Commission Regulation (EC) No 1827/2001 of 17 September 2001 imposing a provisional anti-dumping duty on imports of certain zinc oxides originating in the People's Republic of China
Date: 2001-09-17
Institutions: European Commission
Subjects: China, anti-dumping duty, import, originating product, oxide, zinc

18.9.2001

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Official Journal of the European Communities

L 248/17

COMMISSION REGULATION (EC) No 1827/2001

of 17 September 2001

imposing a provisional anti-dumping duty on imports of certain zinc oxides originating in the
People's Republic of China

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 384/96 of 22
December 1995 on protection against dumped imports from
countries not members of the European Community (1), as last
amended by Regulation (EC) No 2238/2000 (2), and in partic-
ular Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

(1)

(2)

(3)

(4)

A. PROCEDURE

On 20 December 2000 the Commission announced by
a notice (‘notice of initiation’) published in the Official
Journal of the European Communities (3) the initiation of an
anti-dumping proceeding with regard to imports into
the Community of certain zinc oxides originating in the
People's Republic of China (‘PRC’).

The proceeding was initiated as a result of a complaint
lodged in November 2000 by the European Association
of Metals (‘Eurometaux’) on behalf of Asturiana de Zinc
SA, Co.ge.fin. SpA, Elementis Pigments, Grillo Zinkoxid
GmbH, Metaleurop GmbH and Union Minière Zinc
Chemicals (‘the complainant Community producers’),
together representing a major proportion, in the current
case 75 %, of the Community production of certain zinc
oxides. The complaint contained evidence of dumping of
the said product and of material injury resulting there-
from, which was considered sufficient
to justify the
initiation of an anti-dumping proceeding.

the representatives of

The Commission officially advised the exporting produ-
cers and importers/traders known to be concerned as
well as their associations,
the
exporting country concerned, users, suppliers and the
complainant Community producers, of the initiation of
the proceeding. Interested parties were given the oppor-
tunity to make their views known in writing and to
request a hearing within the time limit set in the notice
of initiation.

in the country
A number of exporting producers
concerned,
producers,
as
as well
Community users and importers/traders made their
views known in writing. All parties who so requested

Community

(1) OJ L 56, 6.3.1996, p. 1.
(2) OJ L 257, 11.10.2000, p. 2.
(3) OJ C 366, 20.12.2000, p. 7.

(5)

(6)

within the above time limit and showed that there were
particular
reasons why they should be heard were
granted the opportunity to be heard.

The Commission sent questionnaires
to all parties
known to be concerned and to all the other companies
that made themselves known within the deadlines set
out in the notice of initiation. Replies were received
from the six complainant Community producers, five
exporting producers in the country concerned as well as
from six importers in the Community which were not
related to exporting producers. The Commission also
received replies from 13 users, five suppliers and two
users' associations. Six other producers of zinc oxide in
involved in the
the Community, which were not
complaint, also provided the Commission with some
general

information on their activities.

In order to allow exporting producers in the PRC to
submit a claim for market economy treatment (‘MET’) or
individual treatment if they so wished, the Commission
sent to Chinese companies known to be concerned a
market economy status and an individual
treatment
claim form. No other companies made themselves
known within the deadlines set out in the notice of
initiation. Five companies requested MET pursuant to
Article 2(7)(b) of Regulation (EC) No 384/96 (‘the basic
Regulation’) or individual treatment should the invest-
igation establish that they did not meet the conditions
for MET.

(7)

The Commission sought and verified all the information
it deemed necessary for the purpose of a determination
of dumping, injury and Community interest. Verification
visits were carried out at the premises of the following
companies:

(a) E x p o r t i n g p r o d u c e r s i n t h e P R C

— Liuzhou Nonferrous Metals Smelting Co. Ltd,

Liuzhou

— Liuzhou Fuxin Chemical

Industry Co. Ltd,

Liuzhou

— Gredmann Guigang Chemical Ltd, Guigang

— Liuzhou Zinc Products Co. Ltd, Liuzhou

— Liuzhou Longcheng Chemical General Plant,

Liuzhou

(b) A n a l o g u e c o u n t r y

— United

States of America: US Zinc Co.

Millington, Tennessee

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Official Journal of the European Communities

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(c) C o m m u n i t y p r o d u c e r s

— Asturiana de Zinc SA, Madrid, Spain

— Co.ge.fin SpA, Bellusco, Italy

— Elementis Pigments, Durham, United Kingdom

— Grillo Zinkoxid GmbH, Goslar, Germany

— Metaleurop GmbH, Goslar, Germany

— Union Minière, Angleur, Belgium

(d) U n r e l a t e d i m p o r t e r s i n t h e C o m m u n i t y

— Almiberia SA, San Antonio de Benageber, Spain

(e) U s e r s

— Esmalglass SA, Villarreal-Onda, Spain.

(8)

The investigation of dumping and injury covered the
period from 1 January 2000 to 31 December 2000 (‘IP’).
The examination of trends relevant for the assessment of
injury covered the period from 1 January 1996 to the
end of the IP (‘analysis period’).

B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

(9)

scope of

therefore outside

The product concerned is zinc oxide (chemical formula:
ZnO) with a purity in net weight of not less than 93 %
zinc oxide. It is currently classifiable within CN code
ex 2817 00 00 (TARIC code 2817 00 00*10). It should
be noted that technical zinc oxide and feed grade zinc
oxide have a zinc oxide content of less than 93 % and
are
the product
the
concerned. In addition, technical and feed grade zinc
oxide differ from the product concerned in terms of
both zinc content and appearance. Technical zinc oxide
is a greyish to brownish powder whereas feed grade zinc
oxide is a yellow brownish material. The product
itself commercialised as a fine white
concerned is
powder. These three types of zinc oxide have different
chemical properties and thus end uses they do not
compete with each other, furthermore technical and feed
grade zinc oxide are significantly less expensive.
It
should be noted that zinc peroxide (ZnO2)
is a
completely different product: it does not have the same
chemical characteristics and is considerably more expen-
sive than zinc oxide.

(10)

Zinc oxide has a wide range of applications including,
amongst others, the rubber, chemical, paint, ceramic and
pharmaceutical

industries.

(11) A number of interested parties argued that there existed
different grades of the product concerned and that these
constituted different products and as such should be
treated separately for the purposes of the investigation.
This contention was rejected and it was determined that

all grades of the product concerned should be consid-
ered as a single product for the following reasons:

— all grades have the same basic chemical characteris-
they share the same basic chemical

tics in that
composition (ZnO),

— they share the same physical characteristics in that
zinc oxide is normally presented as a white powder
and any further processing, such as granulation does
not change the product's basic physical characteris-
tics,

— grades are defined in terms of purity of zinc oxide
content and impurities (such as lead and cadmium).
There are, however no precise definition or standard
norms for the definition of various grades. Each
producer has its own classification system which
supports their marketing effort and serves to differ-
entiate their products from those of their competi-
tors, but nevertheless, there are overlaps between
grades offered in these various classifications,

— there is a significant degree of

interchangeability
between the grades as regards their end-use. This
interchangeability can depend as much on the nature
of any impurities in the product concerned as it can
on the purity of the product in terms of its zinc
oxide content. It was found, for example, that the
purity of the zinc oxide used in the ceramic industry
ranged between 98 % and 99,5 %, but that a more
pure product could also be used.
is therefore
concluded that a significant degree of competition
and overlap exists between different grades of zinc
oxide with a purity in net weight of not less than
93 % and that as such all grades should be consid-
ered as a single product.

