J 
COMMISSION OF THE EUROPEAN COMMUNITIES 
liC^* 
Itilif C0M(93) 181 final 
Brussels, 13 May 1993 
Mit-Proposal for a 
COUNCIL REGULATION (EEC) 
is 
UkâLj^ 
Sil'ÉI^''S|*fc inposing a definitive anti-dumping duty on imports of 
Magnesium oxide originating in the People's Republic of China 
(presented by the Commission) 
A 
Explanatory Memorandum 
1. Commission Regulation (EEC) No 2800/92(*•) imposed a provisional 
anti-dumping duty on imports of magnesium oxide (commonly called 
caustic magnesite) originating in the People's Republic of China. 
2. Council Regulation (EEC) No 105/93(2) extended this duty for a 
period of two months. The expiry date for this provisional duty was 
Thursday 26 March 1993. 
3. The Chinese exporters requested and were granted a hearing and made 
their views known in writing, as did other interested parties. 
4. A prolonged process of consultation was necessary in order to 
consider fully all views before the Commission was able to draw its 
final conclusion. This lengthy consultation has resulted in the 
provisional measures lapsing on 26 March 1993 before the imposition 
of definitive measures. 
5. With regard to normal value, following publication of the 
provisional measures and the subsequent disclosure of the 
Commission's dumping calculation, the Chinese exporters showed that 
insufficient allowance had been made to take into account the ease 
of access to raw materials found in China when compared to Turkey, 
the reference country. The Commission modified its calculation 
acccordingly. 
6. With regard to the comparison between normal value and export price 
the Chinese exporters showed that insufficient adjustment had been 
made to normal value to allow for differences in the burning 
process in China compared with Turkey. The Commission modified its 
calculation accordingly. 
7. As a result of these changes to normal value, the dumping margin 
for all Chinese exporters is reduced to 27.09%. 
8. As far as other points in the provisional measures are concerned, 
particularly with regard to injury and causality, various arguments 
were put forward by the Chinese exporters, the Community importers, 
and users, as to why definitive measures should not be imposed. 
These arguments are discussed in detail in the attached regulation, 
however, the Commission has proposed that definitive anti-dumping 
measures should be imposed. 
(1) OJ No L 282, 26.09.1992, p. 23 
(2) OJ No L 15, 23.01.1993, p. 2 
-4 ©^ 
9. With regard to the calculation of the definitive duty, the 
Commission has taken into consideration the contribution of the 
dumped imports to the poor economic situation of the Community 
industry. It considers that only a duty equal to the full dumping 
margin, which would bring the Chinese prices up to the normal 
value, is sufficient to remove the injury experienced by the 
Community industry. 
10. As far as the form of the duty is concerned the Commission notes 
that the caustic magnesite market is very sensitive to the price 
instability generated by the dumped Chinese imports. The form of 
the duty should be such as to prevent further price decreases by 
the Chinese exporters. In these circumstances a minimum price at 
which the Chinese magnesite can be sold on the Comminity market has 
been established. This minimum price is 112 ECU per tonne for all 
grades. Consequently the duty shall be equal to the difference 
between this minimum price and the net free at Community frontier 
price before customs clearance. 
COUNCIL REGULATION (EEC) No 
Of 
imposing a definitive anti-dumping duty on imports of 
magnesium oxide originating in the People's Republic of China 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, 
Having regard to Council Regulation (EEC) No 2423/88 of 11 July 19 88 
on protection against dumped or subsidised imports from countries not 
members of the European Economic Community(*) and in particular 
Article 12 thereof, 
Having regard to the proposal from the Commission, submitted after 
consultation within the Advisory Committee as provided under the above 
Regulation, 
Whereas : 
A. PROVISIONAL MEASURES 
(1) The Commission, by Regulation (ECC) No 2800/92(2), (hereafter 
referred to as the provisional regulation) imposed a provisional 
anti-dumping duty on imports of magnesium oxide (commonly called 
caustic magnesite) originating in the People's Republic of China 
and falling within the CN Code ex 2519 90 90. 
(1) OJ No L 209, 02.08.1988, p. 1 
(2) OJ No L 282, 26.09.1992, p. 23 
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B. SUBSEQUENT PROCEDURE 
(2) Following the imposition of the provisional anti-dumping duty, 
five Chinese exporters and some independent importers requested 
and were granted an opportunity to be heard by the Commission. 
