COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 538 final 
Brussels, 6 December 1991 
Proposal for a 
COUNCIL REGULATION (EECÏ 
imposing a definitive anti-dumping duty on imports of 
dihydrostreptomycin originating in the 
People's Republic of China and definitively collecting 
the provisional anti-dumping duty 
(presented by the Commission) 

A-
Proposal for a 
COUNCIL REGULATION (EEC) N* .../... 
Of 
imposing a definitive anti-dumping duty on imports of 
dihydrostreptomycin originating in the 
People's Republic of China and definitively collecting 
the provisional anti-dumping duty 
THE COUNCIL OF THE EUROPEAN COMMUNITIES 
Having regard to the Treaty establishing the European Economic Community, 
Having regard to Council Regulation (EEC) N* 2423/88 of 11 July 1988 on 
protection against dumped or subsidized imports from countries not 
members of the European Economic Community^1), and in particular 
Articles 9 and 12 thereof, 
Having regard to the proposal from the Commission, submitted after 
consultation within the Advisory Committee as provided under the above 
Régulât ion, 
Whereas : 
(1) OJ No L 209, 2.8.1988, p. 1 
2 -
A. PROVISIONAL MEASURES 
(1) The Commission, by Regulation (EEC) No 2054/91(2) (hereafter 
referred to as the provisional Regulation) imposed a provisional 
anti-dumping duty on imports of dihydrostreptomycin (hererin 
referred to as DHS) originating in the People's Republic of China. 
The Council, by Regulation (EEC) No 3090/91^3^ extended this duty 
for a period not exceeding two months. 
(2) The Commission did not impose measures concerning Japan, since it 
found that dumped Japanese imports did not cause any injury to the 
Community industry. In this respect the proceeding concerning Japan 
has been terminated by a Commission decision^4). 
B. SUBSEQUENT PROCEDURE 
(3) Following the imposition of the provisional anti-dumping duty, the 
Chinese exporters as well as the complainants, requested, and were 
granted an opportunity to be heard by the Commission. They also 
made written submissions making known their views on the findings. 
(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. 
(5) Owing to the complexity of the proceeding, in particular to the 
detailed verification of the data involved and the numerous 
(2) 0J L 187, 13.07.1991, p. 23 
(3) 0J L 293, 24.10.1991 , p.1 
(4) 0J L .... 
- 3 -
arguments put forward, the investigation could not be concluded 
within the time limit provided for in Article 7 (9)(a) of Counci 
Regulation (EEC) No 2423/88 (hereafter referred to as the basic 
Régulât ion). 
C. DUMPING 
(a) Normal value 
(6) For the purpose of definitive findings, normal value was, in 
general, established on the basis of the same method as that used in 
the provisional findings. 
(7) As explained in recitals 10 to 15 of the provisional Regulation, 
normal value for the the Chinese exporters was established on the 
basis of the constructed normal value in Japan. 
(8) DHS is only produced in two countries apart from the Community, one 
of which is the People's Republic of China and the other, Japan, 
which has a particular market situation. According to Article 2 (5) 
of the basic Regulation, the normal value has to be established in 
an appropriate and not unreasonable manner on the basis of the 
prices or the constructed value in a third market economy country by 
adding cost of production and a reasonable margin of profit. 
As explained in recital 11 to 15 of the provisional Regulation, the 
prices in Japan were not fairly comparable with the export prices of 
the Chinese exporters. Normal value had, therefore, to be 
constructed on the basis of the Japanese costs of production and a 
reasonable profit margin. The result was then adjusted to render it 
reasonable and appropriate by taking account of the fact that one of 
the raw materials was sourced in the People's Republic of China and 
the use of its cost price would have reintroduced the distortions 
which Article 2(5) of the basic Regulation was intended to 
eIiminate. 
- 4 -
Since Rhône Poulenc is the only other known producer of 
dihydrostreptomycin in the world, its costs, exclusive of selling, 
general, and administrative expenses and profit, pertaining to the 
relevant raw material were, utilized, as there is no established 
world market price for this raw material, which could be used as an 
alternative. The constructed normal value for Japan was therefore 
adjusted by the difference between the cost of production of the raw 
material of the only known market economy producer and the cost 
price of the Chinese raw material to the Japanese producer of 
d i hydrostreptomyc i n. 
