Proposal for a COUNCIL REGULATION (EC) imposing a definitive anti-dumping duty on imports of furfuraldehyde originating in the People's Republic of China
Date: 1994-12-22
Institutions: European Commission
Subjects: China, anti-dumping duty, chemical alcohol, chemical compound, dumping, import

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

COM(94)  6 83 

f i n al 

B r u s s e l s, 

2 2 . 1 2 . 1 9 94 

P r o p o s al 

f or  a 

COUNCIL  REGULATION 

(EC) 

i m p o s i ng  a  definitive  a n t i - d u m p i ng  d u ty  on  i m p o r ts  o f f i i r f u r a l d c h y de  o r i g i n a t i ng  in  the 

People's  Republic  of  C h i na 

(presented by the Commission) 

explanatory  memorandum 

I he  Commission  Regulation  ( I X)  No  1783/94" t)  imposed  a  provisional  anti-dumping  duty 

on  imports  of  furfuraldehydc  originating  in the  People's  Republic  of China. 

"> 

This  provisional  anti-dumping  duty  has been extended  by  a further  period  of  two  months  by 

Council  Regulation  (IX")  No  28l8/94«2). 

3.  Alter  examining  the  arguments  put  forward  by  the  interested  parties,  the  Commission  has 

dellnitively  established  the  facts. 

4. 

In accordance  with  Article  12 of  Council  Regulation  (BC)  No  2423/88(((3), the  Commission, 

after  consultation  of  the  Advisory  Committee,  proposes  to  impose  a  definitive  duty  of  the 

same amount  ol  the  provisional  duly  and  to collect  definitively  the  provisional  anti-dumping 

duty. 

' I)  O.J. No. I,  186, 21.07.1994, p.  II 
,,2)O.J.  No. 1,298,  I9.II.IW4,  p. 31 
,,(3)()..!.  No. 1,209, 02.08.1988, p.  I 

COUNCIL  REGULATION  (EC)  Nc 

of 

imposing  a definitive  anti-dumping duty on  imports of furfuraldehyde  originating  in  the 

People's  Republic  of  China 

iin;COUNCIL01  mi;  EUROPBAN  UNION, 

H a v i ng  regard  to  the  Treaty  establishing  the  European  C o m m u n i t y, 

Having  regard  to  Council  Regulation  (EEC)  N°  2423/88  of  I I  July  1988  on  protection  against 

imports  from  countries  not  members  of  the  European  Economic 
dumped  or  subsidised 
Community  (ll(i) as  last  amended  by  Regulation  (EC)  N°  522/94  """2), and  in  particular  Article  12 

thereof. 

Having  regard  to  the  proposal  submitted  by  the  Commission  after  consultations  within  the 

Advisory  Committee, 

Whereas: 

A. 

PROVISIONAL  MEASURES 

(I) 

By  Regulation  (EC)  N°  1783/94 

(,,lll3),  hereinafter 

referred 

to  as  "the  provisional 

Regulation",  the  Commission  imposed  a  provisional  anti-dumping  duty  on  imports  of 

furfuraldehyde  falling  within  the  CN  code  2932  12  00  and  originating  in  the  People's 

Republic of  China. 

liy  Regulation  (EC)  N°  2818/94  """'4), the Council  extended  the  validity  of these  duties  for 

a  period  not  exceeding  two  months. 

" " I)  O.J.  No.  1,209,02.08.1988  p.  I 
( , < , ,2)()..l.  No.  I,  66,  10.03.1994  p. 10 
3)  O.J.  No.  L  186, 21.07.1994,  p. I I 
4)  O.J.  No.  L 2 9 8,  19.1 1.1994, p.3 I 

' 

B. 

SUBSEQUENT  PROCEDURE 

(2) 

Subséquent  to  the  imposition  of  the  provisional  anti-dumping  duty,  Sinochem,  the  main 

Chinese  exporter  submitted  comments  in writing and  requested  and  was granted  a  hearing. 

One  importer  made  its views  known  to the Commission  in  writing. 

