Commission Regulation (EC) No 510/2003 of 20 March 2003 imposing provisional anti-dumping duties on imports of paracresol originating in the People's Republic of China
Date: 2003-03-20
Institutions: European Commission
Subjects: China, anti-dumping duty, anti-dumping legislation, chemical product, import, originating product

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COMMISSION REGULATION (EC) No 510/2003

of 20 March 2003

imposing provisional anti-dumping duties on imports of paracresol 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) (basic
Regulation), as last amended by Regulation (EC) No 1972/
2002 (2), and in particular Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

(1)

(2)

(3)

(4)

(5)

A. PROCEDURE

On 27 June 2002, 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 paracresol originating in the People's
Republic of China (PRC).

The anti-dumping proceeding was initiated following a
complaint lodged on 13 May 2002 by Degussa Knot-
tingley Ltd, the sole producer in the Community repre-
senting therefore 100 % of the Community production
of paracresol. The complaint contained evidence of
injury
dumping of the said product and of material
resulting therefrom, which was considered sufficient to
justify the initiation of a 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 countries concerned, users, and the complai-
nant Community producers of
the
proceeding. Interested parties were given the opportu-
nity to make their views known in writing and to
request a hearing within the time limit set in the Notice
of Initiation.

the initiation of

A number of parties made their views known in writing.
All parties who so requested within the time limit and
showed that
there were particular reasons why they
should be heard were granted the opportunity to be
heard orally.

In view of the large number of Chinese exporting produ-
cers listed in the complaint, the Commission indicated
that it might be necessary to apply sampling in accor-
dance with Article 17 of the basic Regulation. In order
to enable the Commission to decide whether sampling
if so, to select a sample, all
would be necessary and,

(1) OJ L 56, 6.3.1996, p. 1.
(2) OJ L 305, 7.11.2002, p. 1.
(3) OJ C 153, 27.6.2002, p. 7.

(6)

(7)

(8)

(9)

exporting producers were requested to make themselves
known to the Commission and to provide, as specified
in the Notice of Initiation, basic information on their
activities related to the product concerned during the
investigation period (1 April 2001 to 31 March 2002).

the information submitted by
After examination of
exporting producers and due to the low number of
replies to the sampling questions,
it was decided that
sampling was not necessary.

In order to allow exporting producers in the PRC to
submit a claim for market economy treatment (MET) or
individual treatment (IT), if they so wished, the Commis-
sion sent claim forms to the Chinese exporting produ-
cers known to be concerned. Claims for MET and IT
were received from two exporting producers.

The Commission sent questionnaires to 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
complaining Community producer,
two exporting
producers, one producer in the analogue country and
seven users.

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

(a) Exporting producers

— Nanjing Jingmei Chemical Co, Ltd, People's

Republic of China,

— Shandong Reipu Chemicals Co, Ltd, People's

Republic of China;

(b) Analogue country producer

— Merisol USA LLC, United States of America;

(c) Community producers

— Degussa Knottingley Ltd, United Kingdom;

(d) Users

— BASF, Ludwigshafen, Germany.

(10)

The investigation of dumping and injury covered the
period from 1 April 2001 to 31 March 2002 (investiga-
tion period or IP). The examination of trends in the
context of the injury analysis covered the period from 1
January 1998 to the end of the IP (period under consid-
eration).

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B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

criteria laid down in Article 2(7)(c) of that Regulation,
i.e. that market economy conditions prevail in respect of
the manufacture and sale of the product concerned.

(11)

(12)

The product concerned is paracresol with a minimum
para-isomer purity of 97 %, calculated on a net dry basis,
currently
code
ex 2907 12 00.

classifiable

within

CN

the

is a colourless to pale yellow toxic organic
Paracresol
chemical used as an intermediary chemical
in the
production of anti-oxidants and fine chemicals such as
anisic aldehyde, sun screens, UV stabilisers etc. The
product concerned exists in different purities between
97 % and 99,9 % which all share the same basic physical
and chemical characteristics and uses. They all share the
same basic molecule (C7H8O) with the methyl function
in the same position and the same impurities (such as
orthocresol, metacresol etc.).

2. Like product

(13) One exporting producer and one user submitted that
paracresol produced in the Community could not be
considered comparable to that produced and exported to
the Community from the PRC on the grounds of the
difference in purity between these two products. The
user claimed to have encountered problems due to the
the paracresol produced by the
impurity profile of
Community industry. However,
the investigation has
shown that all paracresol is alike, as it has the same basic
physical and chemical characteristics and essentially the
same uses. This was confirmed both by the on-the-spot
the Community producer and the
investigation of
majority of the users.

(14)

It was found that the paracresol manufactured in the
PRC and sold domestically, as well as that exported to
the product sold on the domestic
the Community,
market of
the analogue country (United States of
America — USA) and manufactured and sold in the
Community by the Community industry have basically
the same physical and chemical characteristics and the
same uses. Therefore these products are considered to be
alike within the meaning of Article 1(4) of the basic
Regulation.

