WORLD TRADE
ORGANIZATIONG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
6 November 2003
(03-5949)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT
ON SAFEGUARDS BEFORE TAKING A PROVISIONAL
SAFEGUARD MEASURE REFERRED TO IN ARTICLE 6
NOTIFICATION UNDER ARTICLE 9, FOOTNOTE 2
OF THE AGREEMENT ON SAFEGUARDS
EUROPEAN COMMUNITIES
(Mandarins and other Citrus Fruits)
The following communication, dated 6 November 2003, has been received from the
Delegation of the European Commission.
_______________
I enclose for your attention a notification pu rsuant to Article 12.4 of the Agreement on
Safeguards regarding the proposal to adopt provisional safeguard measures on imports of mandarins
and other citrus products, and pursuant to Article 9, footnote 2 concerning the exclusion of developing
countries.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 2
A. NOTIFICATION UNDER ARTICLE 12.4 BEFORE TAKING PROVISIONAL SAFEGUARD MEASURES
1. Specify the product subject to the proposed provisional safeguard measure
The product in respect of which it is proposed to apply provisional safeguard measures are
certain prepared or preserved mandarins (including tangerines and satsumas), clementines, wilkingsand other similar citrus hybrids, not containing added spirit, containing added sugar (‘the product
concerned’).
The product concerned is currently classified within CN codes 2008.30.55 and 2008.30.75.
These CN codes correspond to the product concerned in immediate packings of a net content
exceeding 1kg, and of net content not exceeding 1kg, respectively.
2. Specify the proposed provisional safeguard measure
The proposed provisional safeguard measure consists in the establishment of  temporary tariff
quotas in respect of the product concerned, in excess of which an additional duty of € 155 per tonne
will be required to be paid.  The volume of the proposed tariff quotas is 11,389 tonnes for the product
concerned originating in the People’s Republic of China (PRC), and 906 tonnes for the productconcerned originating in all other countries. It is proposed to administer the tariff quotas on the basis
of import licenses.
3. Specify the proposed date of introduction  of  the proposed provisional safeguard
measure
The proposed date of introduction of the provisional safeguard measure is 9 November 2003.
4. Specify the expected duration of the provisional safeguard measure
The provisional safeguard measure will apply for 154 days from the date of its introduction.
5. Provide the basis for:
(i) making a preliminary determination, as provided for in Article 6, that increased
imports have caused or are threatening to cause serious injury; and
UNFORESEEN DEVELOPMENTS
After the conclusion of the Uruguay round, a series of events occurred which led to a sharp
increase in imports of the product concerned, particularly from PRC.  This series of events (described
below) could not have been foreseen at the time of conclusion of the Uruguay round.  It should be
noted that the analysis focuses exclusively on PRC, as more than 98% of imports of the product
concerned into the European Union (EU: also the term ‘the Community’ is used interchangeably in
this notification) are of Chinese origin.
Until the mid 1990’s, PRC’s capacity for producing the product concerned was large enough
to meet domestic demand and exports to its main and most profitable export markets namely Japan
and the USA (West Coast).  Chinese exports to the EU were at a low level and were relatively stable.
The table below provides estimates of worl d-wide consumption and of PRC's production
capacity, production, exports and domestic consumption for the canning seasons 1996/97 to 2002/03
on an indexed basis where estimated world-wide consumption in 1998/99 is equal to 100.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 3
1998/99 1999/00 2000/01 2001/02 2002/03
World-wide
consumption100 115 113 137 141
Chinese
production
capacity70 96 113 139 148
Chinese
production57 82 86 109 124
Chinese
domestic
consumption591 2 1 6 2 0
Chinese total
exports(estimated)48 65 70 96 104
Source  - Eurostat and other publicly available information as well as information submitted in the investigation.
The data is indexed because the party providing the Chinese domestic production capacity, Chinese production,
Chinese domestic consumption and Chinese exports requested that this be treated as confidential.  Pending adecision on this request and for the purposes of the preliminary determination the data has been indexed.However, this is without prejudice to the decision of the European Commission under Article 9 of CouncilRegulation (EC) 3285/94.
In 1998/99, Chinese domestic consumption was 5, whilst production capacity was 70, with
actual production of 57 (greatly in excess of what was needed to supply domestic needs).  By
2002/03, Chinese domestic consumption had increased to 20, but Chinese production capacity had
increased to 148, with actual production of 124 (88% of estimated world-wide consumption).
Although Chinese consumption has been increasing rapidly, it remains low in real terms.  Whilst
worldwide consumption has been increasing, it has done so gradually (by around 7% per annum).  Inthese circumstances, it was not foreseeable that Chinese production capacity would soar by 16% per
annum and outstrip world-wide co nsumption by 2002/03, leaving no room for other producers.  As
PRC’s domestic consumption has increased to only 20, the increase in Chinese production capacity
and production clearly increased pressure on PRC to export very large quantities (and indeed, exports
more than doubled from 48 to 104 in the period considered).  These figures can be given some contextby considering that Chinese exports in 2002/03 were more than three times total estimated
consumption in the European Community in that year.
