Proposal for a COUNCIL REGULATION extending the definitive anti-dumping duty imposed by Regulation (EC) No 408/2002 on imports of certain zinc oxides originating in the People's Republic of China to imports of certain zinc oxides consigned from Vietnam, whether declared as originating in Vietnam or not, and to imports of certain zinc oxides originating in the People's Republic of China and mixed with silica

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. By Regulation (EC) No 408/2002, the Council imposed in March 2002 definitive anti-dumping duties ranging from 6,9 % to 28 % on imports of zinc oxides with a purity of not less than 93 % zinc oxide (zinc oxides) originating in the People's Republic of China (the PRC).

2. Following a request lodged on behalf of producers representing a major proportion of the Community production of zinc oxides, the Commission initiated in December 2002 an investigation into the alleged circumvention of the measures on imports of zinc oxides originating in the PRC by imports of zinc oxides consigned from Vietnam or imports of zinc oxides mixed with other substances (notably silica).

3. The investigation showed a significant increase in the imports of zinc oxides into the Community from Vietnam after the imposition of the definitive anti-dumping duties and a simultaneous decrease in the imports from the PRC. The verification also showed the existence of imports of a mixture of zinc oxides with silica. These imports of zinc oxides consigned from Vietnam and mixed with silica started after the imposition of the measures in March 2002. For these practises no economic justification or sufficient due cause could be established other than the avoidance of the anti-dumping duty on zinc oxides.

4. It is therefore proposed to extend the definitive anti-dumping duty of 28 % imposed on imports of zinc oxides originating in the PRC to imports of zinc oxides consigned from Vietnam, whether declared as originating in Vietnam or not, and to zinc oxides presented mixed with silica originating in the PRC.

Proposal for a COUNCIL REGULATION extending the definitive anti-dumping duty imposed by Regulation (EC) No 408/2002 on imports of certain zinc oxides originating in the People's Republic of China to imports of certain zinc oxides consigned from Vietnam, whether declared as originating in Vietnam or not, and to imports of certain zinc oxides originating in the People's Republic of China and mixed with silica

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 1972/2002( [2]) and in particular Article 13 thereof,

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

[2] OJ L 305, 7.11.2002, p. 1.

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

Whereas:

A. PROCEDURE

1. Existing measures

(1) By Regulation (EC) No 408/2002( [3]) (the original Regulation), the Council imposed definitive anti-dumping duties ranging from 6,9 % to 28 % on imports of zinc oxide with a purity of not less than 93 % zinc oxide (zinc oxides) originating in the People's Republic of China (the PRC).

[3] OJ L 62, 5.3.2002, p. 7.

2. Request

(2) On 18 November 2002, the Commission received a request pursuant to Article 13(3) of Regulation (EC) No 384/96 (the basic Regulation) to investigate the alleged circumvention of the anti-dumping measures imposed on imports of zinc oxides originating in the PRC. The request was submitted by Eurometaux on behalf of producers representing a major proportion of the Community production of zinc oxides.

(3) The request alleged that there had been a change in the pattern of trade following the imposition of the anti-dumping measures on imports of zinc oxides originating in the PRC, as shown by a significant increase in imports of the same product from Vietnam while imports from the PRC had decreased substantially during the same time span.

(4) This change in the pattern of trade was alleged to stem both from the transhipment of zinc oxides originating in the PRC via Vietnam. In addition, it was further alleged that zinc oxides originating in the PRC are being mixed with other substances, such as silica, thereby falling outside the relevant TARIC code. It was further alleged that as the basic characteristics and uses of the product remain unchanged, there was insufficient due cause or economic justification for these practices other than the existence of the anti-dumping duties on zinc oxides originating in the PRC.

(5) Finally, the applicant alleged that the remedial effects of the existing anti-dumping duties on zinc oxides originating in the PRC were being undermined both in terms of quantities and prices and that dumping was taking place in relation to the normal values previously established.

3. Initiation

(6) The Commission initiated an investigation by Regulation (EC) No 2261/2002( [4]) (the initiating Regulation) and, pursuant to Articles 13(3) and 14(5) of the basic Regulation, directed the customs authorities to register imports of zinc oxides consigned from Vietnam, whether declared as originating in Vietnam or not, under CN code Taric 2817 00 00 11, and imports of the zinc oxides mixed with other substances originating in the PRC under CN code Taric 2817 00 00 19, as from 20 December 2002.

