Commission Regulation (EC) No 658/2004 of 7 April 2004 imposing definitive safeguard measures against imports of certain prepared or preserved citrus fruits (namely mandarins, etc.)
Date: 2004-04-07
Institutions: European Commission
Subjects: citrus fruit, fruit product, import, preserved product, protective clause

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COMMISSION REGULATION (EC) No 658/2004

of 7 April 2004

imposing definitive safeguard measures against imports of certain prepared or preserved citrus
fruits (namely mandarins, etc.)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 3285/94 of 22 December 1995 on common rules for
imports and repealing Regulation (EC) No 518/94 (1), as last amended by Regulation (EC) No 2474/
2000 (2), and in particular Articles 7 and 16 thereof,

Having regard to Council Regulation (EC) No 519/94 of 7 March 1994 on common rules for imports
from certain third countries and repealing Regulations (EC) No 1765/82, (EEC) No 1766/82 and (EEC) No
3420/83 (3), as last amended by Regulation (EC) No 427/2003 (4), and in particular Articles 6 and 15
thereof,

After consultations within the Advisory Committee established under Article 4 of Regulation (EC) No
3285/94 and of Regulation (EC) No 519/94 respectively,

Whereas:

1. PROCEDURE

(1)

(2)

(3)

(4)

(5)

On 20 June 2003, the Spanish Government informed the Commission that trends in imports of
prepared or preserved citrus fruits (namely mandarins, etc.) appeared to call for safeguard measures
under Regulations (EC) No 3285/94 and (EC) No 519/94, submitted information containing the
evidence available as determined on the basis of Article 10 of Regulation (EC) No 3285/94 and
Article 8 of Regulation (EC) No 519/94, and requested the Commission to take safeguard measures
under those instruments.

Spain claimed that there had been recent substantial and rapid increases in imports of the product
concerned, both in absolute terms and relative to Community production and consumption. Further-
more, Spain alleged that the increase in the volume of imports into the European Community had
had a negative impact on the price level in the Community and in the market share and the volume
sold by the Community producers, causing them serious damage. Spain also urged the adoption of
Community safeguard measures as a matter of urgency.

The Commission informed all Member States of the situation and consulted with them on the terms
and conditions of imports, import trends and the serious injury or threat thereof and the various
aspects of the economic and commercial situation with regard to the Community products in ques-
tion.

On 11 July 2003, the Commission initiated an investigation relating to serious injury or threat
thereof to the Community producers of products like or directly competing with the imported
product.

Following a preliminary investigation, the Commission imposed provisional safeguard measures
against
imports of certain prepared or preserved citrus fruits (namely mandarins, etc.) under
Commission Regulation (EC) No 1964/2003 (5) of 7 November 2003.

(1) OJ L 349, 31.12.1994, p. 53.
(2) OJ L 286, 11.11.2000, p. 1.
(3) OJ L 67, 10.3.1994, p. 89.
(4) OJ L 65, 8.3.2003, p. 1.
(5) OJ L 290, 8.11.2003, p. 3.

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(6)

(7)

(8)

(9)

(10)

(11)

(12)

The Commission continued to a full investigation in relation to the product concerned and officially
advised the exporting producers and importers as well as their representative associations known to
be concerned, the representatives of exporting countries and the Community producers.

Certain exporting producers, Community producers and importers submitted comments in writing.
All interested parties who requested a hearing within the time limit set, and who indicated that they
were likely to be affected by the result of the proceeding and that there were particular reasons why
they should be heard, were granted such a hearing. The oral and written comments submitted by
the parties were considered and taken into account in reaching the definitive findings. The Commis-
sion sought and verified all the information which it deemed necessary for the purpose of a defini-
tive determination.

2. RESULTS OF THE INVESTIGATION

2.1. PRODUCT CONCERNED AND LIKE OR DIRECTLY COMPETING PRODUCT

2.1.1. Product concerned

The product in respect of which the Commission has been informed that trends in imports appear
to call for safeguard measures is certain prepared or preserved mandarins (including tangerines and
satsumas), clementines, wilkings and other similar citrus hybrids, not containing added spirit,
containing added sugar (the product concerned).

The product concerned is currently classified within CN codes 2008 30 55 and 2008 30 75. These
CN codes correspond to the product concerned in immediate packing of a net content exceeding
1 kg, and of net content not exceeding 1 kg, respectively.

The investigation showed that the product concerned is obtained by peeling and segmenting certain
varieties of small citrus fruit (mainly satsumas) which are then packaged in a medium of sugar syrup
(14 to 16 %). Peeling and segmenting can either be carried out manually or by machine.

The product concerned is produced in various weights to meet the demands both of the consumer
market and of the catering and food industries. The vast majority of the consumer market is taken
by the 312 g net weight/(175 g drained) size, although the share of sales taken by the larger
850 g/(480 g) size is increasing. Larger packaging sizes, particularly those of 2,65 kg/(1 500 g)
and 3,1 kg/(1 700 g), are used by the catering and food industries, with the 2,65 kg format being
most popular.