They also made written submissions making known their views on the 
findings as did other independent importers, some end users and 
the Chinese Authorities. 
(3) Parties were also informed of the essential facts and 
considerations on the basis of which it was intended to recommend 
the imposition of definitive duties and the definitive collection 
of amounts secured by way of a provisional duty. They were also 
granted a period within which they could make representations 
subsequent to these disclosures. 
(4) The oral and written comments submitted by the parties were 
considered and, where appropriate, the commission's findings were 
modified to take account of them. 
C. PRODUCT UNDER CONSIDERATION - LIKE PRODUCT 
(5) Certain Chinese exporters, independent importers and end users 
have repeated the argument that caustic magnesite originating in 
the Community and elsewhere is not a like product to that 
originating in the People's Republic of China. In this respect, 
the Chinese exporters proposed that an independent technical 
expert be appointed by the Commission to determine the question of 
whether or not Chinese magnesite is a "like product" to any other 
caustic magnesite, in terms of the quality of its mineral 
deposits, the extracting and processing methods, its chemical and 
physical characteristics and the application of the final product. 
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(6) The Commission accepts that an independent expert may provide 
factual information as to any such differences between Chinese 
magnesite and that from other sources. The existence of these 
differences is, however, accepted by the Community Institutions. 
It is also not contested that these differences do not alter the 
fact that the basic physical and chemical characteristics of all 
types of magnesite are identical. Only if these basic physical and 
technical characteristics were to be different, could it be 
considered that the different types of magnesite are not similar 
products. The fact that caustic magnesite from whatever source can 
be used interchangeably by end users confirms that it is one like 
product. It was thus not considered necessary to appoint such an 
expert for these reasons and for those given in recitals 10 and 11 
of the provisional regulation. 
The Council confirms these findings and conclusions. 
D. DUMPING 
a) Reference country 
(7) In its provisional regulation, the Commission found that Turkey 
was an appropriate reference country for the determination of 
normal value for the People's Republic of China. After the 
imposition of provisional duties some of the exporters objected to 
the use of Turkey as a reference country and proposed 
Czechoslovakia as being more appropriate because of the nature of 
its reserves, its processing techniques, and the range of the MgO 
(magnesium oxide) grades. They argued that the former 
Czechoslovakia, while being a market economy, has an economic 
structure closer to that of China. 
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The Commission recalls however that, in conformity with Regulation 
(EEC) No 1765/82<3), the former Czechoslovakia cannot be regarded 
as a market economy during the investigation period of July 199 0 to 
June 1991. According to the provisions of Article 2(5) of 
Regulation (EEC) No 2423/88, prices and costs in such a non market 
economy cannot be used as a basis for establishing normal value. 
When selecting a market economy country in which normal value can 
be established, the Commission takes several factors into account. 
It considers the access to raw materials, the representativity of 
the market in relation to the quantities exported by the exporting 
country and whether cost and prices of the product in question in 
that country are formed by competitive market forces. 
After a full examination of conditions in Turkey in the light of 
the above considerations, the Commission concluded, as in recital 
15 of the provisional regulation, that Turkey is an appropriate 
reference country. 
The Council confirms these findings and conclusions. 
b) Normal value 
(8) With regard to the price situation in Turkey, the Commission found 
that the high proportion of sales between related companies made 
it inappropriate to base normal value on selling prices. However, 
it was found, as shown in recital 16 of the provisional 
regulation, that the costs of production of the Turkish producer 
are determined through a process of competitive tendering. Costs 
of production are thus established in the ordinary course of trade 
and form an appropriate basis for normal value. 
(3) OJ No L 195, 05.07.1982 
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(9) The Chinese exporters argued, after the imposition of provisional 
duties, that the normal value as constructed for each MgO grade 
and as adjusted to take account of differences in conditions 
between China and Turkey, did not fully reflect the natural 
advantages of China, where they claimed magnesite can be extracted 
and processed more easily than in Turkey. 
