PROVISIONS ON THE COUNTERVAILING INVESTIGATION OF INDUSTRY INJURY

Ministry of Commerce

Order of the Ministry of Commerce of the People’s Republic of China

No.5

Provisions on the Antidumping Investigation of Industry Injury, Provisions on the Countervailing Investigation of Industry Injury,
Provisions on the Investigation of Industry Injury under Safeguard Measures which have been reviewed and passed by the 5th executive
meeting of the Ministry of Commerce on September 29, 2003, are hereby issued and shall be put into effect after 30 days as of promulgation.

Lv Fuyuan, the Minister of Commerce

October 17, 2003

Provisions on the Countervailing Investigation of Industry Injury

Chapter I. General Provisions

Article 1

The present Provisions are formulated in accordance with the Countervailing Regulation of the People’s Republic of China (hereinafter
referred to as Countervailing Regulation) in order to regulate the countervailing investigation of industry injury.

Article 2

The present Provisions shall apply to to the activities related to the countervailing investigation of industry injury in the light
of the Countervailing Regulation.

Article 3

The Ministry of Commerce of the People’s Republic of China (MOFCOM) shall take charge of the countervailing investigations of industry
injury. As for the countervailing investigations of industry injury involving agricultural products, the responsibility shall be
taken jointly by the MOFCOM and the Ministry of Agriculture.

Chapter II. Determination of Injury

Article 4

The term “industry injury” refers to an actual injury or a risk of actual injury to an existing domestic industry, or the actual encumbrance
of the foundation of a domestic industry resulted from subsidies.

The term “actual injury” as stated in the present Provisions refers to the non-negligible injury that has already been caused by subsidies
to an existing domestic industry.

The term “risk of actual injury” means that the subsidies hasn’t resulted in actual injury to the domestic industry, but there are
evidences showing that actual injury to a domestic industry is clearly foreseeable and imminent unless measures are taken against
it. The term “actual encumbrance” means the retardation of the establishing process and the development of a to-be-established domestic
industry, which results in the failure of the foundation of the domestic industry.

Article 5

In the determination of injury to a domestic industry resulted from subsidies, the following matters shall be investigated:

(1)

The volume of the subsidized imports and the consequential influence of subsidized imports on the price of the domestic like products;

(2)

The consequential influence of subsidized imports on the domestic industry.

The investigation of the subsidized imports shall involve whether there has been a great increase in the subsidized imports either
in absolute terms or in relation to production or consumption of the domestic like product.

The investigation of the consequential influence of the subsidized imports on the price of the domestic like products shall involve
whether there has been a significant price reduction on the subsidized imports or whether the subsidized imports have induced a significant
depression in prices of the domestic like product or prevented price increase of the domestic like product that would have happened.

Article 6

The investigation of the influence of subsidized imports on a domestic industry shall involve an assessment of all relevant economic
factors and indicators which have an impact on the situation of industry. These factors and indicators include the actual and potential
decline in sales, profits, output, market share, productivity, the return on investment, or equipment utilization; the factors that
affect domestic prices; the amplitude of the subsidized imports; the actual or potential adverse effects on the inventories, employment,
wages, growth, ability to raise capital or to make investment etc. In the case that agricultural products are involved, whether a
heavier burden is placed on the government’s support plans should be taken into account.

Article 7

In the determination of the actual injury to a domestic industry by subsidies, the feature of the subsidies and the consequential
influence on trade shall be examined as well.

Article 8

The determination of a risk of an actual injury shall be based on clearly foreseeable and imminent situation, in which if no measure
is taken, actual material injury would have occurred. The determination of a risk of an actual injury shall be based on the facts,
rather than simply on complaints, conjectures or the least possibility.

Moreover, in the determination of a risk of an actual injury, examination shall be made but not limited to the factors as follows:

(1)

The feature of the subsidies and the possible consequential impact on trade;

(2)

A significant increase rate of subsidized imports showing a likely actual increase of imports;

(3)

An increase of the productivity of the producers of the subsidized imports showing a likely real increase of imports. If this indicator
is adopted, one should consider the factor whether there are any other export markets that may take in any additional exports;

(4)

Whether the imported products are being imported at prices that greatly depressing or suppressing the prices of domestic like product,
and it is likely to induce an increase of the demands of imports;

(5)

The inventories of the products product under investigation.

