[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 20.12.2007

COM(2007) 834 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of dihydromyrcenol originating in India

(presented by the Commission)

EXPLANATORY MEMORANDUM

CONTEXT OF THE PROPOSAL |

110 | Grounds for and objectives of the proposal This proposal concerns the application of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 (the 'basic Regulation') in the proceeding concerning imports of dihydromyrcenol originating in India. |

120 | 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. |

139 | Existing provisions in the area of the proposal There are no existing provisions in the area of the proposal. |

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

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT |

Consultation of interested parties |

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

Collection and use of expertise |

229 | There was no need for external expertise. |

230 | 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 the requirement that the measures should not be contrary to the "Community interest" means that the assessment of the wider impact of the measures forms an integral part of the investigation. |

LEGAL ELEMENTS OF THE PROPOSAL |

305 | Summary of the proposed action On 11 November 2006, the Commission announced by a notice ('notice of initiation'), published in the Official Journal of the European Union, the initiation of an anti-dumping proceeding concerning imports into the Community of dihydromyrcenol originating in India. The anti-dumping proceeding was initiated following a complaint lodged on 29 September 2006 by two Community producers representing a major proportion of the Community production of dihydromyrcenol, containing evidence of dumping and of material injury resulting there from. On 28 July 2007, the Commission imposed, by Regulation (EC) No 896/2007, a provisional anti-dumping duty on imports into the Community of dihydromyrcenol originating in India. The enclosed Commission proposal for a Council Regulation contains the definitive conclusiona regarding dumping, injury, causality and Community interest. Member States were consulted during the Anti-Dumping Committee of 15 November 2007. 20 Member States were in favour of the proposed course of action, 1 opposed and 6 abstained. It is proposed that the Council adopt the attached proposal for a Regulation which should be published in the Official Journal of the European Union by 26 January 2008 at the latest. |

310 | Legal basis Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 2117/2005 of 21 December 2005. |

329 | Subsidiarity principle The proposal falls under the exclusive competence of the Community. The subsidiarity principle therefore does not apply. |

Proportionality principle The proposal complies with the proportionality principle for the following reason(s). |

331 | The form of action is described in the above-mentioned basic Regulation and leaves no scope for national decision. |

332 | Indication of how financial and administrative burden falling upon the Community, 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 |

341 | Proposed instruments: regulation. |

342 | Other means would not be adequate for the following reason(s). The above-mentioned basic Regulation does not foresee alternative options. |

BUDGETARY IMPLICATION |

409 | The proposal has no implication for the Community budget. |

1. Proposal for a

COUNCIL REGULATION

of

imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of dihydromyrcenol originating in India

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community[1] (the 'basic Regulation') and in particular Article 9 thereof,

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

Whereas:

A. PROCEDURE

1. Provisional measures

(1) On 27 July 2007, the Commission imposed by Regulation (EC) No 896/2007[2] (the 'provisional Regulation') a provisional anti-dumping duty on imports into the Community of dihydromyrcenol originating in India (the 'country concerned').

(2) It is recalled that the investigation of dumping and injury covered the period from 1 October 2005 to 30 September 2006 (the 'investigation period' or 'IP'). The examination of trends relevant for the injury analysis covered the period from 1 January 2003 to the end of the IP (the 'period considered').

(3) The addresses of the Community producers listed in recital (7) of the provisional Regulation are rectified as follows:

- Destilaciones Bordas Chinchurreta S.A., Dos Hermanas (Sevilla), Spain;

- Sensient Fragrances S.A., Granada, Spain;

- Takasago International Chemicals (Europe) S.A., Murcia, Spain.

2. Subsequent procedure

(4) Following the imposition of a provisional anti-dumping duty on imports of dihydromyrcenol originating from India, all parties received disclosure of the essential facts and considerations on which the provisional Regulation was based (the provisional disclosure). All parties were granted a period within which they could make written and oral representations in relation to this disclosure.

(5) Some interested parties submitted comments in writing. Those parties who so requested were also granted an opportunity to be heard orally. The Commission continued to seek and verify all information it deemed necessary for its definitive findings.

(6) All interested parties were informed of the essential facts and considerations on the basis of which it was intended to recommend the imposition of a definitive anti-dumping duty and the definitive collection of amounts secured by way of the provisional duty (the 'final disclosure'). The interested parties were also granted a period within which they could make representations subsequent to this disclosure. The oral and written comments submitted by the parties were considered and, where appropriate, the findings have been modified accordingly.