C. DUMPING

1. Normal value

(a) M ar ke t e c onomy tr e a tme n t

(15)

Pursuant to Article 2(7)(b) of the basic Regulation,
in
anti-dumping investigations concerning imports origi-
nating in the PRC, normal value shall be determined in
accordance with paragraphs 1 to 6 of Article 2 for those
exporting producers which can show that they meet the

(16)

Claims for MET were received from two exporting
producers:

— Nanjing Jingmei Chemical Co, Ltd, Nanjing, a Sino-

Taiwanese joint venture,

— Shandong Reipu Chemicals Co, Ltd, Qihe County, a

fully Chinese limited liability company.

The claims were analysed on the basis of the five criteria
required by Article 2(7)(c) of the basic Regulation. Both
companies fulfilled the required criteria because business
decisions are made in response to the market and
without significant State interference. They have one
clear set of basic accounting records which are indepen-
dently audited in line with international accounting stan-
dards and are applied for all purposes. The production
costs and the financial situation are not subject to signifi-
from the former non-
cant distortions carried over
market economy system. Legal certainty and stability of
the operations are assured as both companies are subject
to bankruptcy and property laws and exchange rate
conversions are carried out at the market rate.

The Community industry was given the opportunity to
comment and particularly questioned whether the raw
material prices were market prices. The subsequent
investigation showed that prices for the main raw mate-
rials of the two Chinese exporters were in line with
world market prices and also with the purchase prices of
the Community industry. The Advisory Committee was
to the Commission's
consulted and did not object
conclusions.

(b) A nalog u e countr y

to Article 2(7)(a) of

Pursuant
the basic Regulation,
normal value for the exporting producers which are not
granted market economy treatment has to be established
on the basis of the prices or constructed value of the
analogue country for the products comparable to those
sold by the Chinese exporting producers.

Initiation of

In the Notice of
the
Commission proposed Japan as an appropriate market
economy third country for the purpose of establishing
normal value for the PRC.

this proceeding,

(17)

(18)

(19)

(20)

(21) One exporting producer opposed this proposal and
proposed India as an analogue country with the main
argument that the cost structure of the Indian producer
was similar to the cost structure of the Chinese produ-
cers. The Community industry objected to India as an
analogue country on the basis that domestic sales to
unrelated customers made by Indian producers were
allegedly not representative.

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(22)

(23)

(24)

The Commission contacted all known producers of para-
cresol outside the European Community and the PRC
(one producer each in India, Japan and the USA). The
producers in Japan and India refused to cooperate in the
proceeding. In addition, the vast majority of the produc-
tion in India was for captive use. The USA producer's
sales were representative as domestic sales accounted for
more than 5 % of the exports of the product concerned
originating in the PRC to the Community and there are
the
no substantial
Commission decided to use the USA as an appropriate
analogue country.

restrictions. Consequently,

import

( d) De t e r mi n a ti o n of n o r ma l

v a l u e

i n t h e

a na log u e cou ntr y

(26)

In order to establish whether sales in the USA market of
the products comparable to those sold by the Chinese
exporting producers to the Community were made in
the ordinary course of trade, the domestic selling price
was compared to the full cost of production (i.e. the cost
of manufacturing plus SG&A expenses). Since less than
the type sold on the
20 % of
domestic market was sold at a loss and since the
weighted average cost of production was lower than the
weighted average selling price, normal value was estab-
lished as the weighted average price of all transactions.

the sales volume of

(27) As a result, normal value was established as the weighted
average domestic sales price to unrelated customers by
the cooperating producer in the USA.

(c) De te r mi na t i on of nor ma l v a lu e for coop -
er a ti ng e xpor ti ng pr oduce r s g r a nted ME T

In accordance with Article 2(2) of the basic Regulation,
the Commission first examined whether the domestic
sales of paracresol were representative, i.e. whether the
total volume of such sales represented at least 5 % of the
total export sales volume to the Community. The investi-
gation showed that domestic sales were representative.

(28)

The export prices for the cooperating exporting produ-
cers were established on the basis of the prices paid or
payable for the product concerned when sold to the first
independent customer in the Community in accordance
with Article 2(8) of the basic Regulation.

2. Export price

The Commission subsequently examined whether the
domestic sales of the company could be considered as
being made in the ordinary course of trade pursuant to
Article 2(4) of the basic Regulation. This was done by
establishing the proportion of domestic sales to indepen-
dent customers not sold at a loss on the domestic market
during the IP.

(29) Due to a lack of cooperation, the export prices for the
established in
remaining exporting producers were
accordance with Article 18 of
the basic Regulation.
Export prices were calculated based on the average
weighted export price of the cooperating producers for
the product type sold by the producer in the analogue
country as no other sources were available. Eurostat
figures could not be used because the product concerned
is only part of a CN code which also covers other
products with a different price structure.