It appears that the EU/US trade dispute over hormones in meat was also a factor in the
increase in Chinese exports to the EU.  The list of products that the US proposed to make subject to
retaliatory measures in relation to that dispute included the product concerned.  This appears to have
been perceived by Chinese producers as providing an opportunity to substantially increase their
exports to the US in replacement of the EU product, and encouraged considerable expansion of
Chinese canning capacity.  However, the opportunity never materialised, and PRC was faced with
significant excess capacity for which it had to find alternative outlets.  The most attractive marketappeared to be the EU, and PRC massively increased its exports to the EU market.
A change in consumer preferences can also be observed.  Traditionally, there was a consumer
perception that canned mandarins are an expensive product, and there was a consumer preference for
small can sizes (312 grammes).  The larger can sizes were only purchased by the catering trade (e.g.
bakeries which would use mandarins for decorating cakes).  As from 2001/02 consumer preferences
have changed and the larger can size (850 grammes) is increasingly purchased by consumers.  Indeed,since 2001 retail sales of the large can size have increased by around 10% per annum.  This
development may have assisted certain large importers/retailers to obtain very low prices fromG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 4
Chinese exporters and import and resell large quantities of Chinese satsumas in 850 grammes cans at
very low prices.  This change in consumer preference was unforeseen, and was one further
unexpected factor which led to the sharp increase in Chinese imports, in particular between 2000/01
and 2001/02, and its continuing high level.
Chinese monetary policy, in terms of which th e yuan is pegged to the US$ at 8.28 yuan/US$,
despite perceived differences in the relative values of the two currencies, has also encouraged exports.
This has made it much more likely that the product concerned is exported rather than being sold on
the Chinese domestic market.  Further, following the unexpected fall in the value of the US$ against
the € since October 2000, the yuan lost around 26% of its value compared to the € making the
European market all the more attractive to Chinese exporters.
In conclusion, it is the preliminary analysis of the European Commission (‘the Commission’)
that the unforeseen development which caused the increase in imports to the EU consists of a number
of concurrent factors: the unprecedented increase in Chinese production capacity (which exceeds
2002/2003 estimated world consumption) leading to high pressure to export; the possibility that USretaliatory measures in the hormones dispute would exclude the EU product from the US, encouraging
an increase in PRC's capacity and consequently production; a change in consumer preferences from
2001 onwards; and the exchange rate policy of the Chinese government coupled with the unexpected
fall of the US$ since October 2000.  This combination of factors, clearly unforeseeable at the end of
the Uruguay Round, created the conditions for an unprecedented increase in imports to theCommunity.
The developments described above, each of which has contributed to the very large increases
in exports to the EU from PRC, will be investigated further by the Commission at the definitive stage
of this proceeding.
INCREASE IN IMPORTS
The Commission has undertaken a preliminary ex amination of whether the product concerned
is imported into the Community in such greatly incr eased quantities, absolute or relative to total
Community production, and/or on such terms or conditions as to cause, or threaten to cause, serious
injury to the Community producers.  In this respect, the Commission has focused on imports of theproduct concerned in the most recent period for which data is available in absolute terms and relative
to production.  The table below shows the development of imports in absolute terms and against total
Community production for each of the years 1998/99 to 2002/03.
TABLE
1998/99 1999/00 2000/01 2001/02 2002/03
EU imports
from third
countries16,347 17,573 20,335 44,804 38,066*
Total
Community
Production81,869 75,767 60,462 60,329 43,331**
Imports/
Production20% 23% 34% 74% 88%
* A simple mathematical extrapolation (n/9*12) based on the first 9 months data (1.10.02 to 30.06.03)
**All Community production for the 2002/03 season took place in the six month period to 31.3.03.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 5
The following table further demonstrates the increasing trend in imports by comparing the
figures for the first 9 months of each season (i.e. October to June).  The figures confirm that the
imports in the final period represent a large increase (around 100%) over the figures for 2000/01 and
before.
Nine month
comparison
(October to June)1998/99 1999/00 2000/01 2001/02 2002/03
Volume in tonnes 12,156 12,425 14,535 30,640 28,474
Index - 1998/99
= 100100 102 120 252 234
In the period between 1998/99 and 1999/00, imports increased by around 7%, from 16,347
tonnes to 17,573 tonnes. In the following year, the ra te of increase grew to around 16% with imports
increasing to 20,335 tonnes in 2000/01.  There then  followed a massive surge in imports between
2000/01 and 2001/02. Imports increased by 120% in a single year to 44,804 tonnes, more than 2.5
times the level of imports in 1998/99.
Imports remained very high in the first 9 months of 2002/03, but the above tables show that,
using a simple extrapolation, imports may fall to 38,066.  While recent intelligence suggests that
imports will reach a higher figure than the above extrapolated figure no reliable data is yet available to
confirm this.
The ratio of imports to total Community production, increased from around 20% in 1998/99
to around 34% in 2000/01 and to around 74% in 2001/02.  Imports are expected to further increase to
around 88% of total Community production in the most recent canning season (2002/03).
It is the Commission’s preliminary conclusion that the increases in imports relative to
domestic production can be considered recent, sudden, sharp and significant.
