Council Regulation (EC) No 985/2003 of 5 June 2003 amending the anti-dumping measures imposed by Council Regulation (EC) No 1334/1999 on imports of magnesium oxide originating in the People's Republic of China
Date: 2003-06-05
Institutions: Council of the European Union
Subjects: China, anti-dumping duty, chemical product, import, magnesium, originating product, oxide

11.6.2003

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Official Journal of the European Union

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(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 985/2003

of 5 June 2003

amending the anti-dumping measures imposed by Council Regulation (EC) No 1334/1999 on
imports of magnesium oxide originating in the People's Republic of China

THE COUNCIL OF THE EUROPEAN UNION,

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), and in particular Article 11(3) thereof,

Having regard to the proposal submitted by the Commission
after consulting the Advisory Committee,

Whereas:

A. PROCEDURE

1. Measures in force

(1)

(2)

(3)

In June 1999, the Council, by Regulation (EC) No 1334/
1999 (2),
imposed definitive anti-dumping duties on
imports of magnesium oxide originating in the People's
Republic of China (the PRC). The duties took the form
of a minimum import price (MIP).

2. Initiation

On 13 June 2002, the Commission announced by a
notice (Notice of
Initiation) published in the Official
Journal of the European Communities (3), the initiation of a
partial
the anti-dumping measures
applicable to imports into the Community of magne-
sium oxide originating in the PRC pursuant to Article
11(3) of the basic Regulation.

interim review of

The review was initiated on the initiative of the Commis-
sion in order to examine the appropriateness of the form
of the measures in force. The current measures in the
form of an MIP do not differentiate between sales made
to related parties and sales made to unrelated parties, or
between direct sales to the Community and indirect
sales, i.e. sales not made directly from an exporter in the
country concerned to an importer in the Community.

(1) OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation

(EC) No 1972/2002 (OJ L 305, 7.11.2002, p. 1).

(2) OJ L 159, 25.6.1999, p. 1.
(3) OJ C 140, 13.6.2002, p. 6.

This lack of differentiation between different types of
sales possibly leads to circumvention problems. Indeed,
parties could set the import price at an artificially high
level when entering the Community, in order to avoid
the payment of anti-dumping duties. This artificially high
level may be attained through an agreement between
related parties or because the price was inflated due to
successive sales before customs clearance.

Consequently, the existing measures do not appear suffi-
cient to counteract the dumping which is causing injury.

Furthermore, the current measures do not cater for situa-
tions in which imported goods have been damaged
before entry into free circulation into the Community. In
this respect it should be noted that, since the measures
should not go beyond what is necessary for the removal
of injury, due account should be taken of the possible
value reduction in cases of damage before the goods
enter into free circulation into the Community.

3. Investigation

The Commission officially advised exporting producers,
the importers, the users known to be concerned and
their associations, the representatives of the exporting
country concerned and the Community producers about
the initiation of the proceeding.

Interested parties were given the opportunity to make
their views known in writing and to request a hearing
within the time limit set out in the Notice of Initiation.

One chamber of commerce in the country concerned, as
well as an association of Community producers and
Community importers/traders, made their views known
in writing. All parties who so requested within the set
time limit and who demonstrated that there were parti-
cular reasons why they should be heard were granted
the opportunity to be heard.

(4)

(5)

(6)

(7)

(8)

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(9)

The Commission sought and verified all the information
it deemed necessary for the purpose of a determination
of the appropriateness of the measures in force.

B. SALES MADE TO RELATED AND UNRELATED

PARTIES

(10) When they export to related companies in the Commu-
nity, exporters subject to measures are in a position to
invoice at a price above the MIP, and to subsequently
compensate such a price after customs declaration. This
may render the MIP ineffective, as it may mean that the
product concerned is effectively still exported below the
MIP to the Community. Accordingly, this could lead to
subsequent
in the Community which
prevent that the intended effects of the measure, i.e. to
remove the injurious effects of dumping, are achieved.

resale prices

(11)

If, however, sales made by exporters located in the PRC
to related importers in the Community were subject to
an ad valorem duty,
the serious risk of such a duty
evasion between related parties would be considerably
reduced and any possible price manipulation would be
more easily detected. Indeed, an ad valorem duty would
be assessed in relation to the value in view of
the
existing rules on the determination of the customs value
of goods imported into the Community as set out in the
Community Customs Code (1). For transactions made
the Community Customs
between unrelated parties,
Code assumes that
imported goods for
the value of
customs purposes is normally the transaction value. In
order for a transaction value between related parties to
be accepted by customs, the exporter must demonstrate
that this value closely approximates to one of the trans-
action values as defined in Article 30 of the Community
Customs Code. It is part of the daily activity of customs
authorities to detect possible underestimates of the trans-
action values so determined.
the customs
authorities detect an artificially low transfer price
between related parties,
they will calculate a new
customs value that would then be higher. The Commu-
nity customs legislation (2) provides an exhaustive defini-
tion of ‘related parties’ for customs purposes. It is there-
fore part of the routine activity of the customs authori-
ties to determine if a transaction is made between related
parties, and hence the customs authorities are well
equipped to identify the status of parties dealing with
the product concerned. As a result, should an ad valorem
duty be applied, customs authorities would be in a posi-
tion to detect any irregular value declaration between
related parties,
circumvention more
difficult.

thus making

Indeed,

if

(13)

(14)

including anti-absorption investigations, since these low
transaction values will be taken as a basis for the deter-
mination of the new export price with the potential of
an increase of the dumping margin. In this context, in
the case of an ad valorem duty, the (low) transaction
values are evidenced in the relevant shipping documents.

