Proposal for a COUNCIL REGULATION amending Regulation (EC) No 2402/98 imposing a definitive anti-dumping duty on imports of unwrought unalloyed magnesium originating in the People's Republic of China

(presented by the Commission)

EXPLANATORY MEMORANDUM

By Regulation (EC) No 2402/98 [1] the Council imposed a definitive anti-dumping duty on imports of unwrought unalloyed magnesium originating in the People's Republic of China ("the PRC") in the form of either a variable duty based on a minimum price of ECU 2622 per tonne for purchases from unrelated parties or an ad valorem duty of 31,7% for purchases from related parties.

[1] OJ L 298, 7.11.1998, p. 1.

The anti-absorption investigation was initiated in September 1999 following a request lodged by the Community industry.

The request alleged that the anti-dumping measures against the PRC had led to no movement or insufficient movement in resale prices or subsequent selling prices in the Community, and thus that the injury of the Community industry caused by the imports of unwrought unalloyed magnesium originating in the PRC had not been removed.

The investigation showed that the resale prices of PRC magnesium in the EC have slightly decreased whilst they should have gone up by the amount of the duties charged. There has been no satisfactory explanation given for the absence of a price increase following adoption of the measures. Clear evidence of full absorption has therefore been established.

Normal value was not re-examined as no claim for a change in normal value was made. Injury and Community interest are not revisited in anti-absorption investigations.

The investigation showed that the form of the measures imposed following the original investigation was effective and still appears to be appropriate, as absorption was only established in respect of the ad valorem duty but not the variable duty. Therefore the form of the measures does not need to be modified.

As the investigation showed that the duty was fully absorbed, the level of the ad valorem duty should be doubled, while the minimum import price should remain at its current level.

It is therefore proposed that the Council adopts the attached proposal.

Proposal for a COUNCIL REGULATION amending Regulation (EC) No 2402/98 imposing a definitive anti-dumping duty on imports of unwrought unalloyed magnesium originating in the People's Republic of China

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 [2] and in particular Article 12 thereof,

[2] OJ L 56, 6.3.1996, p. 1, as last amended by Regulation (EC) No 905/98 (OJ L 128, 30.4.1998, p. 18).

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

Whereas:

A. PROCEDURE

1. Original measures

(1) In November 1998, by Regulation (EC) No 2402/98 [3] (hereinafter referred to as "the Regulation"), the Council imposed a definitive anti-dumping duty on imports of unwrought unalloyed magnesium originating in the People's Republic of China (hereinafter referred to as "the PRC"). The measure was in the form of either:

[3] OJ L 298, 7.11.1998, p. 1.

(a) the difference between the minimum import price of ECU 2622 per tonne and the cif Community frontier price in all cases where the latter is less than the minimum import price, and established on the basis of an invoice issued by an exporter located in the PRC to a party unrelated to it. No duty should be collected where the cif Community frontier price per tonne is equal to or higher than the minimum import price; or

(b) equal to an ad valorem duty of 31,7% in all other cases not falling under subparagraph (a) above.

2. Request for an anti-absorption review

(2) On 22 July 1999, the Commission received a request for a review pursuant to Article 12 of Council Regulation (EC) No 384/96 (hereinafter referred to as "the Basic Regulation"). The request was lodged by the Comité de Liaison des Industries de Ferro-Alliages (Euro Alliages) on behalf of the sole known Community producer of unwrought unalloyed magnesium, Pechiney Electrométallurgie, France, alleging that all or part of the anti-dumping duty had been absorbed and therefore the above-mentioned anti-dumping measures had led to an insufficient movement or no movement in resale prices or subsequent selling prices in the Community.

(3) The request contained prima facie evidence that the resale prices and subsequent selling prices in the Community of the product concerned did not adequately reflect the level of the anti-dumping measures imposed. In addition to the insufficient movement of resale and subsequent selling prices, the request also argued that most of the imports were made at heavily discounted prices by Community importers related to exporters and thus subject to the ad valorem duty which was insufficient to raise duty-paid prices to a level close to the minimum price.

