Proposal for a COUNCIL REGULATION ( EEC ) imposing a definitive anti-dumping duty on imports of dihydrostreptomycin originating in the People' s Republic of China and definitively collecting the provisional anti­dumping duty
Date: 1991-12-06
Institutions: European Commission
Subjects: China, anti-dumping duty, anti-dumping legislation, antibiotic

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

C0M(91) 538 final 

Brussels,  6  December  1991 

Proposal  for a 

COUNCIL REGULATION (EECÏ 

imposing a definitive anti-dumping duty on  imports of 

dihydrostreptomycin originating  in the 

People's Republic of China and  definitively collecting 

the provisional  anti-dumping duty 

(presented by the Commission) 

A-

Proposal  for a 

COUNCIL REGULATION (EEC) N*  .../... 

Of 

imposing a definitive anti-dumping  duty on  imports of 

dihydrostreptomycin originating  in the 

People's Republic of China and  definitively collecting 

the provisional  anti-dumping duty 

THE COUNCIL OF THE EUROPEAN COMMUNITIES 

Having regard  to the Treaty establishing  the European Economic Community, 

Having regard  to Council  Regulation  (EEC) N* 2423/88 of  11 July 1988 on 

protection against dumped or subsidized  imports from countries not 

members of the European Economic Community^1), and  in particular 

Articles 9 and  12 thereof, 

Having regard to the proposal  from the Commission, submitted after 

consultation within the Advisory Committee as provided under  the above 

Régulât ion, 

Whereas : 

(1) OJ No L 209, 2.8.1988, p. 1 

2 -

A.  PROVISIONAL MEASURES 

(1)  The Commission, by Regulation  (EEC) No 2054/91(2)  (hereafter 

referred  to as the provisional  Regulation)  imposed a provisional 

anti-dumping duty on  imports of dihydrostreptomycin (hererin 

referred  to as DHS) originating  in the People's Republic of China. 

The Council, by Regulation  (EEC) No 3090/91^3^ extended  this duty 

for a period not exceeding  two months. 

(2)  The Commission did not  impose measures concerning  Japan, since it 

found  that dumped  Japanese  imports did not cause any  injury  to the 

Community  industry.  In this respect  the proceeding concerning  Japan 

has been terminated by a Commission  decision^4). 

B.  SUBSEQUENT PROCEDURE 

(3)  Following the  imposition of  the provisional  anti-dumping  duty, the 

Chinese exporters as well as the complainants, requested, and were 

granted an opportunity  to be heard by the Commission.  They also 

made written submissions making known their views on the findings. 

(4)  The oral  and written comments submitted by the parties were 

considered and, where appropriate, the Commission's findings were 

modified to take account of them. 

(5)  Owing  to the complexity of the proceeding,  in particular  to the 

detailed verification of the data  involved and the numerous 

(2) 0J L 187, 13.07.1991, p. 23 
(3) 0J L 293, 24.10.1991 , p.1 
(4) 0J L  .... 

-  3 -

arguments  put  forward,  the  investigation  could  not  be  concluded 

within  the  time  limit  provided  for  in Article  7  (9)(a) of  Counci 

Regulation  (EEC) No  2423/88  (hereafter  referred  to as  the  basic 

Régulât ion). 

C.  DUMPING 

(a)  Normal  value 

(6)  For  the  purpose  of  definitive  findings,  normal  value  was,  in 

general, established  on  the  basis  of  the  same  method  as  that  used  in 

the provisional  findings. 

(7)  As explained  in recitals  10  to  15 of  the provisional  Regulation, 

normal  value  for  the  the  Chinese  exporters  was  established  on  the 

basis of  the  constructed  normal  value  in  Japan. 

(8)  DHS  is only  produced  in two  countries  apart  from  the  Community,  one 

of  which  is the  People's  Republic  of  China  and  the other,  Japan, 

which  has  a particular  market  situation.  According  to Article  2  (5) 

of  the  basic  Regulation,  the  normal  value  has  to be established  in 

an  appropriate  and  not  unreasonable  manner  on  the  basis  of  the 

prices or  the  constructed  value  in a  third  market  economy  country  by 

adding  cost  of  production  and  a  reasonable  margin  of  profit. 