(25) As less than 10 % of the domestic sales of the like
product during the IP of both Chinese exporting produ-
cers concerned were profitable, normal value had to be
constructed in accordance with Article 2(3) of the basic
Regulation. Normal value was constructed on the basis
of each exporting producer's own cost of manufacturing
plus a reasonable amount for selling, general and admin-
istrative (SG&A) costs and for profit. Its own SG&A costs
could be used because the domestic sales of the like
product made by the exporting producer were represen-
tative as defined in Article 2(2) of the basic Regulation,
i.e. the domestic sales of each company accounted for
more than 5 % of the exports of the product concerned
by the respective company. For the profit margin,
in
accordance with Article 2(6)(b) of the basic Regulation,
the profit margin of
the same general category of
products in the domestic market was used. This profit
margin could be used as a number of products sold fall
into the same general category of products because they
are basic organic chemicals (such as sodium sulphite
etc.).

3. Comparison

(30) As far as the cooperating exporting producers are
concerned, for the purposes of ensuring a fair compar-
ison between the normal value and the export price at
an ex-works level, due allowance in the form of adjust-
ments was made for differences that were claimed and
demonstrated to affect prices and price comparability in
accordance with Article 2(10) of the basic Regulation.
Adjustments were made in respect of transport, insur-
ance and handling, packing, credit costs and commis-
sions where applicable and justified.

(31)

The comparison for non-cooperating producers was
based on a comparison of the average export price of
the cooperating producers as defined in recital 29 with
the normal value in the analogue country as defined in
recital 27.

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4. Dumping margin

(40)

(32)

In accordance with Article 2(11) and (12) of the basic
Regulation, the dumping margin was established on the
basis of a comparison of the weighted average normal
value with the weighted average export prices, as deter-
mined above. The provisional dumping margin was
expressed as a percentage of the cif Community frontier
price, duty unpaid.

(33)

The margins are:

— Nanjing Jingmei Chemical Co,

Ltd, Nanjing:

— Shandong Reipu Chemicals Co,

Ltd, Qihe County:

— Country-wide dumping margin:

(41)

23,8 %;

9,4 %;

40,7 %.

D. INJURY

1. Definition of the Community industry

(34)

The sole cooperating Community producer accounted
for 100 % of the Community production of paracresol
during the IP.

(35) One user and one exporting producer claimed that para-
cresol was also being manufactured by one of the users
for captive consumption. However,
the investigation
showed that this user did not produce paracresol, but a
mixture of isomers. This mixture of isomers is further
processed without separation of
the paracresol. This
mixture does not fall under the definition of the product
as set out above in recital 11. Therefore, for the purpose
of the investigation, the user concerned is not considered
to be a producer of the product concerned.

(36)

The sole Community producer is therefore deemed to
constitute the Community industry within the meaning
of Article 4(1) and Article 5(4) of the basic Regulation.

(43)

(37) As the Community industry is thus constituted of only
one producer, all figures relating to the latter had to be
indexed for reasons of confidentiality.

2. Determination of

relevant Community

the
market

(38)

(39)

For the purpose of establishing whether or not
the
Community industry suffered injury and of determining
consumption and the various
indicators
related to the situation of the Community industry, it
was examined whether and to what extent the subse-
quent use of the Community industry's production of
the product concerned had to be taken into account in
the analysis.

economic

Paracresol is used as an intermediate material for other
chemical products (mainly anti-oxidants and fine chemi-
cals such as sunscreens) within the same group of
companies, or is sold as such to a third party, related or
not. The former possibility is referred to as captive use.

For the purposes of the investigation, captive use was
defined as occurring when production was delivered
within the same group of companies for further down-
stream processing. In situations of captive use, sales were
made at
transfer prices not set according to market
conditions or were made to a company which did not
have a free choice of supplier. Consequently, captive use
had to be analysed at the level of produced quantities
and the proportion of total sales it represented. All other
situations were considered as free market sales.

In order to provide as complete a picture as possible of
the situation of the Community industry, data have been
obtained and analysed for all paracresol activity and it
was determined whether paracresol was destined for
captive use or destined for the free market. Paracresol
destined for captive use was found not to be directly
affected by imports. By contrast, production destined for
free market sales was found to be in direct competition
with imports, because these sales were made under
normal market conditions,
implying free choice of
supplier. For this reason, attention was focused on the
free market. While, where justified, data on free market
sales and captive use were combined, the analysis was
split between free market and captive deliveries so far as
possible.

(42) On the basis of the investigation,

it was found that
certain economic indicators related to the Community
industry could reasonably be examined by referring to
the whole activity. Indeed, production (for both captive
use and free market sales), capacity utilisation,
invest-
ments, stocks, employment and productivity depend
upon the whole activity, whether the product is trans-
ferred downstream within a group of companies for
is sold on the free
further processing or whether it
market.