[4] OJ L 344, 19.12.2002, p. 12.

4. Investigation

(7) The Commission advised the authorities of the PRC and Vietnam of the initiation of the investigation. Questionnaires were sent to the producers/exporters in the PRC and Vietnam as well as to importers in the Community named in the request or known to the Commission from the original investigation. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set in the initiating Regulation.

(8) Five producers/exporters in the PRC submitted completed replies to the questionnaires whilst no reply was received from producers/exporters in Vietnam. Replies to the questionnaire were also submitted by four importers in the Community. The Commission carried out verification visits at the premises of the following companies:

Unrelated importers:

- Norkem Ltd, Knutsford, UK;

- Norkem B.V., Enkhuizen, The Netherlands;

- Almiberia, S.A., San Antonio de Benagéber, Spain;

- Explorer, s.r.l, Sassuolo, Italy.

Chinese producers/exporters:

- Liuzhou Fuxin Chemical Industry Co. Ltd, Liuzhou, China;

- Liuzhou Nonferrous Metals Smelting Co. Ltd, Liuzhou, China, and its related exporter;

- Liuzhou Nonferrous Metals Smelting Import & Export Co. Ltd, Liuzhou, China.

5. Investigation period

(9) The investigation period covered the period from 1 October 2001 to 30 September 2002 (the IP). Data was collected from 2000 up to the IP to investigate the change in the pattern of trade.

B. RESULTS OF THE INVESTIGATION

1. General considerations/degree of cooperation

(a) Vietnam

(10) No producers/exporters of zinc oxides in Vietnam co-operated in the investigation. It was made clear to the companies involved that non co-operation may lead to the application of Article 18 of the basic Regulation. The Vietnamese Government (the Ministry of Trade), in reaction to the initiation of the investigation, made it clear that no exports of zinc oxides of Vietnamese origin to the Community have taken place throughout the year 2002, and that the Vietnamese authorities have not granted any certificates of Vietnamese origin for exports of zinc oxides.

(b) PRC

(11) The five Chinese producers/exporters that co-operated in the investigation accounted for close to 100 % in volume of the total imports of zinc oxides declared under CN Code 2817 00 00 from the PRC during the IP, as reported by Eurostat.

(12) It should be noted that during the IP of the original investigation the co-operating companies in the current investigation represented only 22 % of the total exports to the Community. This means that the major part of the exported quantities in the original investigation were exported by companies that are non-co-operating in the current investigation. It was made clear to these non co-operating companies that non co-operation may lead to the application of Article 18 of the basic Regulation.

(13) One Chinese Company, for which an individual duty had been established in the original investigation and which was subject to a periodical monitoring by the Commission( [5]) on a six monthly basis, argued that it was not necessary for it to fill in the questionnaire since the Commission had previously visited the company in the context of the periodical monitoring and all the data requested in the present investigation were already available. It was informed that it should nevertheless reply to the questionnaire, since data collected for other purposes and for a different period were not sufficient for the purpose of the present investigation. The export data requested in the present investigation were not completely covered by the previously submitted monitoring reports. As the company did not submit any questionnaire response, they were informed that it would be treated as a non-co-operating party and that therefore, in their respect, findings would be made on the basis of the facts available in accordance with Article 18 of the basic Regulation.

[5] Recital 59 of the original Regulation.

2. Product concerned and like product

(14) The product concerned is, as defined in the original investigation, zinc oxide (chemical formula ZnO) with a purity of not less than 93 % zinc oxide, currently classifiable within CN code ex 2817 00 00 (TARIC code 2817 00 00*12).

(15) The investigation has shown that the product concerned, zinc oxides, are imported into the Community presented in two different forms: either as zinc oxides or as zinc oxides mixed with silica. The investigation has also shown that the mixing of zinc oxides with silica does not alter the basic physical and chemical characteristics of the product concerned, as the zinc oxides maintain their molecular structure and their chemical properties intact. Furthermore, the investigation has shown that for instance in the in the case of the ceramic tile industry - which is one of the major users of zinc oxides - the product concerned must in any event be mixed with several other substances, including silica, in order to be used in the production of tiles.