B. PRODUCT CONCERNED AND LIKE PRODUCT

(7) In the absence of any comments concerning the product concerned and the like product, recitals (9) to (12) of the provisional Regulation are hereby confirmed.

C. DUMPING

1. Normal value

(8) Following the imposition of provisional measures, the exporting producer referred to in recital (17) of the provisional Regulation alleged that the analysis carried out by the Commission ignored certain important elements affecting the cost of production and, thus, the normal value determination. It claimed that its normal value should be based on its own cost of production instead of being determined on the basis of the domestic prices in the ordinary course of trade of the other co-operating exporting producer.

(9) Firstly, the aforesaid allegations concerning the cost of production were not found justified. Secondly, pursuant to Article 2 of the basic Regulation, the methodology applied by the Commission in determining the normal value for the exporting producer in question (see recital (17) of the provisional Regulation) is considered to be the most appropriate for the following reasons: (i) the exporting producer in question had no domestic sales of the like product and of the same general category of products in the IP, (ii) the products are perfectly interchangeable and (iii) only one other exporting producer co-operated in the investigation. Moreover, if the normal value had not been based on prices of the other Indian producer, it would have been necessary to determine the amounts for selling, for general and administrative costs and for profits pursuant to Article 2(6)(c) of the basic Regulation. On balance, the use of domestic sales prices of the other Indian producer appears to be the most representative basis for reflecting prevailing sales conditions on the Indian domestic market and hence for establishing normal value. The claim was therefore rejected.

(10) In view of the above and in the absence of any other comments concerning normal value, recitals (13) to (17) of the provisional Regulation are hereby confirmed.

2. Export price

(11) In the absence of any comments, recital (18) of the provisional Regulation is hereby confirmed.

3. Comparison

(12) One exporting producer claimed that the Commission, when determining for comparison purposes the adjustments to the export price, made certain non justified deductions in relation to certain elements concerning transport, handling and credit costs. The Commission accepted the claim and revised the relevant adjustments accordingly.

(13) In the absence of any other comments in this respect, recital (19) of the provisional Regulation is hereby confirmed.

4. Dumping margins

(14) Following the imposition of provisional measures, one party argued that for those exporting producers which did not co-operate a higher dumping margin should be calculated based on the lowest CIF prices of the co-operating exporting producers. In this respect, it is noted that no indications were found showing that the non-cooperating companies were dumping in the IP at a higher level than the co-operating companies. On the contrary, a comparison between Eurostat data concerning imports originating in India and the volume and value of exports to the Community reported by the co-operating exporting producers shows that (i) the volume of imports into the Community from any non-cooperating exporting producers represented less than 20% of the total imports from India in the IP (the precise ratio cannot be disclosed for confidentiality reasons), and (ii) the prices charged by any non-cooperating exporting producers on the Community market were apparently higher than those charged by the co-operating companies. This claim was thus rejected.

(15) Following the final disclosure, the same party reiterated the above claim concerning the dumping margin of any non-cooperating exporting producers. No new arguments were brought forward, which could alter the conclusions drawn in recital (14) above. The party concerned only added that it could not verify the import data used in the analysis carried out by the Commission, since they were allegedly kept confidential. The company was informed that the import volume and the average import price were set out in detail in recitals (38) and (39) of the provisional Regulation and that the source statistics, i.e. Eurostat, were open to public. Thus, the company was in no case prevented from verifying the Commission's conclusions and defending its rights. The claim is therefore rejected.

(16) In the light of the above, the definitive dumping margins, expressed as a percentage of the CIF Community frontier price, duty unpaid, are the following:

Company | Definitive dumping margin |

Neeru Enterprises, Rampur | 3,1 % |

Privi Organics Limited, Mumbai | 7,5 % |

All other companies | 7,5 % |

D. INJURY

(17) Following the imposition of provisional measures, one exporting producer submitted that the Community producer which had made substantial imports of dihydromyrcenol from India in the IP (see recital (25) of the provisional Regulation) should be excluded from the definition of the Community industry and consequently the injury analysis, including the injury elimination level determination. In this respect, it is recalled that the Community producer in question did not shift its core business from production to importation. Indeed, it had made the aforesaid imports from India in particular in order to maintain its own production of the like product viable. Therefore, no grounds for excluding this company from the Community industry exist. Furthermore, it is noted that even if the producer in question was excluded from the definition of the Community industry, the injury finding would not have been different. The claim was therefore rejected.