The Commission, to some extent, agrees with this argument. As far 
as the differences in the mining and processing methods are 
concerned, the Commission accepts that for Chinese produced 
caustic magnesite, due to the natural advantages, some cost 
factors do not exist in China. In the provisional regulation 
normal value was adjusted to allow for beneficiation and sorting 
processes found in Turkey but not found in China. The Commission 
now considers that an additional allowance should be made for the 
ease of access to raw materials in China in comparison with that 
of Turkey. Therefore, taking into account the actual ore/spoil 
ratio found in Turkey and the level of adjustment suggested by the 
Chinese exporters, the costs of extraction have been reduced by 
20% as found in Turkey. 
On this basis, the normal value as established for the Turkish 
producer is considered to reflect the natural advantages in China. 
The Chinese exporters argued that a further allowance should be 
made in the light of the claimed proximity of the open cast mines 
to the kilns in China. In this respect it has to be recalled that 
only differences which stem from the different natural advantages 
of the product in China and in Turkey can justify adjustments to 
be made to the normal value based on the situation in Turkey. The 
location of kilns, however, is not a natural advantage of the 
Chinese magnesite industy but is a result of commercial decisions 
made by the production organisation concerned. In any event the 
distance between mine and kilns varies constantly, as the mine and 
its resources are exploited. 
_ 6 -
(10) The normal value thus established is confirmed by the council. 
(c) Export Price 
(11) The Council confirms the method used to establish export prices 
set out in recital 19 of the provisional regulation as no 
substantial comments in this respect were made by interested 
parties. 
E. COMPARISON AND DUMPING MARGIN 
(12) The Chinese exporters argued that Chinese producers use simple, 
low cost, coke burning, shaft kilns and that an adjustment of 10% 
should be made to reflect lower burning costs in China. The 
Commission established, however, that the Turkish producer also 
uses shaft kilns. By contrast the Commission accepted that an 
allowance should be made to reflect the higher cost of the fuel 
oil used by the Turkish producer and costs of production have thus 
been reduced by 3%. No other observation having been raised by any 
other party, the findings and conclusions in recital 20 of the 
provisional regulation are hereby confirmed by the Council. 
The final examination of the facts showed the existence of 
dumping, the margin of dumping being equal to the amount by which 
the normal value exceeds the price for export to the Community. 
This margin is equal to ECU 24 per tonne, if calculated as a 
percentage of the weighted average CIF value of the imports 
concerned and expressed as an ECU value. 
(13) For the purpose of the provisional findings the Commission has 
established a single dumping margin for all Chinese exporters. The 
co-operating Chinese exporters contested the single dumping margin 
and argued that the Commission should calculate a dumping margin 
for each co-operating exporter. 
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The Commission recalls however that, with regard fo exports from * 
non-mark»?L economy, individual tieatment must i <=iuaiii a strict 
exception to be applied solely in cases where the producer 
concerned has provided evidence that it is free to establish 
export pricon without the influence of the titate authorities The 
state, through its control, could modify the pattern of production 
and trade, so as to take advantage of the lowest dumping margin 
and thus undermine the effectiveness of any measures. In this 
respect, as explained in recital 22 of the provisional regulation, 
these exporters could not demonstrate that they are independent of 
any State influence and are free in fixing their export prices. 
Therefore only one dumping margin for all Chinese exports has been 
established. The Council confirms the above findings and 
conclusions. 
F. INJURY 
(14) The Commission «-one I utl«=>ri in i t a pi. »v i s i<»im I ic-..|nlnt ion (aoc 
recitals 23-33) that the Community industry had suffered material 
injury as a result of the dumped imports of caustic magnesite 
originating in the People's Republic of China. Imports of the 
product concerned from the People's Republic of China increased 
from 72.000 tonnes in 1988 to over 120.000 tonnes during the 
investigation period of 1 July 1990 to 30 June J9*J1, the market 
share of the Community producers decreased in a growing market and 
their prices were significantly depressed. All sales by Community 
pro<lue«»itt wui »« loon making oi at a low profil l«*vel. in this» 
respect no new arguments were put forward by interested parties. 
The Council, therefore, confirms the Commission findings and 
conclusions as in recital 33 of the provisional r««|u I .-it ion. 
(15) The Chinese exporters argued that there can be no injury for 
grades above 91% MgO as the Community producer of these grades 
has, allegedly, continually increased sales, production volume and 
capacity utilisation. 