As  explained  in recital  11  to  15 of  the  provisional  Regulation,  the 

prices  in Japan  were  not  fairly  comparable  with  the  export  prices  of 

the Chinese  exporters.  Normal  value  had,  therefore,  to  be 

constructed  on  the  basis  of  the  Japanese  costs  of  production  and  a 

reasonable  profit  margin.  The  result  was  then  adjusted  to  render  it 

reasonable  and  appropriate  by  taking  account  of  the  fact  that  one  of 

the  raw materials  was  sourced  in the  People's  Republic  of  China  and 

the use  of  its cost  price  would  have  reintroduced  the  distortions 

which  Article  2(5) of  the  basic  Regulation  was  intended  to 

eIiminate. 

-  4  -

Since  Rhône  Poulenc  is the only  other  known  producer  of 

dihydrostreptomycin  in the world,  its costs, exclusive  of  selling, 

general,  and  administrative  expenses  and  profit,  pertaining  to  the 

relevant  raw material  were, utilized,  as  there  is no  established 

world  market  price  for  this  raw material,  which  could  be  used  as  an 

alternative.  The  constructed  normal  value  for  Japan  was  therefore 

adjusted  by  the  difference  between  the  cost  of  production  of  the  raw 

material  of  the only  known  market  economy  producer  and  the  cost 

price of  the Chinese  raw material  to  the  Japanese  producer  of 

d i hydrostreptomyc i n. 

(9)  The Chinese  exporters  contested  this method,  arguing  that  the 

Commission  had  confused  different  methods  of  determining  normal 

value  as  set  out  in Article  2  (5) of  the  basic  Regulation. 

The Commission  cannot  accept  this  argument.  The method  used  is 

fully  in accordance  with  the  second  indent  to Article  2(5), the 

normal  value  being  adjusted  as explained  above  to make  it  reasonable 

and  appropriate  as  is required.  Thus,  the  fact  that  this  adjustment 

was made  by  reference  to  the  cost  of  a  raw material  in the  Community 

does  not  mean  that  the Commission  mixed  the methods. 

(10) As  far  as  a  reasonable  profit  margin  is concerned,  it  is  recalled 

that,  due  to  the  predominant  market  position  enjoyed  by  the  Japanese 

producer  on  its domestic  market,  the  profit  margin  found  for  this 

Japanese  producer  was  exceptional  and  therefore  it was  not 

considered  appropriate  to  include  it  in  the  calculation  of  the 

constructed  value  for  the Chinese  exporters.  For  this  reason, a 

profit  margin  of  5%,  as  requested  by  the  Chinese  exporters,  was 

used  in the  calculation  of  the  normal  value, as  this was  thought  to 

be  reasonable  for  a mature  generic  pharmaceutical  product  used  in 

the  agricultural  sector. 

5 -

The Council  confirms these findings and conclusions of the 

Commission  as well  as those set out  in Recital  9 to 15 of the 

provisional  Regulation. 

(b)  Export  Price 

(11) The export  price of DHS exported  by the Chinese producers was 

determined  as explained  in recital  16 of the provisional  Regulation 

No comments  from any party have been made on this course of action. 

Therefore  the Council  confirms the Commission's  findings. 

(c)  Compar ison 

(12) The comparison  between normal  value and the export  prices was made 

on a transaction-by-transaction basis at  the ex-works  level  and at 

the same  level of trade.  For  the purposes of ensuring a fair 

comparison  the Commission  took account, where appropriate, of 

differences concerning  price comparability, such as differences in 

physical  characteristics and selling expenses.  The Chinese 

exporters claimed, and the Commission  after examination agreed that 

a 9% downward  adjustment  of the normal  value was  justified  in the 

light of the differences  in the physicial  characteristics, namely 

the  lower potency of DHS produced  in China. 

(13) In addition, the Chinese exporters claimed  that  the differences in 

the manufacturing process between DHS produced  in Japan and China 

Justify a further  adjustment.  However, no material  evidence was put 

forward by the exporters as provided  for by Art. 2(9)(b) of the 

basic Regulation.  Therefore  the Council  confirms  the Commission's 

posit ion. 

(14) The Chinese exporters also argued  that  the Commission  had neglected 

other  factors of adjustement such as differences  in end-use, in 

customer  perception due to  lower potency and colouration of Chinese 

-  6 

DHS.  These  differences  were  already  taken  into account  by  the 

abovementioned  9%  allowance, because  they  are  a consequence  of  the 

lower  potency.  It  is considered  that  these  claims  are  not  justified 

and  this  is confirmed  by  the  Council. 