SERIOUS INJURY
Introduction
In order to make a provisional determination as to whether there is serious injury to the
Community producers of the like product, i.e. a sign ificant overall impairment in the position of the
Community producers, the Commission has undertaken a preliminary evaluation of all relevant
factors of an objective and quantifiable nature having a bearing on the situation of the Community
producers.  In particular, for the product concerned, the Commission has evaluated the developmentof production capacity, production, capacity utilisation, employment, productivity, cash flow, return
on capital employed, captive use, stocks, consumption, sales, market share, price, undercutting and
profitability for the seasons 1998/99 to 2002/03.
The information in this section relates to can ning seasons with extrapolations made where
necessary for the period 2002/03.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 6
Analysis of the Community Producers
(1) Consumption
1998/99 1999/00 2000/01 2001/02 2002/03
Consumption (t) 80,065 74,056 65,676 80,960 71,564
Consumption of the product concerned in the Community was provisionally established on
the basis of the total sales made by the Community producers and other EU producers and total
imports of the product concerned into the Community as reported by Eurostat.
Between 1998/99 and 2000/01, consumption in the Community declined by 18% from 80,065
tonnes to 65,676 tonnes. Between 2000/01 and 2001/02, it grew by 23% to reach its highest level for
the period under examination (80,960 tonnes).  The data extrapolated for the current season (2002/03)
indicate a 12% decline in consumption in that period compared to 2001/02, with consumption closerto its 1999/2000 level.
(2) Production Capacity and Capacity utilisation
1998/99 1999/00 2000/01 2001/02 2002/03
Capacity (t) 126,760 129,260 129,260 129,260 129,260
Capacity Utilisation
(%)65% 59% 47% 47% 34%
The Commission has undertaken a preliminary analysis of the Community producers
production capacity.  For the sake of clarity, the capacity figures given are full season  (1 October to
30 September in the following year) production capacities.  It should be noted that the like product is
produced from November until January using production facilities some of which can be used forprocessing other fruit and vegetables during the remaining part of the year.  However, from November
until January there are no other fruits or vegetables which are available for processing in the regions
concerned (Valencia and Murcia, Spain).
The preliminary investigation showed that overall estimated theoretical production capacity
remained more or less stable throughout the period of the investigation with only one increase
recorded.  That increase (of 2%) occurred between 1998/99 and 1999/00.
Capacity utilisation fell between 1998/99 and 1999/00 (from 65% to 59%).  This fall is
partially explained by the 2% increase in capacity in that year, but the greater part appears to be
explained by a fall in production of 7.5% from 81,869 tonnes to 75,767 tonnes.  Capacity utilisation
fell by a further 12 percentage points in 2000/01 (to 47%).  It remained stable in the following yearbut then fell to 34% (a fall of 13 percentage points ) in the current season.  This sharp fall in capacity
utilisation appears to reflect the fall in production in the same period.
(3) Total Community Production
1998/99 1999/00 2000/01 2001/02 2002/03
Production (t) 81,869 75,767 60,462 60,329 43,331
Total Community production fell between 1998/99 and 2001/02 from 81,869 tonnes to 60,329
tonnes.  Thereafter, production fell by a further 28% in the last season (2002/03) to its lowest level in
the period under examination.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 7
(4) Employment
1998/99 1999/00 2000/01 2001/ 02 Extrapolated
2002/03
Employment(end of period)2502 2441 2462 2419 2343
Employment in relation to the product concerned fell in 1999/00. It then recovered slightly in
2000/01 before falling further in 2001/02 and 2002/03.  In addition to the fall in employment recordedby the Community producers, there was also a reduction in employment in mandarin canning in the
Community during the 5 year period as some producers involved in canning the product concerned in
the Community ceased this activity before the opening of the safeguard investigation.  It is to be noted
that a large majority of the workforce are seasonal workers.  For this reason, this table should be
considered in conjunction with the following table on hours worked.
(5) Hours worked and Productivity
1998/99 1999/00 2000/01 2001/02 2002/03
Hours worked 943,844 987,871 821,478 859,539 625,764
Productivity
(hours
worked/tonne)15,9 16,8 15,6 16,8 17,7
Employment as shown above relates to full time workers.  However, the real impact on
employment in the Community is more apparent from hours worked which also includes the
employment of seasonal workers.  The number of hours worked also provides a more accurate basis
for measuring productivity than the number of employees.
In general, a steady decline in the number of hours worked can be observed, with a sharp fall
in the most recent period.  Productivity has fallen slightly between 1998/99 and 2001/02 from
15,9 hours worked per tonne produced to 16,8 hours worked, and further declined to 17,7 hours in the
last season (2002/03).
(6) Cash Flow
Financial year 1998 1999 2000 2001 2002
Cash Flow
(index)100 95 93 196 -49
Cash flow could only be examined at the level of the co-operating companies which produced
the product concerned rather than in relation to only the product concerned itself.  This indicator was
therefore seen as less meaningful than the other indicators shown above and is shown in terms of the
most recent financial years (the calendar year).  Nevertheless, it can be seen that cashflow wassubstantially reduced in the most recent period.
(7) Return on Capital Employed (ROCE)
Financial year 1998 1999 2000 2001 2002
ROCE 15.1 18.9 9.3 9.8 8.1G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 8
ROCE could also only be examined on the le vel of the co-operating companies which
produced the product concerned rather than in relation to only the product concerned itself.  This
indicator was therefore also seen as less meaningful than the other indicators.  Nevertheless, it can be
seen that ROCE was substantially reduced in the most recent period.