It

2. Like product

(12)

(13)

Comments made by a number of users of the product
concerned show clearly that imports originating in the
PRC are perfect substitutable for zinc oxide purchased
from the Community industry, since they share the same
physical and chemical characteristics.

is a like product

The Commission therefore established that zinc oxide
produced by the Community producers and sold on the
Community market
to zinc oxide
produced in the PRC and exported to the Community as
well as that produced and sold domestically in the
analogue country, since there are no differences in the
basic characteristics and uses. The same is true with
regard to zinc oxide produced by the Chinese producers
which received MET and that sold on their domestic
market.

(14)

Therefore, these products are alike within the meaning
of Article 1(4) of the basic Regulation.

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C. DUMPING

(22)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

1. Market economy treatment

Pursuant to Article 2(7)(b) of the basic Regulation, in
anti-dumping investigations concerning imports origin-
ating in the PRC, normal value shall be determined in
accordance with paragraphs 1 to 6 of the said Article for
those producers which were found to meet the criteria
laid down in Article 2(7)(c), i.e. where it is shown that
market economy conditions prevail
in respect of the
manufacture and sale of the product concerned.

Five Chinese companies requested MET pursuant
to
Article 2(7)(b) of the basic Regulation and replied to the
MET claim for exporting producers.

The Commission sought all information deemed neces-
sary and verified on the spot all information submitted
in the MET applications at the premises of the compa-
nies in question.

For three companies it was established that, overall, their
decisions regarding prices and costs were made without
significant state interference within the meaning of
Article 2(7)(c) and that costs and prices reflected market
values. These companies had accounts independently
audited in line with international accounting standards
and their production costs and financial situation was
not subject to significant distortions carried over from
the former non-market-economy system. Finally,
the
three companies were found to be subject to bankruptcy
and property laws which guaranteed legal certainty and
stability and exchange rate conversions were carried out
at the market rate. Consequently, it was concluded that
the following three companies fulfilled the conditions set
out in Article 2(7)(c) of the basic Regulation:

— Liuzhou Nonferrous Metals Smelting Co. Ltd,

— Liuzhou Fuxin Chemical Industry Co. Ltd,

— Gredmann Guigang Chemical Ltd.

state

interference

relating to and costs

For the other two companies it was found that there was
in business decisions,
significant
including decisions
for one
company and that the financial situation, especially costs
and accounts, were subject to significant distortions for
both of
two companies
concerned did not fulfil one or more of the conditions
set out in Article 2(7)(c) of the basic Regulation.

them. Consequently,

the

companies

The
complainant
Community producers were given an opportunity to
comment on the above findings.

concerned

and

the

findings,

The exporting producers not granted MET contested the
Commission's
regarding state
interference and distortion of
the financial situation.
However no new arguments were brought forward to
alter the MET determination.

in particular

The Community industry opposed the granting of MET
to the three Chinese companies. It argued that these
companies were operating in a macroeconomic environ-
ment where state intervention was the predominant
factor, that the State fixed the price of the zinc raw
in the
material, which was the main raw material
production of zinc oxide and that certain companies did
not apply all of the key international accounting princi-
ples.

(23)

In order to be granted MET, the companies concerned
had to show that market economy conditions prevailed
for their individual companies in respect of the manufac-
ture and sale of the like product. The three companies'
accounts had been audited in line with international
accounting standards. The Commission had not found
any indication of significant state interference in the
trading of zinc raw materials.

(24)

It was therefore decided to grant MET to three compa-
nies and to reject the MET claims for the other two. The
Advisory Committee was consulted and did not object
to the Commission's conclusions.

2. Individual treatment

(25)

(26)

In accordance with Article 9(5) of the basic Regulation,
it is the Commission's policy to calculate a countrywide
duty for countries falling under Article 2(7), except in
those cases where companies are either granted MET or
are able to demonstrate that their export activities are
determined by market forces and free from State inter-
ference. This would justify a departure from the deter-
mination of a single countrywide duty. In the latter case,
an individual dumping margin would be based on a
comparison of the company's own export prices with
the normal value for the analogue country.

The two Chinese companies, which were not granted
MET, also requested individual treatment. The Commis-
sion sought and verified all information deemed neces-
sary for the purposes of determining whether or not
these companies qualified for individual treatment. For
one of these companies, it was found that the export
prices and quantities and conditions and terms of sale
are freely determined, the exporter is free to repatriate
capital and profits and any state interference was not
such as to permit circumvention of the measures if that
exporter were granted an individual dumping margin.
For the second company,
it was found that the state
interference, in particular the degree of state ownership,
was such as to permit circumvention of the measures if
the company were granted an individual dumping
margin.

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(34)

The replies showed that:

— of the four known producers in Thailand, the sole
company willing to cooperate had a low production
volume and the Thai domestic market appeared to
be influenced by high import duties,

— of several domestic producers in Taiwan, the sole
company willing to cooperate had both a very low
production volume and a very low domestic sales
volume,

— the cooperating US producer had a significant
volume of production as well as a high domestic
sales volume.

(35)

Further analysis of the replies showed that the USA had
a highly competitive market for the product concerned
with eight Nafta producers operating on the US/Nafta
market, a high number of end users in both the rubber
and ceramic sectors, significant
imports from third
countries and no import duties. Moreover, both produc-
tion methods, the indirect, or French process, and the
direct, or American, process, are used in the PRC and
the USA and give the same range of grades of purity of
zinc oxide. The cost
in the USA could be
items
compared to those in the PRC. The arguments on differ-
ences in costs between the PRC and the USA, like envir-
onmental compliance costs,
labour costs, etc, were
without proper basis and therefore found not to be
relevant. USA's domestic sales were also representative
as compared to Chinese export sales of the product
concerned to the Community.

(36)

In view of the above it was concluded that the USA was
the most appropriate and reasonable analogue country
in accordance with Article 2(7) of the basic Regulation.

(27)

It was therefore considered justified to grant individual
to Liuzhou Longcheng Chemical General
treatment
Plant, and to its related company Yinli
Import and
Export Co. Ltd and to reject individual treatment for the
other company concerned, namely Liuzhou Zinc Prod-
ucts Co. Ltd.

3. Normal value

Determination of normal value for exporting producers
not granted MET

Selection of the analogue country

(28) According to Article 2(7) of the basic Regulation, for
non-market-economy countries and for companies to
which MET could not be granted, normal value has to
be established on the basis of the price or constructed
value in an analogue country.

In the notice of initiation, the Commission indicated its
intention to use the United States of America (‘USA’) as
an appropriate analogue country for the purpose of
establishing normal value for the PRC.

The exporting producers in the PRC objected to this
proposal. The main arguments against the USA were:
differences
in the level of economic development
between Asia and the USA; the oligopolistic position of
zinc oxide producers on the US market which was
alleged to lead to artificially high prices; differences in
end-uses, as the rubber industry is the major US market
for
to the
Community seem to be used primarily in the ceramic
industry; furthermore, it was claimed that the cost struc-
ture in the USA could not be compared with that in the
PRC, where labour costs, environmental compliance
costs, etc. are lower than in the USA.

zinc oxide whereas Chinese

exports

(29)

(30)

(31)

(32)

The interested parties in question suggested South Korea,
Malaysia, Indonesia, Taiwan, or Thailand as an appro-
priate analogue country but did not substantiate their
proposals.

The Commission sent a request for information on sales
and market conditions to all known producers of the
product concerned in the six market economy countries
suggested above. Replies were
received from one
producer in Taiwan, one in Thailand and one in the
USA. None of the producers in Indonesia, South Korea
or Malaysia replied to the request for information.

(37)

(38)

(33)

The Commission subsequently sent a more detailed
questionnaire to the producers in the USA, Taiwan and
Thailand requesting information on domestic sales prices
and costs of production for the product concerned.