(d")  Dumping  margin 

(15) The  final  examination  revealed  that  exports of  DHS  by  the  Chinese 

exporters were  dumped.  The  dumping  margin  is equal  to  the 

difference  between  the normal  value  and  the export  prices.  The 

Commission  has  taken  into account  the  fact  that  the  Chinese 

exporters  are  controlled  and  represented  by  a single  state 

organization  which  is also  able  to  influence  the export  prices. 

Consequently,  a uniform  dumping  margin  has been  determined  for  the 

Chinese  exporters  who  cooperated. 

(16) The  two Chinese  exporters  which  cooperated  claimed,  however,  that 

they  acted  independently  and  were  therefore  entitled  to  individual 

dumping  margins.  In this  respect,  the Commission  noted  that  these 

Chinese exporters  were  represented  by  a single Chamber  of  Commerce 

on  behalf  of  which  identical  arguments  and  considerations  for  the 

two exporters, without  any  evidence  of  differences  in  circumstances 

except  for  differences  in potencies of  DHS were  submitted.  In 

addition,  these  exporters  were  unable  to show  that  they  enjoyed  a 

high  degree  of  independence,  that  they  are  not  state  controlled  in 

their  commercial  behaviour,  especially  in the  setting  of  export 

prices  and  that  they  had  the  possibility  to  transfer  any  part  of 

their  profit  outside  China.  For  these  reasons,  the  exporters'claim, 

in this  respect,  has  to be  rejected. 

(17) As  far  as other  Chinese  exports  to  the Community  are  concerned,  an 

analysis of  Eurostat  figures  for  imports of  DHS  and  a  comparison 

with  the  declared  export  volumes  by  the Chinese  exporters  which 

cooperated  shows  that  it  is highly  probable  that  other  Chinese 

producers  export  DHS  to  the Community  with  a similar  purity  as  the 

-  7 

Japanese  producer.  No evidence  was  available on  the  individual 

circumstances of  these  exporters  for  which,  therefore,  a  dumping 

margin  had  to be calculated  on  the basis of  the  facts available  as 

provided  for  in Article  7(7)(b) of  the basic  Regulation.  Since  it 

has  to be  assumed  that  these  non-cooperating  exporters  export  higher 

potency  DHS, no  allowance  can  be made  for  differences  in potency 

levels. 

Therefore,  it was  considered  reasonable  that  the  dumping 

margin  calculated  for  all  other  exporters  from  the People's  Republic 

of  China  should  not  take  account  of  any  allowances  claimed  by  the 

Chinese  exporters  which  cooperated. 

On  this basis,  the  dumping  margins  expressed  as  a percentage  of  CI F 

frontier  prices were  found  to be  for  : 

Long March  Pharmaceutical  PI ant,and 

Shanghai  Fourth  Pharmaceutical  Plant 

For  all  other  Chinese  exporters 

37.46% 

50.65% 

These margins  are  equivalent  to  14.9  Ecu per  kilogram  of  base  DHS 

for  Long  March  Pharmaceutical  and  Shanghai  Fourth  Pharmaceutical 

Plant  and  20.16  Ecu  for  all  other  Chinese  exporters. 

The Council  confirms  these  findings. 

E.  INJURY 

(18) The  Commission  concluded  in  its provisional  findings  that  the 

Community  industry  had  suffered  material  injury.  While  further 

investigation  revealed  that  the  capacity  utilization  was  not  as  low 

as  indicated  in the  provisional  Regulation  but  dropped  from  an  index 

of  100  in 1985  to 84 during  the  investigation  period,  all  other 

injury  factors  remained  unchanged  even  after  the  submission  by  the 

interested  part ies. 

(19) Given  the  above  and  for  the  reasons  explained  in recitals  21  to  26 

of  the provisional  Regulation,  the Council  confirms  that  the 

Community  Industry  has  suffered  material  injury. 

-  8  -

G.  CAUSATION OF  INJURY 

(20)  in recital  29  to 34 of  the provisional  Regulation,  the  Commission 

found  that  the  increase  in the  volume of  DHS  imports  from  the 

People's Republic of  China, at  low prices which  undercut  the  prices 

of  the EC  industry, coincided  with  the  reduction  in the  Community 

industry's profit  margin,  reduction  In market  share  and  price 

erosion,  in this  respect,  the Chinese exporters  themselves  have 

indicated  that  the DHS market  is U g h ly  price  sensitive,  it  is, 

therefore, clear  that  the  lower  prices charged  by  the  Chinese 

exporters was  an  important  factor  in the  realignment  of  market 

shares amongst  the Chinese  exporters  and  the Community  industry,  and 

also  in the price  erosion  and  the consequent  losses  suffered  by  the 

Community  industry. 