Satsumas, clementines and other small citrus fruit are commonly known by the collective name
‘mandarin’. Most of these different varieties of fruit are suitable to be used as fresh produce or for
juicing or canning. They are similar, and indeed fresh mandarins (including tangerines and
satsumas), clementines, wilkings and similar citrus hybrids all fall under a single CN code at six-digit
level (0805 20).

(13)

Certain exporting producers argued that not only canned mandarins, but all canned fruits, should be
treated as a single imported product concerned.

(14)

The Commission rejected this argument and confirmed that there is a difference between canned
mandarins and other types of canned fruit. The fresh fruit from which other types of canned fruit
are manufactured have different codes in the Combined Nomenclature at the six-digit level. Whilst it
is true that canned mandarins and other canned fruit fall within HS code 2008, so too do other
products which are diverse. Therefore, falling within HS code 2008 is not considered, of itself, to be
an important factor. Whilst, different types of canned fruit (both single variety and mixed variety)
share some characteristics (e.g. long shelf-life, preservation in sugar syrup or fruit juice), the taste,
texture, size, shape and colour of the products are different and they are not readily substitutable for
canned mandarins. Although, all are foodstuffs, their principal end-uses are also different. Moreover
the production process in relation to each product is different (depending on whether or not the
fruit requires to be dried, peeled, chopped, sliced or segmented).

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(15) Another argument was that prepared and preserved fruit and fresh fruit are one imported product
concerned. That argument was also rejected. Prepared and preserved fruit fall under a different tariff
classification from fresh fruit at four-digit level. Fresh fruit is not processed, and has a limited shelf-
life. It is generally washed, peeled, stoned, sliced, chopped or otherwise processed by the end-user. It
is generally considered to have different characteristics such as taste, texture etc. to prepared and
preserved fruit as well as different end uses.

(16) Notwithstanding the fact that the product concerned can be manufactured from a number of distin-
guishable types of small citrus fruit, that it comes in different qualities, and that it is packaged in
immediate packings of various different sizes, the Commission's enquiry indicates that they all have
identical or similar physical characteristics, uses and applications. Accordingly, the Commission's
determination is that the product concerned forms one single product falling under the relevant CN
codes listed above.

2.1.2. Like or directly competing products

(17)

The Commission has examined whether the product produced by the Community producers (here-
inafter referred to as the like product) is like the imported product concerned.

(18)

The product concerned is produced in different qualities, generally with around 10 % or less of
broken fruit segments (referred to as ‘fancy’ quality). All others are referred to as ‘standard’. Some
cooperating exporters and importers alleged that canned mandarins originating in the People's
Republic of China (PRC) were of better quality than those of EU origin because they were peeled by
hand, claiming that imports from PRC usually contained a lower percentage of broken segments.
However, whilst a large majority of imports originate in PRC, there is conflicting evidence as to the
quality/perceived quality of the product concerned and the like product and this quality argument
could not be substantiated:

— one importer traded premium and also discount brands of the product concerned. The verifica-
tion showed that in 2002 he bought slightly larger quantities of premium brand product from
Spain than from PRC and imported all his discount brand quantities from PRC,

— in order to ensure the quality of their product and the highest standards of hygiene, the Com-
munity producers have invested heavily in extensive modernisation programmes and their
processes are highly automated. Community producers pointed out that as a result of concerns
as to the rigour with which hygiene controls are applied to imported products during the
canning process, there is a consumer preference in some countries for canned mandarins
produced by the Community producers.

(19)

In these circumstances, the Commission determination of this issue is that there is no significant
difference in either the actual quality or the perceived quality of the product concerned and that
produced by the Community producers, although some slight differences both in actual quality and
perceived quality do exist.

(20)

In reaching its determination, the Commission took into account in particular the following findings
of the investigation:

(a) the imported product and the Community product share the same international classification for
tariff purposes at HS code level (six digits). Furthermore, they share the same or similar physical
properties such as taste, size, shape and texture. There were some differences in terms of quality
but these were generally not perceived by consumers. Furthermore, the absence of the origin in
the label of certain imported products sold in the European market makes it difficult for the
consumers to distinguish between EU product and imported product;

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(b) the imported product and the Community product were sold via similar or identical sales chan-
nels, price information was readily available to buyers and the product concerned and the
product of the Community producers competed mainly on price;

(c) the imported product and the Community product both serve the same or similar end-uses, they

were, therefore, alternative or substitute products and were easily interchangeable;

(d) the imported product and the Community product were both perceived by consumers as alter-
natives to satisfy a particular want or demand, in this respect the differences identified by certain
exporters and importers were simply minor variations.

(21)

In light of the foregoing, the Commission has concluded that despite the alleged differences in the
product characteristics and qualities identified in aforementioned submissions, the imported product
and the Community product are ‘like’.