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As established in recital 35 of the provisional regulation, the 
Commission did not find, during its investigation, that this or 
any other Community producer had increased sales, production 
volume and capacity utilisation for these grades. In addition, 
this argument ignores the fact that according to Article 4(4) of 
Regulation EC No 2423/88 injury has to be established in relation 
to the Community production of the like product, which consists of 
all types and grades of magnesite which are largely 
interchangeable. If sales in the Community by the Community 
producers of certain grades are not affected by dumped imports in 
an identical way to other grades, this has to be seen in the 
global context of the Community industry•s performance on the 
Community market for the like product as a whole, which means all 
types and grades. This argument has, therefore, to be rejected. 
The Council confirms the above findings and conclusions. 
G. CAUSATION OF INJURY 
(16) As set out in recitals 34 and 35 of the provisional regulation, 
the Commission found that the Community industry had suffered 
material injury through the effect of dumped imports within the 
meaning of Article 4(1) of Regulation (EEC) No 2423/88. However, 
after the imposition of provisional measures, the Chinese 
exporters and some importers argued that the rising costs of 
production incurred by Community producers indicated that injury 
was self inflicted and not attributable to imports from China. 
They also argued that injury had been caused by imports from North 
Korea. 
- 9 -
(17) With regard to the first argument, the commission did not find 
that Community producers• costs had risen significantly between 
1988 and the investigation period. The worsening financial 
position of the Community industry was the result of the downward 
pressure on prices from dumped imports from China while costs 
remained stable. The Commission, therefore, cannot accept that 
there was any self inflicted injury on the part of the Community 
industry due to rising costs of production and this argument, 
therefore, has to be rejected. 
(18) With regard to imports from North Korea the Commission notes that 
China is by far the largest source of imports of caustic magnesite 
into the Community. North Korea accounted for 8% of imports of 
caustic magnesite into the Community during the reference period, 
whereas China accounted for 54% of the imports. Accordingly, while 
it cannot be excluded that factors other than dumped imports from 
China also had negative effects on the Community industry, it must 
be concluded that the very substantial expansion in volume and the 
low prices of the dumped Chinese exports have been responsible for 
the fall in market share and deteriorating financial position of 
the Community producers. These exports taken in isolation, must, 
therefore, be considered to have caused material injury to the 
Community industry. 
(19) The pulp and paper producers and liquid fertiliser producers 
argued that imports from China used by them had not caused injury 
to the Community producers as the Community producers did not 
offer for sale caustic magnesite with the appropriate chemical 
profile. 
- 10 
In this respect, the Commission recalls that all the products 
imported and the magnesite produced by the Community industry are 
like products having the same basic and identical physical and 
chemical characteristics and the same applications. The commission 
found in addition, that the Community industry is able to provide 
all types of magnesite, including those which meet the 
requirements of the above mentioned users. The fact that, in this 
specific case, the Community industry could not sell these types 
of magnesite to these users, while the Chinese exporters could, 
due to their low prices, is a further indication that the 
Community industry was injured by the dumped imports from China. 
The Council confirms the above findings and conclusions. 
H. DUTY 
(20) As far as the amount of the duty is concerned, the Commission 
established in recital 45 of the provisional regulation that only 
a duty equal to the full dumping margin (as established in recital 
12) which would bring the Chinese prices up to the normal value, 
is sufficient to remove the injury, caused by dumping, experienced 
by the Community industry. No arguments concerning this duty 
amount were put forward, subsequent to the imposition of the 
provisional duty, the Council, therefore, confirms the 
Commission's findings and conclusions in this respect. 
As far as the form of the duty is concerned, the Commission 
considers that the structure of a state controlled economy gives 
the Chinese exporters considerable room for manoeuvre to further 
decrease their export prices and such falls in price by Chinese 
exporters have indeed taken place since 1988. The magnesite market 
is very sensitive to price instability thus the form of the duty 
should be such as to prevent further price decreases by the 
Chinese exporters. Therefore, neither a fixed amount of duty nor 
an ad-valorem duty seem to be appropriate. 
- 11 -
In these circumstances it is considered that a minimum price at 
which the Chinese magnesite should be sold on the Community market 
should be established. This minimum price has been calculated on 
the basis of the weighted average normal value of caustic 
magnesite as established in recital 9 and as adjusted to CIF 
Community frontier value. This minimum price is 112 ECU per tonne 
for all grades, consequently, the duty should be equal to the 
difference between this minimum price and the net free at 
Community frontier price before customs clearance. This is 
confirmed by the Council. 