The other economic indicators related to the Community
industry were analysed and evaluated referring to the
situation prevailing on the free market,
in particular
where measurable market conditions exist and where
transactions are made under normal market conditions
implying free choice of supplier: sales volume and sales
prices on the Community market, export volume and
prices. To this effect, consumption and market shares
were determined on the basis of the volume of free
market sales and imports.

3. Community consumption

(44)

The apparent Community consumption was established
on the basis of the sales volumes of the Community
industry on the Community market, excluding captive
use, and import
figures concerning the volume of
imports from both the country concerned and other
third countries.

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(45) As mentioned above, it was found that not only para-
cresol, but also other products are imported into the
Community under CN code ex 2907 12 00. In addition,
no other public statistics or studies are available on the
consumption of paracresol. Therefore, estimates of the
imports had to be based on the replies to the question-
naire by the cooperating users, which were found to
import almost all of the paracresol, and on the verified
information provided by the Chinese exporting produ-
cers.

(46) On this basis, Community consumption increased by
around 45 % between 1998 and the IP from 8 780
tonnes to 12 770 tonnes. Between 1998 and 2000
consumption rose by 62 %, followed by a drop of 11 %
between 2000 and the IP. A steep increase occurred in
particular from 1999 to 2000.

(51)

These undercutting margins did not show the full effect
of the imports on prices in the Community market as
prices were depressed, which is demonstrated by the lack
of profitability of
the Community industry, which
became loss-making from the year 2001.

5. Situation of the Community industry

5.1. Analysis of the factors pertinent to the entire activity,

including captive sales

(a) Produ cti on

(52)

The Community industry's production increased by 1 %
between 1998 and the IP. There was an increase until
2000 of 28 % followed by a decrease until the end of
the period under consideration of 21 %.

4. Imports from the country concerned

( b ) Ca p a c i ty a nd c a p a c i t y u ti li sa ti on r a te s

(a) Volume a nd marke t share

(53)

the import
(47) During the period under consideration,
volume of paracresol originating
country
concerned increased from 40 tonnes in 1998 to 240
tonnes in 2000 and subsequently to 4 035 tonnes
during the IP.

in the

(48)

The market share of
the imports originating in the
country concerned increased from less than 1 % in 1998
to more than 30 % in the IP.

(54)

( b) Pr i c e s of th e du mp e d i mp or t s

(49)

The Commission has examined whether the exporting
producers in the country concerned undercut the prices
of the Community industry during the IP. In order to
bring prices on to a comparable basis, the exporting
producers' prices have been duly adjusted to a cif level,
whereas the Community producer's prices have been
adjusted to an ex-works level.

(50)

The undercutting margins found on this basis, expressed
as a percentage of the Community producers' prices, are
as follows:

total production capacity of

The
the Community
industry also increased between 1998 and the IP, by
17 %. This was related to the modernisation of
the
production facilities. The capacity utilisation decreased
by 14 % during the same period and reached its lowest
point in the IP, after peaking in 2000.

(c)

Inve stme n t

The Community industry continued to make consider-
able investments in its production facilities throughout
the period under consideration and even significantly
increased its yearly spending on new investments
between 1998 and the IP by around 80 %. This develop-
ment relates mainly to investments in environmental
protection and to investments in new machinery and
equipment, carried out
in order to increase capacity
(both in 1998 and the IP) and to improve efficiency and
productivity.

( d )

In v e n t or i e s

(55)

Stocks of finished product decreased by 60 % between
1998 and the IP and remained low throughout the IP.
During the IP these stocks represented less than 1 % of
all sales. However, it should be noted that during the IP
the amount of unfinished products increased consider-
ably and was unusually high.

Country: PRC

Average undercutting margin

Price U/C

31 %

Undercutting margins of cooperating
exporting producers only

Between 29 % and
33 %

(e ) E mployme nt, pr oduc ti v i ty and w ag e s

(56)

Employment in the Community industry decreased by
6 % between 1998 and the IP. Wages increased from
1998 to the IP by around 18 %. Average productivity on
the basis of tonnes produced per employee increased
slightly over the period under consideration.

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the factors pertinent

for

the free-market

5.2. Analysis of
activity

( a ) Sa l e s

(57)

Between 1998 and the IP the sales volume on the
Community market of the product concerned produced
in the Community increased by 23 %. Once more, there
was an increase up to 2000 (of 52 %), followed by a
decrease between 2000 and the IP (of 19 %).

( b ) M a r k e t sh a r e

(58)

Between 1998 and the IP, the Community industry lost
about 9 percentage points of its market share on the
Community market (it was about 51 % during the IP),
while in the same period overall consumption rose by
around 45 % and the market share of the imports origi-
nating in the country concerned increased from less than
1 % to more than 30 %.