Determination of normal value in the analogue country

to Article 2(7)(a) of

Pursuant
the basic Regulation,
normal value for the exporting producers not granted
MET was established on the basis of verified information
received from the producer in the analogue country, i.e.
on the basis of
the prices paid or payable on the
domestic market of the USA for products comparable to
those sold by the Chinese exporting producers to the
Community.

The Commission examined whether sales of the product
concerned in the USA were made in the ordinary course
of trade. With regard to costs of production, the verifica-
tion showed that the cost of the main raw material was
based on the London Metal Exchange (‘LME’) quotations
which provide reference prices
the world-wide
pricing of activities relating to non-ferrous metals, in this
case zinc materials and related zinc products.

for

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(39) As domestic sales by the USA producer concerned were
made in the ordinary course of trade, normal value was
the weighted average
established on the basis of
domestic
to unrelated
customers by the cooperating USA producer in accord-
ance with Article 2(4) of the basic Regulation.

sales prices of zinc oxide

irrespective of whether these sales were profitable or
not. In all other cases normal value was based on the
actual domestic price calculated as a weighted average of
profitable sales only, provided these sales represented
10 % or more of the total sales volume.

Determination of normal value for exporting producers
granted MET

(40)

The companies granted MET were requested to submit a
full questionnaire reply including domestic sales infor-
mation and information on costs of production of the
product concerned and these replies were verified at the
premises of the companies concerned.

(41) As

far as

the determination of normal value

is
concerned, the Commission first established, for each
exporting producer granted MET, whether
total
domestic sales of zinc oxide were representative in
comparison with its
to the
total
Community. In accordance with Article 2(2) of the basic
Regulation domestic sales were considered representative
when the total domestic sales volume of each exporting
producer was at least 5 % of its total export sales volume
to the Community.

export

sales

its

(42)

(43)

The Commission subsequently identified those grades of
zinc oxide, sold domestically by the companies having
representative domestic sales,
that were identical or
directly comparable with the grades sold for export to
the Community.

For each grade sold by the exporting producers on their
found to be directly
domestic market which was
comparable with the grade sold for export
to the
Community it was established whether domestic sales
were sufficiently representative for
the purposes of
Article 2(2) of the basic Regulation. Domestic sales of a
particular grade of zinc oxide were considered suffi-
ciently representative when the total domestic sales
volume of that grade during the IP represented 5 % or
more of the total sales volume of the comparable grade
of zinc oxide exported to the Community.

(44) An examination was also made as to whether the
domestic sales of each grade could be regarded as having
been made in the ordinary course of trade by estab-
lishing the proportion of profitable sales to independent
customers of the grade in question. In cases where the
sales volume of zinc oxide, sold at a net sales price equal
to or above the calculated cost of production, repre-
sented 80 % or more of the total sales volume, and
where the weighted average price of that grade was
equal to or above the cost of production (‘profitable
sales’), normal value was based on the weighted average
of the prices of all domestic sales made during the IP

(45)

(46)

(47)

In cases where the volume of profitable sales of any
grade of zinc oxide represented less than 10 % of the
total sales volume, it was considered that this particular
grade was sold in insufficient quantities for the domestic
price to provide an appropriate basis for the establish-
ment of the normal value.

In establishing the profitability of the three companies
concerned the Commission's investigation revealed that
the purchase prices of the basic zinc raw materials for
the production of zinc oxide appeared to be below
market prices. This finding was based on a comparison
between actual prices paid by the three companies and
zinc quotations on the LME, generally recognised in the
metals trade as an accurate reference for establishing
prices.

For all three companies granted MET it was found that,
after adjusting their costs for zinc raw materials in
accordance with the LME quotations,
their domestic
sales appeared not to be made in the ordinary course of
trade.
It was consequently not possible to use the
the three exporters and
domestic prices of any of
recourse had to be made to constructed normal value.
Normal value was constructed for the three companies
in accordance with Article 2(3) of the basic Regulation.
Costs for zinc raw materials were corrected in line with
LME quotations. Domestic sales, general and adminis-
trative expenses reported by the exporting producers,
where considered to be reliable, were applied without
any adjustment. For the reasons noted above, none of
the methods set out in the chapeau and in subpara-
graphs (a) and (b) of Article 2(6) of the basic Regulation
could be used as domestic sales appeared not to be
made in the ordinary course of trade and none of the
companies concerned recorded a profit after adjustments
had been made to their zinc raw material costs in
accordance with the LME quotation. Therefore, profit
was provisionally established by reference to the produ-
cer's profit in the analogue country, which, pursuant to
Article 2(6)(c) of the basic Regulation, was considered to
be the most reasonable approach in the circumstances.

4. Export prices

(48) All export sales to the Community were made directly to
independent
in the Community and the
export price was established pursuant to Article 2(8) of
the basic Regulation by reference to the prices actually
paid or payable.

importers

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5. Comparison

For all other exporting producers

(49)

(50)

(51)

(52)

For one company in the PRC sales to the Community
were made through a related company in Hong Kong.
This company carried out the functions of a trader and
an adjustment was made to the export price from this
company in Hong Kong by deducting a commission
from the export price to take account of the functions
performed by it.

The comparison was made on an ex-factory basis and at
the same level of trade. In order to ensure a fair compar-
ison, account was taken,
in accordance with Article
2(10) of the basic Regulation, of differences in factors
which were claimed and demonstrated to affect prices
and price comparability. On this basis, allowances for
differences in transport, insurance, handling, loading and
ancillary costs, credit, commissions, import charges and
after sales costs (warranty/guarantee, etc.) were made.

(54)

(55)

6. Dumping margin

the
For
MET/IT

cooperating exporting producers granted

For the three companies granted MET, the weighted
the product
average normal value of each grade of
concerned exported to the Community was compared
with the weighted average export price of the corre-
sponding grade of the product concerned, as provided
for under Article 2(11) of the basic Regulation.

the company granted individual

For
the
weighted average normal value for each grade exported
to the Community established for the analogue country
was compared with the weighted average export price of
the corresponding grade exported to the Community, as
provided for under Article 2(11) of the basic Regulation.

treatment,

In order to calculate the countrywide duty applicable to
all other exporters in the PRC, the Commission first
established the level of cooperation. A comparison was
made between the
the product
concerned originating in the PRC calculated on the basis
of Eurostat and the actual questionnaire replies received
from exporters in the PRC. On this basis it was estab-
lished that the level of cooperation was 65 %.

imports of

total

the

The dumping margin was consequently calculated as a
weighted average of the dumping margin established for
the sole remaining cooperating exporter which was
neither granted MET nor IT and the dumping margin
calculated on the basis of Article 18 of the basic Regula-
tion for
remaining unknown exporters. The
dumping margin for the sole remaining cooperating
exporter mentioned above was calculated by comparing
the weighted average normal value established for the
analogue country and the weighted average export price
reported by the exporter concerned. The dumping
margin for the unknown exporters was established as
the difference between the weighted average normal
value established in the analogue country and the
weighted average export price for the most dumped
the abovementioned company. The
transactions of
resulting dumping margin was applied to the volume
(extracted from Eurostat) exported by the unknown
Chinese producers. It was considered that non-cooper-
ating producers did not dump at a lower level and that
there should be no bonus for non-cooperating.

(56) On this basis the countrywide level of dumping was
provisionally established at 69,8 % of the cif Community
frontier price.