(8) Sales volume
1998/99 1999/00 2000/01 2001/ 02 Extrapolated
2002/03
Sales volume in theCommunity (t)63,718 56,483 45,341 36,156 33,498
Sales in the Community of the like product by the Community producers fell from 63,718
tonnes to 45,341 tonnes between 1998/99 and 2000/01, reflecting the fall in consumption and the
increase in imports in that period.  However, desp ite increased consumption in the following year,
sales continued to fall between 2000/01 and 2001/ 02 (by 20%) reaching 36,156 tonnes, as imports
more than doubled to 44,804 tonnes.  This reflects the increasing dominance of imports in the market.
In the most recent period, sales have continued to fall.
(9) Market share
1998/99 1999/00 2000/01 2001/ 02 Extrapolated
2002/03
Market share (%) 79% 76% 69% 44% 47%
The Community producers’ market share fell from 79% to 69% between 1998/99 and
2000/01, and then to 44% in 2001/02.  The fall in 2001/02 demonstrates the increasing market
penetration of imports in that period, which occurred despite the fact that Community producers
lowered their prices by 17% between 2000/01 and 2001/02. Although this fall in prices was from a
relatively high level it occurred at a time when Chinese prices fell at a comparative rate and also from
a high level.
The combination of the fall in prices and loss of market share to imports occurred at the same
time as a significant fall in the profitability of  the Community producers (discussed below).  The
Community producers’ market share subsequently slightly recovered to 47% in the current season
(2002/03) but this is thought to relate to the imp act of the opening of this investigation which reduced
import volumes slightly.
(10) Price of the like product and undercutting
1998/99 1999/00 2000/01 2001/02 2002/03
Unit prices of Community sales
(€/tonne)826 790 925 827 790
Unit prices of Chinese exports
plus customs duty(€/tonne)732 773 910 790 703
Undercutting (€/tonne) 94 17 15 37 87
Undercutting (%) 11% 2% 2% 4% 11%
The average price of the like product fell between 1998/99 and 1999/00 but recovered in
2000/01, increasing by 17% before falling to €827 per tonne in 2001/02 and further declining at €790
per tonne in 2002/03.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 9
The difference in prices can be explained in terms of several factors.  On one hand a cost
element; i.e. raw material, labour, capacity to shar e the fixed cost in an environment of decreasing
production and, on the other hand; a price competition element represented by the prices offered bythe exporters.  It is significant that, during the 2000/01 season when there were rumours of a low
overall crop volume in PRC and the price of exports increased steadily, the Community producers
were able to adjust their prices in the same range.
The following table gives the trends of the main cost elements:
Index of cost of canned mandarins 1998/99 1999/00 2000/01 2001/02 2002/03
Raw material(fresh product) 100 100 122 96 67
Labour Cost 100 106 99 106 112
Fixed costs 100 96 112 122 142
Total Costs 100 99 109 106 104
Furthermore, as regards the price of the fresh product destined to be processed, this is the
result of annual contracts between the canners and the farmers established at the beginning of the
season.  For comparison we have shown the price obtained by the producers for mandarins sold as
fresh product and for canning (the latter excludes the effect of the CAP scheme ):
Fresh Market (€/Tonne) 547 498 571 557 527
Canning 256 255 313 245 172
In order to reach a preliminary determination as to the level of undercutting, price information
was examined for comparable time periods, at the same level of trade and for sales to similar
customers.  Based on a comparison of average ex-w orks prices charged by the Community producers
and by exporting producers to the Community impor ters (CIF EU border including customs duty),
domestic prices were undercut throughout the 5 periods examined by between 2 and 11%.
The Commission notes that, throughout the whol e period of the investigation, the price of
imports was clearly below the price of the Community product.  The table indicates that the sharpincrease in imports at low prices in 2001/02 forced the Community producers to reduce their prices,
which together with the reduction in sales volume in the Community (despite an increase in
consumption) lead to a sharp reduction in sales revenues and profitability, and the losses sustained by
the Community producers in that year.
(11) Profitability
1998/99 1999/00 2000/01 2001/02 1.10.02/
31.3.03
Net profit/loss onCommunity sales (%)4.0% 0.5% 6.8% -1.7% -4.0%
The profitability of the Community producers’ sa les in the Community varied significantly in
the five-year period under consideration.  The lowest profitability was recorded in 2001/02 and in the
period to 31 March 2003, and the highest in 2000/01. In 2001/02, as imports increased to their highest
level in the four and a half-year period, the average price of imports fell to €691 per tonne and theaverage price of the Community product fell to €827 per tonne.  This is mirrored in the undercutting
of 15.9% found for the period 01/10/01 to 31/3/03.  This fall in prices taken together with the fall inG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 10
sales volume appears to have caused the Community producers profitability to fall from 6.8% to (-
1.7%), and this trend has continued into a worse loss making situation (-4%) in the current season.
Underselling reflects the extent to which the pr ice of the imported product is lower than the
price level which the Community producers could be expected to achieve in a non-injurious situation.