Article 9

In the determination of an actual encumbrance of the foundation of a domestic industry, examination shall be made but not limited
to the factors as follows:

(1)

The foundation and the related preparatory work of the domestic industry;

(2)

The increase of domestic demands and the consequential impact;

(3)

The impact of the subsidized imports on the situation of domestic market;

(4)

The follow-up productivity of the subsidized imported product and the future tendency in the domestic market.

Article 10

Like product refers to a product that is identical to, or in the absence of such a product, one that has characteristics closely similar
to those of the subsidized product under investigation.

Article 11

In the determination of like products, there are a lot of factor that may be taken into account, including the physical characteristics
of the products, chemical features, manufacturing equipment and techniques, purposes of use, substitutability, appraisal of consumers
and producers, distribution channels, and price, etc.

Article 12

The impact of subsidized imports on the domestic industry shall be evaluated on the basis of a separate definition of the production
of the domestic like product. If, on the basis of the techniques of production and the sales and profits of the producers, one cannot
distinguish the production of domestic like product from the production of other products, the impact of subsidized imports shall
be determined by reference to the production of the narrowest product group or scope which include the domestic like product insofar
as the product group or scope can provide sufficient information.

Article 13

In the determination of a domestic industry, one should consider all of the producers of the domestic like product in China, or the
producers whose total output forms the major part of the total output of domestic like product; however, if a domestic producer have
relations with an export business operator or import business operator, or he himself is an import business operator of the subsidized
imports, he may not be considered as the domestic industry.

The term “have relations with” mentioned in the preceding item means that one party controls or influences another party in a direct
or an indirect way, or both parties are controlled or influenced by a third party, or both parties jointly control or affect a third
party in a direct or an indirect way.

Article 14

In the determination of a regional industry, the following factors shall be considered:

(1)

The producers have sold all or nearly all of the like product manufactured by them in the regional market;

(2)

The demands of the regional market aren’t satisfied or aren’t mainly satisfied by the like-product producers in other domestic regions;
and

(3)

Other factors.

Article 15

An accumulative evaluation of the impact of subsidized imports on domestic industry may be made if the subsidized imports come from
more than two countries (regions) and meet concurrently the following requirements:

(1)

The amount of the subsidy for an imported product from a country (region) isn’t minim and the volume of the imports isn’t negligible;

(2)

According to the competition conditions among the subsidized imports and those between the subsidized imports and domestic like product,
it is reasonable to make an accumulative evaluation.

The term “minim subsidy ” mentioned in the preceding item refers to a subsidy whose amount is below 1% of the value of the product;
but for the subsidized product imported from a developing country (region), minim subsidy refers to one whose amount is below 2%
of the value of the product.

Article 16

In the process of the accumulative evaluation, the following factors may be considered:

(1)

The continuity and possibility of the influence of subsidized imports from different countries (regions) on the domestic industry;

(2)

The substitutability between the subsidized imports from different countries and the domestic like product, including such factors
as the demands of special clients, the product quality and other related factors;

(3)

The sales prices, sellers’ quotations and actual transaction prices of the subsidized imports from different countries (regions) and
the domestic like product in the same market of area;

(4)

Whether there are identical or similar distribution channels for a subsidized product imported from different countries (regions)
and the domestic like product, and whether they appear in the market simultaneously;

(5)

Other competition conditions that exist among the subsidized imports and between the subsidized import product and the domestic like
product; and

(6)

Other factors.

Article 17

In the countervailing investigation of industry injury, the MOFCOM shall give users or consumers of the subsidized imports an opportunity
to present their views and evidences.

Article 18

The period subject to countervailing investigation of industry injury shall generally be 3-5 years before the investigation commences.

Chapter III. Industry Injury Investigation

Article 19

When any interested party intends to answer the countervailing investigation of industry injury, it shall submit an application to
the MOFCOM within 20 days from the day when an announcement on the initiation of countervailing investigation of industry injury
is made, and shall carry out relevant registration formalities. At the same time, the applicant shall offer the documents about its
productivity, output, inventories, construction and expansion plans, the volume and amount of the product exported to China, the
volume and amount of the product imported by the import business operators.

Article 20

The interested parties may be:

(1)

Overseas producers export business operators, and domestic import business operators of the products under investigation, or guilds
or other organizations of the producers, export business operators and import business operators of the products under investigation;

(2)

The government of the country (region) of origin and the export country (region) of the products under investigation as well as the
representatives thereof;

(3)

The producers and business operators of domestic like product, or guilds or other organizations of the producers and business operators
of the products; or

(4)

Others .

Article 21

In the case that an interested party takes part in the investigation, he shall present his identification certificate. If the interested
party is an enterprise or any other organization, it shall present its business license and other registration certificates, and
the identification certificate of the legal representative thereof.