(9) The Chinese exporters contested this method, arguing that the 
Commission had confused different methods of determining normal 
value as set out in Article 2 (5) of the basic Regulation. 
The Commission cannot accept this argument. The method used is 
fully in accordance with the second indent to Article 2(5), the 
normal value being adjusted as explained above to make it reasonable 
and appropriate as is required. Thus, the fact that this adjustment 
was made by reference to the cost of a raw material in the Community 
does not mean that the Commission mixed the methods. 
(10) As far as a reasonable profit margin is concerned, it is recalled 
that, due to the predominant market position enjoyed by the Japanese 
producer on its domestic market, the profit margin found for this 
Japanese producer was exceptional and therefore it was not 
considered appropriate to include it in the calculation of the 
constructed value for the Chinese exporters. For this reason, a 
profit margin of 5%, as requested by the Chinese exporters, was 
used in the calculation of the normal value, as this was thought to 
be reasonable for a mature generic pharmaceutical product used in 
the agricultural sector. 
5 -
The Council confirms these findings and conclusions of the 
Commission as well as those set out in Recital 9 to 15 of the 
provisional Regulation. 
(b) Export Price 
(11) The export price of DHS exported by the Chinese producers was 
determined as explained in recital 16 of the provisional Regulation 
No comments from any party have been made on this course of action. 
Therefore the Council confirms the Commission's findings. 
(c) Compar ison 
(12) The comparison between normal value and the export prices was made 
on a transaction-by-transaction basis at the ex-works level and at 
the same level of trade. For the purposes of ensuring a fair 
comparison the Commission took account, where appropriate, of 
differences concerning price comparability, such as differences in 
physical characteristics and selling expenses. The Chinese 
exporters claimed, and the Commission after examination agreed that 
a 9% downward adjustment of the normal value was justified in the 
light of the differences in the physicial characteristics, namely 
the lower potency of DHS produced in China. 
(13) In addition, the Chinese exporters claimed that the differences in 
the manufacturing process between DHS produced in Japan and China 
Justify a further adjustment. However, no material evidence was put 
forward by the exporters as provided for by Art. 2(9)(b) of the 
basic Regulation. Therefore the Council confirms the Commission's 
posit ion. 
(14) The Chinese exporters also argued that the Commission had neglected 
other factors of adjustement such as differences in end-use, in 
customer perception due to lower potency and colouration of Chinese 
- 6 
DHS. These differences were already taken into account by the 
abovementioned 9% allowance, because they are a consequence of the 
lower potency. It is considered that these claims are not justified 
and this is confirmed by the Council. 
(d") Dumping margin 
(15) The final examination revealed that exports of DHS by the Chinese 
exporters were dumped. The dumping margin is equal to the 
difference between the normal value and the export prices. The 
Commission has taken into account the fact that the Chinese 
exporters are controlled and represented by a single state 
organization which is also able to influence the export prices. 
Consequently, a uniform dumping margin has been determined for the 
Chinese exporters who cooperated. 
(16) The two Chinese exporters which cooperated claimed, however, that 
they acted independently and were therefore entitled to individual 
dumping margins. In this respect, the Commission noted that these 
Chinese exporters were represented by a single Chamber of Commerce 
on behalf of which identical arguments and considerations for the 
two exporters, without any evidence of differences in circumstances 
except for differences in potencies of DHS were submitted. In 
addition, these exporters were unable to show that they enjoyed a 
high degree of independence, that they are not state controlled in 
their commercial behaviour, especially in the setting of export 
prices and that they had the possibility to transfer any part of 
their profit outside China. For these reasons, the exporters'claim, 
in this respect, has to be rejected. 
(17) As far as other Chinese exports to the Community are concerned, an 
analysis of Eurostat figures for imports of DHS and a comparison 
with the declared export volumes by the Chinese exporters which 
cooperated shows that it is highly probable that other Chinese 
producers export DHS to the Community with a similar purity as the 
- 7 
Japanese producer. No evidence was available on the individual 
circumstances of these exporters for which, therefore, a dumping 
margin had to be calculated on the basis of the facts available as 
provided for in Article 7(7)(b) of the basic Regulation. Since it 
has to be assumed that these non-cooperating exporters export higher 
potency DHS, no allowance can be made for differences in potency 
levels. Therefore, it was considered reasonable that the dumping 
margin calculated for all other exporters from the People's Republic 
of China should not take account of any allowances claimed by the 
Chinese exporters which cooperated. 