The level of underselling was provisionally calculated on the basis of the weighted average non
injurious price per tonne of the Community product.  This price was provisionally calculated by
taking the respective cost of production for the Community product to which was added a profit
margin of 6.83%.  This profit margin was considered reasonable as it refers to profits of the
Community producers in a normal trading situation unaffected by a sudden sharp rise in imports.  This
non injurious price was compared with the weighted average price per tonne of the imported productconcerned during the period October 2001 to March 2003.  The difference between these two prices
was expressed as a percentage of the CIF/Community border price of the imported product, and
resulted in underselling of around 22%.
(12) Stocks
1998/99 1999/00 2000/01 2001/ 02 Extrapolated
2002/03
Closing stock (t) 13,016 9,120 6,751 16,387 16,467
Stock levels fell between 1998/99 and 2000/01, but then increased significantly in 2001/02
and remained high in 2002/03.  The increase in stock between 2000/01 and 2001/02 coincided with a
fall in the Community producers’ sales volume in the Community of 20%, and appears to be chiefly
attributable to that fall in sales volume.  For reasons of consistency the figure for the period ended
30 September 2003, has been calculated based on expected sales in the second half of that season.  It
is likely that stocks will be high at the end of the period (30 September 2003, representing 38% of theproduction (27% in the previous season).
(13) Conclusion
The data shows that whilst production capacity increased slightly, there is negative
development for capacity utilisation, production, employment, productivity, cash flow and ROCE.
Overall, before the background of consumption which declined for two years and then recovered to
close to its previous level before declining again, the data shows negative developments for sales,
market share, prices and profitability and an increase in stocks in the most recent periods.
In particular, the Commission notes that whilst, in 2001/02, as imports reached their highest
level for five years (44,804 tonnes), the Community producers' sales volume in the Community
reached a low level (36,156 tonnes) and the level of profitability fell to (-1.7%).  This occurred
against the background of a concurrent increase in consumption in that year.  Against such a
background, whilst imports could have been expected to increase in line with consumption and pricescould have been expected to firm, imports more than doubled and the price of both the imported
product and that produced by the Community producers fell.
This combination of factors appears to be reflected in the economic indicators pertaining to
the Community producers.  The Community producers have lost market share, which reached its
lowest level for five years in 2001/02.  Their capacity utilisation has fallen sharply in the period to
31 March 2003 as the Community producers have reduced production apparently in order to reducethe high stock levels recorded at the end of 2001/02 and in 2002/03.  Productivity and employment
have also fallen in both 2001/02 and in 2002/03.  The overall effect of the falls in Community salesG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 11
volume and prices appears to be a reduction in the Community producers’ sales revenue by 29% from
€41.9m in 2000/01 to €29.9m in 2001/02.  At the same time, the profitability of the Community
producers fell from 6.8% to (-1.7%).  The Community producers have thereafter incurred losses (-
4.0%) in the period to 31 March 2003.
Taking account of all of these factors the Commission has reached the preliminary conclusion
that the Community producers have suffered serious injury.
CAUSATIONEffect of increased imports
The market for canned mandarins is transparent as regards sources of supply and customers.
As canned mandarins are essentially a commodity product, the product concerned and the like product
compete mainly on price.
In the period 2000/01 to 2001/02, the market share of imports grew from 31% to 56%, whilst
the market share of the Community producers fell from 69% to 44%.  Over the same period, imports
have grown from 34% to 74% of Community production.  Thus, it appears that imports have also
increased relative to production, at the expense of the Community producers.
Market
Share1998/99 1999/00 2000/01 2001/02 2002/03
Imports 20% 24% 31% 56% 53%
Sales of the
Community
Industry79% 76% 69% 44% 47%
As to prices, between 2000/01 and 2001/02, the average unit price of the imported product on
the Community market fell from €792 to €691 per tonne.  The average unit price of the Community
product fell from €925 to €827 per tonne.  The effect of the fall in the average unit price of the like
product alone on the Community producers’ revenue from sales in the Community would have been a
reduction of 11% (€4.4m) in 2001/02.  Taking account of the simultaneous fall in sales volume the
actual fall in sales revenue in the Community was €12m.  This reduction in sales revenues (togetherwith increased costs) created a significant fall in  profitability and the Community producers showed a
loss of 1.7% in 2001/02.
For the foregoing reasons, it is the Commission’s preliminary conclusion that there is a
correlation between the increase in imports at low prices and the serious injury suffered by theCommunity producers, and that the increase in imports has had injurious effects in particular in terms
of downward pressure on prices and a reduction in the volume sold by the Community producers on
the Community market.
OTHER FACTORS- Effect of changes in consumption
The Commission has carried out a preliminary examination of the injurious effects of the fall
in consumption between 1998/99 and 2000/01.  That fall has to be considered in the context of the
overall trend during the 5 year period under investigation.  Consumption decreased from 80,065
tonnes in 1998/99 to 74,056 tonnes in 1999/00 and 65,676 tonnes in 2000/01, but then grew by 15,284G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 12
tonnes to 80,960 tonnes in 2001/02, before falling back to 71,564 tonnes in the current season
(2002/03).  The fall in consumption from 1998/99 to 2000/01 was due to a fall in EU sales of the
Community producers, because some producers had reduced or ceased production.  This had an
immediate impact on the level of consumption because the market was only supplied from two mainsources (i.e. from Spain and PRC).
