Fund Grant

- Provision of Land-Use Rights and Fee Exemptions To Enterprises Located in the ZHTDZ

Provision of goods

- Provision of Land-Use Rights to Enterprises Located in the South Sanshui Science & Technology Industrial Park

Provision of goods

- Preferential Tax Policies for the Opening and Development of Beibu Gulf Economic Zone of Guangxi Zhuang Autonomous Region

Tax

- Preferential Tax Policy for HTNEs Tax - Tax Offset for Research & Development Tax

- Exemption from City Construction Tax and Education Tax for Foreign Invested Enterprises

Tax

- Import Tariff and VAT Exemptions for FIEs and Certain Domestic Enterprises using Imported Equipment in Encouraged Industries

Tax

- Refund of Land-Use Tax for Firms Located in the ZHTDZ Tax

- Refund of VAT on Products Made Through Comprehensive Utilization of Resources

Tax

- Fund for Economic, Scientific and Technology Development Grant

- Fund for SME Bank-Enterprise Cooperation Projects Grant - Provincial Fund for Fiscal and Technological Innovation Grant

- Assistance for Science Research and Technology Development Planning Projects of Nanning Municipality

Grant

- Awards of Guangxi Autonomous Region for Emission Reduction of Main Pollutants

Grant

- Guangxi Awards for Private Enterprises designated as Pilot Innovation-Oriented Enterprises

Grant

- Special Funs of Guangxi Autonomous Region for Small Highland of Talents

Grant

- Special Funds of Nanning Municipality for Academic and Technical Leaders of the New Century

Grant

- Special Funds of Nanning Municipality for Small Highland of Talents

Grant

- State Key Technology Renovation Project Fund Grant - Technical Standards Awards Grant

- Financial Supporting Funds of Nanning Municipality for Technology Renovation for Production Safety

Grant

- Financial Assistance (interest subsidy) of Nanning Municipality for Key Technology Renovation

Grant

- Funds for Projects of Science and Technology Professionals Serving the Enterprises

Grant

- Funds of Guangxi Autonomous Region for Enterprises’ Grant

38

United States Department of Commerce, International Trade Administration, Issues and Decision Memorandum for the Final Results of the First Expedited Sunset Review of the Countervailing Duty Order on Aluminum Extrusions from the People’s Republic of China, C-570-968, August 1, 2016. P.10~22.



Technology Renovation

- Funds of Nanning Municipality for Technology Innovation Grant

- Guangxi Technology R&D Funds Grant

- National Funds for Construction of Ten “Key Energy Saving Projects”, “Key Demonstration Bases for Recycling Economy and Resource Saving” and “Key Industrial Pollution Control Projects”

Grant

- National Funds for the Industry Revitalization and Technology Renovation of the Key Fields

Grant

- Special Funds of Guangxi Autonomous Region for Production Safety (Supporting Fund for Eliminating Potential and Seriously Dangerous Projects)

Grant

- Special Funds of Guangxi Beibu Economic Zone for the Development of Key Industries

Grant

- Supporting Funds of Nanning Municipality for “Information-industrialization Integration” and Development of Information Industry

Grant

- Award for Self-Innovation Brand/Grant for Self-Innovation Brand and Enterprise Listing “Income Tax Award for Listed Enterprises”

Grant

- Awards of Guangxi Autonomous Region for Advancement of Science and Technology

Grant

- Awards of Guangxi Autonomous Region for New Products Grant

- Awards of Nanning Municipality for New Products Grant - Awards to Key Enterprises for Large Consumption of Electricity

- Intellectual Property Award Grant

- Special Reward Fund for Industrial Economy Transformation and Upgrading of the Whole District

Grant

- Special Funds for the Development of Five Industries Grant - Guangzhou Innovation Enterprise Fund from Guangzhou Grant

- Industrial Development Fund Grant - Working Capital Loans Discount Grant

Part C – Will material injury recur ?

(xi) In the absence of measures, will future imports of ARWs from China cause injury, or threaten

to cause injury, to the Australian industry ?

Arrowcrest submits that if the anti-dumping and countervailing measures on ARWs from China are allowed to expire, the exporters in China will seek to increase export volumes to Australia. The basis for these concerns include:

the available size of the Australian market;

the relative stability of prices in the Australian market;

the ongoing networks maintained by China exporters in the Australian market;

the attractiveness of the returns on the subsidized input costs for China producers;

the attractiveness of returns resulting from dumped and subsidized prices for ARWs from China; and

the potential for further expansion of the Australian aftermarket over the longer term.

