[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 7.12.2005

COM(2005)619 final

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Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 1338/2002 imposing a definitive countervailing duty on imports of sulphanilic acid originating in India and amending Regulation (EC) No 1339/2002 imposing a definitive anti-dumping duty on imports of sulphanilic acid originating, inter alia, in India

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(presented by the Commission)

EXPLANATORY MEMORANDUM

CONTEXT OF THE PROPOSAL |

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 (the basic anti-dumping Regulation) and Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 461/2004 of 8 March 2004 (‘the basic anti-subsidy Regulation’) in the proceeding concerning imports of sulphanilic acid originating in India. |

General context This proposal is made in the context of the implementation of both, the basic anti-dumping Regulation and the basic anti-subsidy Regulation and is the result of an investigation which was carried out in line with the substantive and procedural requirements laid out in these Regulations. |

Existing provisions in the area of the proposal Council Regulation (EC) No 1339/2002 imposing a definitive anti-dumping duty on imports of sulphanilic acid originating in India and the People’s Republic of China (the PRC). Council Regulation (EC) No 1338/2002 imposing a definitive countervailing duty on imports of sulphanilic acid originating in India. Commission Decision 2002/611/EC accepting the undertaking offered by Kokan Synthetics & Chemicals Pvt Ltd. in connection with the anti-dumping and countervailing measures. Commission Decision 2004/255/EC repealing the undertaking offered by Kokan Synthetics & Chemicals Pvt Ltd. Council Regulation (EC) No 236/2004, concluding an anti-absorption investigation pursuant to Article 12 of the basic anti-dumping Regulation and increasing the rate of definitive anti-dumping duty concerning imports originating in the PRC. |

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

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT |

Consultation of interested parties |

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 Regulations. Collection and use of expertise |

There was no need for external expertise. |

Impact assessment This proposal is the result of the implementation of the basic anti-dumping and the basic anti-subsidy Regulation. Both Regulations do not foresee a general impact assessment but contain an exhaustive list of conditions that have to be assessed. |

LEGAL ELEMENTS OF THE PROPOSAL |

Summary of the proposed action In April 2005, following a request lodged by Kokan Synthetics, the Commission initiated a partial interim review of the measures pursuant to Article 11 (3) of the basic antidumping Regulation and Article 19 of the basic anti-subsidy Regulation respectively, limited in scope to the examination of the acceptability of an undertaking to be offered by Kokan Synthetics. The Commission had already accepted an undertaking from the applicant when definitive anti-dumping and countervailing duties were imposed, which was withdrawn by the applicant at a later stage in March 2004. The investigation showed no compelling reasons not to re-accept an undertaking from the applicant. In view of this, it is necessary to amend Regulations (EC) No 1338/2002 and No 1339/2002 in order to exempt the company from the payment of the anti-dumping and countervailing duty. It is therefore proposed that the Council adopts the attached proposal for a Regulation which should be published in the Official Journal of the European Union as soon as possible. |

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 461/2004 of 8 March 2004. Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 461/2004 of 8 March 2004. |

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 reasons: |

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

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 |

Proposed instruments: regulation. |

Other means would not be adequate because the basic Regulations do not foresee alternative options. |

BUDGETARY IMPLICATION |

The proposal has no implication for the Community budget. |

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 1338/2002 imposing a definitive countervailing duty on imports of sulphanilic acid originating in India and amending Regulation (EC) No 1339/2002 imposing a definitive anti-dumping duty on imports of sulphanilic acid originating, inter alia , 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 anti-dumping Regulation’), and in particular Articles 8 and 11(3) thereof,

Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community[2] (‘the basic anti-subsidy Regulation’), and in particular Articles 13 and 19 thereof,

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

Whereas:

A. PROCEDURE

1. Previous investigations and existing measures

1. In July 2002, the Council, by Regulation (EC) No 1338/2002[3] imposed definitive countervailing duties on imports of sulphanilic acid originating in India. On the same day, the Council, by Regulation (EC) No 1339/2002[4], imposed definitive anti-dumping duties on imports of sulphanilic acid originating in the People’s Republic of China and India (‘the measures’).

2. Within the framework of these proceedings, the Commission, by Decision 2002/611/EC[5] accepted a price undertaking offered by the Indian company, i.e. Kokan Synthetics & Chemicals Pvt Ltd. ( ‘the company’).

3. In June 2003, the Commission initiated an anti-absorption reinvestigation pursuant to Article 12 of the basic anti-dumping Regulation, concerning imports of sulphanilic acid originating in the People’s Republic of China (‘PRC’).[6]

4. In December 2003, the company informed the Commission that it wished to withdraw its undertaking voluntarily. Accordingly, the Commission Decision accepting the undertaking was repealed by Commission Decision 2004/255/EC.[7]

5. In February 2004, an anti-absorption investigation concerning imports of the sulphanilic acid originating in the PRC has been concluded by Council Regulation (EC) No 236/2004,[8] which increased the rate of the definitive anti-dumping duty for the PRC from 21% to 33,7% (‘the anti-absorption investigation’).

