Commission Regulation (EC) No 2997/95 of 20 December 1995 imposing a provisional anti-dumping duty on imports of unwrought magnesium originating in Russia and Ukraine
Date: 1995-12-20
Institutions: European Commission
Subjects: Russia, Ukraine, anti-dumping legislation, import, magnesium, originating product













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31995R2997

Commission Regulation (EC) No 2997/95 of 20 December 1995 imposing a provisional anti-dumping duty on imports of unwrought magnesium originating in Russia and Ukraine  


Official Journal L 312 , 23/12/1995 P. 0037 - 0049 





COMMISSION REGULATION (EC) No 2997/95 of 20 December 1995 imposing a provisional anti-dumping duty  on imports of unwrought magnesium originating in Russia and UkraineTHE COMMISSION  OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 3283/94 of 22 December 1994 on protection against  dumped imports from countries not members of the European Community  (1), as last amended by  Regulation (EC) No 1251/95  (2), and in particular Article 23 thereof, Having regard to Council Regulation (EEC) No 2423/88 of 11 July 1988 on protection against dumped  or subsidized imports from countries not members of the European Economic Community  (3), as last  amended by Regulation (EC) No 552/94  (4) and in particular Article 11 thereof, After consulting the Advisory Committee, Whereas: I.  PROCEDURE (1)  On 15 January 1994, the Commission nounced by a notice published in the  Official Journal of the European Communities (5), the initiation of an anti-dumping proceeding  concerning imports into the Community of unwrought magnesium originating in Kazakhstan, Russia and  Ukraine, and commenced an investigation. (2)  The proceeding was initiated as a result of a complaint lodged by the Comité de Liaison des  Industries de Ferro-Alliages on behalf of a producer in the Community, namely Péchiney  Electrometallurgie, France ('PEM`). After the closure of the magnesium production of Societa Italiana per il magnesio e leghe di  magnesio SPA ('SAIM`), in Bolzano, Italy, at the beginning of 1992, PEM is allegedly the only  producer of unwrought magnesium remaining operational in the Community. (3)  The complaint contained evidence of dumping of the product originating in the countries  indicated above, and of material injury resulting therefrom; this evidence was considered  sufficient to justify opening a proceeding. (4)  The Commission officially advised the producers, exporters and importers known to be  concerned, the representatives of the exporting countries, and the complainants, and gave the  parties directly concerned the opportunity to make their views known in writing and to request a  hearing. A number of producers in the countries concerned and several importers made their views known in  writing. Several parties requested a hearing. (5)  The Commission sent questionnaires to parties known to be concerned and received detailed  information from the complaining Community producer, from one Kazakh producer, from two Russian  producers, from two Ukrainian producers and from three independent importers located in the  Community. (6)  The Commission sought and verified all information it deemed necessary for the purposes of a  preliminary determination and carried out investigations at the premises of the following: (a)  complaining Community producer: -  PEM; (b)  producer located in the analogue country: -  Hydro Magnesium, Porsgrunn, Norway; (c)  independent importers in the Community: -  Ayrton & Partners, London, UK, -  Deutsche Erz- und Metall-Union GmbH, Hannover, Germany, -  Sassoon Metals & Chemicals, Brussels, Belgium. (7)  The investigation of dumping covered the period from 1 January 1993 to 31 December 1993 ('the  investigation period`). (8)  Owing to problems arising in the establishment of normal value based on the situation in an  analogue country, the investigation has exceeded the normal time period of one year. II.  PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT (9)  The product covered by the complaint and  the notice of initiation is unwrought magnesium. Unwrought magnesium is marketed in different  degrees of purity that is, as alloyed magnesium with an additional content of aluminium and zinc,  up to purer forms containing minor quantities of impurities. Unwrought magnesium falls within CN  codes 8104  11  00 and 8104  19  00. (10)  There are two main types of process used in the production of magnesium: -  the thermic process, and -  the electrolytic process. In both of these processes, a variety of raw materials can be used, e.g. dolomite, carnallite, sea  water or a mixture of these in order to produce unwrought magnesium. The differences in the raw  material used and in the production process used have no effect on the physical characteristics or  uses of the finished products. Unwrought magnesium is generally sold in ingots. The weight of these ingots can vary from a few  hundred grams to hundreds of kilograms. (11)  Unwrought magnesium is mainly used, in decreasing order of importance, in -  production of aluminium as an alloy element (for such a use unwrought magnesium can be used  either in pure or alloyed form), -  structural applications (for such a use unwrought magnesium can be used either in pure or  alloyed form), -  desulphurization of blast-furnace castings, -  chemical reduction, or -  spheroidal casting processes. (12)  Despite certain differences in composition and physical appearance, the various kinds of  unwrought magnesium have the same use, are to a great extent interchangeable and thus compete with  each other and cannot be differentiated. (13)  It has been concluded on the basis of the investigation that all unwrought magnesium produced  and exported originating in Kazakhstan, Russia and Ukraine falls, in general, into the category of  unwrought magnesium as described above. It was found that the unwrought magnesium exported to the Community from the exporting countries  has basic technical characteristics and uses identical or similar unwrought magnesium produced and  sold in the Community and is, therefore, a like product. (14)  As to whether unwrought magnesium sold on the domestic market forms a like product with the  unwrought magnesium exported to the Community from the exporting countries or sold in the Community  by the Community industry, the investigation confirmed that the unwrought magnesium sold on the  domestic analogue market (see recital 20) constituted a like product with the unwrought magnesium  sold by the Community industry. This conclusion was reached despite certain differences in the  shape and impurities of the unwrought magnesium sold on the two markets because, overall, the  unwrought magnesium was identical or similar in physical characteristics, marketing and use to the  unwrought magnesium produced and sold by the Community industry. (15)  Accordingly, the Commission considers that unwrought magnesium produced and sold in the  Community constitutes a 'like product` within the meaning of Article 2 (12) of Regulation (EEC) No  2423/88 (hereinafter referred to as the Basic Regulation), relative to the product sold in the  analogue country and the product exported to the Community from the countries under investigation. III.  