2.2. DEFINITION OF THE COMMUNITY PRODUCERS

(22)

(23)

Total Community production of the product concerned was around 40 000 tonnes during the
2002/03 canning season. All production of the product concerned in the Community was carried
out in Spain.

The eight producers (canners) in the Community which cooperated fully in the investigation are all
members of associations integrated with the Spanish National Federation of Associations of
Processed Fruit and Vegetables (FNACV). In the year 2002/03, total Community production of the
product concerned was 39 600 tonnes of which the aforementioned producers accounted for
34 150 tonnes, equivalent to over 85 % of the total Community production. They represent there-
fore a major proportion of total Community production within the meaning of Article 5(3)(c) of
Regulation (EC) No 3285/94 and Article 15(1) of Regulation (EC) No 519/94. They are accordingly
considered as the Community producers for the purposes of this proceeding.

3. INCREASED IMPORTS

3.1. INTRODUCTION

(24)

The Commission has investigated whether the product concerned is imported into the Community
in such greatly increased quantities, absolute or relative to total Community production, and/or on
such terms or conditions as to cause, or threaten to cause, serious injury to the Community produ-
cers. In this respect, the Commission has focused on imports of the product concerned in the most
recent period for which data were available. The table below shows the development of imports for
the years 1998/99 to 2002/03.

EU imports

16 347

17 573

20 335

44 804

44 813

1998/99

1999/2000

2000/01

2001/02

2002/03

Community production

81 869

75 767

60 462

60 329

39 600

Imports/Production

20 %

23 %

34 %

74 %

113 %

3.2. VOLUME OF IMPORTS

(25)

Between 1998/99 and 1999/2000, imports increased by around 7 %. In the following year, the rate
of increase grew to around 16 % with imports increasing to 20 335 tonnes in 2000/01. There then
followed a massive surge in imports between 2000/01 and 2001/02. Imports increased by 120 % in
a single year to 44 804 tonnes, more than 2,5 times the level of imports in 1998/99. Imports
remained at about this level in the 2002/03 canning season.

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These trends are confirmed by the most recent data available. Recent intelligence indicates that
imports into the EU during 2003 (latest period for which data is available) reached around 54 000
tonnes, and peaked in the last quarter with imports of over 17 000 tonnes notwithstanding that
provisional safeguard measures were introduced on 9 November 2003.

(26)

Relative to total Community production, imports increased from 20 % in 1998/99 to 34 % in 2000/
01, to 74 % in 2001/02, and 113 % in 2002/03. These trends are confirmed by the most recent
information.

3.3. MARKET SHARE OF IMPORTS

Market share of imports

20 %

24 %

31 %

56 %

62 %

1998/99

1999/00

2000/01

2001/02

2002/03

(27)

The market share of imports increased between 1998/99 and 2000/01 from 20 to 31 %, before
nearly doubling to 56 % in 2001/02. The market share taken by imports further increased to 62 %
of the consumption in 2002/03. It is the Commission's conclusion that the increases in the recent
past can be considered sudden, sharp and significant when comparing them to developments in
previous canning seasons.

4. IMPORT PRICES

Price EUR/tonne

631

670

792

691

605

1998/99

1999/2000

2000/01

2001/02

2002/03

Source: Eurostat.

(28)

(29)

The average price (cif, EU border) of the imported product increased by 6 % between 1998/99 and
1999/2000, and then by a further 18 % between 1999/2000 and 2000/01, before falling by 13 %
in 2001/02 to 691 EUR/tonne. Average prices continued to fall in 2002/03 reaching EUR 605.
The Commission notes that, although prices increased in 2000/01, the main increase in imports
occurred in 2001/02 against a background of falling prices and that prices continued to fall in
2002/03 (by 12 %).

The downward trend in prices is further confirmed by the most recently available data. Updated
information provided by importers on the evolution of import and resale prices and quantities in
the period April 2003 to December 2003 indicates that prices fell by a further 13,5 % in that
period. As exports of canned mandarins are usually invoiced in US dollars, the fall of the US dollar
against
the euro has contributed to the further price decrease. The exchange rate averaged
USD 1,15: EUR in the period April 2003 to December 2003 against USD 1,08: EUR in the period
2002/03, a drop of 6,6 %. Since the overall price decrease amounted to 13,5 %, it appears that this
fall is not wholly attributable to exchange rate movements but also real price decreases during the
months before and shortly after the imposition of provisional measures.

(30)

In assessing likely future price trends, the Commission also notes that the market leading retailer of
satsumas in Germany lowered the price for a standard tin of 314 ml from 0,35 EUR to 0,29 EUR
as of 5 January 2004 (i.e. after the imposition of provisional measures).

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5. UNFORESEEN DEVELOPMENTS

(31)

In the last five years, a series of events has occurred which led to a sharp increase in imports of the
product concerned, particularly from PRC. This series of events could not have been foreseen at the
time of conclusion of the Uruguay round. It should be noted that the analysis focuses on PRC, as
more than 98 % of imports of the product concerned into the EU are of Chinese origin.

