Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 3068/92 imposing a definitive anti-dumping duty on imports of potassium chloride originating in Belarus, Russia or Ukraine

(presented by the Commission)

EXPLANATORY MEMORANDUM

On 20 March 2004, the Commission initiated a review investigation with regard to, inter alia, imports of potassium chloride originating in Belarus, Russia or Ukraine. The purpose of this review was to examine whether these measures should be amended to take account of the enlargement of the Community.

The examination showed that it was in the interests of the Community to provide for the temporary adaptation of the measures in force to avoid an excessive negative impact on importers and users in EU10.

It is therefore proposed to accept temporary undertakings from the exporters concerned with elements for minimum prices and quantitative ceilings corresponding to their traditional export volumes to EU10.

Member States were consulted and did not oppose the proposal.

It is proposed that the Council adopt the attached proposal for a Regulation which should be published in the Official Journal no later than 20 May 2004.

Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 3068/92 imposing a definitive anti-dumping duty on imports of potassium chloride originating in Belarus, Russia or Ukraine

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], as last amended by Regulation (EC) No 461/2004 [2] ("the basic Regulation"), and in particular Articles 8, 11(3), 21 and 22 (c) thereof,

[1] OJ L 56, 6.3.1996, p. 1.

[2] OJ L 77, 13.3.2004, p. 12.

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

Whereas:

A. PROCEDURE

1. Measures in force

(1) By Regulation (EC) No 969/2000 [3] the Council amended and extended the measures imposed by Regulation (EC) No 3068/92 [4], as amended by Regulations (EC) No 643/94 [5] and (EC) 449/98 [6], on imports into the Community of potassium chloride ("the product concerned") originating in the Republic of Belarus ("Belarus"), the Russian Federation ("Russia") and Ukraine.

[3] OJ L112, 11.5.2000, p. 4.

[4] OJ L 308, 24.10.1992, p. 41.

[5] OJ L 80, 24.3.1994, p. 1.

[6] OJ L 58, 27.2.1998, p. 15.

(2) The measures are fixed duty amounts, established by category and grade of product, ranging from EUR/tonne 19.51 to EUR/tonne 48.19 in the case of Belarus, EUR/tonne 19.61 to EUR/tonne 40.63 in the case of Russia and EUR/tonne 19.61 to EUR/tonne 48.19 in the case of Ukraine.

2. Investigation

(3) On 20 March 2004 the Commission announced through the publication of a notice in the Official Journal of the European Union [7] the initiation of a partial interim review of the measures in force ("the measures") pursuant to Articles 11(3) and 22 (c) of the basic Regulation.

[7] OJ C 70, 20.3.2004, p.15.

(4) The review was launched at the initiative of the Commission in order to examine whether, as a consequence of the enlargement of the European Union on 1 May 2004 ("Enlargement") and, bearing in mind the aspect of Community interest, there is a need to adapt the measures in order to avoid a sudden and excessively negative effect on all interested parties including users, distributors and consumers.

3. Parties concerned by the investigation

(5) All interested parties known to the Commission, including the Community industry, associations of producers or users in the Community, exporters/producers in the countries concerned, importers and their associations and the relevant authorities of the countries concerned as well as interested parties in the ten new Member States which acceded to the European Union on 1 May 2004 ("the EU10") were advised of the initiation of the investigation and were given the opportunity to make their views known in writing, to submit information and to provide supporting evidence within the time limit set out in the notice of initiation. All interested parties who so requested and showed that there were reasons why they should be heard were granted a hearing.

(6) In this regard, the following interested parties made their views known:

(a) Community producers Association: European Association of Potash Producers

(b) Exporting producers:

Production Amalgamation Belaruskali, Soligorsk, Belarus

JSC Silvinit, Solikamsk, Russia

JSC Uralkali, Berezniki, Russia

(c) Exporter:

IPC, Moscow, Russia (related to JSC Silvinit and Production Amalgamation Belaruskali).