The Commission notes that whilst consumption fell to possibly its lowest level for the four
and a half year period in 2000/01, that was also the year in which the Community producers achieved
their highest level of profitability (6.8%).  On the other hand consumption rose in 2001/02 to 80,960
tonnes (its highest level during the period) but the Community producers profitability fell to (-1.7%)
at the same time.  Therefore, there is no clear correlation between consumption itself and theprofitability and general economic situation of the Community producers.
In examining the effect of consumption on the profitability of the Community producers,
account has to be taken of the reaction of all market participants to the changes in consumption. In
this respect, it was found that while Community pr oducers were forced to reduce their sales in the
Community by roughly 9,185 tonnes in 2001/02 compar ed to 2000/01, imports moved sharply in the
other direction (+24,469 tonnes).
As regards price effects, variations in consumption of canned goods with a substantial shelf
life should not normally lead to substantial price effects if production is adjusted to the needs of themarket.  In this respect, the Community producers appear to have reacted by reducing both production
and sales in line with the falls in consumption.
Bearing in mind that profits could still be made in a situation of falling consumption, it is
reasonable to conclude that, in the absence of the sharp rise in imports at low prices, the fall inconsumption would not have led to a substantial fall in profits.
Consumption in 2001/02 was at its highest le vel since 1998/99, and at approximately the
same level as in that year.  The Community producers’ sales, however, decreased in 2001/02
compared to 1998/99 by 29,438 tonnes, a decrease of 43%.  At the same time, imports increased in
2001/02 by 28,457 tonnes compared to 1998/99.  Imports therefore increased considerably despite
consumption being only slightly higher.
1998/99 1999/00 2000/01 2001/02 2002/03
Consumption (t)
actual
development80,065 74,056 65,676 80,960 71,564
Market share
(simulation - held
at 1998/99 level)80% 80% 80% 80% 80%
EU sales volume
simulation*63,718 58,936 52,267 64,430 56,953
Actual EU sales
volume63,718 56,483 45,341 36,156 33,498
* simulated as if the Community industry market share had been maintained at the 1998/99 level
The above table shows that if the Community producers’ market share had been maintained at
its 1998/99 level, the Community producers would have  been much more successful in terms of sales
volume.  This shows that it was not the developm ent of consumption that impacted on the Community
producers, but loss of market share to imports.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 13
For the reasons given above, it is concluded that developments in consumption were not
responsible for any of the injury observed.
- Effect of changes in export performance
The Commission also examined the effects of a fall in exports.
1998/99 1999/00 2000/01 2001/ 02 Extrapolate
d 2002/03
Exports (in tonnes) 21,316 21,672 14,544 18,099 19,078
Between 1998/99 and 2000/01, the volume of Community producers’ exports of canned
mandarins fell from 21,316 tonnes to 14,544 tonnes as the Community producers lost market share to
low priced competition from PRC (particularly as a result of the US importers anticipating theapplication of US countermeasures in the hormones dispute). Between 2000/01 and 2001/02, exports
recovered to 18,099 tonnes and to 19,078 tonnes in the 2002/03 season.  Over the five year period,
exports decreased by around 2,300 tonnes, although the principal reduction occurred between 1999/00
and 2000/01 (the year in which the Community pr oducers were most profitable).  Since 2000/01,
exports have actually increased.  In particular, in the most recent period, between 2000/01 and
2002/03 exports have increased largely because of the resolution of the hormones trade dispute
without retaliatory measures by the US against exports of the product concerned from theCommunity.  This increase in exports has not contributed to the injurious effects suffered by the
Community producers.
It should also be noted that in the calculation of profitability at section 11 above, only
Community sales were taken into account.
For the reasons given above, the Commission concluded that whilst there might be some link
between the fall in exports and the injurious effects observed in the earlier part of the four and a half
year period, there is no such link in the latter part of the period.
- Effect of any excess capacity
The Commission has further examined whether injurious effects may have resulted from
excess capacity amongst the Community producers.  There was only a single small change in
estimated theoretical production capacity during the period of the investigation, when, in 1999/00production capacity increased by 2% to 129,260 tonnes.
1998/99 1999/00 2000/01 2001/02 2002/03
Capacity tonnes 126,760 129,260 129,260 129,260 129,260
Production tonnes
(actual)81,869 75,767 60,462 60,329 43,331
Production tonnes
(simulation*)81,869 81,869 81,869 81,869 81,869
Capacity
utilisation (actual)65% 59% 47% 47% 34%
Capacity
utilisation
(simulation*)65% 63% 63% 63% 63%
* simulated as if the Community industry production had been maintained at the 1998/99 levelG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 14
The above table shows that if the Community industry production volume had been
maintained at its 1998/99 level, the Community industr y would have also maintained a high utilisation
rate.  However, since actual production and utilisation rates were much lower than those simulated itis clear that it is the reduction in production rather than the small increase in capacity which has
caused the serious injury.
This increase in capacity contributed to a fall in capacity utilisation in 1999/00 and
subsequent years as the anticipated need for additional capacity did not materialise.  Given the very
minor increase in capacity, and that without it capacity utilisation would not have followed a
substantially different pattern, the Commission concludes that the very minor increase in capacity didnot cause any injurious effects to the industry.