(32) Until the mid 1990s, PRC's capacity for producing the product concerned was large enough to meet
domestic demand and exports to its main and most profitable export markets namely Japan and the
United States of America (West Coast). Chinese exports to the Community were at a low level and
were relatively stable.

(33)

The table below provides estimates of worldwide consumption and of PRC's production capacity,
production, exports and domestic consumption for the canning seasons 1998/99 to 2002/03 on an
indexed basis where estimated worldwide consumption in 1998/99 is equal to 100.

Worldwide consumption

100

115

113

137

141

1998/99

1999/2000

2000/01

2001/02

2002/03

Chinese production capacity

Chinese production

Chinese domestic consumption

Chinese total exports (estimated)

70

57

5

48

96

82

9

65

113

139

148

86

12

70

109

124

16

96

20

104

Source: Eurostat and other publicly available information as well as information submitted in the investigation. The data is

indexed because the party providing the Chinese data requested that this be treated as confidential.

(34)

(35)

In 1998/99, Chinese domestic consumption was 5, whilst production capacity was 70, with actual
production of 57 (greatly in excess of what was needed to supply domestic needs). By 2002/03,
Chinese domestic consumption had increased to 20, but Chinese production capacity had increased
to 148, with actual production of 124 (88 % of estimated worldwide consumption). Although
Chinese consumption has been increasing rapidly, it remains low in real terms. Whilst worldwide
consumption has been increasing, it has done so gradually (by around 7 % per annum). In these
circumstances, it was not foreseeable that Chinese production capacity would soar by 16 % per
annum and outstrip worldwide consumption by 2002/03, leaving no room for other producers. As
PRC's domestic consumption has increased to only 20, the increase in Chinese production capacity
and production clearly increased pressure on PRC to export very large quantities (and indeed,
exports more than doubled from 48 to 104 in the period considered). These figures can be given
some context by considering that Chinese exports in 2002/03 were more than three times total esti-
mated consumption in the European Community in that year.

It appears that the EU/US trade dispute over hormones in meat was also a factor in the increase in
Chinese exports to the EU. The list of products that the United States of America proposed to make
subject to retaliatory measures in relation to that dispute included the product concerned. This
appears to have been perceived by Chinese producers as providing an opportunity to substantially
increase their exports to the United States of America in replacement of the EU product, and
encouraged considerable expansion of Chinese canning capacity. However, the opportunity never
materialised, and PRC was faced with significant excess capacity for which it had to find alternative
outlets. The most attractive market appeared to be the EU, and PRC massively increased its exports
to the EU market.

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(36)

(37)

Chinese monetary policy, in terms of which the yuan is pegged to the US dollar at around 8,28
yuan/USD, despite perceived differences in the relative values of the two currencies, has also encour-
aged exports. This made it much more likely that the product concerned would be exported, rather
than being sold on the Chinese domestic market. Further, following the unexpected fall in the value
of the US dollar against the euro since October 2000, the yuan lost value compared to the euro
making the European market all the more attractive to Chinese exporters.

In conclusion, it is the Commission's analysis that the unforeseen developments which caused the
increase in imports to the Community consists of a number of concurrent factors: the unprece-
dented increase in Chinese production capacity leading to high pressure to export; the possibility
that United States retaliatory measures in the hormones dispute would exclude the EU product from
the United States, encouraging an increase in PRC's capacity and consequently production; a change
in consumer preferences from 2001 onwards and the exchange rate policy of the Chinese govern-
ment coupled with the unexpected fall of the United States dollar since October 2000. This combi-
nation of factors, clearly unforeseeable at the end of the Uruguay Round, created the conditions for
an unprecedented increase in imports to the Community.

6. SERIOUS INJURY

6.1. INTRODUCTION

(38)

In order to make a definitive determination as to whether there is serious injury to the Community
producers of the like product, i.e. a significant overall impairment in the position of the Community
producers, the Commission finalised its evaluation of all relevant factors of an objective and quantifi-
able nature having a bearing on the situation of the Community producers. In particular, for the
product concerned, the Commission evaluated the development of production capacity, production,
capacity utilisation, employment, productivity, cash flow, return on capital employed, captive use,
stocks, consumption, sales, market share, price, undercutting and profitability for the seasons 1998/
99 to 2002/03.

(39) An analysis of Community consumption, although not in an injury indicator, is also given.

6.1.1. Consumption

Consumption (t)

80 065

74 056

65 676

80 960

72 843

1998/99

1999/2000

2000/01

2001/02

2002/03

(40)

(41)

Consumption of the product concerned in the Community was established on the basis of total sales
made by the Community producers and other EU producers and total
imports of the product
concerned into the Community as reported by Eurostat.

Between 1998/99 and 2000/01, consumption in the Community declined by 18 % from 80 065
tonnes to 65 676 tonnes. Between 2000/01 and 2001/02, it grew by 23 % to reach its highest level
for the period under examination (80 960 tonnes). In the most recent season (2002/03) there was a
10 % decline in consumption compared to 2001/02, with consumption closer to its average for the
period under consideration (74 720 tonnes per annum).