2. Request for an interim review

6. In December 2004, after conclusion of the anti-absorption investigation, the company lodged a request for a partial interim review pursuant to Article 11(3) of the basic anti-dumping Regulation and Article 19 of the basic anti-subsidy Regulation respectively, limited in scope to the examination of the acceptability of the reinstatement of its undertaking.

7. The company argued that its original wish to withdraw the undertaking followed from the fact that after imposition of measures in 2002, Chinese exporters absorbed the anti-dumping duties imposed, which resulted in a price depression and made the undertaking unworkable. The company also referred to the fact that as a result of the conclusion of the absorption review, the duty level on imports from the PRC was increased, which had allowed market prices to rise. Therefore, the company informed the Commission that it was prepared to offer its undertaking again under the former terms and conditions, which were considered appropriate to eliminate the relevant injurious effects of dumping and subsidisation.

8. The company provided sufficient prima facie evidence that no structural changes had occurred in the company since the previous findings that may have an impact on the acceptability and enforceability of an undertaking.

9. In April 2005, pursuant to a notice published in the Official Journal of the European Union [9], the Commission initiated a partial interim review of the anti-dumping and countervailing measures applicable to imports of sulphanilic acid originating in India, limited in scope to the examination of the acceptability of an undertaking to be offered by the company.

3. Procedure

10. The Commission officially advised the representatives of the exporting country, the applicant and the Community industry of the initiation of the partial interim review and gave all parties directly concerned the opportunity to make their views known in writing and to request a hearing.

11. The company re-offered formally its original undertaking.

12. The Commission sought and verified all the information it deemed necessary for the purpose of examining the re-acceptability of this undertaking.

B. FINDINGS OF THE INVESTIGATION

13. The investigation has shown that no structural changes occurred in the company since the original investigation that may have a negative impact on the acceptability and workability of an undertaking. Furthermore, experience gained during the application of the original undertaking has shown that the company respected the terms of the undertaking and that the undertaking could effectively be monitored by the Commission.

14. Nonetheless, it should be noted that significant differences were observed in the price of key ingredients in the production of sulphanilic acid since the original investigation, in particular aniline, and its key feedstock, benzene. In view of the above, the applicant agreed to index the minimum price originally offered in order to address the cyclical nature of sulphanilic acid prices in a way which reasonably eliminates the risk of injurious dumping. In view of the fact that a publicly available and independent database providing reliable international price data does exist for benzene but not for aniline and given further the strong correlation between the price of benzene and the price of aniline, the indexation was based on the price of benzene.

15. The Community industry argued that the applicant should not be allowed to choose the form of the measures and in particular to respect a minimum import price only when the prevailing market prices suit the company. Indeed, a company should not be allowed to have the form of the measures changed based on the evolution of the market. However, due account should be taken of the exceptional circumstances of the case. In this regard, it should be noted that the anti-absorption investigation revealed that the decrease in market prices at the time the company voluntarily withdrew its undertaking was prompted by the absorption of the anti-dumping duty on imports of sulphanilic acid originating in the PRC. Therefore, and in view of the changed circumstances resulting from the outcome of the anti-absorption investigation, the company’s wish to reinstall its undertaking is considered appropriate.

16. The Community industry further claimed that the undertaking offer should only be accepted following a full interim review, since the market evolution which might justify a new undertaking might justify as well a review of the company’s dumping margin. In this regard, it should be noted that the current investigation is limited in scope to the examination of acceptability of an undertaking to be offered by the company and that no request for an interim review with a different scope has been received. Therefore, the claim had to be rejected.

17. A user requested to lower the anti-dumping duty or, alternatively, to address the limited availability of purified sulphanilic acid on the Community market by introducing a system of quotas. Here again, in view of the limited scope of the current investigation, the claim had to be rejected.

C. UNDERTAKING

18. In view of the above, the undertaking was accepted by the Commission in Decision [INSERT NUMBER].

19. To further enable the Commission to effectively monitor the compliance of the company with the undertaking, when the request for release for free circulation is presented to the relevant customs authority, exemption from the duties will be conditional upon the presentation of a commercial invoice containing at least the elements listed in the Annex. This level of information is also necessary to enable customs authorities to ascertain with sufficient precision that shipments correspond to the commercial documents. Where no such invoice is presented, or when it does not correspond to the product presented to customs, the appropriate rate of anti-dumping and countervailing duty will instead be payable.

20. To further ensure the effective respect of the undertaking, the importers should be made aware that any violation of the undertaking may lead to the retrospective application of the anti-dumping and countervailing duty for the relevant transactions. Therefore, it is necessary to implement legal provisions providing for the incurrence of a customs debt at the level of the appropriate anti-dumping and countervailing duty whenever one or more conditions for the exemption are not respected. A customs debt should therefore be incurred whenever the declarant has chosen to release the goods for free circulation, i.e. without collection of anti-dumping and countervailing duty, and one or several conditions of that undertaking are found to have been violated.