DUMPING A.  Kazakhstan (16)  As far as exports from Kazakhstan are concerned, the  Commission has established on the basis of Community Eurostat statistics that imports from that  country were made in quantities representing a Community market share of substantially less than 1   %. At the same time, the producer located in Kazakhstan which cooperated in the anti-dumping  proceeding has submitted information indicating that it did not sell any unwrought magnesium for  export to the Community. Furthermore, the Commission collected information in the framework of the  present anti-dumping proceeding indicating that the producer had substantially reduced its  production of unwrought magnesium due to the general economic situation prevailing in that country.  On this basis, and despite contradictory information concerning export quantities provided by this  producer and import statistics, the Commission considers the imports originating in Kazakhstan as  de minimis. Consequently and in conformity with usual Community practice no dumping calculation was  made with regard to imports of magnesium originating in that country. B.  Russia and Ukraine 1.  Normal value (17)  Since neither Russia nor Ukraine are regarded as market economy countries for the purposes of  the present anti-dumping proceeding, the normal values to be compared with the respective export  prices were established by the Commission on the basis of the normal value established for an  analogue country having a market economy in accordance with Article 2 (5) on the Basic Regulation. (18)  As an analogue country, the complainant had suggested Japan and had claimed that it was a  reasonable choice since the domestic market had a representative size as compared to the exports  allegedly being dumped. Furthermore, the complainant claimed that prices and costs on the Japanese  markets were the results of normal market forces, as the Japanese market for this product could be  considered open to imports and competitive. However, the Commission had requested the complainant  to provide additional information on alternative analogue countries, as it was considered that  Japan was not comparable to Russia and the Ukraine with respect to the access to raw materials and  the technology used for the production of unwrought magnesium and consequently did not appear to be  an appropriate choice. (19)  As alternatives, the notice published upon initiation of the proceeding mentioned Canada and  the United States of America. The Commission requested information from all known producers located in the above alternative  analogue countries. Despite it having established contact with one producer located in the USA, the  producer ultimately decided not to cooperate in the present proceeding. One producer located in Canada was willing to cooperate in the proceeding. However, the volume of  its domestic sales transactions was not considered representative if compared to the exports from  the countries concerned and, furthermore, the production process used by this producer differed  considerably from the production process used by the producers located in the exporting countries  concerned. Consequently, neither Canada nor the USA could be chosen as appropriate analogue  countries. (20)  Following the initiation of the proceeding, the Commission also considered a fourth producing  country, Norway. Although Norway was not explicitly mentioned in the notice of initiation as a  possible analogue country, the Commission took the view that on the basis of general industrial  information available that country appeared to serve as a further alternative. The sole known Norwegian producer agreed to cooperate in the present investigation. On the basis of  an analysis of the various aspects concerned in the choice of an analogue country, such as  comparability of access to raw materials and production technology as well as the size of the  domestic sales operations, the Commission determined that Norway was an appropriate analogue  country at the provisional stage. With regard to the analysis conducted, it should be noted that, worldwide, there is only a limited  number of magnesium producers, with the consequence that all producers and their respective  production processes and production technologies are known within the industry. The choice of Norway, as analogue country is supported by the following factors: -  there is a substantial domestic market for the product concerned, -  the volume of this market is representative as compared to the export quantities originating in  Russia or the Ukraine, representing substantially more than 5  % of these exports, -  there are significant imports of unwrought magnesium from third countries into Norway with the  consequence that there is a competitive environment in this market, -  the producer concerned in Norway is of considerable size and has a high efficient production  process at all stages of production and has continuously invested in this production over the  years, -  the basic production technology used by the domestic producer is comparable to the one used in  Russia and the Ukraine, and -  the situation with respect to access to raw materials in Norway is very similar, if not more  advantageous, as compared to the situation in Russia and the Ukraine, in that the main raw material  (dolomite and sea water) is sourced in Norway, where there is also a significant supply of electric  energy from low-cost sources. The production plant is well located with respect to the transport of  both raw material and finished product. As stated in recital 14 there were minor differences in the shape and impurity-content of the  magnesium produced in Norway as compared with the magnesium exported from the exporting countries  concerned; nevertheless, in view of the above considerations, the Commission considers it  appropriate on balance to take Norway as the analogue country for the two exporting countries  concerned in this specific anti-dumping investigation. (21)  The use of the same analogue country for both exporting countries is justified by the fact  that the production plants in Russia and the Ukraine were set up during the existence of the USSR  and still operate using the same production technology. This has been confirmed by the information  submitted. (22)  In order to establish the normal value, the Commission first established whether the total  domestic sales of unwrought magnesium by the Norwegian producer were representative for the  purposes of the exports to the Community from each of the exporting countries. This assessment revealed that the Norwegian producer had in both cases a domestic sales volume  substantially in excess of 5  % of the export sales concerned. (23)  The Commission further assessed whether this producer's domestic sales overall were made in  the ordinary course of trade - that is, if they were made at a profitable level and at arm's-length  conditions. It was established that the producer concerned had not made profitable sales of the product  concerned in sufficient quantities during the investigation period on the domestic market. Consequently, the normal value was constructed in accordance with Article 2 (3) (b) (ii) of