B. PRODUCT UNDER CONSIDERATION

(7) The product concerned is potassium chloride (potash, KCl) and is generally used as agricultural fertiliser, directly, blended with other fertilisers or after transformation into a complex fertiliser known as NPK (nitrogen, phosphorus, potassium). The potassium content is variable and is expressed as a percentage of the weight of potassium oxide (K2O) on the dry anhydrous product. It is also used as a raw material in the manufacture of certain industrial and pharmaceutical products.

(8) Potash is generally commercialised in either a standard/powder form (standard potash) or in other than standard' form that includes but is not limited to a granular form (granular potash). The product is generally classified into three basic categories, based on the K2O content, namely:

- potassium content not exceeding 40 % K2O-falling under CN code 3104 20 10,

- potassium content exceeding 40 % K2O but less than or equal to 62 % - falling under CN code 3104 20 50,

- potassium content over 62 % K2O - falling under CN code 3104 20 90.

(9) The anti-dumping measures in force specify different levels of anti-dumping duties for standard potash, on the one hand, and the remaining forms of potash, including granular potash on the other. In this regard it should be recalled that in the last review investigation in 2000, it was found that imports of certain special mixtures or blends with an unusually high content of potash, which do not fall under of the CN codes indicated for potash indicated above, should be considered a product concerned. This conclusion was reached as such mixtures and blends shared the same basic physical and chemical characteristics and have the same uses as the basic categories mentioned above. As the present investigation has also not brought to light any consideration that the approach taken previously should not be continued, and accordingly and in order to ensure a consistent application of the anti-dumping measures, as well as to avoid erroneous classification, it has been considered necessary, in this Regulation, to confirm the finding of the previous review investigation that the content of K2O of such mixtures and blends as being equal to or exceeding 35%, up to a content of 62% by weight, of the dry anhydrous product.

C. results of the investigation

1. Submissions of interested parties in exporting countries

(10) Two Russian and one Belarusian exporting producers, one Russian exporter and the Russian authorities claimed that due to the high level of the anti-dumping duties and as a consequence of the extension of the measures to the EU10, their traditional trade flows to the EU10 would be significantly disrupted.

(11) In particular, they claimed that the sudden sharp price increases triggered by the fixed price anti-dumping duties rendered the product prohibitively expensive for agricultural, industrial and pharmaceutical end users in the EU10.

(12) It should be noted that neither any exporting producer/exporter from Ukraine, nor the Ukrainian authorities came forward.

2. Comments received from the Community Industry

(13) The Community Industry stated that although average prices in the EU10 were over 30% lower than those in the European Union as constituted immediately prior to 1 May 2004 ("the EU15"), it would not oppose any proposals for intermediate measures to be taken over a transitional period which do not adversely affect its present trade patterns in the EU15.

3. Comments received from Member States

(14) The authorities of certain Member States of the EU10 including the Czech Republic, Hungary, Lithuania and the Slovak Republic considered that special transitional arrangements should apply to imports of the product concerned from Belarus and Russia following Enlargement.

(15) In this regard, it was argued that the product concerned is of strategic importance for industrial and agricultural users in the EU10 since it is not produced in these countries, nor can it easily be substituted by another product. It was also submitted that producers of the product concerned in the EU15 would not have the capacity to satisfy the demands of users in the EU10.

(16) It was further considered that a sharp and sudden increase in potash fertiliser prices for farmers in the EU10 should be prevented, as they would otherwise face additional hardship in adjusting to the new competition of agricultural producers in the EU15. The importance of this issue was further underlined by the significant value of the exports (around 87 million Euro per annum) from Belarus and Russia to the EU10 compared to exports to the EU15 of around 45 million Euro per annum from these countries.

(17) It was therefore argued that import supply into the EU10 of the product concerned at prices which do not suddenly and sharply increase is therefore of utmost importance to these end users in the EU10.