(16) In the absence of co-operation and considering the change in the pattern of trade as described in recitals (20) and (21) it must be inferred that the zinc oxides exported to the Community from the PRC and those consigned from Vietnam have the same basic physical and chemical characteristics and have the same uses. They are therefore to be considered as like products within the meaning of Article 1(4) of the basic Regulation.

(17) On the basis of the information available, it is considered that zinc oxides presented mixed with silica still maintain their individual characteristics and should therefore be considered the same product as zinc oxides which are not presented in a mixed form. Consequently, zinc oxide mixed with silica and zinc oxide originating in the PRC are considered as like products within the meaning of Article 1(4) of the basic Regulation.

3. Change in the pattern of trade

(18) As stated in recital (4) the change in the pattern of the trade was alleged to stem from two practices, either transhipment via Vietnam or by mixing of zinc oxides with other substances, such as silica.

(a) Zinc oxides consigned from Vietnam

(19) As no Vietnamese company co-operated in the investigation, exports from Vietnam to the Community had to be established on the basis of the facts available pursuant to Article 18 of the basic Regulation. Eurostat data at CN level, which were the most appropriate information available in such a situation, were therefore used to establish the export prices and quantities from Vietnam to the Community.

(20) Imports of zinc oxides from Vietnam increased from 0 tonnes both in 2000 and 2001 to 6 523 tonnes at the end of the IP (September 2002). These imports from Vietnam commenced in fact in March 2002, thus at the same time as the imposition of the definitive duty. Imports into the Community of zinc oxides from the PRC decreased substantially, from 47 326 tonnes in 2000 (the IP of the original investigation) to 35 732 tonnes in 2001, and to 16 873 tonnes during the IP. This shows that a strong decrease of exports from the PRC has occurred after the initiation of the original anti-dumping investigation.

(21) According to data collected from Chinese trade statistics, before the imposition of the measures the exports of the product concerned from the PRC to Vietnam have been relatively stable, amounting to 1 643 tonnes in the year 2000 and to 2 029 tonnes in the year 2001. However, in the year 2002 these exports increased dramatically to 12 609 tonnes. In the period between the imposition of the duties in March 2002 and the end of the IP in September 2002, the exports amounted to 8 482 tonnes. As indicated above, in the same time period, 6 523 tonnes have been exported to the Community from Vietnam. This shows that imports of zinc oxides originating in the PRC into Vietnam have increased substantially in the year 2002, at a pace very similar to the increase of exports from Vietnam to the Community in the same period.

(22) From the figures above it can be concluded that a clear change in the pattern of trade is established and coincided, in the case of both exporting countries, with the entry into force of the anti-dumping measures on the product concerned originating in the PRC in March 2002.

(b) Zinc oxides mixed with silica

(23) In the request it was alleged that zinc oxides originating in the PRC were presented mixed with other substances and declared under another customs heading when imported into the Community. The verification of the data of one co-operating importer has confirmed the fact that zinc oxides have been imported mixed with silica. These imports were purchased from a Chinese producer/exporter which did not co-operate in the investigation and they were declared, on the basis of Binding Tariff Information (BTI) from the customs authorities of one Member State, under CN code 3824 90 99, which makes the imports concerned not subject to anti-dumping duties.

(24) For this importer, it has been established that the imports of zinc oxides presented mixed with silica started after the imposition of the measures in March 2002. However, in consideration of the fact that the co-operating importers only cover 65 % of the total imports to the Community it cannot be excluded that other non co-operating importers have used the same practice. Indeed the request contained evidence that this practice may have been applied by at least another importer which did not co-operate in the investigation.

(25) Considering that the exporting companies co-operating in this investigation only represented 22 % of the exports during the IP of the original, but close to 100 % in the current investigation and that the total exports from the PRC into the Community have dropped from 47 367 tonnes to 16 873 tonnes, it is reasonable to conclude that part of this decrease could be explained by the imports of zinc oxides presented mixed with silica. Given the high percentage of non co-operation, it was considered that significant quantities of zinc oxides presented mixed with silica may have been exported from China to the Community, declared under CN codes not subject to the duties.

(26) Based on best evidence available pursuant to Article 18 of the basic Regulation, a change in the pattern of trade is established, which coincided with the entry into force of the anti-dumping measures on the product concerned originating in the PRC in March 2002.