the  Basic Regulation, based on the producer's costs incurred in the ordinary course of trade - namely  this producer's variable and fixed manufacturing costs, to which an amount for selling,  administrative and other general expenses as well as a reasonable profit (was added). The  investigation showed, that the company had operated at a substantially reduced production level  during the investigation period as a result of a deterioration of market conditions after the  exporting countries concerned in the present anti-dumping proceeding had substantially increased  their exports to the Norwegian market as well. Therefore, and in order to determine the company's  cost of production as incurred in the ordinary course of trade, the Commission adjusted the  company's cost of production. (24)  Since as explained above, the company concerned had no profitable sales in sufficient  quantities, being the only magnesium producer operating in Norway, and as no data were available  for the same business sector, the Commission had to determine the relevant profit rate on 'any  reasonable basis` in accordance with Article 2 (3) (b) (ii) of the Basic Regulation. For the  reasons explained in recital 76, the Commission considered that a profit margin of 5  % was  appropriate and reflected the profitability requirements in light of the continuing investment  needs. 2.  Export price (a)  General (25)  One particular characteristic of the unwrought magnesium trade in general during the  investigation period was that the harbour of Rotterdam served as a hub for world trade and, in  particular, the Community market. The investigation has shown that a number of purchasers, in  particular traders, buy the product from a bonded warehouse in Rotterdam or put the product into  bonded warehouses there after having purchased it on an FOB-exporting country basis. Depending on market demand, these purchasers then sell the product to their customers in, and  outside, the Community from the bonded warehouse. The producers and exporters of the exporting  countries concerned who have cooperated in the present proceeding have stated that on a number of  occasions they have sold to customers which were located in or outside the Community without  knowing the ultimate destination of the product they sold (see recital 30 to 33). (26)  Furthermore, it has been alleged by the exporters and producers located in the exporting  countries concerned that another peculiarity of the magnesium market during the investigation  period consisted in sales of unwrought magnesium coming from strategic stockpiles kept by the  authorities in the former USSR. After the dissolution of the USSR and the creation of a number of  independent states on its former territory, full central control over the strategic stockpile of  unwrought magensium ceased to exist and part of the stockpiled material was sold for export. It has  been further alleged by the same interested parties that sales of such magnesium were made at very  low prices as the material was often of inferior quality and as sales frequently occurred through  non traditional sales channels. However, sales of this type of magnesium into the Community were  marginal because the economic use of such magnesium was very limited in the Community. The  individual ingots of the stockpiled material were protected against oxidization with paraffin and  wrapping during stockage. Before such material can be used it has to be cleaned, a process which is  very labour intensive and costly in the Community. For this reason, none of the cooperating  importers had pruchased any such material. (27)  In order to determine the export prices from both Russia and Ukraine, the Commission took  account of the arguments put forward in particular by the exporters located in Russia and by the  Russian authorities. They claimed that in the present case any adverse effect on the Community  market caused by imports of unwrought magnesium coming from the stockpiles should be disregarded by  the Commission as such exports were presently again under control. Furthermore, those parties claimed that any past negative effects of exports of stockpile material  should not adversely affect the future prospects of the producers of unwrought magnesium located in  Russia which had not participated in such activity. In support of this claim the parties argued  that such exports had been made by persons not traditionally operating in the sector. Although the Commission is not able to assess the reliability of the above statement, in particular  because certain claims relate to developments having occurred after the investigation period, an  attempt to assess the particular impact, if any, of exports of unwrought magnesium taken from the  strategic stockpiles kept in former USSR has been made. On the basis of Eurostat import statistics,  an analysis of the flow of imports into the Community of unwrought magnesium from all countries  which are today situated on the territory of the former USSR has shown that imports were made into  the Community and declared as originating in countries which, according to information available,  do not have any production of the product concerned. The volume of these imports into the Community  amounted to around 1  000 tons at an average price of around 1  700 ECU/t. From the same source of  information it was determined that the average import prices of magnesium originating in either  Russia or Ukraine were substantially higher. The main exporting countries, accounting for more than 90  % of imports from non-producing  countries mentioned above during the investigation period were Estonia, Latvia and Lithuania. This  quantity represents about 11  % of total imports into the Community from countries on the territory  of the former USSR. There was, however, no indication that the said imports were wholly or  substantially made up of stockpile material, as the import volumes concerned were substantial,  whereas the use for such material in the Community as mentioned in recital 26 appeared very  limited. Given also that by far the greater part of those exports was declared as originating in  the three Baltic States through which the Russian producers have, according to the producers'  replies, also channeled part of their sales to the Community, it appeared possible that they were  exports of newly produced material merely trans-shipped through the non-producing countries. On the other hand, the information collected during the investigation confirmed that, in general,  the stockpiled magnesium attracted a price discount. In that respect the differential between  import prices of the non-producing countries mentioned above and the exporting countries concerned  by the present anti-dumping proceeding would indicate that material from non-producing countries  could be stockpile material. (28)  The Commission has provisionally concluded that exports declared as originating from  non-producing countries should not be taken into account in establishing export prices for the  exporting countries concerned. Given the low unit prices for such imports and their unclear origin,  it appears possible that the products concerned derive from the stockpile. As has been stated, the  