[pic] | EUROPEAN COMMISSION |

Brussels, 9.3.2010

COM(2010)80 final

2010/0049 (NLE)

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 452/2007 imposing a definitive anti-dumping duty on imports of ironing boards originating, inter alia , in the People's Republic of China

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 proceeding concerning imports of certain ironing boards originating in, inter alia, the People's Republic of China. |

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

Existing provisions in the area of the proposal Council Regulation (EC) No 452/2007[2] imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of ironing boards originating in the People's Republic of China and Ukraine. |

Consistency with other policies and objectives of the Union Not applicable. |

2) Consultation of interested parties and impact assessment |

Consultation of interested parties |

Interested parties concerned by the proceedings 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 foresee 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 8 January 2009, the European Commission ('the Commission') initiated a partial interim review limited to dumping aspects of the anti-dumping measures applicable to imports of ironing boards originating in the People's Republic of China imposed by Council Regulation (EC) No 452/2007 of 23 April 2007. The request for the review was lodged by a Chinese exporting producer, namely Power Team Houseware Co. Ltd., Guangzhou. In its request the company claimed that the circumstances on the basis of which measures were imposed have changed and that these changes are of a lasting nature. The applicant provided prima facie evidence that the continued imposition of the measure at its current level is no longer necessary to offset dumping and notably that it operates under market economy conditions. The review investigation showed that the applicant did not fulfil the relevant provisions of the basic Regulation to be granted market economy treatment and its individual margin of dumping had to be revised. Additionally, the residual rate applicable to all non-cooperating producers had to be revised. Therefore, it is suggested that the Council adopts the attached proposal for a Regulation amending the anti-dumping duty applicable to Power Team and the residual duty. The Regulation should be published in the Official Journal no later than 7 April 2010. |

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 and in particular Article 11(3) thereof. |

Subsidiarity principle The proposal falls under the exclusive competence of the 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: Council Regulation. |

Other means would not be adequate because the basic Regulation does not foresee alternative options. |

4) Budgetary implication |

The proposal has no implication for the Union budget. |

2010/0049 (NLE)

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 452/2007 imposing a definitive anti-dumping duty on imports of ironing boards originating, inter alia , 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[3] ('the basic Regulation'), and in particular Article 11(3) thereof,

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

Whereas:

1. PROCEDURE

2. Measures in force

3. The Council, by Regulation (EC) No 452/2007[4], imposed a definitive anti-dumping duty on imports of ironing boards originating, inter alia , in the People's Republic of China ('PRC'). The measures consist of an ad valorem duty rate of 38,1 %, with the exception of five companies expressly mentioned which are subject to individual duty rates.

4. Request for a review

5. In 2008, the Commission received a request for a partial interim review pursuant to Article 11(3) of the basic Regulation ('interim review'). The request, limited in scope to the examination of dumping, was lodged by a Chinese exporting producer Guangzhou Power Team Houseware Co. Ltd., Guangzhou ('Power Team' or 'the applicant'). The rate of the definitive anti-dumping duty applicable to the applicant is 36,5 %.

6. In its request, the applicant claimed that the circumstances on the basis of which measures were imposed have changed and that these changes are of a lasting nature. The applicant provided prima facie evidence that the continued imposition of the measure at its current level is no longer necessary to offset dumping.

7. In particular, the applicant has claimed that it now operates under market economy conditions, i.e. that it meets the criteria laid down in Article 2(7)(c) of the basic Regulation. The applicant therefore alleged that its normal value should be determined in accordance with Article 2(7)(b) of the basic Regulation. A comparison of this normal value and its export prices to the European Union indicated that the dumping margin appears to be substantially lower than the current level of the measure.

8. Therefore, the applicant claimed that the continued imposition of measures at the existing level, which was based on the level of dumping previously established, was no longer necessary to offset dumping.

9. Initiation of a review

10. Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an interim review, the Commission decided to initiate an interim review in accordance with Article 11(3) of the basic Regulation, limited in scope to the examination of dumping in respect of the applicant[5].

11. Product concerned and like product

12. The product concerned by the interim review is the same as that in the investigation that led to the imposition of the measures in force ('original investigation'), i.e. ironing boards, whether or not free-standing, with or without a steam soaking and/or heating top and/or blowing top, including sleeve boards, and essential parts thereof, i.e. the legs, the top and the iron rest originating in the People's Republic of China currently falling within CN codes ex 3924 90 00[6], ex 4421 90 98, ex 7323 93 90, ex 7323 99 91, ex 7323 99 99, ex 8516 79 70 and ex 8516 90 00.