In  addition,  an  importer  and  processor  of  furfuraldehyde,  which  had  not  been  taken  into 

consideration  for  the  imposition  of the  provisional  duty  because  it started  operating  only  at 

the  beginning  of  1994,  submitted  its  written  comments.  Furthermore  it  requested  and  was 

granted  the opportunity  to be heard  orally. 

(3) 

The  oral  and  written  comments  submitted  by  the  interested  parties  were  considered  by  the 

Commission  services and  taken  into account  where  appropriate. 

C. 

PRODUCT  UNDER  CONSIDERATION.  LIKE  PRODUCT  AND  COMMUNITY 

INDUSTRY 

(4)  As  no  further  arguments  have  been  presented  regarding  the  product  under  consideration, 

the  like  product  and  the  Community  industry,  the  findings  set  out  in  recitals  (9)  to  (12)  of 

the  provisional  Regulation  are  confirmed. 

I). 

DUMPING 

1. 

Normal  value 

(5)  As  the  People's  Republic  of  China  is  a  non-market  economy  country,  the  Commission 

based  the  determination  of  normal  value  on  domestic  sales  prices  of  two  furfuraldehyde 

producers  in  a  market  economy  country,  in  this  case  Argentina,  pursuant  to  Article  2  (5) 

(a) (i) of the  basic  Regulation. 

(6)  One  importer  argued  that  Argentina  is  inappropriate  as  an  analogue  country  because  the 

volume  of  the  Argentinian  production  of  furfuraldehyde  would  be  too  small  compared 

with  the estimated world  production  and  with  Chinese  production. 

By  applying  Article  2  (5)  (a)  of  the  basic  Regulation  and,  in  particular,  by  evaluating  the 

representativeness  of  the  sales  on  which  normal  value  is  to  be  based,  it  is  the  practice  of 

the Commission  to  compare  the  volumes  exported  to the  Community  by  the  country  under 

investigation  with  the  volume  of  sales  on  which  normal  value  is  based. 

In  applying  this 

principle,  it  has  been  found  that  Argentinian  domestic  sales  represented  more  than  10%  of 

the  Chinese  exports 

to 

the  Community,  which  can  be  regarded  as  sufficiently 

representative.  The  ratio  between  the  production  in  the  analogue  country  and  the  world 

production  or  the  production  in  the country  under  investigation  is  not  relevant  in  regard  to 

the choice  of  the analogue  country. 

(7) 

The  same  importer  argued  that  the  production  costs  of  furfuraldehyde  in  Argentina  are 

higher  than  in  other  countries.  This  could  be  proved  by  the  fact  that  Argentinian 

furfuraldehyde  could  only  be exported  to  other  South  American  countries,  whose  markets 

are  protected  by  high  duties,  but  which  grant  preferential  treatment  to  A L A DI  (Latin 

American  Integration  Association)  countries. 

It  was  found  that  this  statement  by  the 

importer  in  question  is  incorrect,  as  during  the  investigation  period  about  one  third  of 

Argentinian  production  offiirfuraldchyde  was exported  to the  Community. 

(8) 

Sinochem  also  reiterated  its  arguments  with  regard  to  the  choice  of  Argentina  as  an 

analogue  country.  The  Commission  has already  given  adequate  reasons  for  this  choice  in 

recitals  (13)  and ( 14) of  the provisional  Regulation. 

(9) 

Therefore,  the  Council  maintains  that  the  choice  of  Argentina  as  an  analogue  country  has 

been  made  in  an  appropriate  and  not  unreasonable  manner.  Recitals  (13)  and  (14)  of  the 

provisional  Regulation  are  confirmed. 

(10)  Consequently,  for  the  purpose  ol  definitive  findings,  the  Council  confirms  the  normal 

value  established  on  the  basis  of  Argentinian  domestic  prices,  as  indicated  in  recital  (15) 

of the  provisional  Regulation. 

2. 

Export  prices 

(11)  No  new  arguments  were  presented  regarding  the  establishment  of  export  prices.  The 

findings  set  out  in  recitals ( 16) to ( 19) are  therefore  confirmed. 

3. 

Comparison 

( 12)  No  new  arguments  were  presented  concerning  the  method  followed  by  the  Commission  in 

the comparison  between  normal  value and  export  price.  The  method  set out  in  recital  (20) 

of the  provisional  Regulation  is, therefore,  confirmed. 