level of stockpiled magnesium has been substantially reduced and, as such sales represented only a  temporary phenomenon, this approach was considered to be the most reasonable. (b)  Russia (29)  In order to assess exports of unwrought magnesium originating in Russia, the Commission  analysed information from Eurostat statistics and information supplied by the cooperating Russian  producers on exports made to the Community. This analysis revealed a substantial discrepancy  between the two sets of information: Eurostat information showed substantially higher import  volumes than the exports reported by the Russian producers. The Commission therefore assessed the  reasons for such a discrepancy. In particular, the Commission investigated whether exports of  magnesium from the strategic stockpile reserves could explain the discrepancy. As it had been  established with respect to stockpile material that such magnesium is typically sold at  considerably lower prices than newly produced magnesium (see recital 26) and as the Eurostat import  statistics contain export prices (around 1  900 ECU/t) close to the prices reported by the  cooperating Russian producers, the Commission did not consider it realistic to suppose that the  above discrepancy was due to imports of unwrought magnesium from stockpile. (30)  The Commission further noted that one Russian producer submitted information in the response  to the questionnaire indicating that it had sold a substantial quantity of the product concerned to  2 purchasers located outside the Community, such sales accounting for all its exports. While for  all these export transactions the related product shipments were made into bonded warehouse in  Rotterdam, this producer invoiced the corresponding sales transactions to purchasers located  outside the Community. In those circumstances the producer concerned had considered the sales not  to have been made for export to the Community and argued that the corresponding sales prices and  volumes should not be taken into account in the determination of the export price or in the  determination of export volume. From the information available, it can be concluded that both  purchasers in question are trading companies which do not process the merchandise themselves but  sell it on to other users; the producer declared, however, that he did not know the final  destination of the product sold to such companies. The Commission found, however, that one of the companies concerned (which is located in  Switzerland) was related to the Russian producer, so it appears justified to assume that the  producer did have knowledge of the ultimate destination of those export sales. As the volume of the  sales in question corresponds to the quantity by which the imports shown in the Eurostat statistics  exceed the volume of imports declared by the Russian exporters, the Commission treated the sales by  the Russian producer to the related company in Switzerland being made for export to the Community. (31)  In conclusion, the Commission considers it appropriate to determine the export prices and  volumes on the basis of all the export transactions reported by one of the Russian producers and on  the basis of the sales transactions reported by the other producer as having been made to its  related company located in Switzerland. (c)  Ukraine (32)  One Ukrainian producer argued that: -  it had sold magnesium to purchasers in the Community but claimed that for a substantial part of  the sales it had not been known whether the product concerned had acutally been imported into the  Community; and that, -  it had exported a substantial volume of magnesium to a purchaser located in a country outside  the Community, claiming that the sales should not be considered exports to the Community as they  were sold for export to a third country and as the producer had no control over the destination of  the product concerned. (33)  In order to investigate the 2 claims put forward by this producer, the Commission examined  the Eurostat import statistics for magnesium originating in the Ukraine. The import volume of  around 3  000 tons during the investigation period was considerably higher than the sales volume  which the Ukrainian exporters overall have submitted as being exported to customers for consumption  in the Community. Furthermore, the Commission determined on the basis of the information submitted by the Ukrainian  producer concerned regarding its sales to the customer in a third country mentioned above, that  although the goods had been invoiced to a thirdcountry company, the actual shipment of the goods  was made by the Ukrainian producer to end-user customers located in the Community. This indicated  clearly that the Ukrainian producer was aware of the destination of the product concerned. From the  information submitted by importers which cooperated in the framework of the investigation it was  possible to confirm the above findings. From the above, the Commission concluded that although the Ukrainian producer concerned sold  substantial quantities of magnesium via a thrid country company, it had been fully aware at the  time of sale that the sales were destined for export to the Community. The same conclusions apply to this producer's sales to customers located in the Community for which  it was claimed that the producer did not know the final destination of the product. In these circumstances, the Commission determined the export volume and prices of this Ukrainian  producer by considering all sales transactions for which the shipping address was a customer  located in the Community as export sales to the Community. In this way the discrepancy between the  data submitted by the Ukrainian producers and Eurostat figures became negligible, indicating that  the approach taken reflects the actual export transactions for unwrought magnesium originating in  Ukraine to the Community. (d)  Methodology (34)  As all exports were made to independent importers in the EC, export prices were determined on  the basis of the prices actually paid or payable as reported by the cooperating producers located  in the exporting countries. Where possible, those export prices were cross-checked with information  received from cooperating importers. 3.  