D. COMMUNITY INDUSTRY

(53)

The provisional weighted average dumping margins
expressed as a percentage of the cif Community frontier
price duty unpaid are:

1. Community production

Liuzhou Nonferrous Metals Smelting Co. Ltd

16,9

Liuzhou Fuxin Chemical Industry Co. Ltd

17,8

Gredmann Guigang Chemical Ltd

Liuzhou Longcheng Chemical Plant

24,7

64,5

(%)

(57)

Zinc oxide is manufactured in the Community by the
following companies:

— six complainant producers who cooperated in the
investigation and are the largest producers of zinc
oxide in the Community,

— six

smaller

non-complainant

producers who
provided some general information on their activities
to the Commission but did not cooperate in the
investigation. Of these six producers, five supported
the complaint and one took no position,

— Nine other small non-complainant producers who
neither cooperated in the investigation nor expressed
an opinion.

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L 248/23

(58)

The zinc oxide produced by all these companies therefore constitutes the Community production
within the meaning of Article 4(1) of the basic Regulation.

2. Definition of the Community industry

(59)

The six cooperating complainant Community producers fulfil the requirements of Article 5(4) of the
basic Regulation, since they account for around 75 % of the total Community production of zinc
oxide. They are therefore deemed to constitute the Community industry within the meaning of
Article 4(1) of the same Regulation and will hereinafter be referred to as ‘the Community industry’.

E. INJURY

1. Preliminary remarks

Import data

(60)

Import figures were established using Eurostat information. The CN heading under which the
product concerned is currently classified, also includes feed grade zinc oxide and zinc peroxide.
Evidence given in the complaint shows that only negligible quantities of such products are imported.
Therefore no specific adjustment was made to estimate total

imports.

LME zinc metal quotation and its importance to zinc oxide

(61)

The Commission established during the investigation that for all operators subject to normal market
conditions, the quotation for zinc metal on the LME plays a fundamental role in determining the
prices of both raw materials and end product. The LME quotation serves as a recognised reference
point to which the zinc content of any item, be it zinc concentrate or zinc oxide, can be related.
During the analysis period the LME evolved as described below. In 1997, the activities of speculators
on the zinc market resulted in a price peak. The quotation is made in US dollars with the result that
the price rise between 1999 and 2000 is magnified by the depreciation of the euro against the dollar.

LME flat yearly average

1996

807

1997

1 160

1998

914

1999

IP 2000

1 010

1 220

(EUR/tonne)

2. Community consumption

(62) Apparent consumption of zinc oxide in the Community was established on the basis of:

— the total

imports of the product concerned into the Community as reported by Eurostat,

— the total verified sales of the Community industry on the Community market,

— the sales data of the six other Community producers who provided some general information to

the Commission,

— and evidence contained in the complaint concerning the remaining other Community producers.

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(63)

Community consumption of zinc oxide reached approximately 257 000 tonnes during the IP. As
shown in the table below, it increased by 9 % over the analysis period mostly due to the develop-
ment of the use of zinc oxide in the ceramic industry.

Community consumption

1996

1997

1998

1999

IP 2000

Tonnes

236 415

244 446

256 989

248 250

257 058

1996 = 100

100

103

109

105

109

3. Imports from the PRC

Volume of dumped imports

(64)

The volume of the dumped imports originating in the PRC increased by nearly tenfold between 1996
and the IP from 4 459 tonnes to 47 367 tonnes. The most significant increase occurred in the IP
when the imports concerned were 2,5 times the level of the previous year.

(65)

The market share of the imports concerned reached 18,4 % during the IP compared to less than 2 %
at the start of the analysis period.

Imports from the PRC

1996

1997

1998

1999

IP 2000

Tonnes

4 459

10 081

15 892

19 070

47 367

1996 = 100

Market share (%)

100

1,9

226

4,1

356

6,2

428

7,7

1 062

18,4

Prices of dumped imports

Price evolution

(66)

The prices of the imports concerned increased by 23 % over the analysis period with significant
movements being recorded in 1997 when prices rose by 10 % as the price of zinc metal on the
world market reached record levels. Prices fell back in 1999, only to rebound strongly during the IP.

1996

715

100

1997

788

110

1998

796

111

1999

745

104

IP 2000

876

123

Cif prices

EUR/tonne

1996 = 100

Price undercutting

(67)

For the purposes of analysing price undercutting, weighted average sales prices to independent
customers of the Community industry per grade at an ex-works level were compared to the
corresponding weighted average export prices of Chinese exporting producers on the Community
market during the IP on a cif basis.

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Official Journal of the European Communities

L 248/25

(68)

Export prices of Chinese exporting producers were duly adjusted for customs duties and post-
importation costs. These adjustments have been made on the basis of information collected during
the investigation, notably from cooperating unrelated importers.

(69) On this basis, the price-undercutting margin, expressed as a percentage of the Community industry's
prices was found to be in the range of 6,0 to 13,7 % for those companies granted MET or IT, and
10,8 % on a weighted average basis.

4. Situation of the Community industry

Preliminary remarks

(70)

Community industry data were obtained from the verified questionnaire responses of the six
cooperating Community producers. Three of the six cooperating producers had several production
facilities producing zinc oxide, more often than not in different Member States of the Community. In
these cases, individual replies to the Commission's questionnaires were received from each plant and
verified by the Commission before being aggregated to give data for the Community industry as a
whole.

(71)

In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the
dumped imports on the Community industry included an evaluation of all economic factors and
indices having a bearing on the state of the industry.

Production, production capacity and capacity utilisation

(72)

The Community industry's production decreased by 6 % over the analysis period while the volume of
imports originating in the PRC increased by almost tenfold. Over the same period, the Community
industry increased its capacity by 2 % as a result of a relatively minor investment to meet the needs
of a particular customer. The capacity utilisation rate of the Community industry declined over the
period by six percentage points.

1996

1997

1998

1999

IP 2000

Production (tonnes)

169 028

169 001

172 142

165 048

159 184

1996 = 100

100

100

102

98

94

Capacity (tonnes)

216 961

216 961

221 961

221 961

221 961

1996 = 100

Capacity utilisation (%)

100

78

100

78

102

78

102

74

102

72

Stocks

(73)

Year-end stock levels decreased by 15 % over the analysis period but remained relatively stable when
expressed as a percentage of production.

1996

1997

1998

1999

IP 2000

Stocks (tonnes)

12 183

10 783

13 263

11 233

10 380

1996 = 100

100

89

109

92

85

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Sales volume, market share and growth

(74)

The sales made by the Community industry on the Community market during the analysis period
decreased by 8 % in volume terms, whilst Community consumption went up by 9 % during the same
period and imports concerned increased by more than tenfold.

1996

1997

1998

1999

IP 2000

Sales volume (tonnes)

153 962

157 439

157 647

151 332

141 619

1996 = 100

Market share (%)

100

65

102

64

102

61

98

61

92

55

(75)

Consequently, the Community industry's market share decreased by 10 percentage points over the
analysis period from 65 % of Community consumption in 1996 to 55 % during the IP. Thus, the
Community industry did not benefit from the growth in consumption on the Community market.

Sales prices and costs

(76) Over the analysis period the selling prices of the Community industry increased by 19 % while unit
costs increased by 31 %. The necessary price increases were therefore suppressed due to the massive
presence of low priced imports. Thus, the Community industry suffered price suppression over the
analysis period.

Average selling price deliv-
ered (EUR/tonne)

1996 = 100

Average cost of production
(EUR/tonne)

1996

1997

1998

1999

IP 2000

1 047

1 202

1 144

1 090

1 247

100

979

115

109

104

119

1 180

1 117

1 187

1 283

1996 = 100

100

121

114

121

131

Profitability

(77)

The Community industry's profitability expressed in terms of return on net sales on the Community
market fell sharply over the analysis period from a figure of + 8 % in 1996 to – 1 % in the IP.