In the case that an interested party entrusts an agent to participate in the investigation, it shall present identification certificate
of the agent and a power of attorney. If an interested party entrusts a lawyer as his agent, the lawyer shall come from a law firm
in China and shall practice law in China, and a power of attorney, the business license of the law firm and the law-practice certification
of the lawyer shall be presented.

Article 22

The objects of the MOFCOM’s countervailing investigation of industry injury include domestic producers, domestic import business operators,
domestic purchasers, domestic end consumers, overseas export business operators and overseas producers, etc.

Article 23

The MOFCOM may, whenever necessary, hire experts in the fields of the relevant industry, accounting, economic and trade and law to
provide advisory services. The experts involved shall keep the secrets to themselves.

Article 24

The MOFCOM shall take a lot means to conduct an industry injury investigation, including questionnaires, sampling, hearings, technical
authentications, on-the-spot investigation and other forms.

Article 25

The questionnaires issued by the MOFCOM to the interested parties include domestic producer questionnaires, domestic importer questionnaires,
domestic consumer questionnaires, overseas producer and overseas exporter questionnaires, and other types of questionnaires

Article 26

An interested party shall offer answers to the questionnaires according to the method and time limit as specified in the questionnaires.
If it is necessary to extend the time limit, it shall, 7 days prior to the time limit for the submission of answers, submit a written
application to the MOFCOM and give an explanation. It is for the MOFCOM to decide whether to extend the time limit or not.

Article 27

The MOFCOM may make on-the-spot investigation to the interested parties. Prior to the on-the-spot investigation, it shall notify the
relevant interested parties of the main purposes and content of the investigation beforehand.

Article 28

On the request of the interested parties or in the need of the investigation, the MOFCOM may, upon the approval of the relevant country
(region), send persons to the said country (region) to make investigations on the productivity, investments in expanding production,
inventories, place of origin or entrepot, the affiliation among the enterprises and other information related to the product.

Article 29

The MOFCOM may request the interested parties to offer or supplement written materials in the light of the relevant requirements,
and the interested party may, on his own initiative submit written materials to the MOFCOM as well.

Article 30

On the request of the interested parties or whenever the MOFCOM considers it necessary, a hearing of industry injury may be held.

Article 31

In the case that an interested party who takes part in the industry injury investigation considers it necessary to keep the materials
and the relevant evidence secret, it shall, when submitting the materials to the MOFCOM, provide simultaneously a non-confidential
summary of the materials, or submit the confidential text and an open text of the materials.

The non-confidential summary and open text shall contain reasonable substantial content of the confidential information. The MOFCOM
may, in the absence of substantial content, order the interested party to supplement relevant content and evidential materials.

Article 32

In the case that any interested party who participates in the industry injury investigation fails to provide non-confidential summary
or open texts of the materials submitted by it, or fails to provide good reasons, the MOFCOM may reject to take the materials into
account. If the MOFCOM does not consider it necessary to keep the materials submitted by an interested party secret, it may request
the interested party to withdraw its secrecy application.

Article 33

During the process of industry injury investigation, any interested party subject to the industry injury investigation shall faithfully
present the information and offer relevant materials. If any interested party fails to do so, or fails to provide necessary information
within a reasonable time limit, or seriously intervene the investigation by any other means, the MOFCOM may judge on the basis of
the facts it has already obtained and the best information available.

Chapter IV. Supplementary Provisions

Article 34

When an interested party, who takes part in the industry injury investigation, submits any document or evidential material to the
MOFCOM, it shall submit the original Chinese text in quintuplicate accompanied by the corresponding electronic text (computer floppy
disks or CDs) in triplicate.

Article 35

Chinese language prescribed by the administrative department of languages of the state as the formal language shall be taken as the
prevailing language by the MOFCOM in the industry injury investigation Any document, materials or information offered by any interested
party shall be written in standard Chinese. As for any materials in any other language, a Chinese version and the original text shall
be submitted, and the Chinese version shall prevail. Any materials in the non-prevailing languages without attaching a Chinese version
shall not be regarded as valid and lawful evidential material

Article 36

The authority to interpret the present Provisions shall remain with the Ministry of Commerce.

Article 37

The present Provisions shall go into effect 30 days after the date of promulgation. At the same time when the present Provisions are
implemented, the Provisions on the Countervailing Investigation of Industry Injury and Award (Order No. 46 (2002) of the former State
Economic and Trade Commission shall be abolished.