Comparison (35)  A number of producers in the exporting countries claimed that the normal value established on  the basis of a situation prevailing in an analogue country should be adjusted to take into account  natural comparative advantages prevailling in the exporting countries in accordance with consistent  Community practice. While such claims have been granted in appropriate cases, it is clear that such natural comparative  advantages cannot include advantages either in costs or prices by the non-market economy country  companies. Indeed, in the framework of the present anti-dumping proceeding neither Russia nor  Ukraine are considered to be market economy countries because neither domestic prices nor costs can  form a reliable basis for the determination of the normal value given the structure of the  respective domestic markets. (36)  On this basis a number of claims put forward by the exporters concerned cannot be accepted,  as such claims relate to certain cost advantages, in particular with respect to -  production labour costs, -  depreciation costs, -  environmental costs, -  selling expenses, and -  raw material cost. (37)  As far as specific natural comparative advantages are concerned the producers have claimed  that they benefit from advantages in: -  access to raw materials, -  energy efficiency of the production process, and -  l their level of support staff working in the companies concerned. As a general comment on the above claims it should be noted that the producers concerned have put  forward a number of claims without supplying the necessary detailed quantitative information in  support of them. Two companies in particular have declined to disclose the exact level of their  production on the grounds that this information was secret. Without such information however, the  Commission considers it impossible to assess any advantages stemming from the size of the  production. Furthermore, two producers submitted information relating to a period which did not  coincide with the investigative period. (38)  Nevertheless, the Commission has analysed the situation of the producers located in the  exporting countries taking into account also information compiled by industry analysts that is  publicly available. This analysis led to the following conclusions: -  Unlike the Community producer, which produces magnesium using the thermic production process,  which the producers in the exporting countries have claimed to be energy inefficient, the producer  in the analogue country uses an electrolytic production process. The same production process is  used by the producers in the exporting countries. Thus, cost advantages stemming from this  production process are automatically taken into account for the benefit of the exporters  concerned. -  Whereas the producers in the exporting countries use carnalite as their main feed stock for  magnesium production, the analogue country producer uses dolomite and sea water. As far as the  production process is concerned, on the basis of the technical information submitted during the  present investigation, there is no clear efficiency advantage in the use of either as a raw  material. As far as access to the raw material is concerned, the analogue country producer is  supplied in dolomite from an open-cast mine located in the analogue country. The other source of  feed stock, sea water, is readily available for the producer concerned as its production plant is  on the sea shore. Any disadvantage in the use of dolomite is offset by the particularly easy access  to sea water. -  As regards the energy efficiency of the production process in the analogue country as compared  to the exporting countries, the Commission established, on the basis of the information submitted  by the analogue country producer and by the producers in the exporting countries, that there was no  disadvantage to the analogue country producer. On the contrary, it appeared that this producer  operated a highly energy-efficient production process. It has to be recalled in this context that  the analogue country producer uses the same basic production technology as the producers in the  exporting country, namely the electrolytic process which is considered more energy efficient than  the alternative basic process. (39)  In conclusion, the Commission finds that the various claims put forward by the producers in  the exporting countries concerning specific natural comparative advantages have not been  substantiated. Therefore, the Commission does not consider it justified to make any adjustment in  determining the normal values concerned. (40)  The export prices as established above were adjusted by taking into consideration the actual  transport, insurance, handling, loading and ancillary costs in accordance with Article 2  (9) and  (10) of the Basic Regulation in order to establish the export prices at the ex-country frontier  level, that is, at the same level as the normal value. Certain exporting producers claimed that they did not make their export sales at the same level of  trade as the analogue country producer made its domestic sales. The exporting producers claimed in  particular that they made their sales to unrelated traders located in the Community whereas the  analogue country producer sold its unwrought magnesium to end users. Any differences have been taken into account in accordance with Article 2  (9) and (10) in  constructing the normal value for the analogue country producer at distributor level. 4.  Dumping margin (41)  The comparison between export price and normal value revealed that the ex-factory prices of  all export transactions for the producers were below normal value, dumping being equal to the  amounts by which the normal value exceeded the export price. Those amounts were aggregated for all  export transactions and the total dumping, expressed as a percentage of the total cif EC border  value, is as follows: >TABLE> IV.  INJURY A.  Volume of the Community market (42)  According to the information supplied in  the case of the present anti-dumping proceeding concerning sales of unwrought magnesium on the  Community market and import statistics, total Community consumption of unwrought magnesium measured  in metric tons shows the following pattern over 4 years: >TABLE> B.  Cumulation of the imports originating in the countries concerned (43)  Following the  consistent practice of the Community institutions, the Commission examined whether the effect of  the imports of unwrought magnesium from the two countries concerned with regard to the Community  industry should be analysed cumulatively according to the following criteria: -  absolute and relative level of imports from the exporting countries concerned during the  investigation period -  comparability of the products imported in terms of physical characteristics and  interchangeability of end use, and -  similarity of market behaviour. (44)  As far as imports from the two exporting countries in the investigation period are concerned,  for each country individually these were made in non-negligible quantities relative to the size of  the Community market, as imports from Russia and Ukraine reached a market share of around 13  % and  7  % respectively. Furthermore, the investigation revealed that the prices of the imports originating in the two  countries were at a low level when compared to those of the Community industry. Finally, the investigation confirmed that the unwrought magnesium originating in the countries  concerned is a like product when compared to the unwrought magnesium sold by the Community  industry, as established in recital 14. (45)  Therefore, the Commission considers that, in accordance with the normal practice of the  Community institutions, the imports concerned should be cumulated. C.  