# EUR-Lex - 52012PC0284 - EN

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# 52012PC0284

**Proposal for a COUNCIL REGULATION amending Regulation (EU) 349/2012 imposing a definitive anti-dumping duty on imports of tartaric acid originating in the People's Republic of China /* COM/2012/0284 final - 2012/0148 (NLE) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

· Grounds for and objectives of the proposal

This proposal concerns the application of
Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against
dumped imports from countries not members of the European Community[1] (‘the basic Regulation’) in the
interim review proceeding concerning the anti-dumping duty in force in respect
of imports of tartaric acid originating in the People's Republic of China (‘PRC’).

· General context

This proposal is made in the context of the
implementation of the basic Regulation and is the result of an investigation
which was carried out in line with the substantive and procedural requirements
laid out in the basic Regulation.

· Existing provisions in the area of the proposal

A definitive anti-dumping duty on imports
of tartaric acid originating in the PRC
was imposed by Council Regulation (EC) No 130/2006[2]. This duty was amended by
Council Implementing Regulation (EU) No 332/2012[3]
and extended for a further five years by Council Implementing Regulation (EU)
No 349/2012[4].

· Consistency with other policies and objectives of the Union

Not applicable.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

· Consultation of interested parties

Interested parties concerned by the
proceeding have had the possibility to defend their interests during the
investigation, in line with the provisions of the basic Regulation.

· Collection and use of expertise

There was no need for external expertise.

· Impact assessment

This proposal is the result of the
implementation of the basic Regulation.

The basic Regulation does not provide for a
general impact assessment but contains an exhaustive list of conditions that
have to be assessed.

3.           LEGAL ELEMENTS OF THE PROPOSAL

· Summary of the proposed action

On 29 July 2011 the Commission announced an
interim review of the anti-dumping duty in force in respect of imports of tartaric
acid originating in the PRC by a notice ('notice of initiation') published in
the Official Journal of the European Union. This was following a request
for review limited to dumping and limited to two producers of tartaric acid in
the PRC, namely Ninghai Organic Chemical Factory, Ninghai and Changmao
Biochemical Engineering Co., Ltd., Changzhou.

The investigation found the continued
existence of dumping.

Therefore, it is suggested that the Council
adopt the attached proposal for a Regulation in order to amend the existing
measures, which should be published in the Official Journal of the European
Union by 28 July 2012 at the latest.

· Legal basis

Council Regulation (EC) No 1225/2009 of 30
November 2009 on protection against dumped imports from countries not members
of the European Community.

· Subsidiarity principle

The proposal falls under the exclusive
competence of the European Union. The subsidiarity principle therefore does not
apply.

· Proportionality principle

The proposal complies with the
proportionality principle for the following reasons:

The form of action is described in the
basic Regulation and leaves no scope for national decision.

Indication of how financial and
administrative burden falling upon the Union, national governments, regional
and local authorities, economic operators and citizens is minimized and
proportionate to the objective of the proposal is not applicable.

· Choice of instruments

Proposed instruments: regulation.

Other means would not be adequate for the
following reason:

The basic Regulation does not provide for
alternative options.

4.           BUDGETARY IMPLICATION

The proposal has no implications for the
Union budget.

2012/0148 (NLE)

Proposal for a

COUNCIL REGULATION

amending Regulation (EU) 349/2012 imposing
a definitive anti-dumping duty on imports of tartaric acid originating in the
People's Republic of China

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Regulation (EC) No
1225/2009 of 30 November 2009 on protection against dumped imports from
countries not members of the European Community[5]
(‘the basic Regulation’), and in particular Articles 9 and 11(3), (5) and (6)
thereof,

Having regard to the proposal submitted by
the European Commission ('Commission') after consulting the Advisory Committee,

Whereas:

A.        PROCEDURE

1.           Measures in force

(1)       In 2006, the Council
imposed by Regulation (EC) No 130/2006[6]
a definitive anti-dumping duty on imports of tartaric acid originating in the People's Republic of China
(‘PRC’ or 'the country concerned') (‘the original anti-dumping
measures’). This Regulation was amended by
Council Regulation (EC) No 150/2008.[7]
In 2012, the Council amended the measures by Implementing Regulation (EU) No.
332/2012[8]
and extended the measures in force for a further five years by Implementing Regulation
(EU) No. 349/2012[9].

2.           Initiation of an interim
review

(2)       A request for review was lodged
by the following producers in the Union:
Distillerie Bonollo SpA, Industria Chimica Valenzana SpA, Distillerie Mazzari
SpA, Caviro Distillerie Srl and Comercial Quimica Sarasa s.l. ('the
applicants').