This increase in Chinese exports will likely cause material injury to the Australian industry that the measures were intended to prevent.

(xii) OEM copy wheels.



The availability of OEM copy wheels at dumped and subsidised prices from producers in China also threatens to cause material injury to OEM vehicle distributors in Australia, (as well as intellectual property infringement), including to those OEMs sourcing their replacement and accessory ARWs from the Australian industry.

(xiii) CITIC Dicastal normal values. CITIC Dicastal is the largest global producer of ARWs and is a Chinese State Owned Enterprise (SOE). In Report No. 263 CITIC submitted that it exported ARWs to Australia that it sourced from a variety of sources in China. The Commission found that these outside sources represented a significant proportion of CITIC's Australian sales and hence dumping margins would be more accurate if they reflected sales of ARWs from all such sources.

39

The CTM of CITIC’s ARWs from the other sources was not provided to the Commission so normal values were determined under subs 269TAC(6) as follows:

1. the weighted average monthly CTM incurred by CITIC for its out-sourced ARWs exported to Australia was established using data in a spreadsheet drawn from CITIC's inventory management system;

2. SG&A expenses were determined using quarterly weighted average costs based on costs reported in CITIC's domestic SG&A worksheet; and

3. a profit rate was calculated by comparing weighted average CTMS values for all ARWs (excluding an aluminium cost substitute) with the sales values of corresponding like goods as shown in CITIC's domestic sales spreadsheet.

Arrowcrest submits however that as the CTM for CITIC’s out-sourced ARWs was not verified at source, the Commission must now, as a crucial step in this continuation review, ensure that the actual CTM for CITIC’s out-sourced ARWs is verified and properly adjusted to include:

1. an in-store alloyed aluminium cost substitute; plus 2. SG&A expenses for the out-sourced suppliers for sales to unrelated parties; 3. an amount for delivery from the out-sourced suppliers for sales to unrelated parties; 4. an amount for profit for the out-sourced suppliers for sales to unrelated parties; 5. an amount for SG&A expenses for CITIC; and 6. an amount for profit for CITIC derived from the AM sector where scale and profit is in

keeping with a non-SOE enterprise against whom Arrowcrest must compete in a market the size of Australia. (In other words, CITIC's domestic OEM selling prices are not directly comparable to the Australian level of trade (predominantly AMs). This approach has already been taken for Jinfei Kaida, for example.

40)

Furthermore, CITIC's OEM exports to Australia will cease in 2017 when GM-Holden ceases Australian production of their Commodore model. CITIC's OEM domestic sales should therefore be excluded from profit calculations because the sales CITIC would make to Australian customers in future, i.e. shortly after July 2017, will be to the Australian aftermarket. Should CITIC receive a low dumping margin from July 2017, derived from their significant OEM sales volumes in China and un-verified CTM for their out-sourced ARWs, then volumes of AM ARWs could foreseeably be channeled in future through CITIC to Australia, to the significant detriment of the Australian industry.

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P.43~47. 40

Report No. 263, P.49~52.



(ix) Jinfei Kaida normal values.41

Actual CTM for Jinfei Kaida’s out-sourced ARWs must also be verified at source and adjusted in a manner similar to CITIC to include:

1. an in-store alloyed aluminium cost substitute; plus 2. SG&A expenses for the out-sourced suppliers for sales to unrelated parties; 3. an amount for delivery from the out-sourced suppliers for sales to unrelated parties; 4. an amount for profit for the out-sourced suppliers for sales to unrelated parties; 5. an amount for SG&A expenses for Jinfei Kaida; and 6. an amount for profit for Jinfei Kaida derived from the AM sector per Report No. 263.

(x) ADRP Report No. 33

(a) Pilotdoer Arrowcrest notes the ADRP’s comments concerning the Commission’s examination of Pilotdoer’s

domestic sales in review inquiry No. 263 where concerns were highlighted as to whether Pilotdoer’s sales were in the ordinary course of trade. The ADRP quoted the Commission

42:

“The Commission still believes that Pilotdoer’s domestic sales may still have occurred outside the ordinary course of trade, having observed the company’s proposed rate of profit is [redacted]……The Commission views that this issue could warrant further investigation, and will consider how to address this issue.”

The Commission applied a very low 2.7 per cent profit margin for Pilotdoer in its reinvestigation. Arrowcrest submits that this level of profit is entirely unsatisfactory. Arrowcrest anticipates that the Commission will re-examine Pilotdoer’s domestic sales and re-consider the level of profit to be included for the purposes of determining sales in the ordinary course of trade.