( c ) G r ow th

(59) As mentioned above, while Community consumption
increased by around 45 % between 1998 and the investi-
gation period,
the Community
the sales volume of
industry increased by 23 % and the volume of imports
concerned went up by a factor of 100. Thus,
the
growing trend of the market was not followed by a
corresponding increase in the Community industry's
sales. On the contrary,
its market share decreased by
about 9 percentage points between 1998 and the inves-
tigation period, whereas the market share of imports
concerned increased from less than 1 % to more than
30 % during the same period.

( d ) P r i c e s

(60)

The Community producers' average net sales price of the
product concerned produced and sold in the Community
increased by 10 % between 1998 and the IP. The
increase took place almost entirely in 2001.
In this
respect, it should be pointed out that in the year 2001
the price of one of the main raw materials, caustic soda,
more than doubled.

( e ) Pr o fi t a bi li t y ,

r e tu r n on i n v e st me n t, c a sh

flow a n d a b i li t y t o r a i s e c a p i t a l

(61)

The weighted average profitability, expressed as profits/
losses in relation to the net sales value of the products
produced and sold in the Community, deteriorated
between 1998 and the IP. Profitability was highest in
1999 (more than 10 %) and started to decrease sharply
in 2000 to drop below zero in 2001 and the IP, when it
was between minus 5 % and minus 10 %. It was found
that one US competitor carried out an aggressive pricing
campaign during the year 2000, which eventually led to
its own disappearance from the market. As a conse-

quence, an increase in the price of raw materials in that
year could only be passed on to the customers to a
limited extent. In this context, it should be pointed out
that the price of the main raw materials, toluene and
caustic soda, increased by more than 50 % during the
period under consideration. In 2001, imports from the
country concerned started to enter the Community in
large volumes and at low prices, leading to further and
an even greater reduction of
the
Community industry.

the profitability of

(62) A similar deterioration occurred in the return on invest-
ment, expressed as profits/losses in relation to the net
book value of investments.

(63)

The cash flow generated by the product produced and
sold in the Community decreased sharply between 1998
and the IP. After peaking in 1999, it became negative
during the IP.

(64)

The Community industry was not found to be experien-
cing difficulties in raising capital by means of bank loans
and financing from the parent company.

(f) M a g ni tu de of du mpi ng mar g i n

(65) Given the volume and the prices of the dumped imports
from the country concerned, the impact of the actual
margins of dumping cannot be considered negligible.

6. Conclusion on injury

(66)

(67)

Community consumption expanded by around 45 %
from 1998 to the IP. However, the Community industry
could not benefit fully from this development since its
sales only increased by half
the
increase in Community consumption while, in particular
from 2000,
country
concerned increased dramatically.

imports originating

the proportion of

in the

In terms of price development, the Community industry
was able to increase its sales prices moderately between
1998 and the IP. However, that price increase was not
even sufficient to cover the price increases of the main
raw materials. During the same period, the prices of
Chinese imports decreased by 30 %. In addition, during
the IP,
the imports concerned were made at prices
clearly undercutting those of the Community industry
which was operating at a loss-making level from 2001
onwards.

(68) A deterioration has been found in the situation of the
Community industry during the period covering 2001
and the IP, in particular in terms of reduced production,
capacity utilization, sales, market share, profitability,
return on investment and cash flow. In addition, signifi-
cant price undercutting as well as a serious deterioration
in profitability and return on investment occurred.

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(69) One exporting producer suggested that the Community
industry did not suffer injury. This argument was based
on the increase in production, capacity, sales, sales prices
and the decreasing stocks experienced by the Commu-
nity industry. As far as this point is concerned, following
the sharp increase in demand for the product concerned
between 1998 and 2000, the Community industry was
indeed able to increase its production, sales and sales
prices. However, although sales have risen, they did not
increase to the extent that could have been expected
given the growth in the market. Moreover, the rise in
sales prices was clearly insufficient since, inter alia, the
raw material prices
increased even more and the
Community industry was loss-making in the IP (and as
well in 2001).

(70)

The situation of the Community industry is thus found
to have deteriorated to such an extent that it is provi-
the Community industry has
sionally concluded that
suffered material
injury within the meaning of Article
3(6) of the basic Regulation.

E. CAUSATION

1. Introduction

(71) According to Article 3(6) and (7) of the basic Regulation,
the Commission has examined whether the dumped
imports of paracresol originating in the
country
concerned have
caused injury to the Community
industry to a such degree that it may 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

(72) Over the period under consideration, dumped imports
from the country concerned increased significantly in
terms of volume (from 40 tonnes to 4 035 tonnes) and
market share (from less than 1 % to more than 30 %).
The dramatic increase in the imports from the PRC
happened during the IP (from 240 tonnes in 2000 to
4 035 tonnes in the IP), while its import prices already
decreased substantially from 2000 until the IP, by 46 %.