13. The product produced and sold on the Chinese domestic market and that exported to the European Union ('EU'), as well as that produced and sold in Ukraine (used as analogue country) have the same basic physical and technical characteristics and uses and are therefore considered to be alike within the meaning of Article 1(4) of the basic Regulation.

14. Parties concerned

15. The Commission officially advised the representative of the Union industry, the applicant and the representatives of the exporting country of the initiation of the review. Interested parties were given the opportunity to make their views known in writing and to be heard.

16. The Commission sent a market economy treatment ('MET') claim form and a questionnaire to the applicant and received a reply within the deadline set for that purpose. The Commission sought and verified all the information it deemed necessary for the determination of dumping, and a verification visit was carried out at the premises of the applicant.

17. Review investigation period

18. The investigation of dumping covered the period from 1 January 2008 to 31 December 2008 ('the review investigation period' or 'RIP'). It is recalled that the investigation period of the original investigation leading to the imposition of the measures was 1 January 2005 to 31 December 2005 ('the original investigation period').

19. RESULTS OF THE INVESTIGATION

20. Market Economy Treatment ( 'MET')

21. 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 Article 2 of the basic Regulation for those producers which were found to meet the criteria laid down in Article 2(7)(c) of the basic Regulation, i.e. where it is shown that market economy conditions prevail in respect of the manufacture and sale of the like product. These criteria are set out in a summarised form below:

22. business decisions are made in response to market signals, without significant State interference, and costs reflect market values,

23. firms have one clear set of basic accounting records which are independently audited in line with International Accounting Standards ('IAS') and applied for all purposes,

24. there are no significant distortions carried over from the former non-market economy system,

25. bankruptcy and property laws guarantee stability and legal certainty,

26. currency exchanges are carried out at market rates.

27. The applicant requested MET pursuant to Article 2(7)(b) of the basic Regulation and was invited to complete a MET claim form.

28. The investigation established that the applicant did not meet the MET criterion referred to in the first indent of Article 2(7)(c) (criterion 1) of the basic Regulation as regards costs of major inputs. It was established that after the investigation period in the original investigation, i.e. after 2005, export restrictions were imposed by the State on several steel products, including the main raw materials for the production of ironing boards, i.e. steel plate, steel pipes and steel wire. It is noted that the cost of these raw materials represent significant part of the total raw materials cost. The imposition of export taxes decreased the incentive to export and thereby increased the volumes available domestically, leading in turn to lower prices. It was also found that a number of subsidy schemes were available for Chinese steel producers[7], as well as publicly available accounts of a number of steel producers confirm that the Chinese State is actively supporting the development of the steel sector in the PRC.

29. As a consequence, domestic steel prices in the PRC were during the review investigation period far below prices on other sizeable world markets, notably steel prices in North America and North Europe[8], and these price differences cannot be explained by any competitive advantage in the production of steel.

30. Moreover, from the information on the file, it was found that the applicant was benefiting from these artificially low and distorted prices of steel, as it purchased its raw materials on the domestic Chinese market.

31. It was thus concluded that major inputs of Power Team do not substantially reflect market values. Consequently, it was concluded that the applicant has not shown that it fulfils all the criteria set out in Article 2(7)(c) of the basic Regulation and, thus, could not be granted MET.

32. The applicant, the exporting country and the Union industry were given an opportunity to comment on the above findings. Comments were received from the applicant and the Union industry.

33. The applicant put forward three main arguments within the deadline. Firstly, it stated that Power Team's raw material prices were still in line with domestic prices and that this finding was sufficient to fulfil criterion 1 in the original investigation. As a consequence, the company considered it a breach of Article 11(9) of the basic Regulation to compare the prices on the Chinese domestic market with prices on other international steel markets. In this context, the company also questioned the relevance of the North European and North American steel market prices to which a comparison was made. The applicant stated that there would be also prices of other international markets such as the Turkish export prices that were lower than the domestic prices in the PRC.

34. It is indeed true that the applicant fulfilled criterion 1 in the original investigation, but failed criterion 2. It is however considered that there is no breach of Article 11(9) of the basic Regulation as there is no change in methodology to assess whether the company operates under market economy conditions and notably whether it still fulfils criterion 1. In both investigations, the original investigation and the review investigation, the question of raw materials reflecting market values was assessed. In both investigations one of the indicators examined were domestic steel prices, but in the original investigation there were no other significant factors that appeared to influence raw material prices. Thus, the methodology remained the same, only the findings were different.