Profitability

1996

1997

1998

1999

IP 2000

(%)

8

4

4

0

– 1

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Official Journal of the European Communities

L 248/27

(78)

(79)

(80)

(81)

Investments and ability to raise capital

The level of investments decreased over the analysis period from EUR 5,2 million in 1996 to
EUR 2,8 million in the IP. Approximately 86 % of expenditure over the analysis period was recorded
under the category of machinery, equipment and other items. The investigation showed that most of
this capital expenditure was spent on replacing or maintaining existing facilities.

It has been established that over the analysis period it became increasingly difficult
for the
Community industry to justify capital expenditure related to zinc oxide, especially for those plants
mostly dedicated to the supply of the ceramic industry. This resulted in the cancellation of a number
of investment programmes in the second half of the analysis period and in some cases, severe cut
backs in even routine maintenance programmes. Furthermore, the Community industry's ability to
raise capital from external providers of finance also became more difficult at this time as its
deteriorating financial situation raised concerns in some lenders' minds.

Investment

1996

1997

1998

1999

IP 2000

EUR

5 230 899

2 731 329

3 432 534

4 288 935

2 809 980

1996 = 100

100

52

66

82

54

Return on investments

In assessing the impact of the dumped imports on the Community industry's return on investments,
the Commission examined the pre-tax profit or loss on sales of zinc oxide compared to the assets
employed in the zinc oxide sector.

In a limited number of cases, it was found that certain assets were used both in the production of
zinc oxide and other products. The Commission satisfied itself that the method used to allocate
assets relating solely to zinc oxide were appropriate. The data and trends shown in the table below
demonstrate the considerable deterioration in its financial performance that occurred over the
analysis period.

Return on total assets

1996

12

1997

1998

7

3

1999

– 1

(%)

IP 2000

– 6

Cash flow

(82)

The following table clearly demonstrates the marked deterioration in the cash flow generated by the
Community industry's zinc oxide activities.

1996

1997

1998

1999

IP 2000

13 197

4 234

8 852

4 830

– 2 356

Net cash inflow (outflow)
from operating
activities
(thousand EUR)

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Employment, productivity and wages

(83)

The following table shows the number of employees in the zinc oxide activities of the Community
industry and the average total employment cost per employee (i.e. wage and social costs).

Number of employees

1996 = 100

Average employment cost
per
(thousand/
EUR)

employee

1996 = 100

Productivity (production in
tonnes per employee)

1996

551

100

40

100

307

1997

544

99

39

99

311

1998

532

97

42

104

325

1999

509

92

43

108

322

IP 2000

484

88

46

116

329

1996 = 100

100

101

106

105

107

(84)

(85)

The Community industry's number of employees at the end of the IP was 484. This represents a
decrease of 12 % over the analysis period with the rate of decline accelerating from 1998 onwards.
Productivity increased by 7 % over the analysis period.

The average wage per employee however rose by 16 %. Part of this increase can be attributed to
exchange rate movements between the euro and the pound sterling. Approximately 18 % of the
Community industry's workforce is located in the United Kingdom. Over the analysis period, the
euro depreciated against the pound by 25 %.

Magnitude of dumping

(86) Given the volume and the price of the dumped imports, the impact of the actual margins of

dumping, which are significant, cannot be considered negligible.

5. Conclusion on injury

(87)

(88)

Between 1996 and the IP, the volume of dumped imports of zinc oxide originating in the PRC
increased by 962 % from under 4 500 tonnes to over 47 000 tonnes. This resulted in an overall
increase in their market share of 16 percentage points. The prices of the imports concerned
remained below those of the Community industry throughout the analysis period with a weighted
average price undercutting of 10,8 %.

Between 1996 and the IP the situation of the Community industry deteriorated both in terms of
production (– 6 %) and sales volume (– 7 %) despite the increase in consumption. As a consequence,
the Community industry's market share fell from 65 % to 55 %, i.e. by 10 percentage points. This
decline was particularly significant between 1999 and the IP when imports originating in the PRC
were growing at their fastest rate. Over the analysis period, the Community industry's profitability
deteriorated and was negative during the IP. In the face of declining profitability, the Community
industry was compelled to reduce its costs in an attempt to remain competitive. Levels of both
employment and investment were cut back. Despite these efforts, costs rose rapidly because of the
increase of zinc prices while average selling prices were prevented from increasing commensurately
due to the presence of massive quantities of low priced dumped imports.

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L 248/29

(89)

In view of the above, as evidenced most notably by the decrease in production, sales and employ-
ment, loss of market share, price suppression and declining profitability, it is provisionally concluded
that the Community industry has suffered material injury within the meaning of Article 3 of the
basic Regulation.

F. CAUSATION OF INJURY

1. Introduction

(90)

In accordance with Article 3(6) and (7) of the basic Regulation, the Commission examined whether
the dumped imports originating in the country concerned have caused injury to the Community
industry to a degree that enables it to be classified as material. Known factors other than the dumped
imports, which could at the same time be injuring the Community industry, were also examined to
ensure that possible injury caused by these other factors was not attributed to the dumped imports.

2. Effect of the dumped imports

(91)

The substantial increase in the volume of imports originating in the country concerned and their
gain in market share over the analysis period, at prices which undercut those of the Community
industry coincided with a serious deterioration in the situation of the Community industry notably in
terms of production, sales volume, market share and profitability.

(92)

This deterioration was most marked between 1999 and the IP as the volume of the dumped imports
originating in the PRC increased by approximately 150 % to reach record levels.

(93)

The Community industry's prices have always been at a level to ensure that the cost of raw material
is covered by the selling price while the imports concerned have for extended periods been at levels
below the cost of the zinc metal they contain. However, from 1999 onwards the Community
industry's selling price has not been sufficient to cover the total costs of production and this resulted
in losses being incurred. The Commission found that the effect of the dumped imports had been to
suppress the selling prices of the Community industry and subsequently reduce its profitability.
Evidence obtained as part of the investigation supported the claim that the increased offer of imports
from the country concerned at dumped prices on the Community market had been used by some of
the Community industry's customers to drive down prices during contract negotiations.

(94)

It is therefore considered that the pressure exerted by the imports concerned, which significantly
increased their volume and market share from 1998 onwards and which were made at particularly
low prices, undercutting those of the Community industry, resulted in a deterioration of the situation
of the Community industry.

3. Effect of other factors

Imports originating in other third countries

(95) Over the analysis period, the volume of imports originating in other third countries declined by 18 %
from a level of approximately 23 000 tonnes in 1996 to 19 000 tonnes in the IP. These imports
therefore did not benefit from the growth of consumption recorded over the analysis period and
have lost 3 percentage points in market share, from 10 to 7 %.

(96) Of the above imports, only those originating in Turkey and Poland were at levels above 1 % of
Community consumption during the IP. The table below shows the development in both volume
and price of the imports originating in third countries other than the PRC.

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1996

1997

1998

1999

IP

Other third countries

Quantity (tonnes)

23 150

22 442

27 900

22 787

18 873

Market share (%)

Cif prices (EUR/tonne)

9,8

822

9,2

961

10,9

985

9,2

946

7,3

1 107

Of which Turkey

Quantity (tonnes)

1 633

3 345

4 289

3 172

3 451

Market share (%)

Cif prices (EUR/tonne)

0,7

546

1,4

683

1,7

770

1,3

749

1,3

873

Of which Poland

Quantity (tonnes)

3 236

2 843

2 168

2 669

2 961

Market share (%)

Cif prices (EUR/tonne)

1,4

720

1,2

716

0,8

823

1,1

806

1,2

846

(97)

(98)

In the case of imports originating in Turkey, they were very close to de minimis and appeared to
contain a certain proportion of products other than the product concerned i.e. feed grade, which is
less expensive than zinc oxide. In this respect it has to be noted that feed grade zinc oxide produced
and sold by the Community industry on the Community market was at a lower price than its sales of
zinc oxide (in the region of 20 % less expensive reflecting its lower quality).