4. 

Dumping  margin 

(13)  No  further  arguments  were  submitted  on  the  dumping  margin  determination  by  the 

Commission  in  the  provisional  Regulation,  which  consisted  of  a  single  dumping  margin 

corresponding  to  the  weighted  average  dumping  margins  of  both  cooperating  and  non 

cooperating  exporters.  The  dumping  margin  of  62.6%  as  indicated  in  recital  (21)  of  the 

provisional  Regulation  is, therefore,  confirmed. 

I. 

Preliminary  Remarks 

(14) 

In  its  provisional  Regulation,  the  (Commission  based  its  calculation  on  injury  on  the  price 

effect  of  the  dumped  imports  from  China.  In  this  regard, the Commission  only  considered 

the  part  of  the  market  in  which  Community  produced  furfuraldehyde  competed  with  the 

furfuraldehyde  imported  from  China.  The  Commission  excluded  imports  originating  from 

a  third  country  whose  name  cannot  be  disclosed  for  reasons  of  confidentiality.  These 

imports  are  based  on  a  long  term  exclusive  supply  contract  between  the  producer  in  the 

third  country  and a company  linked  to  the  major  Community  importer,  which  covers  more 

than  80% of  the  furfuraldehyde  purchased  by  this  Community  importer.  The  existence  of 

this  contract  leaves  the  Community  producer  with  only  a  very  low  potential  volume  of 

business  with  this  importer.  H ie  imports  from  the third  country  in question  were  therefore 

considered  to occur  in a captive  market. 

(15)  Sinochem  argued  that  there  is  no  captive  market  as  the  complainant  sells  its  entire 

production  on  the  open  market  and  the  importer  in  question  is  by  far  the  largest  potential 

purchaser  of  furfuraldehyde  from  the Community  industry  since  it  accounts  for  the  bulk  of 

furfuraldehyde  consumption  within  the  Community.  Therefore,  by  excluding  imports 

from  the  third  country  the  evaluation  of  consumption  and  of  the  respective  market  shares 

would  have  differed. 

(16)  The  Commission  carried  out  a  further  inquiry  in  particular  with  regard  to  the  specific 

contractual  relationship  between  the producer  in  the third  country  and a company  linked  to 

the  Community  importer.  This  contractual  relationship  referred  to  in  recital  (14)  has 

existed  since  the  1960s and constituted  in the  investigation  period the  basis of over  80%  of 

the  furfuraldehyde  purchased  by  the  importer  in  question.  The  elements  available  at  the 

provisional  determination  stage  led  the  Commission  to  conclude  that  a  captive  market 

existed.  Having  now  more  information  on  this  issue  and  after  further  analysis,  there  are 

doubts  whether  the situation  described  above could  be qualified  with  certainty  as a captive 

market. 

Under 

these  circumstances, 

the  Commission  has  decided 

to 

take 

into 

consideration  the  imports  from  this  third  country  in  its  assessment  of  the  injury  caused  to 

the Community  producer. 

2. 

M a r k et  share  of the Community  production 

(17)  Necessarily,  compared  with  the  provisional  findings,  when  the  imports  from  the  third 

country  are  included,  Community  consumption  increases  and  the  market  share  of  the 

dumped  imports  and  of  the  Community  producer's  sales  while  showing  an  unchanged 

trend  in  their  developments  over  the  last  years, decreases.  In  particular,  the  market  share 

of  the  Community  producer  amounts  to  6.3%  in  the  investigation  period.  This  apparently 

low  level  is  explained  by  the  fact  that  the  importer  mentioned  above  (recitals  14 and  15) 

accounts  for  approximately  75% of  the Community  consumption  of  furfuraldehyde  and as 

also  explained  above  most  of  the  furfuraldehyde  from  the  third  country  is  imported  under 

special  conditions,  so  that  these  imports  constitute  a  market  segment  separate  from  that 

served  by  Ihe Community  producer. 

3. 