4. Insufficient due cause or economic justification

(27) In the absence of cooperation, and given the coincidence in time with the imposition of the anti-dumping measures on the product concerned originating in the PRC, it has to be concluded that the change in the pattern of trade stemmed from the imposition of the anti-dumping duty rather than from any other sufficient due cause or economic justification within the meaning of Article 13(1), second sentence of the basic Regulation.

(28) This conclusion is reinforced by the fact that no zinc oxides of Vietnamese origin have been exported to the Community, as declared by the Vietnamese authorities. Moreover, it can be inferred from the parallelism of the trends that the imports from the PRC to Vietnam were not meant for the Vietnamese market, but were meant to be re-exported. (See recitals (20) and (21)).

(29) As far as zinc oxides presented mixed with silica are concerned, no due cause or economic justification has been provided to explain the change in the pattern of trade. In fact, silica is a cheap material and in abundant supply in the Community in general and therefore there is no economical justification to transport the silica from China since this is unnecessarily increasing the total transport cost. Imports of zinc oxides presented mixed with silica coincided with the entry into force of the measures. The exporter of the mixture did not co-operate and in addition the importer did not bring forward any reasonable ground, other than avoiding the payment of anti dumping duties, for carrying out the mixture in the country from which the goods were exported.

(30) It is, therefore, concluded that no reasonable grounds, other than avoiding the existing anti-dumping duties on imports of zinc oxides originating in the PRC, could be established for the change in the pattern of trade observed.

5. Undermining of the remedial effects of the duty in terms of the prices and/or the quantities of the like products

(31) It is evident from the trade flow analysis made in recitals (20) and (21) that a change in the pattern of Community imports occurred since the imposition of the measures, and that this marked change in trade flows undermined the remedial effects of the anti-dumping measures in terms of quantities imported into the Community market.

(32) With regard to prices of the products consigned from Vietnam and in the absence of co-operation from exporters, Eurostat data revealed that export prices from Vietnam were even lower than the export prices established for the PRC in the original investigation. Consequently, the prices of Vietnamese exports of the product concerned to the Community are below the injury elimination level of Community prices as established in the original investigation.

(33) With regard to prices of the imported zinc oxides presented in a mixed form and given the non co-operation, recourse had to be made to the best evidence available, i.e. the figures of the co-operating importer for which this practice had been observed. These data revealed that the import prices submitted by this company are below the injury elimination level of Community prices as established in the original investigation.

(34) It is therefore concluded that the imports concerned undermine the remedial effects of the duty both in terms of quantities and prices.

6. Evidence of dumping in relation to the normal values previously established for like or similar products

(35) In order to determine whether evidence of dumping could be found with respect to the product concerned exported to the Community from Vietnam during the IP and the imports of zinc oxides presented mixed with silica, export prices established on the basis of Eurostat data and the figures of the co-operating importer were used. As concerns imports from Vietnam it has been established that prices from Vietnam are more than 15 % lower than the Chinese export prices in the original investigation. As concerns the export prices for the zinc oxides presented mixed with silica, taking into account the quantity of silica in the mix, it has been established that these export prices are more than 22 % lower than the Chinese export prices in the original investigation.

(36) It has to be recalled that Article 13(1) of the basic Regulation requires evidence of dumping in relation to the normal values previously established for the like or similar products but does not require the establishment of a new dumping margin. In accordance with Article 13(1) of the basic Regulation, the normal value previously established was the normal value used in the original investigation. At that time, the United States of America were found to be the appropriate market economy analogue country for the PRC.

(37) For the purpose of a fair comparison between the normal value and the export price, due allowance, in the form of adjustments, was made for differences which affect prices and price comparability. These adjustments were made in accordance with Article 2(10) of the basic Regulation in respect of transport, insurance and handling.

(38) In accordance with Articles 2(11) and (12) of the basic Regulation, the comparison of a weighted average normal value as established in the original investigation and the weighted average of export prices during this investigation's IP expressed as a percentage of the CIF price at the Community frontier duty unpaid, showed dumping for both the imports of the zinc oxides consigned from Vietnam and the imports of the zinc oxides presented mixed with silica.

C. MEASURES

(39) In view of the above finding of circumvention within the meaning of Article 13(1), second sentence, of the basic Regulation and in accordance with Article 13(1), first sentence, of the basic Regulation, the existing anti-dumping measures on the product concerned originating in the PRC should be extended to the same product consigned from Vietnam, whether declared as originating in Vietnam or not.