Imports originating in Poland decreased over the analysis period to a level of under 3 000 tonnes in
the IP. Their market share also decreased over the period from 1,4 % in 1996 to 1,2 % in the IP.
Prices of the imports originating in Poland, although at low levels, were higher than those of imports
originating in the country concerned for much of the analysis period.

(99) On the basis of the above, it is provisionally concluded that imports originating in Turkey, Poland
and other third countries did not contribute to the material injury suffered by the Community
industry.

The export performance of the Community industry

(100) The volume of the Community industry's exports increased by nearly 40 % over the analysis period
the Community industry during the IP

to reach a figure of 15 748 tonnes. The exports of
represented approximately 10 % of production.

(101) One interested party commented that

the
Community industry and its robust financial state. Whilst it is accepted that the growth of export
markets has been considerable,
it should be noted that the actual tonnage concerned remains
marginal when compared to the volume of total sales. Furthermore, it is to be remembered that the
increase in exports did not prevent the decline in the production of the Community industry.

this increase demonstrated the competitiveness of

(102)

In conclusion, the Community industry has proven itself to be competitive as shown by the
performance of its export activities. Thus,
its export activities did not contribute to the injury
suffered by the Community industry.

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Changes in the pattern of consumption

(103) Consumption of zinc oxide in the Community increased by 9 % over the analysis period. It is
injury suffered by the Community industry cannot be

therefore considered that
the material
attributed to a contraction of demand on the Community market.

Conclusion on causation

(104) The substantial increase in the volume and market share of imports from the country concerned
over the analysis period and their level of price undercutting during the IP had material negative
consequences on the volumes and prices of the Community industry's sales. This in turn affected a
in particular profitability. No other
number of the Community industry's economic indicators,
factors were found that could have contributed to the injury suffered by the Community industry.

(105)

It is therefore provisionally concluded that the dumped imports from the country concerned have
caused material injury to the Community industry within the meaning of Article 3(6) of the basic
Regulation.

G. COMMUNITY INTEREST

1. General remarks

(106) The Commission examined whether, despite the conclusion on injurious dumping, compelling
reasons existed that could lead to the conclusion that it is not in the Community interest to adopt
measures in this particular case. For this purpose and in accordance with Article 21(1) of the basic
Regulation, the impact of possible measures on all parties involved in this proceeding and also the
consequences of not taking measures were considered on the basis of all evidence submitted.

2. The investigation

(107) The Commission sent questionnaires to importers, suppliers of raw materials, industrial users of the
product concerned, and to associations representing user groups as well as other interested parties
who made themselves known within the time limit set in the notice of initiation.

(108)

In total, 108 questionnaires were sent out, but only 24 replies were received within the time limits
set.

(109) Questionnaire responses were received within the time limits from:

Six unrelated importers of the product concerned:

— Explorer SRL (Italy)

— I.T.A.C.O Chimica SRL (Italy)

— I.T.A.C.O. International SRL (Italy)

— Almiberia SA (Spain)

— Quimialmel SA (Spain)

— L'Approchimide SRL (Italy)

Five direct suppliers of raw materials:

— Il.co.met Sas (Italy)

— Mapral SAS (France)

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— Rezinal NV (The Netherlands)

— Nuova Eurozinco SpA (Italy)

— Wilhelm Grillo GmbH (Germany)

13 users of the product concerned including:

Ten producers of frits and glazes, a major input for the ceramic industry:

— Johnson Matthey Ceramics SA (Spain)

— Ramacolor (Italy)

— Fritta SL (Spain)

— Ferro Enamel Española SA (Spain)

— Torrecid S.A (Spain)

— Esmaltes SA (Spain)

— Esmalglass SA (Spain)

— Vernis SA (Spain)

— Cerdec Ceramics Iberica SA (Spain)

— Color Esmalt SA (Spain)

and three producers of chemicals and steel products:

— Sikel NV (Belgium)

— Hans Heubach GmbH & Co. KG (Germany)

— Infineum Italia Srl (Italy).

(110) The Commission was also contacted by two professional associations, which provided aggregated
information concerning the activities of their sector and also made representations on behalf of their
members. They were:

— ASCER (Asociación Española de Fabricantes de Azulejos y Pavimentos Cerámicos),

i.e. the

Spanish ceramic tile manufacturers' association,

— ANFFECC (Asociación Nacional de Fabricantes de Fritas, Esmaltes, y Colores Cerámicos), i.e. the

Spanish frit and glaze manufacturers' association.

3. Likely effect of the imposition of measures on the Community industry

(111) The Community industry is composed of six companies with production facilities for zinc oxide in
the Netherlands, Spain and the United
the following Member States: France, Germany,
Kingdom. Substantial competition exists on the Community market due to the number of producers
and production facilities.

Italy,

(112)

In spite of the material injury suffered by the Community industry during the IP, there is no reason
to doubt its long-term viability and competitiveness in a market where normal conditions of fair
trade exist.

(113)

It should be noted that the Community industry's loss-making situation has resulted from its
difficulty to compete with the low-priced, dumped imports, which have gained considerable market
share over the analysis period. It is considered that the imposition of measures will restore fair
competition to the market and allow the Community industry to increase its sales volume and
market share. It is anticipated that an increase in the volumes of sales and production would also
safeguard employment in the industry. The higher contribution towards its fixed costs which would
result from an increase in the volume of sales at fair prices should also help to restore the
profitability of the Community industry.

(114) Should measures not be imposed, the continued decline in the profitability of the Community
industry observed over the analysis period is likely to continue since it will not be able to compete
with the low-priced, dumped imports. Its viability may be threatened and the continued existence of
certain production facilities put in question. Without the imposition of measures, it is likely that
Chinese zinc oxide will progressively gain market share in user markets other than the ceramic
industry. Indeed, there is already some evidence that the Community industry has lost some market
share in the technical rubber sector to Chinese zinc oxide.

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L 248/33

(115)

It is therefore provisionally concluded that the imposition of anti-dumping measures would be in the
interest of the Community industry.

4. Likely effect of the imposition of measures on other Community producers

(116) Other producers of zinc oxide located in the Community share the concerns expressed by the
Community industry. The sales of the six non-complainant producers, who provided some general
information on their activities to the Commission, remained stable over the analysis period. Their
market share in the IP was 7,3 % as opposed to 7,8 % at the start of the analysis period. These
producers therefore did not benefit as a whole from the growth in Community consumption
recorded over the same period. There is no reason to believe that the situation of the six non-
complainant producers who provided information to the Commission and of the remaining produ-
cers of zinc oxide in the Community would differ greatly from that of the Community industry.

(117)

It is therefore provisionally concluded that the imposition of anti-dumping measures would be in the
interest of the other Community producers.

5. Likely effects of the imposition of measures on importers

(118) The Commission received questionnaire replies from six unrelated importers in the Community.
These companies accounted for 46 % of the imports of the product concerned originating in the PRC
during the IP.

(119) Sales of zinc oxide during the IP represented between 8 % and 23 % of the turnover of the
cooperating unrelated importers. It is to be noted that the impact on employment levels is expected
to be minimal, i.e. around 25 employees in these companies may be considered to be directly linked
to zinc oxide activities. This figure however has barely changed over the analysis period in spite of
the dramatic increase in the level of imports from the country concerned, as these employees also
work on other products not concerned by this investigation and would in all likelihood continue to
do so even if measures were imposed.