(18) The same exporting producer also argued that the overall economic situation of the Community producers was very good; in particular, it had allegedly improved significantly in 2005 and in the IP and such positive trend would most likely continue in the near future according to this exporter. These conclusions were based on the development of the Community industry's production and sales volume, stocks and market share presented in recitals (45) to (47) of the provisional Regulation. This argument cannot be accepted because it does not properly take account of the fact that there was a dramatic drop in sales prices of dihydromyrcenol in the Community (see recitals (47) to (49) of the provisional Regulation), and that the Community industry only managed to increase its production and sales volume and, thus, maintain its share on the expanding Community market at the price of severe losses, a fall in return on investment and cash outflow. The claim was therefore rejected.

(19) Following the final disclosure, the exporting producer referred to in recital (17) above reiterated its claim and added that the Commission had not properly analyzed the situation of the Community producer in question, i.e. the producer which had made substantial imports of the product concerned. In particular, the following aspects were allegedly not analyzed: (i) the percentage of the total Community production of the product concerned that is accounted for by this importing producer; (ii) the nature of this importing producer's interest in importation; (iii) the level of long term nature of commitment shown by this importing producer to domestic production as opposed to continued importation; and (iv) the ratio of imports to domestic production for this importing producer.

(20) In this respect, it is noted that all of the points raised concerning the situation of the Community producer in question had indeed been properly analyzed; however, certain details could not be disclosed in view of their confidential nature. As can be seen from recital (25) of the provisional Regulation and recital (17) above, the main reasons for non-excluding the producer in question from the definition of the Community industry, and from the Community production, were (i) the nature of its interest in importation (i.e. it imported the product concerned in order to maintain its own production in the Community of the like product viable), and (ii) the marginal impact of its situation on the overall situation of the Community industry (i.e. the fact that its possible exclusion would not alter the injury findings). Finally, it goes without saying, that by supporting the complaint and fully co-operating with the investigation this producer aimed at curbing the influx of dumped imports from India. It has therefore clearly demonstrated its commitment to domestic production as opposed to continued importation. The allegations cited in recital (19) above are therefore rejected.

(21) With reference to recital (41) of the provisional Regulation, one exporting producer submitted that the price undercutting should have been based on the average import price from India rather than the import prices of the cooperating exporting producers. In this respect, it is noted that given the level of co-operation in this case, i.e. more than 80 %, and given that the total import statistics are based on an ex CN code, i.e. they may include certain quantity of products other than dihydromyrcenol (see recital (36) of the provisional Regulation), the price comparison based on the average import price would be much less precise than the individual company undercutting margins established. The claim is therefore rejected.

(22) In view of the above and in the absence of any other comments concerning injury, recitals (23) to (56) of the provisional Regulation are hereby confirmed.

E. CAUSATION

(23) Following the imposition of provisional measures, one exporting producer claimed that imports from India had not caused injury to the Community industry because their price was on the rise and their market share fell by 2,4 percentage points in the IP. This line of reasoning omits several important aspects of the development of the dumped imports from India and of the situation on the Community market. As it was demonstrated in recitals (38) to (42) of the provisional Regulation, the volume of dumped imports of the product concerned from India into the Community increased from around 25.000 kilograms in 2003 to around 760.000 kilograms in the IP. The market share of these imports increased from 0,7 % in 2003 to 17,3 % in the IP. The slight decrease of their share in the IP was due to a sudden expansion of the Community market in this period, rather than any decline in their volume; indeed, the volume of the dumped imports from India continued increasing in the IP, although not at the same rate as in the previous period. Overall, the presence of dumped imports from India on the Community market increased much more significantly than the Community consumption over the period considered. Finally, it is recalled that the dumped imports from India undercut the prices of the Community industry by substantial margins. The surge of dumped imports at prices significantly undercutting the Community industry's prices clearly coincided in time with the worsened situation of the Community industry. The claim was therefore rejected.

(24) The same exporting producer further argued that any injury sustained by the Community industry had been self-inflicted. They alleged that otherwise it was not possible to suffer losses in an environment of increasing demand, increased prices, consequently increasing sales and turnover, and increasing productivity. As a possible explanation, this party cited the increased average salary by 24 % from 2003 to the IP.