(73)

This coincided with a loss of market share of
the
Community industry of 9 percentage points and, even
more importantly, with an insufficient increase in the
prices of the Community industry. Indeed, the prices of
the Community industry (which were depressed because
it was loss-making) were significantly undercut during
the IP by those of the dumped imports. At the same
the main raw materials, especially
time,
caustic soda, increased considerably.

the cost of

(74)

The above should be seen in the light of the fact that
price is one of the main criteria for customers when
purchasing paracresol. Moreover, it should be noted that
from 1998 to 2000, i.e. when the dumped imports were
not yet penetrating the Community market at significant
levels, the Community industry was still profitable.

3. Effect of other factors

(a )

Imp or ts fr om oth e r th i r d c ou nt r i e s

(75)

(76)

(77)

The investigation showed that Japan and the USA were
the only other third countries from which the product
concerned was imported into the Community at a level
exceeding de minimis. During the period under considera-
tion, the import volume of paracresol from these third
countries decreased substantially, by 35 %, together with
their market share, which went down by around 22
percentage points, to around 17 % in the IP. From 2000
to 2001,
imports from these countries decreased by
more than 50 %, from 5 953 tonnes to 2 566 tonnes.
Thus, their decrease was almost simultaneous with the
increase in Chinese imports.

It should be noted that during the period under consid-
eration, a major US competitor disappeared from the
market. This company carried out an aggressive pricing
policy during the year 2000, which prevented the
Community industry from benefiting from the increase
in sales and raising its profit margin. This company was
subsequently forced to close down its plant in 2001.

In view of the above, it was provisionally concluded that
these imports did not break the causal link between the
dumping and the material injury caused by the Chinese
imports. On the contrary, their position on the Commu-
nity market also developed negatively, as that of the
the investigation
Community industry did. Moreover,
has clearly shown that the dumped imports originating
in China did not merely take over the market shares lost
by Japan and the USA, but far exceeded the market share
lost by these countries.

( b ) F u r t h e r f a c tor s

(78)

The Commission also examined whether any other
factors might have contributed to the injury suffered by
the Community industry, having regard, in particular, to
a possible contraction in demand, developments in tech-
nology and productivity of the Community industry, its
export performance and its captive sales of the product
concerned.

(79) As to the development of demand, given that

the
apparent consumption of paracresol increased consider-
ably during the period under consideration, the material
injury suffered by the Community industry cannot be
attributed to a contraction in demand on the Commu-
nity market.

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Official Journal of the European Union

L 75/19

(80)

In relation to the developments in technology and the
productivity of the Community industry, the Community
industry has maintained and even increased sales levels
between 1998 and the IP. It also carried out considerable
investments and modernised its production facilities,
thereby increasing its productivity in order to limit its
competitive
therefore provisionally
concluded that these developments did not represent a
cause of the material injury.

It was

losses.

(81) One exporting producer, as well as a user, submitted
that part of the injury was caused by the Community
industry's investment in production capacity and that
this was also the cause of the reduction in capacity utili-
sation. In this respect it should be noted that the capa-
city utilisation in fact increased directly after the expan-
sion of production capacity in 1998/1999. The latest
increase in production capacity was only completed after
the IP, which means that it did not have an impact on
the capacity utilisation during the IP.

The same exporting producer also referred to the
decreasing exports by the complainant as an indication
of its insufficient competitiveness. Concerning the export
performance, the Community industry has been forced
to decrease its sales in third country markets, where it
was likewise in competition with the Chinese exporting
producers, by 59 % between 1998 and the IP. However,
export sales accounted for only between 5 % and 10 %
of the total sales of the Community industry during the
IP. The export activity cannot therefore be the explana-
tion for the injury suffered by the Community industry.

It was also investigated whether or not the Community
industry undermined its free market sales by shifting its
attention to deliveries for captive use. However, it was
found that sales for captive use as a proportion of total
sales decreased from 36 % to 29 % over the period
considered. In addition, these sales were made at prices
which were roughly in line with prices charged on the
free market. It is therefore considered that the develop-
in any significant way
ment of captive use did not
contribute
injury suffered by the
Community industry.

to the material

4. Conclusion on causation

(82)

(83)

(84)

(85)

In view of the above, it is provisionally concluded that
the dumped imports caused the material injury suffered
by the Community industry.

F. COMMUNITY INTEREST

1. Preliminary remark

(86)

In accordance with Article 21 of the basic Regulation,
the Commission examined the issue of Community
interest. The determination of Community interest was
based on an appreciation of all the various interests
the
involved,
the
importers/traders
product concerned, to the extent that the relevant parties
submitted the information requested in this respect.

the Community industry,
and the users/consumers of

those of

i.e.

(87) On this basis it was examined whether, despite the
conclusions on dumping, injury and causation, compel-
ling reasons existed which would lead to the conclusion
that it is not in the Community interest to impose anti-
dumping measures in this particular case.

2. Investigation

(88)

In order to assess the likely impact of the imposition or
non-imposition of measures, the Commission requested
information from all interested parties. The Commission
sent questionnaires to the Community industry,
two
importers and 17 users. The Community producer and
seven users replied.