Market  shares  on  the  dumped  imports 

(18)  When  furfuraldehyde  imports  from  the  third  country  are  included,  the  dumped  imports 

from  China  show,  in  volume  terms  between  1989  and  the  investigation  period,  a  stronger 

decrease  (31.7%)  than  that  of  the  total  Community  consumption  (23.7%).  This  situation 

reflects  the  fact  that  between  1989  and  1992  the  market  share  of  imports  from  the  third 

country  referred  to  in  recital  (14)  increased;  between  1992  and  the  investigation  period 

this  trend  however,  was  reversed  and  the  market  share  of  the  Chinese  imports  increased 

from  13.7%  to  15.2%.  Furthermore,  it  should  be  noted  that  the  imports  from  China 

represent  more  than  double  of  Ihe  sales  volume  of  the Community  producer  and  are  by  far 

Ihe  largest  in  volume  after  those  from  the third  country  in question. 

4. 

Price of dumped  imports 

(19)  As  explained  in  recital  28  of  the  provisional  Regulation  import  prices  of  furfuraldehyde 

originating  in  China  were  found  to  undercut  the  prices  of  the  Community  producer  by 

24.4%  and  to  have  dropped  by  more  than  30%  during  the  investigation  period.  This 

calculation  was  based  on  the  CI F prices  paid  to Chinese  exporters  by  the  importers  which 

co-operated.  Sinochem,  without  contesting  this  calculation  argued  that  the  Commission 

has  wrongly  included  in  its  injury  calculation  the  resales  of  furfuraldehyde,  allegedly 

made  by  the  importer  purchasing  primarily  in  the  third  country.  This  argument  is 

incorrect. 

(20)  As  no  other  argument  was  brought  forward  concerning  the  prices  of  dumped  imports,  the 

findings  in  recital  (28) of the  provisional  Regulation  are  confirmed. 

5. 

Situation  of the Community  Industry 

(21)  No  further  argument  concerning  injury,  in  particular  on  the  situation  of  the  Community 

industry,  has  been  received.  In  particular  the  financial  losses  incurred  by  the  Community 

producer  have  not  been  contested  by  the  Chinese  exporters.  The  findings  of  recitals  (29), 

(30) and  (32)  to (35) are, therefore,  confirmed. 

6. 

Conclusions  on  injury 

(22) 

In conclusion,  the  injury  findings  in recital  36 of the  provisional  Regulation  are  confirmed, 

in  view,  in  particular,  of  the  heavy  financial  losses  suffered  by the Community  producer  as 

a consequence  of the strong decrease of  furfuraldehyde  prices on  the Community  market. 

F. 

CAUSATION 

I. 

Effect  of the dumped  imports 

(23)  As  no argument  has  been  submitted,  the  provisional  findings  in  recital  (37), with  regard  to 

the effect  of Ihe dumped  imports, are  confirmed. 

2. 

Other  factors 

;24)  With  regard  to  causation  of  injury,  Sinochem  argued  that  the  Commission,  by  excluding 

imports  originating  in  the  third  country  in  question,  from  the  assessment  of  injury  had 

ignored  an  important  "other  factor"  causing  injury. 

It  alleges  that  these  imports,  which 

would  amount  to  more  than  four  times  the  volume  ol  imports  from  the  People's  Republic 

of  China,  were  made  available  to  the  importer  mentioned  above  (recitals  14  and  15)  at  a 

very  low  price. 

(25)  As  regards  the  imports  from  the  third  country,  they  have,  over  the  last  30  years  provided 

Ihe  major  proportion  of  the  furfuraldehyde  consumed  in  the  Community.  These  imports, 

however,  benefited  a single,  albeit  major  importer,  which,  for  the  reason  explained  above 

(recitals  14  and  15)  did  almost  no  business  with  the  Community  producer.  Despite  that 

situation  Ihe  Community  producer  was  able  to  maintain  its  prices,  its  market  share  and 

remained  largely  profitable  until  1991. 