Volume and Community market shares of the dumped imports (46)  Based on the assessment made  in recitals 26 and 33 concerning the various import channels, the volume of dumped imports of  unwrought magnesium originating in Russia and Ukraine into the Community, measured in metric tons  show a significant increase from around 2  000 metric tons in 1991 to around 6  000 metric tons in  1992; ultimately rising to around 9  000 metric tons in the investigation period, an increase of 50   % since 1992 alone. On the basis of the total apparent Community consumption, this development corresponds to a rise in  market share held by dumped imports from 4  % in 1991 to 11  % in 1992 and to 20  % in the  investigation period. (47)  The Commission considers the increase in total sales volumes and market share with such a  short time to be an important element in the evaluation of the impact of these imports on the  Community magnesium industry. D.  Prices of the dumped imports (48)  The prices of unwrought magnesium imported from Russia and  Ukraine were at a consistently low level and undercut those of the Community industry by a  substantial margin. A detailed evaluation of the export prices charged during the period of  investigation as compared to prices charged by the Community producer at a comparable level of  trade, and taking into account, where appropriate, differences in the quality of the products,  revealed that the undercutting margins were between 30  % and 40  %. Such a comparison was done on  the baisi of detailed transaction-by-transaction sales reports by the Russian and Ukrainian  exporters and producers and the Community producer. An assessment of the price development over a longer time span, from 1990 to 1993, was not possible  on the basis of the data provided by the exporters concerned. An estimate made on the basis of data  from EUROSTAT import statistics for 1990 and 1991 (using information relating to the USSR) and on  the data provided by the exporters concerned for 1992 and 1993 showed the following trend for  export prices in ECU per metric ton of unwrought magnesium, taking the 1990 price as a baseline: >TABLE> E.  Situation of the Community industry (49)  The total yearly output of the Community producer  has dropped continuously since 1990, showing a particularly strong decrease from 1992 to the  investigation period of 25,1  %, from 74  % to 56  % of the 1990 level. (50)  Furthermore, in line with production, the yearly sales volume of the Community producers to  unrelated customers in the Community has also decreased since 1990. For the period from 1991 to  1992 the decrease was 41,7  % and from 1992 to the investigation period 36,9  %, from 50 to 32  between 1992 and the investigation period on an indexed basis (base: 1990  =  100). (51)  Even though production decreased substantially, the sales of the Community industry were even  lower, with the result that the value of the Community industry's stocks rose from 1991 to 1992 by  129,1  % and a further 1,2  % to the investigation period. (52)  The decrease in sales volume resulted in a fall in market share of the Community producer  from 17  % in 1991 to 9  % in 1992 and ultimately to 7  % in the investigation period. (53)  Due to the closure of the production facilities of one company located in the Community, the  total production capacity of the Community industry was substantially reduced during the period  from 1990 to 1993, by around 30  %. Despite this reduction, the capacity utilization of the sole remaining Community producer  decreased. (54)  The closure of one Community producer and the cuts in production made by the other Community  producer in the face of the substantial increases in imports have resulted in a substantial loss of  employment. Indeed, between 1990 and 1993, the employment level in the industry more than halved. (55)  The prices of the Community industry measured in index form have evolved in the following way  since 1990: >TABLE> The above development of prices shows the attempt by the Community industry to reduce its financial  losses after prices substantially decreased in 1991 and 1992 as compared with 1990. The price  increase in 1993 led, however, to a further reduction in sales. (56)  The substantially reduced production and sales volume, the decrease in capacity utilization  and the increase in the volume of product held in stock led to significant losses by the Community  producers throughout the period from 1990 to the investigation period despite its efforts to reduce  costs by a substantial reduction in employment, despite its attempt to improve its situation by  increasing prices from 1992 to 1993 and despite certain technical adjustments made in order to  improve the efficiency of the production process. This negative development in profitability has  now reached a stage where the overall viability of the remaining producer is in danger. That being so, it is concluded that the Community industry has been suffering material injury  within the meaning of Article 4  (1) of the Basic Regulation. V.  CAUSATION OF INJURY A.  Effect of the dumped imports (57)  The rapid increase of dumped  imports of unwrought magnesium originating in Russia and the Ukraine over a short time at prices  which undercut those Community producers' prices substantially, coincides with the deterioration of  the situation of the Community industry, in particular through the decrease of its market share and  the depression of Community magnesium market prices between 1991 and the investigation period. (58)  Since magnesium is a commodity, its market is price sensitive and, consequently, price  undercutting by certain vendors has generally, depressing effect on the market. When faced with low  priced imports originating in the exporting countries concerned, the Community industry had the  choice of maintaining its prices and losing sales, or of following the low prices of dumped imports  regardless of the consequences for its profitability. The price trend of the Community industry in  recital 55 shows that the industry did attempt to follow prices down in the years 1991 and 1992,  resulting in a considerable loss of revenue. During the investigation period, the Community  industry raised its prices in an attempt to improve its financial situation after it had carried  out a restructuring programme but continued to incur heavy losses as a consequence of a drop in  sales volume. It appears noteworthy that the sales prices of the Community industry during the  investigation period for its sales to customers outside the Community were considerably higher.  This price differential indicates that market prices in the Community were particularly depressed. (59)  The Russian producers have argued that no injury could have been caused to the Community  industry by their sales to the Community as the Community industry sold to different segments of  the magnesium market and consequently direct competition between the Community industry and the  Russian producers was very limited. (60)  In this context the Commission notes that there are distinct uses of magnesium as outlined in  recital 11. However, as concluded in this recital, unwrought magnesium used in its various  applications cannot be distinguished. Furthermore, the investigation has shown that the magnesium exported by the producers located in  Russia and the Ukraine is of standard quality and is sold by the importers to clients operating in  the same industry sectors as those of the Community industry. (61)  In particular the Russian exporters have argued that the complainant company, PEM, as part of  a group of companies, supplies unwrought magnesium to other members of the group, with the  consequence that for these sales it is insulated from competition due to imports from the two  exporting countries concerned. (62)  With regard to this argument, it should be noted that all assessments of sales made in the  present investigation relate to the situation in the Community industry with respect to its sales  to unrelated customers. Given the extent of injury suffered by the Community industry in its sales  to unrelated customers alone, which accounted for about half its sales, it was not deemed necessary  to address the question whether or not sales transactions with companies belonging to the group  were at arm's length. (63)  In any event it should be emphasized that, the market for unwrought magnesium being highly  transparent, the impact of imports representing a considerable market share made at low prices  undercutting those of the Community industry by a significant margin must be substantial on prices  obtained in the market as a whole. B.  