- Effect of lack of supply
Some exporters argued that the reason behind the fall in production by the Community
producers was a lack of supply of raw material (namely fresh small citrus fruit) on the EU market.
However, based on its preliminary examination of the EU  market in fresh small citrus fruit, it is the
Commission’s provisional determination that there wa s adequate supply to meet the demand from the
processing industry.
Table A shows actual production of fresh small citrus fruit (clementines, mandarins and
satsumas) in the years 1998 to 2002, whilst Table B shows forecast production together with
withdrawals from the market in each of the seasons 1998/99 to 2002/03.
Table A
Year 1998 1999 2000 2001 2002
Production 2,329,341 2,823,106 2,511,550 2,379,634 2,650,000e
Table B
Season 1998/99 1999/00 2000/01 2001/02 2002/03
Forecast
Production*2,299,500 2,804,900 2,520,000 2,481,000 2,626,700
Withdrawals 43,313 99,958 74,195 43,341 14,329
Withdrawals
as % of
production1.9% 3.5% 3.0% 1.8% N/A
*Source: CLAM
- Demand for Fresh Small Citrus Fruits by the Processing Industry
The quantity of clementines, and satsumas used by the processing industry for the production
of canned mandarins from 1998/99 to 2002/03 is as shown in Table C.
Table C
Season 1998/99 1999/00 2000/01 2001/02 2002/03
Satsumas 110,000 105,000 95,000 95,000 65,000
Clementines  10,000 5,000 0 0 0
As Tables A and C illustrate, the supply of small fresh citrus fruit on the EU market appears
to be far greater than the demand of the processing industry.  Indeed, in each year under examinationG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 15
for which statistics are currently available, supply appears to have outstripped demand both for fresh
produce and for use as raw material for processing and at least 1.8% or production of small fresh
citrus fruit has been withdrawn from the market.
Nevertheless, the processing industry is in competition with other purchasers of fresh
satsumas and clementines and its ability to compete hampered by the fall in prices achieved for the
like product as a result of the increase in imports of the product concerned at low prices in recent
years.  This has two direct consequences.  Firs t, the Community producers are becoming less able to
afford to purchase the raw materials (fresh satsumas and clementines) at a price which allows them to
achieve a reasonable level of profitability.  Second, because of the low prices offered by the
Community producers to growers for satsumas, which are principally used as raw material forcanning, growers are re-orientating their production from satsumas towards clementines in an effort to
increase the profitability of their production.  However, that process does not yet appear to be
sufficiently far advanced to have had an appreciable effect on the availability of supply to the
Community producers.
It should be noted that by the end of 2001/02, the year in which imports increased to 44,804
tonnes and the Community producers EU sales fell to 36,156 tonnes, the Community producers stocks
had increased by 9,636 tonnes to 16,387 tonnes.  This appears to demonstrate that the fall in sales
suffered by the Community producers was not caused by an inability to supply on their part.
Therefore, the Commission has reached the provisional determination that lack of supply did
not contribute to the injury suffered by the Community producers.
No other causation factors were identified by the Commission services or raised by interested
parties during the provisional investigation.
- Attribution of injurious effects
The serious injury suffered by the Community producers took the form mainly of reduced
sales volume, reduced unit prices and worsening profitability and financial losses.  The Commission
did not identify any other factors which could have contributed to the injury apart from the increase in
imports.
The Commission found, having ensured the effects of other factors are not attributed to
increased imports, that there is a genuine and substantial causal link between the decline in the
Community producers’ sales volumes, sales prices and profitability and the increase in imports, which
not only increased at a much faster rate than the increase in consumption between 2000/01 and
2001/02, but increased whilst consumption fell from 1998/99 to 2000/01.
(ii) determining that there are critical ci rcumstances where delay would cause damage
which it would be difficult to repair
CRITICAL SITUATION
The Commission has made a preliminary determination that critical circumstances exist in
which delay would cause damage to the Community producers which it would be difficult to repair.
As indicated above, the Commission has reached the preliminary conclusion that the Communityproducers are suffering serious injury. In particular, they have already suffered a decline, notably in
production, sales volume, unit prices and profitability as a result of increased imports of the product
concerned.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 16
In relation to the like or directly competing product, production has fallen by 28% between
2000/01 and 2002/03.  Sales in the Community have fallen by 26% in the same period1, and the
Community producers’ market share has also declined.  Profitability declined sharply in this period,
and in many cases sales are being made at a loss.
Available information relating to the performance of the Community producers in the third
quarter of 2002/03 indicates that production, sales and profitability continue to decline.  The
Community producers are clearly already in a weak position.  The increase in imports has lead to
oversupply on the Community market; falls in sales volumes and prices, losses, and serious injury.
This situation is made worse by the apparent fall in consumption in the most recent period, compared
to 2001/02.
Therefore, it can be anticipated that without the application of import restrictions to the EU
market, imports of the products concerned into the Community will continue at a high level, and the
Community producers will continue to sustain losses and be forced into bankruptcy.  This process has
already begun.  Two Spanish firms previously involved in the production of canned mandarins wentbankrupt in April 2002, and it is highly likely that others will follow.