(b) Yueling

The ADRP has further examined the information available to the Commission in review investigation No. 263 in respect of exports of ARWs to Australia by Yueling. Yueling was requested by the Commission to provide additional supporting information in respect of its domestic sales for the review investigation period. It would appear from the Commission’s comments in Report No. 263 that Yueling complied with the request. However, the ADRP has noted in its Report No. 263 that the Commission had concerns with the data supplied and repeated the extract from Reinvestigation No. 263 as follows

43:

“As part of the reinvestigation, the Commission assessed the analysis undertaken in Review

263 of Yueling’s cost to make and sell data, which, based on that assessment, indicates that the data appears reasonable.

The Commissioner considers, however, that the information provided to the Commission is not ideal in all respects”.

The Commission therefore was not fully satisfied with the information supplied by Yueling in relation to the exporter’s cost to make and sell.

41

Id. 42

ADRP Report No. 33, paragraphs 29 and 37, P 7 & 11 respectively. 43

ADRP Report No. 33, paragraph 63, P.20.



Arrowcrest submits that the opportunity exists for the Commission to now address this shortfall in information supplied by Yueling.

(xi) Conclusions on dumping and material injury in the absence of measures on ARWs exported from China.

The applicant company Arrowcrest Group is a manufacturer of ARWs in Australia and hereby formally requests the Anti-Dumping Commission to continue the anti-dumping and countervailing measures on ARWs exported from the People’s Republic of China for a further five year period beyond 4 July 2017. Arrowcrest is firmly of the view that should the measures be allowed to expire it is likely that the Australian industry would again be subjected to the dumping and subsidisation resulting in further material injury that the measures were intended to prevent. Arrowcrest has demonstrated in this application that:

exports of ARWs from China have continued whilst the measures have remained in force;

the measures have been effective in ensuring that the Chinese exports of ARWs have been influenced by the operative ascertained export prices (AEPs) and have influenced export prices to Australia since July 2012;

anti-dumping measures continue to apply on ARWs exported from China in both the EU and in India;

Chinese ARW manufacturers may also export aluminium motorcycle wheels which are the subject of an anti-dumping investigation recently commenced in Argentina;

the Commission’s recent analysis of Asian steel and aluminium markets establishes that GOC interventions and trade restrictions in the Chinese aluminium industry have not changed in the intervening period since Report No. 181 was published; and

China continues to increase its production and stockpiles of aluminium creating an oversupply position for raw material inputs used in ARW manufacture.

It is Arrowcrest’s position that:

exports of ARWs from China to Australia in FY 2016 have been at dumped and subsidized prices;

ARW prices in China are artificially low and that a market situation prevails in China with respect of ARW prices;

the expiry of measures will likely result in an increase in export volumes from China into a market that is by global standards relatively large and stable;

in the absence of measures, the export prices of ARWS from China will be injurious to the Australian industry manufacturing like goods;

normal values for CITIC as calculated in Report No. 263 are inappropriate as the CTM for its out-sourced ARWs was not verified at source and may not also include appropriate margins for profit at the source or for CITIC;

normal values for Jinfei Kaida as calculated in Report No. 263 are inappropriate as the CTM for its out-sourced ARWs was not verified at source and may not also include appropriate margins for profit at the source or for Jinfei Kaida;

domestic sales for Pilotdoer are likely to have occurred outside the ordinary course of trade and as a result the level of profit calculated for Pilotdoer in Report No. 33 is unsatisfactory;

cost to make and sell data for Yueling is not fully satisfactory and this shortfall in information must now be addressed by the Commission;

the method applied in Report No. 263 for calculating an appropriate uplift for A356 may be unreliable; and



the Commission must inquire of Chinese ARW exporters whether they have received electricity at beneficial rates (i.e. less than adequate remuneration) throughout the continuation investigation period.

Arrowcrest submits that the Australian industry has demonstrated reasonable grounds to conclude that should the measures on ARWs from China be allowed to expire, there is a strong likelihood that the Australian industry will experience a recurrence of material injury that the measures were intended to prevent. It is therefore recommended that the Commissioner commence a formal investigation into the continuation of anti-dumping measures on ARWs exported from the People’s Republic of China under the Division 6A – Continuation of anti-dumping measures provisions of the Customs Act. Arrowcrest Group Pty Ltd 6 October 2016

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