Other factors (64)  The Commission considered whether factors other than the dumped imports  concerned, namely imports from other countries, the behaviour of the Community industry itself, the  development of the Community market concerned or any other factors could have caused the injury  suffered by the Community industry. (65)  As was stated in recital 42, the Community market for unwrought magnesium was characterized  by volatility caused by a general downturn in the demand resulting in the overall contraction of  the market. While this general contraction in demand could be expected to have an influence on the Community  industry's actual production and sales volume, the negative development of the Community industry's  market share in particular shows a trend that cannot be explained by a mere contraction in demand.  As far as price movements are concerned, the price disparity outline in recital 58 indicates that  the price depression in the Community market was particularly strong. (66)  The producers located in Russia have argued that the injurious situation of the Community  industry was entirely due to a cyclical downturn in the magnesium market. These exporters concluded  that the injury cannot have been caused by exports originating in Russia. (67)  In this context, the Commission notes that while such downturn certainly contributed to the  difficulties experienced by the Community industry, the difficulties were greatly exacerbated by  the effects the dumped imports had on the Community magnesium market. (68)  Imports of unwrought magnesium from countries producing magnesium other than in Russia and  Ukraine have entered the Community in the period from 1990 to the investigation period. The  development of these imports, measured in metric tons by country, is summarized in the table  below: >TABLE> These imports represent the following market shares: >TABLE> The figures show that overall imports from other countries have decreased, with the result that the  market share held by other imports has also decreased overall. This also applies to individual  countries with the exception of imports originating in Canada. However, import statistics show that  the increase in Canadian imports is far less pronounced than that of imports originating in Russia  and the Ukraine, while the market share reached by Canada is relatively moderate and its import  prices are substantially higher than those of the exporters under investigation. Finally, no  indications were available to the Commission to suggest that imports originating in Canada were  made at dumped prices. Therefore, the Commission concluded that imports from other countries could not be the cause for  the injury sustained by the Community industry. C.  Conclusion (69)  The Commission has come to the conclusion that high volume, low-priced  dumped imports of unwrought magnesium originating in Russia and the Ukraine, taken in isolation,  have caused material injury to the Community industry. At the same time it has also been  established that the Community industry has faced negative trends, owing to a downturn in the  market for unwrought magnesium, triggered by a general downturn in the magnesium-using industries.  However, the Commission notes that this does not alter the conclusion that dumped imports from the  exporting countries have caused material injury to the Community industry. VI.  COMMUNITY INTEREST (70)  The purpose of anti-dumping measures is to remedy an unfair trading  practice which has an injurious effect on a Community industry. Such a remedy should result in the  re-establishment of effective competition which, as such, is in the interest of the Community. (71)  In the framework of the investigation it has been established that the Community industry is  facing an injurious situation in the form of loss of sales and market share, decrease in production  and a reduction in employment, which together have led to substantial financial losses. Without  remedial action, the viability of the Community industry would be threatened, a consequence which  has already been foreshadowed by termination of the production of one Community producer. (72)  The Russian producers have argued that the production capacity of the remaining Community  producer was insufficient to supply the Community market and that therefore imports are necessary  to satisfy the demand for unwrought magnesium in the Community. Furthermore, the Russian exporters and Russian government representatives have claimed that the  imposition of anti-dumping measures in the present proceeding would not be in the interest of the  Community because it would reduce the competition on the Community market, in which only one  producer is operating presently. Those interested Russian parties have claimed that such a  situation was particularly likely to occur in the present market situation which after a downturn  in the period of 1991 to the investigation period, is characterized by strong demand, while a  number of producers wolrdwide have either already closed production or plan to do so, with the  consequence of widening the shortfall between worldwide demand and supply of unwrought magnesium. (73)  With respect to the competitive situation in the Community market, the Commission considered  whether the adoption of anti-dumping measures might lead to a situation in which effective  competition might be significantly reduced. First of all, it appears unjustified to conclude that  the imposition of anti-dumping measures would have the consequence of eliminating Russian and  Ukrainian exporters from the Community market: other exporters who are not dumping are present on  the market. Furthermore, the magnesium market of the Community has traditionally been supplied to a  considerable extent by imports from third countries, notably from Norway and the USA. During the  period starting at the beginning of 1991 up to the end of the investigation period a shift has  occurred between exporting countries towards imports originating in the two exporting countries  covered by the present investigation. It can reasonably be assumed that the imposition of anti-dumping measures restoring fair trade  conditions will not lead to a situation of