35. The review investigation revealed that after the original investigation period, i.e. since 2006, the circumstances have changed as several measures were imposed by the Chinese State to discourage exports of steel plate, pipes and wire by introducing an export tax and by eliminating the export VAT refund. This, together with the mentioned subsidy schemes, had a distorting effect on the Chinese domestic steel prices because the price difference found between those prices and the domestic prices published for North America and North Europe, increased significantly to around 30 %. This price difference has not been challenged by the applicant following the disclosure of the MET findings.

36. As regards the argument that the domestic North American and North European steel prices are not the only internationally relevant prices, it is noted that both steel markets were selected for a comparison of prices as both markets have a high consumption of steel and are competitive markets with several active producers. It could thus reasonably be assumed that those domestic prices were representative for competitive market prices. Moreover, the claim that Turkish export prices would be lower than Chinese domestic prices was not further substantiated at this stage, i.e. no concrete prices were submitted within the deadline. Furthermore, no explanation as to why Turkish export prices, given the apparent relative small size of the Turkish export market compared to the domestic North American and North European markets, should be considered as more relevant.

37. The company secondly claimed that it was discriminated in the application of EU law, as in a number of recent other cases in which steel constituted a major input, there were some Chinese steel companies fulfilling criterion 1. These cases were all examined and it was found that none of the companies involved in those cases was granted MET as they all failed at least one other criterion of Article 2(7)(c) of the basic Regulation. So, for reasons of administrative economy, it was not necessary to expand on criterion 1 in great detail when it was clear that the company would fail for another reason. In any event, in none of those recent cases the Commission had concluded that there are no distortions on the Chinese domestic steel market, but on the contrary, in recent cases, MET was denied whenever raw material distortions could be identified[9].

38. Lastly, the applicant argued that an adjustment of the normal value would be more appropriate than denying MET. However, an adjustment to the normal value appears not appropriate given that one of the criteria to be granted MET is that costs of major inputs have to reflect market values. If this is not the case, the consequence should rather be that MET is denied and the normal value will be replace by an analogue country normal value, in particular if the raw materials constitute such a significant part of the cost of the inputs.

39. To conclude, none of the arguments raised by Power Team were convincing or led to a different assessment of the findings.

40. The Union industry pointed out that the Chinese State had massively intervene in the steel industry which already prompted the EU and the US to request WTO consultations to resolve this matter.

41. On the basis of the above, the findings and the conclusion that MET should not be granted to Power Team were confirmed.

42. Following the disclosure of the essential facts and considerations on the basis of which it was intended to recommend an amendment of Council Regulation (EC) No 452/2007, the applicant submitted further comments on the MET finding.

43. The applicant mainly reiterated its argument that its main inputs would reflect market values in the PRC and that Chinese prices would be broadly in line with other international markets. While it acknowledged the fact that the price increase for the main inputs was less pronounced in the PRC in 2008 compared to other international steel markets, the applicant alleged that this was not due to any distortions but that other pure commercial factors could be the reason for the lower prices on the Chinese domestic market. The applicant pointed to increased production in 2008 and indicated that the existing anti-dumping or countervailing duties in place against exports of most of the steel inputs produced in the PRC had led the Chinese producers to decrease their prices in the domestic market.

44. It is noted that the additional price information submitted by the applicant supported the finding that the main raw materials for the production of ironing boards in 2008 were on average significantly cheaper on the Chinese domestic market than on other sizeable world markets.

45. As to the argument that pure commercial factors were the reason for that price difference, i.e. the increased production in the PRC, it is noted that this argument was not sufficiently substantiated in particular with regard to any possible correlation between the alleged increase in production and the situation on the demand side. At the same time, the argument raised by the applicant that there were countervailing duties in place against exports of a number of steel products from the PRC, only demonstrates that indeed the Chinese steel producers were benefiting from subsidies.

46. Consequently, the applicant's argument that the steel market in the PRC is not distorted cannot be upheld and it is definitively concluded that the MET determination should not be revised and that MET should not be granted to Power Team.

47. Individual Treatment ('IT')

48. Pursuant to Article 2(7) of the basic Regulation, a country-wide duty, if any, is established for countries falling under that Article, except in those cases where companies are able to demonstrate that they meet all criteria for individual treatment set out in Article 9(5) of the basic Regulation. These criteria are set out in a summarised form below:

49. in the case of wholly or partly foreign owned firms or joint ventures, exporters are free to repatriate capital and profits;

50. export prices and quantities, and conditions and terms of sale are freely determined;

51. the majority of the shares belong to private persons, and it must be demonstrated that the company is sufficiently independent from State interference;

52. exchange rate conversions are carried out at the market rate;

53. State interference is not such as to permit circumvention of measures if individual exporters are given different rates of duty.