6.1.2. Production capacity and capacity utilisation

Capacity (t)

126 760

129 260

129 260

129 260

129 260

1998/99

1999/2000

2000/01

2001/02

2002/03

Capacity utilisation

65 %

59 %

47 %

47 %

31 %

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(42)

(43)

(44)

(45)

(46)

(47)

The Commission has analysed the Community producers' production capacity on the basis of full
season production capacities (1 October to 30 September in the following year). The like product is
produced from November until February using production facilities some of which can be used for
processing other fruit and vegetables during the rest of the year. However, from November until
February there are no other fruits or vegetables available for processing in the regions concerned
(Valencia and Murcia, Spain).

The investigation confirmed that overall estimated theoretical production capacity remained stable
throughout the period of the investigation with only one small increase (of 2 %) recorded between
1998/99 and 1999/2000.

Capacity utilisation fell between 1998/99 and 1999/2000 from 65 to 59 %. This fall is partially
explained by the 2 % increase in capacity in that year, but the greater part is explained by a fall in
production of 7,5 % from 81 869 tonnes to 75 767 tonnes. Capacity utilisation fell by a further 12
percentage points in 2000/01 (to 47 %). It remained stable in the following year but then fell to
31 % (a fall of 16 percentage points) in 2002/03. The falls in capacity utilisation, from 1999/2000
onwards reflect the falls in production in the same periods.

6.1.3. Total Community production

Production (t)

81 869

75 767

60 462

60 329

39 600

1998/99

1999/2000

2000/01

2001/02

2002/03

Total Community production fell between 1998/99 and 2001/02 from 81 869 tonnes to 60 329
tonnes. Thereafter, production fell by a further 35 % in the season 2002/03 to its lowest level in the
period under examination.

The trend in production is confirmed by the most recently available data (2003/04) which indicate a
further fall in production to 26 165 tonnes (partial data). The Community producers cannot invest
and commit to produce unless they have advance orders from their major customers. However, they
are unable to obtain such orders as they cannot compete on price.

6.1.4. Employment

Employment (end of period)

2 502

2 441

2 462

2 419

2 343

1998/99

1999/2000

2000/01

2001/02

2002/03

Employment in relation to the product concerned fell in 1999/2000. It then recovered slightly in
2000/01 before falling further in 2001/02 and 2002/03. In addition to the fall in employment
recorded by the Community producers, there was also a reduction in employment in mandarin
canning in the Community during the five-year period as some producers involved in canning the
product concerned in the Community ceased this activity before the opening of the safeguard inves-
tigation. It is to be noted that the large majority of the workforce is represented by seasonal
workers. For this reason, this table should be considered in conjunction with the following table on
hours worked.

6.1.5. Hours worked and productivity

Hours worked

944 000

985 000

823 000

861 000

625 000

1998/99

1999/2000

2000/01

2001/02

2002/03

Productivity (hours worked/tonne)

15,9

16,8

15,6

16,8

17,7

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(48) A more accurate picture of the impact on employment by the Community producers is seen from
hours worked, which includes the employment of seasonal workers. The number of hours worked
also provides a more accurate basis for measuring productivity than the number of employees.

(49)

In general, a steady decline in the number of hours worked can be observed, with a fall from
861 000 to 625 000, a fall of 27 % in the most recent period. Productivity fell slightly between
1998/99 and 2001/02 from 15,9 hours worked per tonne produced to 16,8 hours worked, and
further declined to 17,7 hours in the last season (2002/03). It is to be noted that variances in
productivity are mainly due to the yield of the fresh product.

6.1.6. Cash flow and return on capital employed (ROCE)

Financial year

Cash flow (index: 1999 = 100)

1998

2

1999

100

ROCE

15,1

18,9

2000

80

9,3

2001

116

9,8

2002

-4

8,1

(50)

Cash flow and ROCE could only be examined at the level of the cooperating companies which
produced the product concerned (rather than in relation to the product concerned) and are shown
in calendar years. These indicators are therefore less meaningful than the other indicators. Neverthe-
less, it can be seen that cash flow and ROCE were substantially reduced in the most recent period.

6.1.7. Sales volume

Sales volume in the Community (t)

63 718

56 483

45 341

36 156

28 030

1998/99

1999/2000

2000/01

2001/02

2002/03

(51)

Sales in the Community of the like product by the Community producers fell from 63 718 tonnes
to 45 341 tonnes between 1998/99 and 2000/01, reflecting the fall
in consumption and the
increase in imports in that period. However, despite increased consumption in the following year,
sales continued to fall between 2000/01 and 2001/02 (by 20 %) reaching 36 156 tonnes, as imports
more than doubled to 44 804 tonnes. This reflects the increasing dominance of imports in the
market. In the most recent period, sales have continued to fall to 28 030 tonnes in 2002/03, the
lowest historical level, representing a decrease of 56 % in four years.