In consequence, temporary or permanent closure of production facilities will be difficult to
avoid.  These closures are likely to affect production not only of the like product, but also of other
products produced using the same facilities.  The social impact in the regions concerned (principallyValencia and Murcia), would be substantial.  The negative impact would also extend to those
activities which are dependent on the Community producers affected by the measure.
The very high level of imports to the EU market together with the extremely negative
consequences of a continuation of imports at this level demand immediate measures by Communityproducers to increase sales revenues and stem anticipated losses, including closing production
facilities and laying off employees.  The damage caused to the Community producers by taking such
action would be difficult to repair.  If such action is to be avoided, provisional safeguard measures
must be taken.
Finally it is clear from the Chinese Ministry of Agriculture reports that the a large-scale
programme to improve the productivity of the land producing fresh citrus fruit is currently under way.This is expected to be achieved using improvements in technology and by replacing low volume and
low quality trees with improved varieties.  In addition, it is expected that further improvements in
productivity will be achieved simply as a result of past tree planting programmes which have not yet
reached full maturity.
Therefore, bearing in mind the poor economic situation of the Community producers and the
continuing and increasing threat posed by the Chinese exporting producers the Commission considers
that there exists a critical situation in which any delay in the adoption of provisional safeguard
measures would cause damage which it would be diff icult to repair.  The bankruptcy of two producers
already confirms that a critical situation exists.  The Commission, therefore, concludes thatprovisional safeguard measures should be adopted without delay.
6. Offer of consultations under Article 12.4
The European Communities offer consultations on the provisional safeguard measures at any
time after the measure is taken.
                                                     
1 This percentage is based on the assumption that sales in the full year 2002/03 will be double those for
the six month period to 31 March 2003.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 17
7. Other information
A copy of the Commission Regulation which wi ll appear in the Official Journal of the
European Communities is being submitted to the Committee.  This document will also be available inthe WTO Secretariat for inspection by government representatives.G/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 18
B. NOTIFICATION UNDER ARTICLE 9, FOOTNOTE 2 UPON TAKING A DECISION NOT TO APPLY
THOSE PROVISIONAL SAFEGUARD MEASURES TO CERTAIN PRODUCTS ORIGINATING IN
DEVELOPING COUNTRIES
1. Specify the measure
The measures consist of temporary tariff quotas in excess of which additional duty requires to
be paid, described in the notification under Article 12.4 above.
2. Specify the product subject to the measure
The measures apply to the products described in paragraph 1 of the notification under
Article 12.4 above.
3. Specify the developing countries to which the measure is not applied under Article 9.1 of
the Agreement on Safeguards, and the import shares of these countries individually and
collectively
Imports of the products concerned originating in any of the developing countries specified in
Annex 1  shall not be subject to the provisional safeguard measures.  The individual and collective
import shares of the developing countries listed in Annex 1 are negligible (less than 1.2% on a
collective basis).
4. Not applicableG/SG/N/7/EEC/2
G/SG/N/11/EEC/2
Page 19
Annex 1
List of Developing Countries  - excluded from the measures as they export less than 3% of imports to
the Community:
United Arab Emirates, Afghanistan, Antigua and Bar buda, Angola, Argentina, Barbados, Bangladesh,
Burkina Faso, Bahrain, Burundi, Benin, Brunei Darussalam, Bolivia, Brazil, Bahamas, Bhutan,
Botswana, Belize, Democratic Republic of Congo, Central African Republic, Congo, Côte d'Ivoire,
Chile, Cameroon, Colombia, Costa Rica, Cuba, Cape Verde, Djibouti, Dominica, Dominican
Republic, Algeria, Ecuador, Egypt, Eritrea, Ethiopia, Fiji, Federated States of Micronesia, Gabon,Grenada, Ghana, Gambia, Guinea, Equatorial Guinea, Guatemala, Guinea-Bissau, Guyana, Honduras,
Haiti, Indonesia, India, Iraq, Iran (Islamic Republic  of), Jamaica, Jordan, Kenya, Cambodia, Kiribati,
Comoros, St Kitts and Nevis, Kuwait, Lao People' s Democratic Republic, Lebanon, St Lucia, Sri 
Lanka, Liberia, Lesotho, Libyan  Arab Jamahiriya, Morocco, Madagascar, Marshall Islands, Mali,
Myanmar, Mongolia, Mauritania, Mauritius, Maldives, Malawi, Mexico, Malaysia, Mozambique,Namibia, Niger, Nigeria, Nicaragua, Nepal,  Nauru, Oman, Panama, Peru, Papua New Guinea,
Philippines, Pakistan, Palau, Paraguay, Qatar, Rwanda, Saudi Arabia, Solomon Islands, Seychelles,
Sudan, Sierra Leone, Senegal, Somalia, Suriname, Sao Tomé and Principe, El Salvador, Syrian Arab
Republic, Swaziland, Chad, Togo, Thailand, Tunisia, Tonga, East Timor, Trinidad and Tobago,
Tuvalu, Tanzania (United Republic of), Chinese Taipei, Uganda, Uruguay, St Vincent and NorthernGrenadines, Venezuela, Viet Nam, Vanuatu, Samo a, Yemen, South Africa, Zambia and Zimbabwe.
__________