(18) Accordingly, these authorities took the view that imports of the product concerned originating in Belarus and Russia into the EU10 should receive special treatment with regard to the anti-dumping measures.

4. Assessment

(19) On the basis of the available data and information, an analysis was made which confirmed that a marked difference of around 32% did exist between the prevailing prices for the same grades of the product concerned in the EU10 and the EU15 (e.g. standard grade of potash in the EU10 in 2003 was around EUR79 per tone, whilst the same grade in the EU15 in 2003 was, on average, approximately EUR117 per tone).

(20) The analysis also showed the import volumes coming into the EU10 from Belarus and Russia were significant in 2003 (around 1.1 million tonnes and therefore approximately 14% of total estimated consumption of the EU10 and the EU15 together).

(21) It was also found that there is no production of the product concerned in the EU10 and that there is currently insufficient spare capacity amongst producers in the EU15 to be able to supply customers in the EU10. Moreover, given the nature of the product, it is considered that it would be difficult for buyers in the EU10 to suddenly change from their traditional sources of supply.

5. Conclusion

(22) All these various aspects and interests have been taken into account and considered as a whole. It emerges from this that the EU10 importers' and users' interests would be substantially negatively affected by the sudden application of the existing measures if they were not to be temporarily adapted.

(23) However, by contrast, as the interest of the Community Industry itself confirmed it, its interests would not be unduly negatively affected if the measures were to be temporarily adapted as under its present trade patterns in the EU15 it cannot currently fully satisfy the demands of customers in the EU10.

(24) In such circumstances, it can reasonably be concluded in view of the specific situation of Enlargement, that it is not in the Community interest to apply the existing measures without temporary adaptation. However, such adaptation with regard to imports of the product concerned into the EU10 should not be such as to significantly undermine the desired level of trade defence.

(25) To this end, different ways were examined on how to best protect the Community Industry from injurious dumping whilst, at the same time, take into account the Community interest aspects by lessening the economic shock of the anti-dumping duties to traditional buyers in the new Member States during the period of economic adjustment following Enlargement.

(26) It was considered that this could be best achieved by allowing the traditional export volumes from Belarus and Russia to the EU10 be imported free of anti-dumping duties for a transitional period, provided that, in lieu of levying anti-dumping duties, export prices to these Member States would be increased, by way of minimum import prices ("MIP"), to levels which significantly contribute to the removal of injury. In this context, any exports to the EU10 above these traditional export volumes would be subject to the normal anti-dumping duties, as would exports to the EU15.

6. Undertakings

(27) Having assessed the different options on how best to allow these traditional export flows to the EU10 to continue, and ensure the significant contribution to the removal of injury, it was considered that the most appropriate means would be through the acceptance of voluntary undertakings from the cooperating parties with elements for minimum import prices and quantitative ceilings. Therefore, in accordance with Article 8(2) of the basic Regulation, undertakings may be suggested by the Commission to the exporting producers concerned.

(28) In this context, it should be noted that, in accordance with Article 22(c) of the basic Regulation, the special circumstances of Enlargement may be taken into account when the terms of the undertakings are established. They will constitute a special measure in that they provide a temporary way of adapting existing measures for the enlarged Community of twenty five Member States.

(29) It should also be noted that the undertakings will not be directly equivalent to an anti-dumping duty since the minimum import prices established may at lower levels than would usually be the case. To do otherwise would, as mentioned above, render the price of the product concerned prohibitively expensive to end users in the EU10 and, therefore, not be in the Community interest. Nevertheless, the exporting producers should undertake to raise their prices to levels which significantly contribute to the elimination of injury.

(30) Import volumes ("ceilings") should therefore be established for the exporting producers Belarus and Russia, using as a basis their traditional export volumes to the EU10 in 2001, 2002 and 2003. It should be noted, however, that abnormal increases in export volumes to the EU10 observed in the last few months of 2003 and the first months of 2004 should be deducted from the traditional volumes used for determining the ceilings.