(120) Therefore, it is provisionally concluded that the situation of unrelated importers will not be greatly

affected should anti-dumping measures be imposed.

6. Likely effects of the imposition of measures on suppliers of raw materials and zinc

recycling activities

(121) Suppliers of raw material to the Community industry can be categorised according to the type of
products they offer which are mainly special high grade zinc, drosses from the galvanising industry
and other zinc waste materials. Special high grade zinc represented 34 % by value of the Community
industry's raw material purchases during the IP. However, the Commission did not receive any
replies from suppliers of this raw material. It was therefore considered that most probably their
situation would not be significantly affected by the imposition of any anti-dumping measures.

(122) Five companies, which together employed 25 people in their activities supplying materials to the
producers of zinc oxide, cooperated in the investigation. It was found that these companies were
mostly active in collecting, recycling and trading the zinc residues of the galvanising industry. Indeed,
a third of pure zinc used in the Community, by sectors such as the galvanising industry, is recycled
and half of this recycled material is then used to produce zinc oxide. These suppliers represented
14 % of the Community industry's purchases of raw material by value in the IP.

(123) The majority of these suppliers worked closely with the Community industry and other producers of
zinc oxide located in the Community. A large part of their turnover was derived from sales made to
zinc oxide producers. Therefore, any reduction in the Community industry's purchases, as the most
significant producer of zinc oxide in the Community, would have a significant effect on the situation
of these companies.

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(124) The imposition of measures would help to restore fair conditions of competition on the Community
market, thus permitting the recycling of an important part of zinc residues to continue. The
Commission has therefore provisionally concluded that the imposition of anti-dumping measures is
in the interest of the upstream industries.

7. Likely effects of the imposition of measures on users

(125) Zinc oxide has a wide range of applications. The most significant uses of zinc oxide are in the
ceramic industry, which accounted for approximately 39 % of actual Community consumption in
the IP, in rubber compounding (30 %), chemical and pharmaceutical applications (17 %) and other
sectors, including paints (14 %). Most markets for zinc oxide, with the exception of the ceramic
industry, which has recently increased its consumption due to technological advances, are generally
mature and changes in demand are linked to the general state of the economy.

Tyre and rubber producers

(126) As mentioned above, the manufacturers of tyres and other rubber products are important users of
zinc oxide in the Community. However, the Commission did not receive any answers to its
questionnaires from these companies. In the absence of evidence to suggest the contrary, it has been
provisionally considered that they would not be significantly impacted by the imposition of any
anti-dumping measures.

The ceramic tile industry

(127) The ceramic tile industry consists of two tiers: the manufacturers of frits and glazes and the
producers of tiles. These two tiers are interdependent. Indeed, the Community demand for frits and
glazes is completely governed by the tile makers. The Community frits have acquired a world
leadership in terms of technological advance and quality and thus have no serious competitors
outside the Community. For this reason, it has been decided to consider these two tiers as one
industry in the assessment of the impact of the imposition of measures although only the frit and
glaze makers are direct users of zinc oxide in its primary form.

(128) The Commission received replies from 10 frit and glaze companies. These companies accounted for
19 % of the consumption of zinc oxide in the Community in the IP, i.e. approximately half of the
consumption of zinc oxide by the ceramic industry.

(129) The Commission did not receive any replies to their questionnaires from tile makers and have
therefore used the information provided by the Spanish ceramic tile manufacturers association and
industry publications to estimate the impact of measures on the finished product of this industry.
This association represents the vast majority of Spanish ceramic tile producers.

(130) The consumption of zinc oxide in the tile industry increased dramatically from 1996 onwards due to
the introduction of the single firing technique in the production process, which required a higher
percentage of zinc oxide, compared to other techniques.

(131) The Community producers of tiles are principally located in Spain (Castellón area) and Italy. Both
Member States produced in excess of 600 million square metres of tiles in the IP. According to the
Spanish trade association, direct employment in the Spanish ceramic tile industry exceeds 26 000
people, of whom 3 000 work in the manufacture of frits and glazes. The production of frits and
glazes in the Community is increasingly concentrated in Spain. The largest market for Spanish
produced frits and glazes outside Spain is Italy.

Impact of measures on frit and glaze makers

(132) According to the information made available to the Commission, zinc oxide accounts, on average,
for 20 % of the total manufacturing cost of frits and glazes. The imposition of measures would lead
to an increase in the average price paid for their zinc oxide supplies and in turn to an estimated
increase of less than 4 % in terms of their total cost, in view of the large weight of research and
design and other costs in the full costs of production.

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(133) The producers argued that they would be unable to pass on any increase in their costs to their
customers should measures be imposed on the product concerned from the PRC. They also
contended that they would become less competitive on world markets, lose market share, with a
possible threat to employment in the Community and be forced to move production overseas
(delocalise). They also argued that the increase in the use of zinc oxide originating in the PRC was
based entirely on economic reasons in that the industry did not require the more expensive higher
purity grades produced by the Community industry.

(134) With regard to the first argument, according to the replies received by the Commission, frit and glaze
companies recorded profits in excess of 10 % of net turnover for the whole of the analysis period.
The level of investment in new production capacity and research and development facilities has been
substantial and ongoing for the last decade. It is therefore considered that they are in a sufficiently
strong financial position to be able to absorb this increase in their costs if it could not be passed on
to their customers.

(135) Furthermore, the research and development undertaken by the frit and glaze makers allows them to
constantly present new formulations and tile designs to their customers in the tile producing sector
as this market has to renew its offer regularly in order to remain the leading player on the world
market in terms of design style. Indeed, the speed with which new designs are brought to the market
can be a crucial factor in gaining competitive advantage. It is therefore considered that there is a very
strong operational link between the tile producers and the frit makers so that the former will accept
an increase in the prices they have to pay if they are to continue to have access to the Community
frit makers' new designs and technological advances.

(136) With regard to the second argument, the frit and glaze industry has a distinct competitive advantage
in terms of the quality and innovative characteristics of its products. This is borne out by the number
of countries to which these producers export their products. Approximately 37 % of Spanish-
produced glazes were exported outside the Community during the IP. The claim that the frit and
glaze industry will be forced to delocalise appears unsubstantiated when one considers both the level
of investment made by the industry recently in production facilities within the Community and its
strong export competitiveness. Therefore, there is no threat to the level of employment in the
Community due to delocalisation. There are also strong economic reasons for these producers to be
located near to their customers in the Community. This is borne out by the concentration of these
activities in the Castellón region of Spain.

(137) As regards the final argument that the products of the Community producers no longer met the
requirements of these users, the types of zinc oxide purchased by users in this sector were found to
be comparable with those produced by the Community industry.

(138)

It is therefore considered in the light of the overall financial performance of the Community frit and
glaze industry, its continued expansion and investment in new technology and facilities and its
reputation for quality and innovation, that the likely impact of measures would not have a major
adverse impact on its activities.

Impact of measures on ceramic tile producers

(139) The Spanish association of tile manufacturers argued that the imposition of measures on zinc oxide
originating in the PRC would increase the price of glazes used in the production of ceramic tiles and
also increase the cost of the finished tile. It was further suggested that the impact of the imposition
of measures would erode competitiveness and cause social-economic damage that would be more
serious than could result from the alleged dumping itself.

(140) As noted above, the Commission did not receive any cooperation from individual companies
operating in this sector. Nor did the information submitted by the association provide detailed
evidence of costs of production for individual producers. Therefore, in the absence of information
concerning their costs of production, the Commission used official statistics concerning the volume
and value of their production. It was estimated that each square metre of tile contains on average
48 g of zinc oxide and that each 10 % increase in the cost of this input would only raise the unit
value of each square metre produced by 0,06 %.