3. The anti-absorption investigation

(4) On 4 September 1999, the Commission announced by a notice published in the Official Journal of the European Communities [4] the initiation of a review, pursuant to Article 12 of the Basic Regulation, of the anti-dumping measures applicable to imports of unwrought unalloyed magnesium originating in the PRC.

[4] OJ C 253, 4.9.1999, p. 15.

(5) The Commission officially advised the producers/exporters, importers/traders and users/associations known to be concerned, the representatives of the exporting country and the Community producer of the initiation of the review. Interested parties were given the opportunity to make their views known in writing and to request a hearing. All parties who so requested were granted hearings. Questionnaires were sent directly by the Commission to all producers/exporters, users/associations and importers/traders known to be concerned.

(6) Three exporters, two importers, one association of users, and four users belonging to the same group responded to the questionnaire. Written submissions were also received from certain other users and from one steel association. The Commission carried out verification visits at the premises of the following companies:

- Deumu Deutsche Erz- und Metallunion GmbH, Germany,

- Wogen Resources Ltd., United Kingdom.

(7) The investigation covered the period from 1 September 1998 to 31 August 1999 (hereinafter referred to as "the IP"). The IP was used to determine the level of export, resale and subsequent selling prices charged after the imposition of the anti-dumping measures.

(8) The investigation exceeded the normal duration of six months provided for in Article 12(4) of the Basic Regulation due to the complexity of the investigation, notably because of the existence of two forms of duty.

B. PRODUCT UNDER CONSIDERATION

(9) The product reinvestigated is the same as in the investigation that led to the imposition of the measures in force, i.e. unwrought unalloyed magnesium, currently classifiable within CN codes 8104 11 00 and ex 8104 19 00 (TARIC code 8104 19 00*20).

Unwrought unalloyed magnesium comprises:

- unwrought magnesium unintentionally containing small amounts of other elements as impurities, and

- unwrought magnesium, intentionally containing added elements such as aluminium and zinc, which does not correspond to one of the alloys described in the Annex to the Regulation.

The uses of unwrought unalloyed magnesium are as follows:

- as an alloying element in the production of aluminium alloys,

- desulphurisation of steel,

- iron nodularisation,

- chemical applications, e.g. titanium production,

- others, e.g. anode production, pharmaceutical and military applications.

C. THE RE-INVESTIGATION

(10) The investigation sought to establish whether the measures previously imposed have had the intended effect and whether any failure to have such effects was as a result of increased dumping. Such failure can be identified by (i) no movement, or an insufficient movement, of resale or subsequent selling prices in the Community or, if no clear conclusion can be drawn from these price movements, (ii) a fall in the direct export prices charged by exporters to the Community.

1. Movement of resale prices in the Community

(a) Examination of whether the remedial effect of the measures in force was undermined by absorption of the duty

(11) In establishing whether resale and subsequent selling prices had moved sufficiently, a comparison was made of the price levels during the original investigation period (1 July 1996 to 30 June 1997, hereinafter referred to as "the original IP") and those charged during the IP. The two cooperating importers in the Community and the four user companies, which purchased the product concerned exported from the PRC both during the original IP and the IP, provided information on purchase and resale prices of Chinese unwrought unalloyed magnesium. These cooperating importers and users account for 89% of the total volume of imports into the Community during the IP.

A comparison of resale prices charged during the original IP and during the IP, including all payable duties, showed that resale prices had actually fallen since the original measures were imposed. On average prices fell by 0,7% as compared to the level previously established in the original IP, while in fact they should have increased by more than 30%.

(b) Claims made by interested parties

(12) Interested parties were given an opportunity to clarify the situation with regard to resale prices, which could justify a lack of movement in prices in the Community following the imposition of measures for reasons other than absorption of the anti-dumping duties.

None of the importers and users provided any satisfactory explanation for the decrease in resale prices in the Community. Several parties alleged that the lack of movement in resale prices was due to the decrease in export prices which in turn was caused by a general decrease in the prices of magnesium on the world market. In this context, it is difficult to understand why no party requested a review of normal value within the time limits set out in the notice of initiation in accordance with Article 12(5) of the Basic Regulation. In any case, the information submitted well beyond the time limits was incomplete and did not prove the existence of a change in normal value in Norway (the reference country) or in respect of world market prices when compared to those of the original IP.