(3)       The review request was
limited in scope to the examination of dumping as far as two Chinese exporting
produces were concerned, namely Changmao Biochemical Engineering Co., Ltd,
Changzhou, and Ninghai Organic Chemical Factory, Ninghai. The request alleged that
the continued imposition of measures at the existing level, which was based on
the level of dumping previously established, appeared to be no longer sufficient
to counteract dumping, given that both companies should be denied Market
Economy Treatment ('MET').

(4)       Having determined that the
Commission had at its disposal sufficient prima facie evidence for the
initiation of an interim review, and after consulting the Advisory Committee,
the Commission announced on 29 July 2011, in a notice published in the Official
Journal of the European Union[10]
('the notice of initiation'), the initiation of an interim review limited to
dumping pursuant to Article 11(3) of the basic Regulation.

3.           Investigation

3.1.        Investigation period

(5)       The investigation
concerning dumping covered the period from 1 July 2010 to 30 June 2011 (‘the
review investigation period’ or ‘RIP’).

3.2.        Parties concerned by this
investigation

(6)       The Commission officially
advised the two exporting producers in the country concerned and the authorities
of the country concerned of the initiation of the interim review.

(7)       Interested parties were
given the opportunity to make their views known in writing and to request a
hearing within the time limit set in the notice of initiation.

3.3.        Questionnaire replies and
verifications

(8)       The Commission sent
questionnaires to the two exporting producers named in the request for review
and to producers in the analogue country, Argentina.

(9)       Questionnaire replies were
received from the two Chinese exporting producers, and also from the
cooperating producer in the analogue country.

(10)     In order to allow the two exporting
producers in the PRC to submit a claim for market economy treatment (‘MET’) or
individual treatment (‘IT’), if they so wished, the Commission sent claim forms
for this purpose. Claims for MET, or for IT in case the investigation
established that they do not meet the conditions for MET, were received from both
of them.

(11)     The Commission sought and
verified all the information deemed necessary for a determination of dumping and
carried out verifications at the premises of the following companies:

(a)
Exporting producers in the PRC

–
Ninghai Organic Chemical Factory, Ninghai

–
Changmao Biochemical Engineering Co., Ltd.,
Changzhou

(b)
Exporting producers in the analogue
country

–
TARCOL S.A., Buenos Aires

B.        PRODUCT CONCERNED AND
LIKE PRODUCT

1.           Product concerned

(12)     The product concerned by
this review is the same as the one in the original investigation, namely tartaric
acid, excluding D-(-)- tartaric acid with a negative optical rotation of at
least 12,0 degrees, measured in a water solution according to the method
described in the European Pharmacopoeia, originating in the PRC, currently
falling within CN code ex 2918 12 00 (‘the product concerned’).

(13)     The product concerned is
used in wine, in beverage and food additives, as a retardant in plaster and in
numerous other products. It can be obtained either from the by-products of wine
making, as is the case with production in the Union or, via chemical synthesis
from petrochemical compounds, as is the case with production in the PRC. Only
L+ tartaric acid is manufactured from the by-products of wine making. Synthetic
production allows the manufacture of both L+ and DL tartaric acid. Both types
are product concerned and have overlapping uses.

2.           Like product

(14)     As in the previous
investigation, it was considered that the tartaric acid produced in the PRC and
exported to the EU, the tartaric acid produced and sold on the domestic market
of the analogue country (Argentina) and the tartaric acid manufactured and sold
in the EU by the Union producers have the same basic physical and chemical
characteristics, and the same basic uses. They were therefore considered to be
like products within the meaning of Article 1(4) of the basic Regulation.

C.        DUMPING

1.           Market Economy Treatment
('MET')

(15)     Both companies named in the
request for review claimed Market Economy Treatment ('MET'). Pursuant to
Article 2(7)(b) of the basic Regulation, in anti-dumping investigations concerning
imports originating in the PRC, normal value shall be determined in accordance
with paragraphs 1 to 6 of the said Article for those producers which were found
to meet the criteria laid down in Article 2(7)(c) of the basic Regulation.

(16)     Briefly, and for ease of
reference only, the MET criteria are set out in summarised form below:

(1)
Business decisions and costs are made in
response to market conditions and without significant State interference;

(2)
Accounting records are independently audited in
line with international accounting standards and applied for all purposes;

(3)
There are no significant distortions carried
over from the former non-market economy system;

(4)
Legal certainty and stability is provided by
bankruptcy and property laws;

(5)
Currency exchanges are carried out at the market
rate.

(17)     Both producers in the PRC
requested MET pursuant to Article 2(7)(c) of the basic Regulation. Each MET
application was analysed, and on-spot investigations were carried out at the
premises of these co-operating companies.