(25) Firstly, although the Community industry's sales price on the Community market increased by 2 % between 2005 and the IP, it was more than 30 % lower than in 2003, while the volume of sales of the Community industry only increased by 22 % between 2003 and the IP (see recital (47) of the provisional Regulation). As a result, the sales revenue of the Community industry on the Community market decreased significantly, i.e. by around 15 % over the period considered. Secondly, the average labour cost development must be seen together with the employment and productivity trends. As explained in recital (51) of the provisional Regulation, the 24 % increase over the period considered of the labour cost per worker was due, inter alia , to the changes in employment structure towards a higher share of qualified labour. The figures confirm that these changes resulted in higher productivity, which in turn compensated the increased average labour cost. As a result, the total labour cost per unit produced remained the same. Moreover, production of dihydromyrcenol is not labour-intensive. It is thus considered that the increased salaries could not have contributed to the Community industry's losses. The claim was therefore rejected.

(26) Following the final disclosure, the same exporting producer adduced several new arguments concerning causation. These can be summarized as follows: (i) the injury was self-inflicted by imports of the product concerned made by the Community producer referred to in recital (17) above; (ii) the injury was self-inflicted by massive investments made by the Community industry in their new production capacity and by the loans taken for this purpose from financial institutions; (iii) the development of export sales of the Community industry was not analyzed; (iv) the injury was self-inflicted by increasing the production capacity and hiring additional qualified labour and, thus, increasing the production costs.

(27) In respect of these new arguments, it is noted that (i) imports of the product concerned made by one of the Community producers could not have affected the overall situation of the Community industry because they were minor (see recitals (17) and (20) above). In addition, it is recalled that these imports had been made in reaction to the massive influx of the dumped imports from India and the losses caused to the Community industry thereby, i.e. after the material injury had already taken place; (ii) no new investments whatsoever into the production capacity took place during the period considered; on the contrary, capacity remained unchanged and investment significantly decreased (see recitals (45) and (49) of the provisional Regulation); (iii) the export performance of the Community industry was analyzed in recital (68) of the provisional Regulation and was not found breaking the causal link; and (iv) no additional labour was hired by the Community industry. As can be seen from recital (51) of the provisional Regulation, the employment decreased by 15 % between 2003 and the IP. The changes in employment structure were achieved by laying-off unqualified labour. As to the production capacity, it is recalled that no expansion whatsoever took place. The arguments cited in recital (26) above are thus rejected.

(28) In view of the above and in the absence of any other comments concerning causation, recitals (57) to (76) of the provisional Regulation are hereby confirmed.

F. COMMUNITY INTEREST

(29) One exporting producer submitted that imposing measures would greatly disturb importers and users in the Community, thereby jeopardizing thousands of jobs and tax revenues, but did not adduce any evidence in this respect. These allegations were considered irrelevant. Indeed, none of the importers and users opposed the provisional conclusions concerning their interest (see recitals (87) and (88) of the provisional Regulation), which has shown that these parties were not likely to be substantially affected by any anti-dumping measures. The claim was therefore rejected. The exporting producer was also informed that exporting producers are normally not considered parties concerned by the Community interest analysis.

(30) Following the final disclosure, this exporting producer reiterated its claim and submitted that it had right to comment on any aspect of the anti-dumping proceeding, Community interest included. No substantiated arguments were, however, brought forward, which could alter the conclusions drawn in recital (29) above. In respect of the exporting producers' rights to raise comments on any aspect of the proceeding, it is noted that they are indeed not barred from doing so. Nevertheless, according to Article 21(2) of the basic Regulation, these parties are normally not concerned by the Community interest analysis and their comments may be disregarded, in particular when they are not supported by any factual evidence.

(31) In the absence of any other comments concerning the Community interest assessment, recitals (77) to (90) of the provisional Regulation are hereby confirmed.

G. DEFINITIVE ANTI-DUMPING MEASURES

1. Injury elimination level

(32) It is recalled that one exporting producer submitted that the Community producer which had made substantial imports of dihydromyrcenol from India in the IP should be excluded from the definition of the Community industry and consequently the injury elimination level determination should be based on the remaining two Community producers only. As explained in recitals (14) and (15) above, this claim was not found justified. In this view and in the absence of any other comments concerning the injury elimination level, recitals (92) to (94) of the provisional Regulation are hereby confirmed.