21. In the event of a breach, the anti-dumping and countervailing duty may be recovered, provided that the Commission has withdrawn the acceptance of the undertaking in accordance with Article 8(9) of the basic anti-dumping Regulation or Article 13(9) of the basic anti-subsidy Regulation, by referring to that particular transaction and , accordingly, by declaring the relevant undertaking invoice as invalid. Therefore, pursuant to Article 14(7) of the basic anti-dumping Regulation and Article 24(7) of the basic anti-subsidy Regulation, customs authorities should inform the Commission immediately whenever indications of a violation of the undertaking are found.

22. It should be noted that in the event of a breach or withdrawal of the undertaking, or in case of withdrawal of acceptance of the undertaking by the Commission, the anti-dumping and countervailing duty imposed in accordance with Article 9(4) of the basic anti-dumping Regulation and Article 15(1) of the basic anti-subsidy Regulation shall automatically apply pursuant to Article 8(9) of the basic anti-dumping Regulation and Article 13(9) of the basic anti-subsidy Regulation.

HAS ADOPTED THIS REGULATION:

Article 1

1. The following Article 1(3) shall be inserted both in Council Regulation (EC)No 1338/2002 and in Council Regulation (EC) No 1339/2002:

“3. Notwithstanding paragraph 1, the definitive duty shall not apply to imports released for free circulation in accordance with Article 2.”

2. The following Article 2 shall be inserted both in Regulation (EC) No 1338/2002 and in Regulation (EC) No 1339/2002:

«Article 2

1. Imports declared for release into free circulation which are invoiced by companies from which undertakings are accepted by the Commission and whose names are listed in Commission Decision [INSERT NUMBER], as from time to time amended shall be exempt from the duties imposed by Article 1, on condition that:

- they are manufactured, shipped and invoiced directly by the said companies to the first independent customer in the Community; and

- such imports are accompanied by a valid undertaking invoice. An undertaking invoice is a commercial invoice containing at least the elements and the declaration stipulated in the Annex; and

- the goods declared and presented to customs correspond precisely to the description on the undertaking invoice .

2. A customs debt shall be incurred at the time of acceptance of the declaration for release into free circulation whenever it is established, in respect of goods described in Article 1 and exempted from the duties under the conditions listed in paragraph (1), that one or more of such conditions are not fulfilled. The second condition set out in paragraph (1) shall be considered as not being fulfilled where the undertaking invoice is found not to comply with the provisions of Annex 1 or found not to be authentic or where the Commission has withdrawn the acceptance of the undertaking pursuant to Article 8(9) of the basic anti-dumping Regulation or Article 13(9) of the basic anti-subsidy Regulation in a Regulation or Decision which refers to (a) particular transaction(s) and declares the relevant undertaking invoice(s) as invalid.

3. Importers shall accept as a normal trade risk, that the non-fulfilment, by any party, of one or more of the conditions listed in paragraph 1 and further defined in paragraph 2 may give rise to a customs debt incurred under Article 201 of Council Regulation (EEC) No 2913/92. The customs debt incurred shall be recovered upon withdrawal by the Commission of the acceptance of the undertaking.»

3. The Annex of this Regulation shall be inserted both in Regulation (EC)No 1338/2002 and in Regulation (EC) No 1339/2002.

Article 2

This Regulation shall enter into force on the day following that of its publication inthe 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 in the commercial invoice accompanying the company’s sales of sulphanilic acid to the Community which are subject to an Undertaking:

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

2. The name of the company mentioned in Article 1 of the Commission Decision accepting the undertaking [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. ‘PA99’, ‘PS85’ or ‘TA98’),

- the technical/physical specifications of the PCN, i.e. for ‘PA99’ and ‘PS85’ white free flowing powder, and for ‘TA98’ grey free-flowing powder.

- company product code (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 Decision [INSERT NUMBER]. I declare that the information provided in this invoice is complete and correct.’

[1] OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation (EC) No 461/2004(OJ L 77, 13.3.2004 , p. 12).

[2] OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regulation (EC) No 461/2004(OJ L 77, 13.3.2004, p. 12).

[3] OJ L 196, 25.7.2002, p. 1. Regulation last amended by Council Regulation (EC) No 492/2004(OJ L 80, 18.3.2004, p. 6).

[4] OJ L 196, 25.7.2002, p. 11. Regulation as last amended by Council Regulation (EC) No 492/2004(OJ L 80, 18.3.2004, p. 6).

[5] OJ L 196, 25.7.2002, p. 36.

[6] OJ C 149, 26.6.2003, p. 14.

[7] OJ L 80, 18.3.2004, p. 29.

[8] OJ L 40, 12.2.2004, p. 17.

[9] OJ C 101, 27.4.2005, p. 34.