(31) When selling to the EU10 under the terms of their undertakings, the exporting producers concerned should agree to broadly respect their traditional selling patterns to individual customers in the EU10. The exporting producers should therefore aware that any undertaking offer can only be considered as practicable, and therefore acceptable if, for sales covered by the undertakings, they would broadly maintain such traditional patterns of trade with their customers in the EU10.

(32) The exporting producers should also be aware that, under the terms of the undertakings, if it is found that these sales patterns change significantly, or that the undertakings become in any way difficult or impossible to monitor, the Commission is entitled to withdraw acceptance of the company's undertaking resulting in definitive anti-dumping duties being imposed in its place at the level specified in Regulation (EC) No 3068/92 or it may adjust the level of the ceiling, or it may take other remedial action.

(33) Accordingly, any undertaking offers respecting the above conditions may be accepted by the Commission by Commission Regulation.

D. amendment of regulation (EC) No 3068/92

(34) In view of the above, it is necessary to provide, in the event of undertakings being accepted by the Commission in a subsequent Commission Regulation, for the possibility to exempt imports to the Community made under the terms of such undertakings from the anti-dumping duty imposed by Regulation (EC) No 3068/92 by amending that Regulation.

HAS ADOPTED THIS REGULATION:

Article 1

1. Article 2 of Regulation (EEC) No 3068/92, as last amended by Regulation (EC) No 969/2000, is hereby replaced by the following:

'Article 2

1. Imports declared for release into free circulation shall be exempt from the anti-dumping duties imposed by Article 1, provided that they are produced by companies from which undertakings are accepted by the Commission and whose names are listed in the relevant Commission Regulation, as from time to time amended, and have been imported in conformity with the provisions of the same Commission Regulation.

2. The imports mentioned in paragraph 1 shall be exempt from the anti-dumping duty on condition that:

(a) the goods declared and presented to customs correspond precisely to the product described in Article 1,

(b) a commercial invoice containing at least the elements listed in the Annex is presented to Member States' customs authorities upon presentation of the declaration for release into free circulation; and

(c) the goods declared and presented to customs correspond precisely to the description on the commercial invoice.'

3. Article 2 of Regulation (EC) No 3068/92, as last amended by Regulation (EC) No 969/2000, is hereby renumbered Article 3.

4. Article 3 of Regulation (EC) No 3068/92, as last amended by Regulation (EC) No 969/2000, is hereby renumbered Article 4.

Article 2

This Regulation shall enter into force 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

ANNEX

The following elements shall be indicated on the commercial invoice accompanying the company's sales of potassium chloride to the Community which are subject to any Undertaking:

1. The heading "COMMERCIAL INVOICE ACCOMPANYING GOODS SUBJECT TO AN UNDERTAKING".

2. The name of the company mentioned in Article 1 of Commission Regulation [INSERT NUMBER] issuing the commercial invoice.

3. The commercial invoice number.

4. The date of issue of the commercial invoice.

5. The TARIC additional code under which the goods on the invoice are to be customs cleared at the Community frontier.

6. The exact description of the goods, including:

- Product Code Number (PCN) used for the purposes of the investigation and the undertaking (e.g. PCN I, PCN 2 etc),

- plain language description of the goods corresponding to the PCN concerned,

- company product code number (CPC) (if applicable),

- CN code,

- quantity (to be given in tonnes).

7. The description of the terms of the sale, including:

- price per tonne,

- the applicable payment terms,

- the applicable delivery terms,

- total discounts and rebates.

8. Name of the company acting as an importer in the Community to which the commercial invoice accompanying goods subject to an undertaking is issued directly by the company.

9. The name of the official of the company that has issued the invoice and the following signed declaration:

"I, the undersigned, certify that the sale for direct export to the European Community of the goods covered by this invoice is being made within the scope and under the terms of the undertaking offered by [company], and accepted by the European Commission through Regulation [INSERT NUMBER]. I declare that the information provided in this invoice is complete and correct."