2. Form and level of measures

(33) In the light of the foregoing, and in accordance with Article 9(4) of the basic Regulation, a definitive anti-dumping duty should be imposed at the level of the dumping margins found, since for both co-operating exporting producers the injury elimination level was found to be higher than the dumping margin.

(34) With reference to recitals (14) and (15) above, it is considered appropriate to set the duty for any other companies, which had not co-operated in the investigation, at the level of the higher duty to be imposed on the co-operating companies.

(35) On the basis of the above, the definitive duty rates are as follows:

Producer | Anti-dumping duty |

Neeru Enterprises, Rampur | 3,1 % |

All other companies (including Privi Organics Limited, Mumbai) | 7,5 % |

(36) Following the disclosure of the essential facts and considerations on the basis of which it was intended to recommend the imposition of definitive anti-dumping measures, Neeru Enterprises proposed a price undertaking in accordance with Article 8(1) of the basic Regulation. However, it is noted that the product concerned has shown in the last years a considerable volatility in prices and therefore it is not suitable for a fixed price undertaking. As an alternative approach, the possibility of indexing the minimum import price to the price of the main raw material, namely alpha-pinene, was explored. However, this alternative was also not found workable for the following reasons: (i) the fluctuation in the price of the product concerned cannot be sufficiently explained by the fluctuation in the price of alpha-pinene, and (ii) alpha-pinene is not a commodity product for which any generally accessible statistics showing its market prices would be available. On the basis of the above, it was concluded that any price undertaking is impractical in this case and therefore cannot be accepted. The exporter concerned was informed accordingly and given an opportunity to comment. However, its comments have not altered the above conclusion.

(37) The individual company anti-dumping duty rate specified in this Regulation was established on the basis of the findings of the present investigation. Therefore, it reflects the situation found during that investigation with respect to this company. This duty rate (as opposed to the country-wide duty applicable to ‘all other companies’) is thus exclusively applicable to imports of products originating in the country concerned and produced by the company and thus by the specific legal entity mentioned. Imported products produced by any other company not specifically mentioned in the operative part of this Regulation with its name and address, including entities related to that specifically mentioned, cannot benefit from this rate and shall be subject to the duty rate applicable to ‘all other companies’.

(38) Any claim requesting the application of this individual company anti-dumping duty rate (e.g. following a change in the name of the entity or following the setting up of new production or sales entities) should be addressed to the Commission forthwith with all relevant information, in particular any modification in the company’s activities linked to production, domestic and export sales associated with, for example, that name change or that change in the production and sales entities. If appropriate, the Regulation will then be amended accordingly by updating the list of companies benefiting from individual duty rates.

3. Collection of provisional duty

(39) In view of the magnitude of the dumping margins found and in the light of the level of the injury caused to the Community industry, it is considered necessary that the amounts secured by way of the provisional anti-dumping duty imposed by the provisional Regulation, i.e. Commission Regulation (EC) No 896/2007, be collected definitively to the extent of the amount of the duty definitively imposed by the present Regulation. Where the definitive duty is lower than the provisional duty, the duty shall be recalculated and the amounts secured in excess of the definitive duty rate should be released,

HAS ADOPTED THIS REGULATION:

Article 1

1. A definitive anti-dumping duty is hereby imposed on imports of dihydromyrcenol of a purity by weight of 93 % or more, falling within CN code ex 2905 22 90 (TARIC code 2905 22 90 10), originating in India.

2. The rate of the definitive anti-dumping duty applicable to the net, free-at-Community-frontier price, before duty, for products manufactured by the companies listed below shall be as follows:

Producer | Anti-dumping duty (%) | TARIC Additional Code |

Neeru Enterprises, Rampur, India | 3,1 | A827 |

All other companies | 7,5 | A999 |

3. Unless otherwise specified, the provisions in force concerning customs duties shall apply.

Article 2

Amounts secured by way of the provisional anti-dumping duty pursuant to Commission Regulation (EC) No 896/2007 on imports of dihydromyrcenol of a purity by weight of 93 % or more, falling within CN code ex 2905 22 90 (TARIC code 2905 22 90 10), originating in India, shall be definitively collected in accordance with the rules set out below. The amounts secured in excess of the amount of the definitive anti-dumping duty shall be released.

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 56, 6.3.1996, p. 1. Regulation as last amended by Regulation (EC) No 2117/2005 (OJ L 340, 23.12.2005, p. 17).

[2] OJ L 196, 28.7.2007, p. 3.