(18)     For both companies, MET was
denied under Criterion 1 of Article 2(7)(c) based on evidence that the price of
the basic raw material, benzene, was distorted. A comparison of domestic prices
in China, using the purchase prices of one cooperating producer as a source,
against prices in other market economy countries showed a price difference of
between 19% and 51% during the investigation period. The PRC imposes an import
tariff on benzene of 40% (although this was not in fact in force during the RIP)
and also does not refund any of the 17% VAT levied on its export. Distortions
were also found in the price of the intermediate raw material, maleic
anhydride, purchased by the other cooperating producer using their purchases as
a source.

(19)     MET
was also denied to one company under Criteria 2 and 3 due to evidence of
depressed land use right prices and also overvaluation of the company's assets
for the purpose of guaranteeing a loan from a State-owned bank.

(20)     Both companies disputed the
findings of the Commission after they were disclosed to them. However neither
company could explain the low price of benzene on the Chinese market. The
company referred to in recital (19) above provided some documents to dispute
our findings regarding the land use right prices and the valuation of their
assets. However as these documents were requested during the inspection and were
not provided, it was therefore decided that this information could not be
verified or relied upon.

(21)     MET is therefore denied to
both companies.

(22)     However both companies meet
the requirements set out in Article 9(5) of the basic Regulation and are
therefore entitled to an individual anti-dumping duty using their own export
prices.

2.           Analogue country

(23)     Pursuant to Article 2(7)(a)
of the basic Regulation normal value was determined on the basis of the price
or constructed value in an appropriate market economy third country ('the
analogue country'), or the price from the analogue country to other countries,
including the Union, or, where those are not possible, on any other reasonable
basis, including the price actually paid or payable in the Union for the like
product, duly adjusted if necessary to include a reasonable profit margin.

(24)     As in the original
investigation, Argentina was proposed in the notice of initiation as an
appropriate analogue country for the purposes of establishing normal value
pursuant to Article 2(7)(a) of the basic Regulation. Following the publication
of the notice of initiation, one company in India and one company in Australia
were identified as alternative possible producers in a market economy third
country. However neither of the two companies responded to the questionnaire
sent to them.

(25)     One producer of tartaric
acid in Argentina cooperated with the investigation by replying to a
questionnaire. The investigation showed that Argentina had a competitive market
for tartaric acid with two competing local producers and imports from third
countries. The production volume in Argentina constitutes more than 20% of the
volume of Chinese exports of the product concerned to the EU. The Argentinean
market was therefore deemed sufficiently representative for the determination
of normal value for the PRC.

(26)     It is therefore concluded,
as in the previous investigation, that Argentina constitutes an appropriate
analogue country in accordance with Article 2(7)(a) of the basic Regulation.

3.           Normal Value

(27)     Normal
value was established on the basis of the information received from the
cooperating producer in the analogue country. Although the analogue country
producer had domestic sales of the product concerned, given the difference in the
production method between Argentina and the PRC which has a significant impact
on prices and costs, it was decided to construct normal value, rather than use
these domestic sales prices. The cost of raw material in Argentina was replaced
by an average market price for benzene and an adjustment made to SG&A in
Argentina to better reflect the domestic market in China.

(28)     Normal value for L+
Tartaric Acid (which is manufactured by the Argentinian producer) was therefore
constructed from the cost of production in Argentina of L+ Tartaric Acid,
taking into account the difference in production method between Argentina and
the PRC.

(29)     Given that the Argentinian
producer did not manufacture DL tartaric acid, a normal value was also
constructed using the difference in price found between the two product types.

4.           Export price

(30)     Export prices were
determined based on the actual price paid or payable by the first independent
customer in the Union for both Chinese exporting producers.

5.           Comparison

(31)     For the purposes of
ensuring a fair comparison between the normal value and the export price in
accordance with Article 2(10) of the basic Regulation, due allowance in the
form of adjustments was made with regard to certain differences in transport,
insurance and indirect taxation, where these were proved to affect prices and
price comparability.

6.           Dumping margins

(32)     For both companies the
weighted average normal value for each product was compared with the weighted
average export price for the same product type, as provided for under Article
2(11) of the basic Regulation.

(33)     On this basis, the weighted
average dumping margins expressed as a percentage of the CIF Union frontier
price duty unpaid are:

Company || Dumping margin

Changmao Biochemical Engineering Co., Ltd, Changzhou || 13.1%

Ninghai Organic Chemical Factory, Ninghai. || 8.3%

7.           Lasting nature of changed
circumstances

(34)     The request for review
alleged that the two Chinese exporting producers should no longer be granted
MET and that this change was of a lasting nature. Given the reasons for denial
of MET it can be considered that the conclusions of this review are of a
lasting nature. Evidence shows that the distortion in the price of benzene in
China was in existence prior to the RIP and there is no evidence to show that
the Chinese government has, or will, remove such distortions.