(40) Considering that it was found that in some cases zinc oxides are presented mixed with silica with the only purpose of obtaining a different customs classification and avoiding payment of the duties, it is necessary to ensure that the duties imposed on zinc oxides are collected also in those cases where the product concerned is imported as zinc oxides presented mixed with silica. In these cases, the duties should be collected in proportion to the content of zinc oxides in the presented mixed form.

(41) The duty extended should be the one applicable to all other companies as established in Article 1(2) of the original Regulation.

(42) In accordance with Article 14(5) of the basic Regulation, which provides that measures may be applied against registered imports from the date of registration, the anti-dumping duty should be collected on imports of zinc oxides consigned from Vietnam and of zinc oxides presented mixed with silica originating in the PRC which entered the Community under registration imposed by the initiating Regulation.

(43) The circumvention takes place outside the Community. Article 13 of the basic Regulation is aiming at countering circumvention practices without affecting operators which can prove that they are not involved in such practices, but it does not contain a specific provision providing for the treatment of exporters which could establish that they are not involved in circumvention practices. Therefore, it appears necessary to introduce a possibility for exporters which have not exported the product concerned during the IP and are not related to any exporters or producers subject to the extended anti-dumping duty to request an exemption from the measures on these imports. Exporters concerned which would consider to lodge a request for an exemption from the extended anti-dumping duty would be required to complete a questionnaire in order to enable the Commission to determine whether an exemption may be warranted. An exemption may be granted after the assessment of the market situation of the product concerned, production capacity and capacity utilisation, procurement and sales and taking into account the likelihood of practices for which there is insufficient due cause or economic justification and the evidence of dumping. The Commission would normally also carry out an on-spot verification visit. The request would have to be addressed to the Commission forthwith, with all relevant information, in particular any modification in the company's activities linked to production and export sales. Importers could still benefit from exemption from the measures to the extent that their imports are from exporters which are granted such an exemption, and in accordance with Article 13(4).

(44) Where exemption is considered appropriate, the Commission would, after consultation of the Advisory Committee, propose the amendment of the Regulation accordingly.

D. PROCEDURE

(45) Interested parties were informed of the essential facts and considerations on the basis of which the Council intended to extend the definitive anti-dumping duty in force and were given the opportunity to comment. No comments which were of a nature to change the above conclusions were received,

HAS ADOPTED THIS REGULATION:

Article 1

1. The definitive anti-dumping duty of 28 % imposed by Regulation (EC) No 408/2002 on imports of zinc oxide (chemical formula: ZnO) with a purity of not less than 93 % zinc oxide, normally declared under CN code ex 2817 00 00 (TARIC codes 2817 00 00*12 and 2817 00 00*18) originating in the People's Republic of China, is hereby extended to imports of zinc oxide (chemical formula: ZnO) with a purity of not less than 93 % zinc oxide, consigned from Vietnam (whether declared as originating in Vietnam or not) (TARIC code 2817 00 00*12) and to imports of zinc oxide presented mixed with silica, but where the purity of the zinc oxide itself is not less than 93 % zinc oxide. In the latter case, the duty should be collected in proportion to the content of zinc oxide with a purity of not less than 93 % zinc oxide in the mixture originating in the People's Republic of China (Taric code 3824 90 99*87).

2. The duty extended by paragraph 1 of this Article shall be collected on imports registered in accordance with Article 2 of Regulation (EC) No 2261/2002 and Articles 13(3) and 14(5) of Regulation (EC) No 384/96.

3. The provisions in force concerning customs duties shall apply.

Article 2

1. Requests for exemption from the duty extended by Article 1 shall be made in writing in one of the official languages of the Community and must be signed by a person authorised to represent the applicant. The request must be sent to the following address:

European Commission Directorate-General for Trade Directorate B Office: J-79 05/17 B - 1049 Brussels Fax (32 2) 295 65 05 Telex COMEU B 21877.

2. The Commission, after consulting the Advisory Committee, may authorise, by decision, the exemption of imports from companies which do not circumvent the anti-dumping duty imposed by Regulation (EC) No 408/2002 from the duty extended by Article 1, and propose the amendment of the Regulation accordingly.

Article 3

Customs authorities are hereby directed to discontinue the registration of imports, established in accordance with Article 2 of Regulation (EC) No 2261/2002.

Article 4

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