(89) Questionnaire replies were received within the time
limits from the following seven users of the product
concerned:

— BASF AG, Ludwigshafen, Germany,

— Bayer AG, Leverkusen, Germany,

— Ciba

Spezialitätenchemie

Lampertheim GmbH,

Lampertheim, Germany,

— Eliokem SAS, Courtaboeuf, France,

— Great Lakes Chemical

(Europe) GmbH, Frauenfeld,
Switzerland (with factories using paracresol in France
and Germany),

— Raschig GmbH, Ludwigshafen, Germany,

— Rütgers Chemicals AG, Castrop-Rauxel, Germany.

The above analysis has demonstrated that there was a
substantial increase in volume and market share of the
imports originating in the country concerned, especially
from the year 2001 onwards, together with a consider-
able decrease in their sales prices and a high level of
price undercutting during the IP. This increase in market
share of the low-priced Chinese imports coincided with
a significant drop in market share of the Community
industry, which, together with the downward pressure
on prices, resulted, inter alia, in substantial losses to the
Community industry during the IP. In addition, an exam-
ination of the other factors which could have injured the
Community industry revealed that none of these could
have had a significant negative impact on this industry.

(90)

It should be mentioned that Raschig GmbH sold its busi-
ness which incorporated paracresol to the complainant
after the IP and is therefore no longer a user or an inter-
ested party.

3. Community industry

(91)

The Community industry has proven to be a structurally
viable industry, able to adapt to the changing conditions
of the market. It achieved healthy profit margins from
1998 to 2000, when the impact of dumped imports had
not yet been felt on the market. It also made consider-
able investments and continued to export.

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Official Journal of the European Union

21.3.2003

(92)

It is considered that the imposition of measures will
restore fair competition in the market. If measures are
taken the Community industry will be able to regain at
least part of its lost market share with a consequent
positive impact on profitability.

(93) As mentioned above, the Community industry suffered
material injury caused by dumped imports originating in
the country concerned. If measures are not imposed, a
further deterioration in the situation of the Community
industry is probable. This would entail a further loss of
employment. The deflationary effect of
the dumped
imports would continue to frustrate all efforts by the
Community industry in particular to regain a profitable
level. Not taking measures would jeopardise the long-
term presence of the industry and the possibility cannot
be excluded that the sole Community producer might
have to shut down as a result of the competition from
dumped imports if measures are not imposed.

4. Importers/traders

(94) No questionnaire replies were received from importers
or traders. In this context, it should be noted that all the
main users purchase paracresol directly from the produ-
cers.

(95) On the basis of the limited role of importers and their
non-cooperation in the proceeding,
it is provisionally
concluded that anti-dumping measures will not have any
significant negative impact on importers.

5. Users/consumers

(96)

Seven questionnaire replies were received from users.
One verification visit was carried out. The seven coop-
erating users represented 98 % of total imports of para-
cresol from the cooperating Chinese exporting producers
during the IP. The number of effective staff in these
companies directly related to the paracresol business was
close to 200.

(97) Users of the product concerned are companies active in
the chemical industry. The main applications for para-
cresol are anti-oxidants, fine chemicals and intermediate
products. In general, the user companies tend to look for
a combination of reliable supply and the cheapest source
available and they have therefore benefited from low
in recent years. All cooperating
prices for paracresol
users except Raschig GmbH have therefore taken posi-
tion against the imposition of anti-dumping duties, for
fear of losing a cheap source of supply, which would
harm their competitiveness in the downstream market,
both vis-à-vis Asian competitors and the complainant.

to reinforce its position and possibly dominate supply
and price developments in the anti-oxidants market.
With respect to producers of fine chemicals, such as
the main concern is
anisic aldehyde and sunscreens,
competition from producers
in Asia, which would
continue to benefit from access to cheap paracresol from
the PRC.

(99) However, duties will not result in a significant reduction
of competition or a shortage of supply. Instead, it is to
be expected that imports from China will remain avail-
able at competitive prices, as the duties proposed for the
cooperating Chinese exporting producers are below the
In addition, alternative
levels of undercutting found.
sources of supply from other third countries with no
duties are also available. For this reason,
is also
expected that the Community industry will react to any
anti-dumping measures by increasing its production and
its sales (instead of increasing prices) in order to benefit
from increased economies of scale which in turn would
allow them to restore profitability. On the basis of all
this, it is concluded that users will continue to be able to
buy paracresol at competitive prices and it is expected
that the impact on the competitiveness of the users vis-
à-vis Asian competitors and the complainant will be
limited.

it

(100) On the basis of the above, it was provisionally concluded
that the effect of the anti-dumping measures, if any, will
most likely not have a decisive impact on users.