Finally, it should also be considered that the incentive
for related parties to manipulate prices is higher in case
of an MIP.
Indeed with an MIP, price manipulations
could lead to avoiding the anti-dumping duty comple-
tely. In the case of an ad valorem duty, on the other hand,
possible price manipulations will only lead to a lower
duty, as the duty is a percentage of whatever price is
being charged. The risk of manipulation is therefore
higher when an MIP applies than when an ad valorem
duty applies.

Community producers requested that no change in the
form of the measures should be applied for transactions
between related importers. They argued that there is a
risk that national customs authorities will not properly
identify the status of related importers. As a conse-
quence, it is claimed that unrelated importers might hold
themselves out to be related importers, thus benefiting
from the ad valorem duty as opposed to the MIP in an
unjustified manner. In this respect, as mentioned above,
customs authorities are in a position to identify the
status of the parties involved. Moreover, whatever its
form,
i.e. whether a minimum import price or an ad
valorem duty, the effect of the duty is the same, namely
to remove the effects of injurious dumping. For these
reasons, even in the unlikely event
importers
wrongly hold themselves out to be related, the duty will
still have the same effect, whilst
the overall risk of
circumvention is considered to be lessened.

that

(15) Given the above, it is also concluded that if sales made
by exporters located in the PRC to related parties in the
Community were subject to an ad valorem duty, the risks
of circumvention of the duty would be much reduced.
The request by Community producers not to change the
form of the measures for related importers is therefore
rejected.

(12) A duty will have to be paid based on the amount of the
transaction value. Should parties reduce the transaction
value, this will have consequences in subsequent reviews,

(16)

(1) OJ L 302, 19.10.1992, p. 1.
(2) Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying
down provisions for the implementation of Council Regulation
(EEC) No 2913/92 establishing the Community Customs Code (OJ L
253, 11.10.1993, p. 1). Regulation as last amended by Regulation
(EC) No 444/2002 (OJ L 68, 12.3.2002, p. 11).

Community producers also argued that the definition of
price in the operative part of Regulation (EC) No 1334/
1999 ‘net,
free-at-Community-frontier’ still allows the
importer to clear the goods at the end-customer's ware-
house, including all logistics costs incurred from ‘cif free
out’ to ‘franco end-customer’ and that thereby the import
price may be artificially high. It was therefore requested
to change the wording to ‘free-at-Community-port’.

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(17) However, the customs value arrived at by the definition
‘net, free-at-Community-frontier’ includes only the cost
of transport and insurance of the imported goods, and
loading and handling charges associated with the trans-
port of the imported goods to the place of import into
the Community customs territory. Consequently, costs
incurred after import
from the frontier to the end-
customer are not included and the request is therefore
rejected as unfounded.

(22) One importer argued that there should be no differentia-
tion between direct and indirect sales to the Community
as this would lead to an unequal treatment of different
importers. For instance, importers buying the products
via traders in third countries would be disadvantaged
compared to importers buying the product directly from
an exporter in the country concerned, even if all compa-
nies involved were unrelated.

(23)

(18)

The Community industry also argued that in order to
avoid any absorption of measures,
the
measure should be a double duty, i.e. an MIP or an ad
valorem duty, whichever is the higher in order to avoid a
possible manipulation of prices. The argument was not
substantiated and is therefore rejected.

the form of

(19) One chamber of commerce finally argued that any trans-
action at a price which is at or above the MIP level
should be enough to remove the injury, regardless if
such transaction is destined to a related or unrelated
party.
If an ad valorem duty were applied to a price
which is at or above the MIP level, the protection would
go beyond the level necessary to remove injury.

(20)

In this respect, it is stressed that whatever its form, i.e.
whether a minimum import price or an ad valorem duty,
the effect of the duty is the same, namely to remove the
effects of injurious dumping. On the other hand, it is
not proposed that the ad valorem duty should be applied
in addition to the MIP, but instead of the MIP. In addi-
tion, as pointed out above, exporters of products for
which anti-dumping measures are in place could easily
invoice at an artificially high price (i.e. above the MIP)
when they export to related companies in the Commu-
nity, and subsequently compensate such a price after
customs declaration. This may render the MIP meaning-
less and subsequent resale prices in the Community may
not achieve the intended effects of the measure. For
these reasons, and considering the serious risk of price
manipulation in sales between related parties, the argu-
ment made by the chamber of commerce is rejected.