On the contrary, the information submitted in respect of prices practised by a Norwegian company showed an average selling price for the IP above the normal value established for the original IP. Moreover, the data extracted from the Metal Bulletin and submitted by one exporter showed that the average prices in the so-called European Free Market in the IP were 62% higher than the Chinese free market export prices, which shows the continuation of a pattern of Chinese export prices well below international and European market prices.

(c) Conclusion on resale prices

(13) The investigation established a decrease in resale prices between the original IP and the IP. This was found to be enough evidence of absorption and therefore it was not necessary to investigate the development of export prices.

2. New dumping margin

(14) Since the undermining of the remedial effect of the measures was established, the revised level of duty had to be calculated. To that end, in accordance with Article 12(2) of the Basic Regulation, export prices were reassessed and the dumping margin recalculated accordingly.

(a) Reassessment of export prices

(15) Export prices were reassessed pursuant to Article 2(9) of the Basic Regulation because they appeared to be unreliable. Indeed, following the imposition of measures resale prices decreased slightly although they should have increased as a result of the anti-dumping duty. As explained above, no explanation had been given by any party for this lack of movement of resale prices. All this pointed to the existence of a compensatory arrangement between the exporter and the importer. Consequently, the reassessment was based on the originally established export prices, taking into account all applicable costs pursuant to Article 2(9) of the Basic Regulation.

(b) Recalculation of the dumping margin taking into account the reassessed export prices

(16) In line with Article 12 of the Basic Regulation, the country-wide margin of dumping for the Chinese exporters was re-calculated. No party requested that normal value be reviewed pursuant to Article 12(5) of the Basic Regulation. Therefore the reassessed export prices were compared with the normal value established during the original IP on a FOB basis.

The resulting dumping margin expressed as a percentage of the cif net, free at Community frontier prices, before duty, established in the original IP is 63,4%.

As a result the Council considers that pursuant to Article 12(3) of the Basic Regulation, the measures in force should therefore be amended in accordance with the new findings.

D. PROPOSED REVISED MEASURES

(17) The investigation has actually shown that the reconstructed export prices have fallen and that the dumping margin has increased by the amount of this fall.

To take account of this increased dumping the anti-dumping measures should be amended. It will be recalled that two types of anti-dumping duties were imposed i.e. a variable and an ad valorem. Practically all exports during the IP were subject to the ad valorem duty. During the course of the investigation it was found that the ad valorem duty was absorbed whilst no evidence could be found for the absorption of the minimum price. Therefore, the Council considers it as appropriate that the form of the measures remains the same as in the original investigation, i.e. a variable duty in form of a minimum price for unrelated parties and an ad valorem duty for related parties. The ad valorem duty is to be amended with a view to reflecting the increased dumping.

For the ad-valorem duty, the new level, expressed as a percentage of the cif Community frontier price, is 63,4%. The minimum price, which is not affected by the new findings, remains the same as in the original investigation as it corresponds to the normal value adjusted to a cif Community frontier level.

(18) Since the existing duties are based on the dumping margin found in the original investigation, and since these duties have been absorbed, it was not necessary to reassess the injury margin,

HAS ADOPTED THIS REGULATION:

Article 1

Article 1 (2) of Regulation (EC) No 2402/98 shall be replaced by the following:

"The amount of the anti-dumping duty shall be:

(a) the difference between the minimum import price of EUR 2622 per tonne and the cif Community frontier price in all cases where the latter is:

- less than the minimum import price (TARIC additional code A 156), and

- established on the basis of an invoice issued by an exporter located in the People's Republic of China to a party unrelated to it.

No duty shall be collected where the cif Community frontier price per tonne is equal to or higher than the minimum import price;

(b) equal to an ad valorem duty of 63,4% in all other cases not falling under subparagraph (a) above (TARIC additional code 8900)."

Article 2

This Regulation shall enter into force on the day following that of 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

The President