6.1.8. Market share

Market share

79 %

76 %

69 %

44 %

38 %

1998/99

1999/2000

2000/01

2001/02

2002/03

(52)

The Community producers' market share fell from 79 to 69 % between 1998/99 and 2000/01, to
44 % in 2001/02 and to 38 % in 2002/03. The substantial falls in the last two seasons demonstrate
the increasing market penetration of imports in those periods, which occurred despite the fact that
Community producers lowered their prices by 17 % between 2000/01 and 2001/02 and a further
6 % in 2002/03.

(53)

The combination of the fall in prices and loss of market share to imports occurred at the same time
as a significant fall in the profitability of the Community producers (discussed below).

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6.1.9. Price of the like product and undercutting

1998/99

1999/2000

2000/01

2001/02

2002/03

Unit prices of Community sales
(EUR/tonne)

826

790

925

827

781

Unit prices of Chinese exports plus
customs duty (EUR/tonne) (*)

732

773

910

790

691

Undercutting (EUR/tonne)

Undercutting

(*) Source: Eurostat.

94

11 %

17

2 %

15

2 %

37

4 %

90

12 %

(54)

(55)

The average price of the like product fell between 1998/99 and 1999/2000 but recovered in 2000/
01, increasing by 17 % to EUR 925 per tonne. The average price again fell to EUR 827 per tonne
in 2001/02, and further declined to EUR 781 per tonne in 2002/03.

In order to determine the level of undercutting, price information was examined for comparable
time periods, at the same level of trade and for sales to similar customers. Based on a comparison of
average ex-works prices charged by the Community producers and by exporting producers to the
Community importers (cif EU border including customs duty), domestic prices were undercut
throughout the five periods examined by between 2 and 12 %.

6.1.10. Profitability

Net profit/loss on Community sales

4,0 %

0,5 %

6,8 %

-1,7 %

-4,3 %

1998/99

1999/2000

2000/01

2001/02

2002/03

(56)

The profitability of the Community producers' sales in the Community varied significantly in the
five-year period under consideration. The lowest profitability was recorded in 2001/02 and in 2002/
03, and the highest in 2000/01. In 2002/03, as imports increased to their highest level in the
period under consideration, the average price of imports fell to EUR 605 per tonne and the average
price of the Community product fell to EUR 781 per tonne. This fall in prices taken together with
the fall in sales volume occurred at the same time as the Community producers' profitability fell
from 6,8 % to (- 1,7 %) in 2001/02 and this trend continued into a worse loss making situation (-
4,3 %) in 2002/03.

(57) Underselling reflects the extent to which the price of the imported product is lower than the price
which the Community producers could be expected to achieve in a non-injurious situation. The
level of underselling was calculated on the basis of the weighted average non-injurious price per
tonne of the Community product. This price was calculated by taking the respective cost of produc-
tion for the Community product (adjusted to take account of transport costs to ensure a proper
comparison with imports delivered to the main geographical area for consumption) to which was
added a profit margin of 6,8 %. This profit margin was considered reasonable as it refers to profits
of the Community producers in a normal trading situation unaffected by a sudden sharp rise in
imports. This non injurious price was compared with the weighted average price per tonne of the
imported product concerned during the period April to December 2003, at the same level of trade,
cif Community border, customs duty, post importation costs and with importers' profit added. The
difference between these two prices was expressed as a percentage of the cif/Community border
price of the imported product, and resulted in underselling of 57,9 %.

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6.1.11. Stocks

Closing stock (t)

13 016

10 628

11 205

17 279

11 069

1998/99

1999/2000

2000/01

2001/02

2002/03

(58)

Stock levels fell between 1998/99 and 2000/01, but then increased significantly in 2001/02 before
falling again in 2002/03 to their level in 2000/01, as the Community producers reduced their high
stock levels by cutting production. The increase in stock between 2000/01 and 2001/02 coincided
with a fall in the Community producers' sales volume in the Community of 20 %, and was found to
be chiefly attributable to that fall in sales volume.

6.1.12. Conclusion

(59)

(60)

(61)

(62)

The data shows that whilst production capacity increased slightly at the beginning of the period
under consideration, there is negative development for capacity utilisation, production, employment,
productivity, cash flow and ROCE. Overall, before the background of consumption which declined
for two years and recovered to close to its previous level before declining again in 2002/03, the
data shows negative developments for sales, market share, prices and profitability in both 2001/02
and 2002/03. There was an increase in stocks in 2001/02, but these returned to their previous level
in 2002/03.

In particular, the Commission notes that whilst, in 2001/02, as imports more than doubled (44 804
tonnes), the Community producers' sales volume in the Community reached a low level (36 156
tonnes) and the Community producers' profitability fell to (- 1,7 %). This occurred against an
increase in consumption in that year. Against such a background, whilst imports could have been
expected to follow the consumption level and prices could have been expected to firm, imports
more than doubled and the price of both the imported product and that produced by the Com-
munity producers fell.