54. The applicant, as well as requesting MET, also claimed IT in the event of not being granted MET.

55. The investigation showed that the applicant met all the above criteria and it is concluded that IT should be granted to Power Team.

56. Normal value

57. According to Article 2(7) of the basic Regulation, in case of imports from non-market-economy countries and to the extent that MET could not be granted, for countries specified in Article 2(7)(b) of the basic Regulation, normal value has to be established on the basis of the price or constructed value in an analogue country.

58. In the notice of initiation, the Commission indicated its intention to use again Turkey, which was used as an analogue country in the original investigation, as an appropriate analogue country for the purpose of establishing normal value for the PRC, but no Turkish producer co-operated in this interim review. However, co-operation was received from an Ukrainian exporting producer that was subject to a parallel investigation for another interim review. The interested parties were informed accordingly and no comments against using Ukraine as an analogue country were received at that stage.

59. As there were no apparent reasons found not to select Ukraine as analogue country, and in particular as no other third country producer cooperated, the normal value was established pursuant to Article 2(7)(a) of the basic Regulation, i.e. on the basis of verified information received from the cooperating producer in the analogue country.

60. In accordance with Article 2(2) of the basic Regulation, it was found that the volume of domestic sales of the like product of the cooperating producer in the analogue country was representative in comparison with the export sales of the applicant to the EU. Furthermore, for all exported product types, the comparable domestic sales (if necessary adjusted for physical characteristics) were considered representative since their sales volume was at least 5 % of the volume of the corresponding export sales to the EU.

61. The Commission subsequently examined whether the domestic sales in the analogue country of each type of ironing board sold domestically in representative quantities could be regarded as having been made in the ordinary course of trade, by establishing the proportion of profitable sales to independent customers of the ironing board type in question.

62. Domestic sales transactions were considered profitable where the unit price of a specific product type was equal to or above the cost of production. Cost of production of each type sold on the domestic market of the analogue country during the IP was therefore determined.

63. Where the sales volume of a product type, sold at a net sales price equal to or above the calculated cost of production, represented more than 80 % of the total sales volume of that type, and where the weighted average price of that type was equal to or above the cost of production, normal value was based on the actual domestic price. This price was calculated as a weighted average of the prices of all domestic sales of that type made during the IP, irrespective of whether these sales were profitable or not.

64. Where the volume of profitable sales of a product type represented 80 % or less of the total sales volume of that type, or where the weighted average price of that type was below the cost of production, normal value was based on the actual domestic price, calculated as a weighted average of only profitable sales of that type.

65. Following the disclosure, the applicant commented that in cases where profitable sales would represent less than 10 % of total sales volume of a particular type, a constructed normal value should normally be used.

66. In this regard, it is noted that a situation of less than 10 % profitable sales did not occur in this investigation. Moreover, the practice of automatically constructing a normal value in such circumstances is no longer in place.

67. Export price

68. In all cases the product concerned was sold for export to independent customers in the Union via independent traders in the PRC, and therefore, the export price was established in accordance with Article 2(8) of the basic Regulation, namely on the basis of prices actually paid or payable for the product when sold for export to the EU.

69. Following disclosure, the applicant submitted that the export price should be established on the basis of the sales invoice price of the independent Chinese trader to independent customers in the EU, and not, as it was done, on the basis of the price paid or payable for the product when sold from Power Team to the independent trader in the PRC for export. Such an approach, however, would not be in line with Article 2(8) of the basic Regulation that requires that when products are sold for export, the first independent transaction should be the basis for establishing the export price. Consequently, this claim has to be rejected.

70. Comparison

71. The normal value and export price were compared on an ex-works basis. In order to ensure a fair comparison between normal value and export price, account was taken, in accordance with Article 2(10) of the basic Regulation, of differences in factors which were claimed and demonstrated to affect prices and price comparability. On this basis, allowances for physical characteristics, transport costs, insurance, handling charges and credit costs were made where applicable and justified. Given that the export price was established exclusively on the basis of domestic sales to Chinese traders for export, there was no reason for an allowance for differences in taxation, since the normal value was also established on domestic sales in the analogue country subject to similar taxation regime. Both normal value and export price were therefore calculated on a net of VAT basis.

72. Following disclosure, the applicant submitted that the grouping of the product types (that was indeed performed for comparison purposes) would cast certain doubts with regard to the correctness of the price comparison.

73. In this regard, it is noted that the grouping of product types in this investigation was identical as the grouping performed in the original investigation, and was considered necessary in order to increase comparability of the products sold for export to the Union by Power Team and those sold on the domestic market in the analogue country. It is also noted that the applicant did not substantiate its claim any further, in particular with respect to why the grouping as performed (and explained in the specific disclosure addressed to the applicant) would not be appropriate. Consequently, the claim has to be rejected.