C. DIRECT/INDIRECT SALES BETWEEN UNRELATED

PARTIES

(26)

(21) As regards sales between unrelated parties, a further
distinction should be made between direct sales (i.e.
between an importer in the Community and an exporter
in the country concerned) and indirect sales (i.e. not
made directly from an exporter in the country concerned
to an importer in the Community), since in the latter
case the same risk of price manipulation exists.

It

is considered that

First it should be borne in mind that the two types of
duty have the effect of removing the effects of injurious
dumping, and thus represent the same level of duty.
Furthermore, the distinction between direct and indirect
sales is motivated by the necessity to limit the risk of
price manipulation.
this risk is
prevalent in all cases where sales are not made directly
from an exporter located in the PRC to an unrelated
importer in the Community, as a consequence of the
higher number of parties involved and the difficulty for
the customs authorities to verify the full chain of events
when sales are made via traders in third countries. The
seriousness of these risks is underscored by the findings
of the European Court of Auditors in its 2000 Annual
Report (1). Due to the serious risk of price manipulation
in indirect sales, which is considered to outweigh the
potential disadvantage to importers sourcing from third
countries, the importer's argument is rejected.

(24)

It is therefore concluded that sales made by exporters
located in the PRC directly to an unrelated party in the
Community shall remain subject to the MIP, which was
found to be the appropriate measure in the original
investigation. However,
in order to avoid the risk of
price manipulation, in all other cases an ad valorem duty
rate of 27,1 % as previously established (2) shall apply.

D. DAMAGED GOODS

(25) Article 145 of Commission Regulation (EEC) No 2454/
93 foresees that, for the determination of the customs
value, an apportioning of
the price actually paid or
payable in situations where goods have been damaged
before entry into free circulation takes place. Conse-
quently ad valorem duties on damaged goods follow the
decrease in prices paid or payable when a good has been
damaged, and the duty payable is automatically reduced.

In the case of damaged goods for which an MIP is in
place, the duty payable, i.e. the difference between the
MIP and the net,
free-at-Community-frontier price,
before customs clearance, is not automatically adjusted
downwards. As a consequence, if the same MIP applic-
able to non-damaged goods would also apply to
damaged goods, the measures could go beyond what is
necessary for the removal of injury.

(1) OJ C 359, 15.12.2001, p. 1, recitals 1.31 and 1.35.
(2) Council Regulation (EEC) No 1473/93 (OJ L 145, 17.6.1993, p. 1).

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(27)

(28)

(29)

(30)

In order to avoid the situation described the MIP should,
in case of damaged goods, be reduced by a percentage
which corresponds to the apportioning of the price actu-
ally paid or payable. The duty payable will then be equal
to the difference between the reduced MIP and the
free-at-Community-frontier price, before
reduced net,
customs clearance.

in order to avoid
Community producers argued that,
the customs value for
the determination of
fraud,
damaged goods should be assessed by an independent
expert.

The valuation of goods, damaged or not, is carried out
by the customs authorities according to the well-estab-
lished rules set out in the Community Customs Code. In
view of these rules, which ensure a sufficient degree of
it is considered that there is no need for
impartiality,
further
is therefore
rejected.

specific provisions. The request

In the absence of any substantiated argument from inter-
ested parties, it is concluded that in cases where goods
have been damaged before entry into free circulation,
the duty payable should be equal
to the difference
between the reduced minimum import price and the
reduced net,
free-at-Community-frontier price, before
customs clearance,

HAS ADOPTED THIS REGULATION:

‘2.

The amount of the anti-dumping duty shall be:

(a) the difference between the minimum import price of
EUR 112 per tonne and the net, free-at-Community-
frontier price, before duty, in all cases where the latter
is:
— less than the minimum import price, and
— established on the basis of an invoice issued by an
exporter located in the People's Republic of China
directly to an unrelated party in the Community
(TARIC additional code A420);

(b) zero,

if

the net,

free-at-Community-frontier price,
before duty, is established on the basis of an invoice
issued by an exporter located in the People's Republic
of China directly to an unrelated party in the Commu-
nity and equal to or higher than the minimum import
price of EUR 112 per tonne (TARIC additional code
A420);

(c) equal to an ad valorem duty of 27,1 % in all other cases
not falling under subparagraph (a) and (b) (TARIC addi-
tional code A999).

In cases where the anti-dumping duty is established
according to subparagraph 2(a) of Article 1 and where
goods have been damaged before entry into free circulation
and, therefore, the price actually paid or payable is appor-
tioned for the determination of the customs value pursuant
to Article 145 of Commission Regulation (EEC) No 2454/
93, the minimum import price set out above shall be
reduced by a percentage which corresponds to the appor-
tioning of the price actually paid or payable. The duty
payable will then be equal to the difference between the
reduced minimum import price and the reduced net, free-
at-Community-frontier price, before customs clearance.’

Article 1

Article 2

Article 1(2) of Regulation (EC) No 1334/1999 shall be replaced
by the following paragraphs:

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

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

Done at Luxembourg, 5 June 2003.

For the Council

The President

M. STRATAKIS