Further, in 2002/03, although consumption fell by 10 % there was no fall in the level of imports
and the main impact of the fall in consumption was borne by the Community producers whose
sales fell by 22 % whilst their prices fell by 6 %. This together with a stock overhang from the
previous year necessitated a significant reduction in production by the Community producers.

This combination of factors is reflected in the economic indicators pertaining to the Community
producers The Community producers have lost market share, which reached its lowest level
in
2002/03. They have also suffered a reduction in sales in absolute terms in both 2001/02 and 2002/
03. In consequence, they have been forced to reduce production in each of these years. As a result,
their capacity utilisation has fallen in both 2001/02 and in 2002/03. Productivity and employment
have also fallen in both 2001/02 and in 2002/03. The overall effect of the falls in Community sales
volume and prices is a reduction in the Community producers' sales revenue by 29 % from
EUR 41,9 million in 2000/01 to 29,9 million in 2001/02 and EUR 21,9 million in 2002/03. At
the same time, the profitability of the Community producers fell from 6,8 % to (- 1,7 %) in 2001/02
and (- 4,3 %) in 2002/03.

(63)

Taking account of all of these factors the Commission concludes that the Community producers
have suffered serious injury.

7. CAUSATION

(64)

In order to examine the existence of a causal link between increased imports and the serious injury,
and in order to ensure that injury caused by other factors is not attributed to increased imports, the
Commission has proceeded as follows:

— the injurious effects of factors considered to be causing injury have been distinguished from

each other,

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— these injurious effects have been attributed to the factors which are causing them, and,

— after having attributed injury to all causal factors present, the Commission has determined

whether increased imports are a ‘genuine and substantial’ cause of serious injury.

7.1. ANALYSIS OF CAUSATION FACTORS

7.1.1. Effect of increased imports

(65)

The market for canned mandarins is transparent as regards sources of supply and customers. As
canned mandarins are essentially a commodity product, the product concerned and the like product
compete mainly on price.

(66)

In the period 2000/01 to 2002/03, the market share of imports grew from 31 to 56 % and then
62 %, whilst the market share of the Community producers fell from 69 to 44 % and then 38 %.
Over the same period, imports have grown from 34 to 74 % and on to 113 % of Community
production indicating that imports have also increased relative to production, at the expense of the
Community producers.

(67) As to prices, between 2000/01 and 2002/03, the Eurostat average unit price of the imported
product on the Community market fell from EUR 792 to EUR 691 and then to EUR 605 per
tonne. Over the same period, the average unit price of the Community product fell from EUR 925
to EUR 827 and then EUR 781 per tonne. The effect of the fall in the average unit price of the like
product alone on the Community producers' revenue from sales in the Community would have
been a reduction of 11 % (EUR 4,4 m) in 2001/02, and a further reduction of 6 % (EUR 1,7 m) in
2002/03. Taking account of the simultaneous fall in sales volume the actual fall in sales revenue in
the Community was EUR 12 m in 2001/02 and of EUR 8 m in 2002/03. These reductions in
sales revenues (together with increased costs) created a significant fall in profitability and the Com-
munity producers showed a loss of 1,7 % in 2001/02 and of 4,3 % in 2002/03.

(68)

For the foregoing reasons, the Commission concludes that there is a correlation between the increase
in imports at low prices and the serious injury suffered by the Community producers, and that the
increase in imports has had injurious effects in particular in terms of downward pressure on prices
and a reduction in the volume sold by the Community producers on the Community market.

7.1.2. Effect of changes in consumption

(69)

(70)

The Commission has carried out a full examination of the injurious effects of the fall in consump-
tion between 1998/99 and 2000/01. That fall has to be considered in the context of the overall
trend during the five-year period under investigation. Consumption decreased from 80 065 tonnes
in 1998/99 to 74 056 tonnes in 1999/2000 and 65 676 tonnes in 2000/01, but then grew by
15 284 tonnes to 80 960 tonnes in 2001/02, before falling back to 72 843 tonnes in 2002/03.

The Commission notes that whilst consumption fell to its lowest level for the period under consid-
eration in 2000/01, that was also the year in which the Community producers achieved their
highest level of profitability (6,8 %). On the other hand, consumption rose in 2001/02 to 80 960
tonnes (its highest level during the period) but the Community producers profitability fell to (-
1,7 %) at the same time. Therefore, there is no clear correlation between consumption itself and the
profitability and general economic situation of the Community producers.

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(71)

In examining the effect of consumption on the profitability of the Community producers, account
has to be taken of the reaction of all market participants to the changes in consumption. In this
respect, it was found that while Community producers were forced to reduce their sales in the Com-
munity by roughly 9 185 tonnes in 2001/02 compared to 2000/01, imports moved sharply in the
other direction (+ 24 469 tonnes). Similarly, in 2002/03, whilst imports continued at their level in
the previous year, the Community producers' sales fell by over 8 000 tonnes.