Il  was  only  starting  from  1992  when  the  price  for 

furfuraldehyde  imported  from  China  dropped  abruptly,  that  the  Community  producer  was 

compelled  to  cut  its  domestic  sales  prices  and  follow  this  downward  trend  in  order  to 

preserve  ils  market  share.  Under  these  conditions,  it  can  be  excluded  that  the  imports 

from  the  third  country  in  question  are  the  cause  of  its  precarious  situation.  Regarding 

resales  of  furfuraldehyde 

imported  by  that 

importer  and  the  possible  effect  of  such 

transactions  on  the  price  level  in  ihe  Community,  the  Commission  established  that  this 

importer,  in addition  to  furfuraldehyde  from  the third  country  referred  to  in recital  (9),  also 

bought  Chinese  furfuraldehyde  and  that  a  certain  quantity  of  the  imported  material  was 

resold  in  the  Community.  The  prices  of  these  resales,  however,  were  significantly  and 

consistently  higher  than  those  of  Ihe  Chinese  exports  and  did  not  undercut  those  charged 

by  the Community  producer.  The  Council  concludes  therefore  that  these  resales  cannot  be 

considered  a factor  which  eliminates  the  injurious  effect  of the Chinese  exports. 

10 

(26)  As  no  other  argument  has  been  submitted  on  this  issue  and  since  the  changes  in  the  market 

share 

figures  do  not  alter  the  trends  in  market  developments,  the  conclusions  in  recitals 

( 3 8)  to  (11 ) of  the  provisional  Regulation  are  c o n f i r m ed  and  it  is  therefore  maintained  that 

Ihe  l ow  priced  imports  from  the  People's  Republic  of  C h i na  w h i ch  brought  about  a  serious 

price  depression  starting  in  1992,  have,  taken 

in 

isolation,  caused  the  material 

i n j u ry 

suffered  by  the  C o m m u n i ty  industry. 

<;. 

C O M M U N I TY 

I N T E R E ST 

( 2 7)  Some  interested  parlies  argue  that  the  C o m m u n i ty  producer  does  not  have  the  capacity  to 

supply  Ihe  C o m m u n i ty  market.  Furthermore,  an  importer  of  furfuraldehyde  w h i ch  was  set 

up  at  the  b e g i n n i ng  of  1994  w i th  Ihe  aim  of  p r o d u c i ng  f u r f u r il  a l c o h o l,  argued  that  the 

a n t i - d u m p i ng  duty  on  furfuraldehyde  imports  from  China  w o u ld  make  the  p r o d u c t i on  of 

f u r f u r il  alcohol  unprofitable  for  itself  as  il  cannot  rely  on  an  agreement  of  an  exclusive  and 

cheap  supply  of  furfuraldehyde  from  the  third  country  in  question,  as  the  other 

importer 

processor  is  able  to  do. 

( 2 8)  The  C o u n c il 

is  aware  I hat  the  C o m m u n i ty 

is  not  self-sufficient 

in  f u r f u r a l d e h y d e,  but 

t a k i ng  into  account  Ihe  number  of  suppliers  from  third  countries,  it  can  be  expected  that  no 

supply  shortage  w i ll  occur  and  price  c o m p e t i t i on  w i ll  continue 

to  be  considerable. 

Furthermore,  the  C o u n c il  points  out  Ihal  al  Ihe  l i me  when  the  new  processing  c o m p a ny 

was  sel  up  in  January  1994  the  present  a n t i d u m p i ng  proceeding  had  already  been  initiated 

f o l l o w i ng  Ihe  note  published  on  31  July,  1993.  T h is  fact  should  have  been  k n o wn  by  the 

c o m p a ny 

in  question,  w h i ch  should  have 

taken 

into  account 

the  p o s s i b i l i ty 

that  an 

a n t i d u m p i ng  duty  might  be  levied  on  its  principal  raw  material  as  a  proceeding  had  already 

been  initiated. 

In  a d d i t i o n,  the  disadvantage  for  the  importer/processor  in  question  has  to 

be  viewed  against  (he  background  of  the  threat  ol  the  disappearance  of  the  sole  producer 

of  furfuraldehyde  still  operating  in  the  C o m m u n i t y.  T h is  C o m m u n i ty  producer  is  m a i n ly 

oriented 

to 

Ihe  o il 

r e f i n i ng 

industry  market 

for  w h i ch  a  sale  and 

t i m e ly  supply  of 

furfuraldehyde  can  be  considered  of  strategic  importance.  Finally  should  this  c o m p a ny  be 

shut  d o w n,  at  leasl  80  employees  w i ll  become  redundant  in  an  area  w i th  one  of  the  highest 

u n e m p l o y m e nt  rates  in  the  C o m m u n i t y. 