I. COMMUNITY INTEREST 
(21) In assessing the community interest, two basic elements have to be 
taken into account. The first is that to prevent distortions of 
competition arising from unfair commercial practices and thus to 
re-establish open and fair competition on the Community market is 
the purpose of anti-dumping measures and is fundamentally in the 
general Community interest. The second is that, in the particular 
circumstances of the present proceeding, to refrain from re­
establishing a fair market situation would endanger the future 
existence of the caustic magnesite industry since the Community 
industry is at present unable to generate the profits necessary to 
continue trading. The Community caustic magnesite industry would 
cease to be a source of technical expertise, employment and 
investment, see recital 43 of the provisional regulation. 
(22) Certain importers and end users argued that any increase in costs 
for end users in the pulp and paper industry would seriously 
affect their ability to compete with other manufacturers outside 
the Community. 
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The Commission accepts that these industries are currently facing 
a difficult trading situation both within and outwith the 
Community which could be exacerbated by increases in the price of 
caustic magnesite. The Commission considers, however, that the 
impact of the duty in the form of a minimum price per tonne, as 
established in recital 20 above, will be such as to enable 
industrial users, such as those in the pulp and paper industry, to 
buy caustic magnesite at prices which are not significantly higher 
than those of their competitors outside the Community and thus 
maintain their competitive position. In addition, in general, 
while there might be a short term price advantage to end users if 
no duty is imposed, to refrain from establishing fair competition 
on the Community market would, in the longer term, lead to less 
competition and higher prices. 
(23) Some importers argued that there was no need to protect the 
Community Industry in respect of supplies of caustic magnesite 
which it cannot deliver. They suggest that the current capacity of 
the Community industry is not sufficient to supply the entire 
Community demand. 
While it is true that production in the Community is, at present, 
insufficient to meet demand for the product concerned, the 
Commission found that the Community industry is currently 
operating below a reasonable capacity utilisation level and has 
large reserves available. It was only the low priced dumped 
imports from china which prevented the community industry from 
utilising existing capacity and expanding production facilities. 
In addition, this argument is based on a mistaken view of the 
effects of anti-dumping duties. Even with the application of 
duties, Community consumers will still be able to buy Chinese 
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magnesite at competitive prices. Indeed, as in this proceeding, 
where the duty is equal to the dumping margin, but lower than the 
amount required to fully remove the injury, it is only the unfair 
element of the exporters' price advantage which will be 
eliminated. In such a situation, the exporters can fully compete 
on the basis of their true comparative advantage. There are also 
many other non Community suppliers of caustic magnesite on the 
Community market. The Commission sees no danger of any shortage of 
supply. 
(24) The Chinese exporters repeated the argument that it was not in the 
Community interest to impose ineffective measures in that anti­
dumping duties imposed on Chinese caustic magnesite would result 
in a large increase in low priced imports from North Korea. As 
indicated in recital 42 of the provisional regulation, the 
Commission would be made aware of Chinese imports being replaced 
to a large extent by allegedly dumped imports from North Korea and 
in such circumstances appropriate action would be considered. 
(25) For the reasons given above and in recitals 41 to 43 in the 
provisional regulation, the commission concludes that the 
Community interest calls for intervention in this case. The 
Council confirms the above findings and conclusion. 
J. COLLECTION OF PROVISIONAL DUTY 
(26) The Council considers that it is not appropriate, in view of the 
change in the form of the duty, in this particular case, to 
definitively collect the provisional anti-dumping duty, 
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HAS ADOPTED THIS REGULATION 
Article 1 
1. A definitive anti-dumping duty is hereby imposed on imports of 
magnesium oxide falling within CN Code ex 2519 90 90 (Taric 
Code 2519 90 90 10) originating in the People's Republic of China. 
2. The amount of the duty, shall be the difference between ECU 112 per 
tonne and the net, free-at-Community-frontier price before customs 
clearance, if this price is lower. 
3. The provisions in force concerning customs duties shall apply. 
Article 2 
This Regulation shall enter into force on the day following its 
publication in the official Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly 
applicable in all Member States. 
Done at Brussels, For the Council 

ISSN 0254-1475 
COM(93) 181 final 
DOCUMENTS 
EN 02 1X 
Catalogue number : CB CO <)3 209-FN C 
ISBN 92-77-55295-6 
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