(21)  It was  also  found  that  the  Japanese exporters'sales  of  DHS  in the 

Community  had  declined  considerably,  and  had  not  undercut  the 

Community  industry  prices.  It was considered,  therefore,  that  these 

exports  did  not  contribute  to the  injury  to the Community  industry. 

As  regards  any  other  factors which  had  an  impact  on  the situation of 

the Community  industry,  the Council  is aware  that  demand  for  the 

product  concerned  has  contracted  in recent  years.  However,  this 

factor  has not  been  imputed  to  the  injury  caused  by  the  Chinese 

exporters.  Furthermore,  the Commission  considers  that  the  large 

increase  in dumped  imports  from  China  at  very  low prices  into a 

contracting  market  has only  served  to aggravate  the  injurious  effect 

of  the  dumping. 

(22) For  these  reasons  and  for  those  explained  in Recitals  29  to 34 of 

the provisional  Regulation,  the Council  confirms  that  the  dumped 

Chinese  imports  taken  in  isolation,  have  caused  material  injury  to 

the Community  industry. 

-  9 

H.  DUTY 

(23) As  regards  the duty,  the Commission  has  recalculated  what  is 

necessary  to  remove  the  injury  using  the method  as explained  in 

recitals  35 and  36 of  the  provisional  Regulation.  Given  the  low 

prices of  the  Chinese  DHS  in the Community  and  the  high  losses 

suffered  by  the  Community  industry,  the  difference  between  these 

Chinese  prices  and  a price  which  would  allow  the Community  industry 

to achieve  a  reasonable  return  on  sales on  the basis of  a  reasonable 

sales  volume  is still  considerably  higher  than  the  dumping  margins 

now  calculated.  Therefore,  in accordance  with  Article  13(3) of  the 

basic  Regulation,  the  dumping  margins  should  be  imposed  as  definitve 

duties,  since  only  these  two amounts would  be  adequate  to  remove  the 

injury  caused  by  the  dumping. 

(24)  In addition,  the Commission  considers  that  the  structure  of  a  state 

controlled  economy  gives  the Chinese  exporters  considerable  room  for 

manoeuvre  to  further  decrease  their  export  prices.  This  concern  of 

the Commission  has been  confirmed  by  the considerable  price 

undercutting  which  has  taken  place  in the Chinese  export 

transactions.  In such  a situation,  a  fixed  duty  amount  or  an  ad 

valorem  duty  by  itself  would  not  guarantee  the  elimination of  the 

injurious effect  of  the  dumping.  Therefore,  it  is considered  that  a 

minimum  price  has  to be established  in order  to deter  further 

injurious dumping  after  the  imposition  of  the  definitive  anti 

dumping  measures. 

(25) The  Commission  also  had  to  take  account  of  the  fact  that  an  increase 

of  the export  prices of  the Chinese  exporters may  be caused  by  other 

factors  than  the  elimination  of  dumping.  Indeed,  the production  of 

DHS  is an  energy  intensive  process  so  that  changes  in the  energy 

costs may  provoke  an  increase  in overall  costs  which  will  lead  to an 

increase of  the  export  price.  However,  this  increase  would  not 

necessarily  result  in a  reduction  in the  dumping  by  the  Chinese 

- 10 

exporters, as the normal  value could also  increase by a 

corresponding amount.  Therefore,  it is considered appropriate that 

in such a case the form of the duty should be that of a set amount 

per kilo of the  imported DHS.  The dumping amounts are 14.9 ECU per 

kilo of base DHS for the cooperating organisations and 20*16 ECU for 

the other Chinese exporters.  Consequently, given the potential  for 

absorption of any duty  in the market concerned,  it is necessary that 

the imposition of a minimum price  is combined with the  imposition of 

a set amount of duty. 

(26) While this combination of two forms  >f duty  is necessary to 

guarantee the elimination of the  injury caused by dumping and  its 

recurrence, the Commission  is ready to  investigate,  in due course, 

refund or review applications of  importers or  the Chinese exporters, 

should a change  in price  lead to a reduction  in dumping margins or 

for any other reasons should any change  in circumstances be 

considered sufficient justification, 

(27) The Community  industry requested  that the definitive anti-dumping 

duty be  imposed retroactively  in accordance with Article 

13(4)(b)(ii) of Regulation  (E£C) No 2423/88.  No evidence of the 

legal requirements as set out  in the relevant provision has been 

provided and therefore the claim was rejected. 