74. Dumping margin

75. As provided for under Article 2(11) of the basic Regulation, the weighted average normal value by type was compared with the weighted average export price of the corresponding type of the product concerned. This comparison showed the existence of dumping.

76. The dumping margin of Power Team expressed as a percentage of the net, free-at-Union-frontier price was found to be 39,6 %.

77. LASTING NATURE OF CHANGED CIRCUMSTANCES

78. In accordance with Article 11(3) of the basic Regulation, it was also examined whether the changed circumstances could reasonably be considered to be of a lasting nature.

79. In this respect, it is recalled that the applicant was denied MET in the original investigation due to established irregularities with regard to its accounting practices. This review concluded that Power Team fulfilled this criterion. However, as indicated above, the applicant did not meet the MET criterion referred to in the first indent of Article 2(7)(c) of the basic Regulation concerning costs of major inputs. Consequently, as far as MET is concerned, the circumstances have not changed for the applicant.

80. However, the data collected and verified during the investigation (i.e. the applicant's individual prices for export to the EU and a normal value established in Ukraine as analogue country) led to a higher dumping margin. This change is considered significant and the continued application of the measure at its current level would no longer be sufficient to offset dumping.

81. ANTI-DUMPING MEASURES

82. In the light of the results of this review investigation, it is considered appropriate to amend the anti-dumping duty applicable to imports of the product concerned from Power Team to 39,6 %.

83. As concerns the level of the residual duty, it is recalled that in the original investigation, cooperation was low. Thus, the duty for the companies not co-operating was set at a level which corresponded to the weighted average dumping margin of the most sold product types of the co-operating exporting producer with the highest dumping margin. Applying the same methodology and considering the relevant data from the applicant, the residual duty has to be amended to 42,3 %.

84. Interested parties were informed of the essential facts and considerations on the basis of which it was intended to recommend an amendment of Council Regulation (EC) No 452/2007 and were given an opportunity to comment. The comments submitted by the parties were considered and, when appropriate, the definitive findings have been modified accordingly

HAS ADOPTED THIS REGULATION:

Article 1

The entry concerning Guangzhou Power Team Houseware Co. Ltd., Guangzhou in the table in Article 1(2) of Regulation (EC) No 452/2007 shall be replaced by the following:

Country | Manufacturer | Rate of duty (%) | TARIC additional code |

PRC | Guangzhou Power Team Houseware Co. Ltd., Guangzhou | 39,6 | A783 |

Article 2

The entry concerning all other companies in the PRC in the table in Article 1(2) of Regulation (EC) No 452/2007 shall be replaced by the following:

Country | Manufacturer | Rate of duty (%) | TARIC additional code |

PRC | All other companies | 42,3 | A999 |

Article 3

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 109, 26.4.2007, p. 12.

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

[4] OJ L 109, 26.4.2007, p. 12.

[5] OJ C 3, 8.1.2009, p. 14 ('Notice of Initiation').

[6] The modified code (3924 90 00 instead of 3924 90 90 as mentioned in the Notice of Initiation) is a result of the new Combined Nomenclature which became applicable on 1.1.2010 (see Regulation (EC) 948/2009).

[7] For instance ‘Money for Metal: A detailed Examination of Chinese Government Subsidies to its Steel Industry’ by Wiley Rein LLP, July 2007, ‘China Government Subsidies Survey’ by Anne Stevenson- Yang, February 2007, ‘Shedding Light on Energy Subsidies in China: An Analysis of China's Steel Industry from 2000-2007’ by Usha C.V. Haley, ‘China's Specialty Steel Subsidies: Massive, Pervasive and Illegal’ by the Specialty Steel Industry of North America, ‘The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industry’ by Wiley Rein & Fielding LLP, July 2006 and “The State-Business Nexus in China’s Steel Industry – Chinese Market Distortions in Domestic and International Perspective” by Prof. Dr. Markus Taube & Dr. Christian Schmidkonz of THINK!DESK China Research & Consulting, 25.2.2009.

[8] Source: Steel Business Briefing, average prices for 2005 and 2008.

[9] See Council Regulation (EC) No 91/2009 imposing a definitive anti-dumping duty on imports of certain iron or steel fasteners originating in the People's Republic of China (OJ L 29, 31.1.2009, p. 1); Commission Regulation (EC) No 287/2009 imposing a provisional anti-dumping duty on imports of certain aluminium foil originating in, inter alia, the People's Republic of China (OJ L 94, 8.4.2009, p. 17).