On this basis, the dumping margins expressed as a percentage of CI F 
frontier prices were found to be for : 
Long March Pharmaceutical PI ant,and 
Shanghai Fourth Pharmaceutical Plant 37.46% 
For all other Chinese exporters 50.65% 
These margins are equivalent to 14.9 Ecu per kilogram of base DHS 
for Long March Pharmaceutical and Shanghai Fourth Pharmaceutical 
Plant and 20.16 Ecu for all other Chinese exporters. 
The Council confirms these findings. 
E. INJURY 
(18) The Commission concluded in its provisional findings that the 
Community industry had suffered material injury. While further 
investigation revealed that the capacity utilization was not as low 
as indicated in the provisional Regulation but dropped from an index 
of 100 in 1985 to 84 during the investigation period, all other 
injury factors remained unchanged even after the submission by the 
interested part ies. 
(19) Given the above and for the reasons explained in recitals 21 to 26 
of the provisional Regulation, the Council confirms that the 
Community Industry has suffered material injury. 
- 8 -
G. CAUSATION OF INJURY 
(20) in recital 29 to 34 of the provisional Regulation, the Commission 
found that the increase in the volume of DHS imports from the 
People's Republic of China, at low prices which undercut the prices 
of the EC industry, coincided with the reduction in the Community 
industry's profit margin, reduction In market share and price 
erosion, in this respect, the Chinese exporters themselves have 
indicated that the DHS market is Ughly price sensitive, it is, 
therefore, clear that the lower prices charged by the Chinese 
exporters was an important factor in the realignment of market 
shares amongst the Chinese exporters and the Community industry, and 
also in the price erosion and the consequent losses suffered by the 
Community industry. 
(21) It was also found that the Japanese exporters'sales of DHS in the 
Community had declined considerably, and had not undercut the 
Community industry prices. It was considered, therefore, that these 
exports did not contribute to the injury to the Community industry. 
As regards any other factors which had an impact on the situation of 
the Community industry, the Council is aware that demand for the 
product concerned has contracted in recent years. However, this 
factor has not been imputed to the injury caused by the Chinese 
exporters. Furthermore, the Commission considers that the large 
increase in dumped imports from China at very low prices into a 
contracting market has only served to aggravate the injurious effect 
of the dumping. 
(22) For these reasons and for those explained in Recitals 29 to 34 of 
the provisional Regulation, the Council confirms that the dumped 
Chinese imports taken in isolation, have caused material injury to 
the Community industry. 
- 9 
H. DUTY 
(23) As regards the duty, the Commission has recalculated what is 
necessary to remove the injury using the method as explained in 
recitals 35 and 36 of the provisional Regulation. Given the low 
prices of the Chinese DHS in the Community and the high losses 
suffered by the Community industry, the difference between these 
Chinese prices and a price which would allow the Community industry 
to achieve a reasonable return on sales on the basis of a reasonable 
sales volume is still considerably higher than the dumping margins 
now calculated. Therefore, in accordance with Article 13(3) of the 
basic Regulation, the dumping margins should be imposed as definitve 
duties, since only these two amounts would be adequate to remove the 
injury caused by the dumping. 
(24) In addition, 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. This concern of 
the Commission has been confirmed by the considerable price 
undercutting which has taken place in the Chinese export 
transactions. In such a situation, a fixed duty amount or an ad 
valorem duty by itself would not guarantee the elimination of the 
injurious effect of the dumping. Therefore, it is considered that a 
minimum price has to be established in order to deter further 
injurious dumping after the imposition of the definitive anti­
dumping measures. 
(25) The Commission also had to take account of the fact that an increase 
of the export prices of the Chinese exporters may be caused by other 
factors than the elimination of dumping. Indeed, the production of 
DHS is an energy intensive process so that changes in the energy 
costs may provoke an increase in overall costs which will lead to an 
increase of the export price. However, this increase would not 
necessarily result in a reduction in the dumping by the Chinese 
- 10 
exporters, as the normal value could also increase by a 
corresponding amount. Therefore, it is considered appropriate that 
in such a case the form of the duty should be that of a set amount 
per kilo of the imported DHS. The dumping amounts are 14.9 ECU per 
kilo of base DHS for the cooperating organisations and 20*16 ECU for 
the other Chinese exporters. Consequently, given the potential for 
absorption of any duty in the market concerned, it is necessary that 
the imposition of a minimum price is combined with the imposition of 
a set amount of duty. 