No  other  arguments  were  made  w i th  respect  to  C o m m u n i ty 

interest. 

It  can  therefore  be 

considered  as  sel  oui  in  recitals  (12)  lo  (49)  of  the  provisional  Regulation  Ihal  it  is  in  Ihe 

(  ' o i n m u n i ly  inleicsl  lo  impose  d e f i n i t i ve  a n t i - d u m p i ng  measures  lo  eliminate  Ihe  injurious 

effects  of  d u m p ed  imports. 

I I. 

U N D E R I A K L N C; 

( 2 9) 

Sinochem  has  proposed  a  price  underlakiiig  coupled  w i th  a  c o m m i t m e nt  not  lo  exceed  a 

m a x i m um  quantity  of  export  of  furfuraldehyde.  A c c e p t i ng  such  an  undertaking  w o u ld 

i m p ly  granting  i n d i v i d u al  treatment  lo  Sinochem.  However,  S i n o c h e m,  as  a  state-owned 

company,  does  not  meet 

Ihe  requirements 

to  be  granted 

i n d i v i d u al 

treatment 

for  a 

company  in  a  non-market  economy.  Furthermore,  a  number  of  violations  of  undertakings 

by  Chinese  exporters  have  taken  place  in  recent  years. 

In  particular,  Sinochem  itself  has 

previously  breached  an  underlakiiig.  The  offer  of  an  undertaking  is  therefore  rejected. 

I. 

D U TY 

(  W)  Provisional  measures  consisted  of  an  a n t i - d u m p i ng  duty  in  the  form  ol  a  specific  amount 

per  tonne.  T h is  was  imposed  al  the  i n j u ry  e l i m i n a t i on  level  determined,  since  this  was 

lower  than  the  d u m p i ng  margin  established,  as  set  out  in  recital  (51)  of  the  p r o v i s i o n al 

Regulation. 

No  new  arguments  were  put  forward  lo  contradict  this  approach.  The  relevant 

findings  as 

expressed  in  recitals  (21 )  and  (50)  of  the  provisional  Regulation  are  therefore  c o n f i r m e d. 

A c c o r d i n g ly  Ihe  amount  of  Ihe  d e f i n i t i ve  a n t i - d u m p i ng  duty  should  be  the  same  as  the 

amount  ol  the  provisional  duty. 

12 

.1. 

(  Ol ,LEC  1l( )N  ( )E  11 IE  P l« ) V I S I ON A I,  DUTY 

(31 ) 

In  view  of  Ihe  dumping  margin  established  and  of  the  seriousness  ol  the  injury  caused  to 

Ihe ( 'ommunily  industry,  it  is considered  necessary  that  the amounts  secured  by  way  of  the 

provisional  anti-dumping  duty  should  be definitively  collected, 

HAS  A D O P I I I)  THIS  R I X i U L A T I O N: 

Article  1 

1. 

A  definitive  anti-dumping  duly  is  hereby  imposed  on  imports  ol  furfuraldehyde  falling 

within  CN  code 2932  12 00 and originating  in  the  People's  Republic  of  China. 

2. 

The  rate of  the duly  applicable  is \X'\\  352  per  tonne. 

3. 

I Inless otherwise  specified, the  provisions  in  force  concerning  customs  duties  shall  apply. 

Article 2 

The  amounts  secured  by  way  of  Ihe  provisional  anti-dumping  duty  pursuant  to  Regulation 

(F,C)  N"  1783/94  shall  be definitively  collected  in  full. 

Article 3 

This  Regulation  shall  enter  into  force  on  Ihe  day  following  its  publication  in  the  Official 

Journal  of  the  Furopean  Communities. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all  Member 

Slates. 

Done al  Brussels, 

ISSN 0254-1475 

COM (94) 683 final 

DOCUMENTS 

EN 

11 02 

Catalogue number : CB-CO-94-709-EN-C 

ISBN 92-77-84559-7 

Office for Official Publicanons of the European Communities 

L-2985 Luxembourg 

Mj>