(28) The Council confirms these views and the conclusions as set out  in 

recital 23 to 27 of the present Regulation. 

1.  COMMUNITY  INTEREST 

(29) No further facts or arguments concerning Community  interest were 

submitted  to the commission by any of the parties.  The Council 

therefore confirms the Commission's conclusions, set out  in recitals 

40 to 46 of the provisional  Regulation, that  it  is in the 

Community's  interest to eliminate, by anti-dumping measures, the 

injurious effects of the dumping by the Chinese exporters and thus, 

to prevent  the further decline of the Community  industry. 

-  11 -

J.  UNDERTAKING 

(30) A price undertaking  has been offered on behalf of  two Chinese 

producers.  However, the price  level proposed would not eliminate 

the dumping  as established  nor,  Its  Injurious effect, as provided 

for  In Article  10(2)(b) of  the basic Regulation.  The Commission 

has considered  that  the price undertaking  is not acceptable and has 

informed  the exporters concerned of this decision and  the reasons 

therefor. 

K.  COLLECTION OF PROVISIONAL DUTIES 

(31) In view of the dumping margins established, and the seriousness of 

the  Injury caused  to the Community  industry, the Council  considers 

it necessary  that  amounts collected by way of provisional  anti 

dumping duties should be definitively  collected  to the extent of the 

amount of  the duty definitively  imposed, which  is equivalent  to an 

ad-valorem  rate of duty of 37.4 % of the net  free at Community 

frontier  price prior  to customs clearance, as far as  imports from 

Shanghai  Fourth Pharmaceutical  Plant  and Long March Pharmaceutical 

Plant, Sichuan are concerned.  For all other Chinese exporters an ad 

valorem  rate of 47.6% of  the net  free-at-Community  frontier  price to 

customs clearance should  apply. 

HAS ADOPTED  THIS  REGULATION 

-  12 

Article 1 

1. A  definitive  duty  is hereby  Imposed  on  Imports  of  dihydrostreptomycin 

falling  within  CN  code  2941  20  10 and  originating  In  the  People's 

RepublIc of  China. 

2.  The  amount  of  duty  shall  be  20.16  Ecu  per  kilogram  of  base  DHS or  the 

difference  between  the CI F price  and  58.4  Ecu  per  kilogram  of  base  DHS 

whichever  Is the  higher  (Additional  Tarlc Code  8604). 

For  Long  March  Pharmaceutical  Plant,  Sichuan  and  for  Shanghai  Fourth 

Pharmaceutical  Plant  (Additional  Taric Code  8603),  the  duty  shall  be 

14.9  Ecu  per  kilogram  of  base  DHS or  the  difference  between  the  CIF 

price and  53.16  Ecu  per  kilogram  of  base  DHS whichever  Is the  higher. 

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

Article  2 

The  amounts  collected  or  secured  by  way  of  provisional  anti-dumping  duty 

pursuant  to Regulation  (EEC) No  2054/91  shall  be  definitively  collected 

to  the extent  of  the  amounts  resulting  from  the  application of  the 

definitive  duty  as  Imposed  In Article  1(2).  However,  the  extent  of  the 

provisional  amounts  definitively  collected  shall  be  limited  as  follows: 

-  for  Long  March  Pharmaceutical  Plant,  Sichuan  and  for  Shanghai  Fourth 

Pharmaceutical  Plant,  an  ad-valorem  duty  rate  of  37.4% will  be  applied 

subject  to a maximum  of  the  definitive  duty  as  Imposed  In Article  1(2) 

for  imports  from  these  firms,  and 

13  -

-  for  all  other  Chinese  exporters,  an  ad-valorem  rate of  duty  of  47.6% 

will  be  applied  subject  to  a maximum  of  the  definitive  duty  as  Imposed  in 

Article 1(2). 

Article  3 

This  Regulation  shall  enter  Into  force  on  the  day  following  Its 

publication  In  the Official  Journal  of  the  European  Communities. 

This  Regulation  shall  be  binding  in  its entirety  and  directly  applicable 

in a 11 Member  States. 

Done  at  Brussels, 

For  the  CounclI 

The  President 

ISSN 0254-1475 

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