(35)     For the company-specific
reasons set out in recital (19) these are also of a lasting nature, as they
affect the company's costs and decisions over a significant period of time.
They were not events that would have affected the original investigation in
which MET was granted to this company.

D.        AMENDMENT OF THE ANTIDUMPING MEASURES IN FORCE

(36)     In light of the above, it
is considered that the present anti-dumping review should amend the level of
the existing measures in force on imports of tartaric acid from the People's
Republic of China.

(37)     All parties were informed
of the essential facts and considerations on the basis of which it was intended
to recommend that the existing measures be amended. They were also granted a
period within which they could make representations subsequent to this disclosure.

(38)     One Chinese company replied
to the disclosure again disputing the findings regarding the denial of Market
Economy Treatment on the grounds of price distortion of the main raw material.
However they provided no new evidence to support their assertions and their
arguments were therefore rejected. They also requested further information on
the adjustments referred to in recital (27) but this had to be rejected as it
would be impossible to do so without disclosing the production methods and
costs of the sole producer in Argentina.

(39)     The Union Industry
responded to the disclosure by contesting the use of a constructed normal value
rather than domestic sales prices in the analogue country, and also the
adjustments referred to above to the constructed normal value to take account
of the difference in raw materials and production process between Argentina and
China.

(40)     As regards the use of a
constructed normal value rather than prices from Argentina, this cannot be
considered a change of methodology under Article 11(9) of the basic Regulation.
In the original investigation both Chinese companies were granted MET and
therefore normal value was taken from their own domestic prices. Now that MET
has been denied to both companies the same methodology could no longer be used.

(41)     The Union Industry further
claimed that the Commission should have used the methodology set out in the
original investigation to calculate the residual duty for China to calculate
the individual margins for the two exporters concerned by this review. This
argument was rejected as the residual duty was calculated for companies that
did not cooperate with the original investigation. It is therefore not
comparable to calculating an individual duty for a cooperating exporter that has
been denied Market Economy Treatment.

(42)     As regards the adjustments
made to the normal value referred to above, these were necessary to ensure a
fair comparison between the export price of a synthetically produced tartaric
acid, and a normal value based on a natural production process. Attempting the
same calculation using domestic sales prices in Argentina and then adjusting
the normal value and/or export price under Article 2(10) of the basic
Regulation would not have provided for a fair comparison. These arguments were
therefore rejected.

E.         UNDERTAKINGS

(43)     One exporting producer in
the PRC offered a price undertaking in accordance with Article 8(1) of the
basic Regulation. The product concerned is not suitable for a fixed price
undertaking due to the volatility of the export price. In order to overcome
this problem, the exporting producer offered an indexation clause, but without
specifying how this indexation would be calculated. They also offered an
indexation based on the distorted domestic benzene price in China, which could
not be accepted.

(44)     Moreover, this exporting
producer produces different types of other chemical products and may sell these
products to common customers in the European Union via related trading
companies. This would create a serious risk of cross compensation and would make
effective monitoring extremely difficult.

(45)     Furthermore, there are
different types of the product concerned which are not easily distinguishable
and have a considerable difference in price. The different MIPs proposed by the
exporting producer would therefore render monitoring impracticable. On the
basis of the above it was concluded that the undertaking offers cannot be
accepted,

HAS ADOPTED THIS REGULATION:

Article 1

The Table in Article 1(2) of Council Implementing
Regulation (EU) No 349/2012 shall be amended to read as follows:

Company || Anti-dumping duty || TARIC additional code

Changmao Biochemical Engineering Co., Ltd, Changzhou || 13.1% || A688

Ninghai Organic Chemical Factory, Ninghai || 8.3% || A689

All other companies (except Hangzhou Bioking Biochemical Engineering Co. Ltd, Hangzhou – TARIC additional code A687). || 34.9% || A999

Article 2

This Regulation shall enter into force on
the day following that of its publication in the Official Journal of the
European Union.

This
Regulation shall be binding in its entirety and directly applicable in all
Member States.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 343, 22.12.2009, p. 51.

[2]               OJ L 23, 27.1.2006, p. 1.

[3]               OJ L 108, 20.4.2012, p. 1

[4]               OJ L 110, 24.4.2012, p. 3

[5]               OJ L 343, 22.12.2009, p. 51.

[6]               OJ L 23, 27.1.2006, p. 1.

[7]               OJ L 48, 22.2.2008, p. 1.

[8]               OJ L 108, 20.4.2012, p.1

[9]               OJ L 110, 24.4.2012, p.3

[10]             OJ C 223, 29.7.2011, p.16.