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(141)

In conclusion,
producers would be limited.

it is provisionally considered that the likely impact of measures on ceramic tile

Other users

(142) The Commission received very few replies to their questionnaires from users in sectors other than
those already mentioned. Only three other companies cooperated in the investigation. This lack of
cooperation on the part of the majority of other users is considered to indicate that the impact of
measures on them would be limited.

(143) The three respondents operate in distinct sectors, comprising engine oils, zinc phosphate and
electro-galvanised steel sheets for the automotive industry. All three purchased zinc oxide only from
Community producers during the analysis period and represented 3 % of Community consumption
in the IP.

(144) One of these companies mentioned it would not be affected while the others argued that the
imposition of measures would lead to an overall increase in the price of zinc oxide on the market.

(145) Even though zinc oxide represents between 10 % and 26 % of the costs of these companies, it is
considered that the imposition of measures would impact them only to the extent that the prices of
the Community industry are likely to rise following the imposition of measures. Moreover, it is to be
noted that any such rise in the prices of the Community industry would be the result of a return to
normal market conditions.

(146)

It is therefore provisionally considered that in view of the above, i.e. the low level of cooperation and
the situation of the cooperating users, that the imposition of anti-dumping measures on other users
would not have a significant impact on their situation.

Conclusion

(147) Recalling the conclusions reached above in respect of the users of zinc oxide in the present
investigation, it is provisionally concluded that the imposition of measures would not significantly
affect their situation.

8. Competition and trade distorting effects

(148) With respect to the effects of possible measures on competition in the Community, one interested
party argued that duties would unnecessarily strengthen the position of EU zinc oxide producers.

(149) The Commission does not consider that measures would have such a distorting effect on the market.
The consequence of measures would be to remove the distorting effects of the dumped imports and
to re-establish fair market conditions for all operators. Moreover, given the number of producers of
zinc oxide in the Community and the existence of various sources of supply outside the Community,
it was considered that measures would not affect the existing high degree of competition on the
market.

(150)

In view of the above, the imposition of provisional anti-dumping duties would not limit the choice
of the user industries or weaken competition.

9. Conclusion

(151)

In view of the above, the Commission provisionally concluded that no compelling reasons exist not
to impose provisional anti-dumping measures in the present case.

H. PROVISIONAL ANTI-DUMPING MEASURES

1. Injury elimination level

(152)

In order to prevent further injury being caused by the dumped imports, it was considered appro-
priate to adopt anti-dumping measures in the form of provisional duties.

(153) For the purpose of determining the level of these duties, the Commission took account of the
dumping margins found and the amount of duty necessary to eliminate the injury sustained by the
Community industry.

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(154) To this end, the Commission determined a non-injurious price based on production costs of the
Community industry, together with a reasonable profit margin of 8 %. This margin is regarded as an
appropriate minimum that this industry could expect in the absence of injurious dumping. This is
supported by the fact the Community industry recorded this profit margin at the beginning of the
analysis period when the level of dumped imports was relatively low. The non-injurious price was
compared with the prices of the dumped imports used to establish price undercutting, as outlined
above. Differences resulting from this comparison were then expressed as a percentage of the total
cif import value to establish the injury margin.

(155)

In order to calculate the residual injury margin applicable to all other exporting producers in the
PRC, the export prices and methodology used to calculate the countrywide dumping margin as
detailed at recital 55 were used.

2. Provisional measures

(156)

In the light of the foregoing, it is considered that a provisional anti-dumping duty should be imposed
at the level of the dumping margin found, but should not be higher than the injury margin
calculated above in accordance with Article 7(2) of the basic Regulation.

(157) On the basis of the above, anti-dumping duty rates have been established by comparing the injury
margins and the dumping margins. The injury margin was lower than the dumping margin for the
following company: Liuzhou Longcheng Chemical General Plant and consequently the duty rate
should be based on this margin. For the three remaining cooperating exporting producers the duty
has been set at the level of the dumping margins found as these were lower than the injury margins.

(158) As regards the countrywide duty to be applied to the remaining exporting producers,

it was
determined at the level of the injury margin as this was found to be lower than the countrywide
dumping margin.

(159) The individual company anti-dumping duty rates specified in this Regulation were established on the
basis of the findings of the present investigation. Therefore, they reflect the situation found during
that investigation with respect to these companies. These duty rates (as opposed to the countrywide
duty applicable to ‘all other companies’) are thus exclusively applicable to imports of products
originating in the country concerned and produced by the companies and thus by the specific legal
entities mentioned. Imported products produced by any other company not specifically mentioned
in the operative part of this Regulation with its name and address, including entities related to those
specifically mentioned, cannot benefit from these rates and shall be subject to the duty rate
applicable to ‘all other companies’.

(160) Any claim requesting the application of these individual company anti-dumping duty rates (e.g.
following a change in the name of the entity or following the setting up of new production or sales
entities) should be addressed to the Commission forthwith with all relevant information, in particular
any modification in the company's activities linked to production, domestic and export sales
associated with e.g. that name change or that change in the production and sales entities. The
Commission, if appropriate, will, after consultation of the Advisory Committee, amend the Regula-
tion accordingly by updating the list of companies benefiting from individual duty rates.

I. FINAL PROVISION

(161)

In the interest of sound administration, a period should be fixed within which the interested parties
which made themselves known within the time limit specified in the notice of initiation may make
their views known in writing and request a hearing. Furthermore, it should be stated that the findings
concerning the imposition of duties made for the purposes of this regulation are provisional and
may have to be reconsidered for the purposes of any definitive duty,

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HAS ADOPTED THIS REGULATION:

Article 1

A provisional anti-dumping duty is hereby imposed on imports of zinc oxide (chemical formula:
falling within CN heading

1.
ZnO) with a purity in net weight of not
ex 2817 00 00 (TARIC code 2817 00 00*10) and originating in the People's Republic of China.

less than 93 % zinc oxide,

The rate of the provisional anti-dumping duty applicable to the net, free-at-Community-frontier price,

2.
before duty, for products manufactured by the companies listed below, shall be as follows:

Companies

Provisional
duties
(%)

TARIC
additional
code

Liuzhou Nonferrous Metals Smelting Co. Ltd and its related export company Guangxi
Liuzhou Nonferrous Metals Smelting Import & Export Co. Ltd

Liuzhou Fuxin Chemical Industry Co. Ltd

Gredmann Guigang Chemical Ltd and its related export company Rickeed Industries
Ltd, Hong Kong

Liuzhou Longcheng Chemical General Plant and its related export company Yinli
Import and Export Co. Ltd

All other companies

16,9

17,8

24,7

31,7

33,5

A277

A278

A279

A280

A999

3.

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

The release for free circulation in the Community of the product referred to in paragraph 1 shall be

4.
subject to the provision of a security, equivalent to the amount of the provisional duty.

Article 2

1. Without prejudice to Article 20 of Regulation (EC) No 384/96 interested parties may request
disclosure of the essential facts and considerations on the basis of which this Regulation was adopted, make
their views known in writing and apply to be heard orally by the Commission within one month of the
date of entry into force of this Regulation.

Pursuant to Article 21(4) of Regulation (EC) No 384/96, the parties concerned may comment on the

2.
application of this Regulation within one month of the date of its entry into force.

This Regulation shall enter into force on the day following its publication in the Official Journal of the
European Communities.

Article 1 of this Regulation shall apply for a period of six months.

Article 3

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

Done at Brussels, 17 September 2001.

For the Commission

Pascal LAMY

Member of the Commission