6. Competition and trade distorting effects

(101) With respect

the

concerned, given their

to the effects of possible measures on
cooperating
competition in the Community,
exporting producers
strong
market positions, will probably continue to sell their
products, albeit at non-dumped prices. Indeed, the rela-
tively low duty rates for the two cooperating Chinese
exporting producers should allow them to operate under
fair market conditions in the Community. Thus, given
the overall range of duties imposed, it is likely that there
will still be a sufficient number of major competitors on
the Community market, including the producers in the
country concerned, Japan and the USA. Therefore, users
and consumers will continue to have the choice of
different suppliers of the product concerned. If, on the
other hand, no measures were to be imposed, the future
of the sole Community producer would be at stake. Its
disappearance would effectively reduce competition on
the Community market.

7. Conclusion on Community interest

(98)

Producers of anti-oxidants are principally concerned
about competition from the complainant, which is a
major player in this market, and fear that the complai-
nant could use the anti-dumping measures on paracresol

(102) Given the above reasons, it is provisionally concluded
that there are no compelling reasons not to impose anti-
dumping duties in the present case.

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G. PROVISIONAL ANTI-DUMPING MEASURES

1. Injury elimination level

including entities related to those specifically
address,
mentioned, cannot benefit from these rates and shall be
subject to the duty rate applicable to ‘all other compa-
nies’.

(103)

the conclusions reached with regard to
In view of
dumping,
injury, causation and Community interest,
provisional anti-dumping measures should be taken in
order to prevent
further injury being caused to the
Community industry by the dumped imports.

(104)

In establishing the level of duty, account has been taken
of the level of the dumping margins found and of the
amount of duty necessary to eliminate the injury
suffered by the Community industry.

(105)

In order to establish the level of duty needed to remove
the injury caused by dumping, injury margins have been
calculated. The necessary price increase was determined
on the basis of a comparison, at the same level of trade,
of the weighted average export price with the corre-
sponding non-injurious price of paracresol sold by the
Community industry on the Community market.

(106) The non-injurious price has been obtained by calculating
the full cost of production and by adding a profit margin
that may reasonably be reached in the absence of injur-
ious dumping. In view of the financial situation of the
Community industry in previous years (1998-2000) and
taking into account the need for long-term investments,
a profit margin of 10 % has been considered appro-
priate.

(107) The difference resulting from the comparison between
the weighted average export price, as established for the
undercutting calculations, and the non-injurious price of
the Community industry was then expressed as a percen-
tage of the total cif import value.

2. Provisional measures

(108)

it is considered that,

in
In the light of the foregoing,
accordance with Article 7(2) of the basic Regulation,
provisional anti-dumping duties should be imposed in
respect of imports originating in the PRC at the level of
the lowest margins, in accordance with the lesser duty
rule. In this case, all duty rates should accordingly be set
at the level of the dumping margins found.

(109) The individual company anti-dumping duty rates speci-
fied 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 compa-
nies’) 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

(e.g.

(110) Any claim requesting the application of these individual
company anti-dumping duty rates
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 (1) forthwith with all rele-
vant information, in particular any modification in the
company's activities linked to production, domestic and
export sales associated with,
that name
change or that change in the production and sales enti-
ties. The Commission, if appropriate, will, after consulta-
tion of the Advisory Committee, amend the Regulation
accordingly by updating the list of companies benefiting
from individual duty rates.

for example,

H. FINAL PROVISION

(111)

In the interests 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 measures,

HAS ADOPTED THIS REGULATION:

Article 1

1.
A provisional anti-dumping duty is hereby imposed on
imports of paracresol with a minimum para-isomer purity of
97 %, calculated on a net dry basis, falling within CN code
ex 2907 12 00 (TARIC code 2907 12 00 91), originating in
the People's Republic of China.

The rate of duty applicable to the net free-at-Community-
for products produced by the

2.
frontier price, before duty,
following manufacturers shall be as follows:

Manufacturer

Rate of duty

TARIC
additional
code

Nanjing Jingmei Chemical Co, Ltd, Jing-
qiau Town, Lishui County, Nanjing
211224, People's Republic of China

Shandong Reipu Chemicals Co, Ltd,
Chenming West Road, Qihe County,
Shandong, People's Republic of China

23,8 %

A 434

9,4 %

A 435

All other companies

40,7 %

A 999

(1) European Commission

Directorate-General for Trade
Direction B
Office J-79 5/16
B-1049 Brussels.

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21.3.2003

Unless otherwise

3.
concerning customs duties shall apply.

specified,

the provisions

in force

4.
The release for free circulation in the Community of the
product referred to in paragraph 1 shall be subject to the provi-
sions of a security, equivalent to the amount of the provisional
duty.

Pursuant to Article 21(4) of Regulation (EC) No 384/96,
2.
the parties concerned may comment on the application of this
Regulation within one month of its entry into force.

Article 3

Article 2

1. Without prejudice to Article 20 of Regulation (EC) No
384/96, the interested parties may 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.

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

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

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

Done at Brussels, 20 March 2003.

For the Commission

Pascal LAMY

Member of the Commission