reduced competition by allowing the Community industry  to increase its market position unduly. It can, on the contrary, be expected that traditional  suppliers located in exporting countries other than those subject to the present anti-dumping  proceeding may start again or increase their exports to the Community market. While indeed  production was cut in Japan, in the former Yugoslavia, in the Community and in the USA, a producer  in Canada has started substantial production in recent years and it is planned to put into  operation an entirely new production plant in Israel in 1996. Consequently, the Commission came to  the conclusion that it does not appear to be realistic to foresee acute supply shortages in the  market for unwrought magnesium nor in a reduction in the number of competitors. This conclusion is  underlined by the fact that the main customer of the suppliers of unwrought magnesium industry, an  industry made up of companies with a considerable negotiating power that can match that of the  producers of unwrought magnesium. (74)  As far as the users of unwrought magnesium are concerned, none of them has submitted  information to the Commission relating to the effect of anti-dumping measures on their situation.  Nevertheless, it can be assumed that they may have benefited in the short term from the low prices  of dumped imports. However, it must also be borne in mind that unwrought magnesium in its main  applications, namely as an alloy element in aluminium production and in the desulphurization of  blast-furnace castings, accounts only for a relatively small percentage of total production costs,  which points to the conclusion that the effect, if any, of imposing anti-dumping measures in this  proceeding on the users will be very limited. On balance, the Commission does not consider therefore that the possible limited gain of the users,  if the current situation is maintained, is sufficient to deny the Community industry protection  against unfairly priced imports of unwrought magnesium. (75)  In conclusion, the Commission has established that it is in the interest of the Community to  ensure the continued viability of the sole Community producer and consequently to impose  anti-dumping measures. VII.  PROVISIONAL DUTY (76)  On the basis of the conclusions on dumping, injury, causation and  Community interst set out above, the Commission considered the form and level anti-dumping measures  should take in order to restore effective conditions of competition on the Community's unwrought  magnesium market. Accordingly, the level of prices was calculated at which the Community industry would be able to  cover its costs and to obtain a reasonable return. In determining the cost of production, the  Commission excluded certain costs incurred by the Community producer as a result of its  restructuring efforts. This approach was considered reasonable as it ensured that costs not likely  to recur in the future were not included in the target price. The Commission was satisfied that the  Community producer, for its internal business and profitably projections left such extraordinary  cost items out of account. With respect to a reasonable level for profit, the Commission used a  rate of 5  % on turnover, a rate considered by the Community industry to be a strict minimum  necessary to ensure the continuation of its operations. The Commission considers that this target  profit is sufficient given the mature nature of the product requiring only modest investment in  research and development as well as production equipment. (77)  On this basis, and taking account of the Community industry's cost of production, a minimum  import price was calculated which would permit the Community industry to raise its prices to a  profitable level. Since it was established that the resulting injury elimination margin is higher  than the dumping of both exporting countries concerned, the level of the duty should be limited to  the dumping margin in accordance with Article 13  (3) of the Basic Regulation. Given the material injury suffered by the Community industry, the homogeneous nature of the product  and the possible price fluctuations resulting from demand for downstream products, a variable duty  is considered the most appropriate in this case. This will enable the Russian and Ukrainian  exporters to maximize their returns while at the same time ensuring that injurious dumping would be  eliminated. In these circumstances, the Commission has decided to improve a variable duty based on a minimum  price of ECU 2  735 and ECU 2  701 per ton at a cif Community border level for imports of unwrought  magnesium originating in Russia and the Ukraine respectively. (78)  In the interests of sound administration, a period should be fixed which the parties  concerned may make their views known and request a hearing. Furthermore, it should be noted that  all findings made for the purpose of this Regulation are provisional and may be reconsidered for  the purpose of any definitive duty which the Commission may propose, HAS ADOPTED THIS REGULATION: Article 1 1.  A provisional anti-dumping duty is hereby imposed on imports of  unwrought magnesium falling within CN codes 8104  11  00 and 8104  19  00 and originating in Russia  and the Ukraine. 2.  For the product referred to in paragraph 1 originating in Russia, the amount of anti-dumping  duty shall be the difference between the minimum import price of ECU 2  735 per metric tonne of  product and the cif Community frontier price in all cases where the cif Community frontier price  per metric ton of product is less than the minimum import price. 3.  For the product referred to in paragraph 1 originating in the Ukraine, the amount of  anti-dumping duty shall be the difference between the minimum import price of ECU 2  701 per metric  ton of product and the cif Community frontier price in all cases where the cif Community frontier  price per metric ton product is less than the minimum import price. 4.  Unless otherwise specified, the provisions in force concerning customs duties shall apply. 5.  The release for free circulation in the Community of the products referred to in paragraph 1  shall be subject to the provision of a security, equivalent to the amount of the provisional duty. Article 2 Without prejudice to Article 7  (4)  (b) and (c) of Regulation (EEC) No 2423/88, the  parties concerned may make known their views in writing and apply to be heard orally within one  month of the date of the entry into force of this Regulation. 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 all  Member States. Done at Brussels, 20 December 1995. For the Commission Leon BRITTAN Vice-President (1)  OJ No L 349, 31. 12. 1994, p. 1.  (2)  OJ No L 122, 2. 6. 1995, p. 1.  (3)  OJ No L 209, 2. 8. 1988, p. 1.  (4)  OJ No L 66, 10. 3. 1994, p. 10.  (5)  OJ No C 11, 15. 1. 1994, p. 4.  (1)  OJ No L 349, 31. 12. 1994, p. 1.  (2)  OJ No L 122, 2. 6. 1995, p. 1.  (3)  OJ No L 209, 2. 8. 1988, p. 1.  (4)  OJ No L 66, 10. 3. 1994, p. 10.  (5)  OJ No C 11, 15. 1. 1994, p. 4.  (1)  OJ No L 349, 31. 12. 1994, p. 1.  (2)  OJ No L 122, 2. 6. 1995, p. 1.  (3)  OJ No L 209, 2. 8. 1988, p. 1.  (4)  OJ No L 66, 10. 3. 1994, p. 10.  (5)  OJ No C 11, 15. 1. 1994, p. 4.