(26) While this combination of two forms >f duty is necessary to 
guarantee the elimination of the injury caused by dumping and its 
recurrence, the Commission is ready to investigate, in due course, 
refund or review applications of importers or the Chinese exporters, 
should a change in price lead to a reduction in dumping margins or 
for any other reasons should any change in circumstances be 
considered sufficient justification, 
(27) The Community industry requested that the definitive anti-dumping 
duty be imposed retroactively in accordance with Article 
13(4)(b)(ii) of Regulation (E£C) No 2423/88. No evidence of the 
legal requirements as set out in the relevant provision has been 
provided and therefore the claim was rejected. 
(28) The Council confirms these views and the conclusions as set out in 
recital 23 to 27 of the present Regulation. 
1. COMMUNITY INTEREST 
(29) No further facts or arguments concerning Community interest were 
submitted to the commission by any of the parties. The Council 
therefore confirms the Commission's conclusions, set out in recitals 
40 to 46 of the provisional Regulation, that it is in the 
Community's interest to eliminate, by anti-dumping measures, the 
injurious effects of the dumping by the Chinese exporters and thus, 
to prevent the further decline of the Community industry. 
- 11 -
J. UNDERTAKING 
(30) A price undertaking has been offered on behalf of two Chinese 
producers. However, the price level proposed would not eliminate 
the dumping as established nor, Its Injurious effect, as provided 
for In Article 10(2)(b) of the basic Regulation. The Commission 
has considered that the price undertaking is not acceptable and has 
informed the exporters concerned of this decision and the reasons 
therefor. 
K. COLLECTION OF PROVISIONAL DUTIES 
(31) In view of the dumping margins established, and the seriousness of 
the Injury caused to the Community industry, the Council considers 
it necessary that amounts collected by way of provisional anti­
dumping duties should be definitively collected to the extent of the 
amount of the duty definitively imposed, which is equivalent to an 
ad-valorem rate of duty of 37.4 % of the net free at Community 
frontier price prior to customs clearance, as far as imports from 
Shanghai Fourth Pharmaceutical Plant and Long March Pharmaceutical 
Plant, Sichuan are concerned. For all other Chinese exporters an ad 
valorem rate of 47.6% of the net free-at-Community frontier price to 
customs clearance should apply. 
- 12 
HAS ADOPTED THIS REGULATION 
Article 1 
1. A definitive duty is hereby Imposed on Imports of dihydrostreptomycin 
falling within CN code 2941 20 10 and originating In the People's 
RepublIc of China. 
2. The amount of duty shall be 20.16 Ecu per kilogram of base DHS or the 
difference between the CI F price and 58.4 Ecu per kilogram of base DHS 
whichever Is the higher (Additional Tarlc Code 8604). 
For Long March Pharmaceutical Plant, Sichuan and for Shanghai Fourth 
Pharmaceutical Plant (Additional Taric Code 8603), the duty shall be 
14.9 Ecu per kilogram of base DHS or the difference between the CIF 
price and 53.16 Ecu per kilogram of base DHS whichever Is the higher. 
3. The provisions In force concerning customs duties shall apply. 
Article 2 
The amounts collected or secured by way of provisional anti-dumping duty 
pursuant to Regulation (EEC) No 2054/91 shall be definitively collected 
to the extent of the amounts resulting from the application of the 
definitive duty as Imposed In Article 1(2). However, the extent of the 
provisional amounts definitively collected shall be limited as follows: 
- for Long March Pharmaceutical Plant, Sichuan and for Shanghai Fourth 
Pharmaceutical Plant, an ad-valorem duty rate of 37.4% will be applied 
subject to a maximum of the definitive duty as Imposed In Article 1(2) 
for imports from these firms, and 
13 -
- for all other Chinese exporters, an ad-valorem rate of duty of 47.6% 
will be applied subject to a maximum of the definitive duty as Imposed in 
Article 1(2). 
Article 3 
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 a 11 Member States. 
Done at Brussels, 
For the CounclI 
The President 
ISSN 0254-1475 
COM (91) 538 final 
DOCUMENTS 
EN li 02 
Catalogue number : CB-CO-91-584-EN-C 
ISBN 92-77-78800-3 
Office for Official Publications of the European Communities 
L-2985 Luxembourg