(72) As regards price effects, variations in consumption of canned goods with a substantial shelf-life
should not normally lead to substantial price effects if production is adjusted to the needs of the
market. In this respect, the Community producers appear to have reacted by reducing both produc-
tion and sales to a greater extent than that necessary to stay in line with the falls in consumption.
This is mirrored by a similar decrease in stocks.

(73)

(74)

Similarly, if price pressure is reduced then the injurious effects which stem from low prices would
also be minimised. The most important factor is profit, where any fall would have been minimised
if prices and sales volumes had not fallen substantially. Therefore, it is reasonable to conclude that,
in the absence of the sharp rise in imports at low prices, the fall in consumption would not have led
to a substantial fall in profits.

If all market participants had adjusted their production, then the Community producers would still
have sold less in 1999/2000, 2000/01 and 2002/03. But consumption in 2001/02 was at its
highest level since 1998/99, and at approximately the same level as in that year. The Community
producers' sales, however, decreased in 2001/02 compared to 1998/99 by 29 438 tonnes, a
decrease of 43 %. At the same time, imports increased in 2001/02 by 28 457 tonnes compared to
1998/99.
therefore increased considerably between 1998/99 and 2001/02 despite
consumption being only slightly higher.

Imports

1998/99

1999/2000

2000/01

2001/02

2002/03

Consumption (t)
ment

actual develop-

80 065

74 056

65 676

80 960

72 843

Market share actual

80 %

76 %

69 %

45 %

38 %

Market share simulation (*)

80 %

71 %

57 %

45 %

35 %

(*) Simulation if the level of consumption was constant throughout the period at its 1998/99 level.

(75)

The above table illustrates that even if consumption had remained constant throughout the period
examined, the Community industry's market share would not have developed in a substantially
different manner. This shows that the development of consumption had only a limited impact on
the market share of the Community industry.

(76)

For the reasons given above,
consumption and the injurious effects observed, this link is not substantial.

it is concluded that, although there is a link between the fall

in

7.1.3. Effect of changes in export performance

Exports (in tonnes)

21 316

21 672

14 544

18 099

17 780

1998/99

1999/2000

2000/01

2001/02

2002/03

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(77)

(78)

(79)

(80)

(81)

The Commission also examined the effects of the fall in exports. Between 1998/99 and 2000/01,
the volume of Community producers' exports of canned mandarins fell from 21 316 tonnes to
14 544 tonnes as the Community producers lost market share to low-priced competition from PRC
(particularly as a result of the hormones dispute discussed at recital 35. Between 2000/01 and
2001/02, exports recovered to 18 099 tonnes and to 17 780 tonnes in the 2002/03 season. Over
the five-year period, exports decreased by around 3 500 tonnes, although the principal reduction
occurred between 1999/2000 and 2000/01 (the year in which the Community producers were
most profitable). In 2001/02, exports actually increased, to the benefit of the Community producers.
In the most recent period, between 2001/02 and 2002/03, exports have decreased by 319 tonnes
or 1,7 %, representing only 0,8 % of Community production in that year.

It should also be noted that in the calculation of profitability at 6.1.10 only Community sales were
taken into account. Therefore, the recorded fall in the profitability of the Community producers in
the most recent periods is largely independent of the effect of exports.

For the reasons given above, it is concluded that there is some link between the fall in exports and
the injurious effects observed, in so far as, for example, reduced exports have contributed to lower
it is considered that the majority of that effect
production and capacity utilisation. However,
occurred between 1999/2000 and 2000/01 (when the Community producers were still profitable)
and that the very small reduction in exports in 2002/03, equivalent to less than 1 % of Community
production had no appreciable effect.

7.1.4. Effect of any excess capacity

The Commission has examined whether injurious effects may have resulted from excess capacity
amongst the Community producers. There was only a single small change in estimated theoretical
production capacity during the period of the investigation, when, in 1999/2000 production capacity
increased by 2 % to 129 260 tonnes.

This increase in capacity contributed to a fall in capacity utilisation in 1999/2000 and subsequent
years as the anticipated need for additional capacity did not materialise. Therefore, it is concluded
that there is a link between the increase in capacity and the injurious effects observed in the earlier
part of the five year period, although the effect of the additional capacity on the overall profitability
of the Community producers was very small.

7.1.5. Effect of lack of supply of raw material

(82)

Some exporters argued that the reason behind the fall in production by the Community producers
was a lack of supply of raw material (namely fresh small citrus fruit) on the EU market. However,
based on its examination of the EU market in fresh small citrus fruit, the Commission determines
that there was adequate supply to meet demand from the processing industry.

(83)

Table A shows actual production of fresh small citrus fruit (clementines, mandarins and satsumas) in
the years 1998 to 2002.

Table A

Year

1998

1999

2000

2001

2002

2 329 341

2 823 106

2 511 550

2 379 634

2 650 000

Production

Source: CLAM

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7.1.6. Demand for fresh small citrus fruits by the processing industry

(84)

The quantity of clementines and satsumas used by the processing industry for the production of
canned mandarins from 1998/99 to 2002/03 is as shown in table B.

Table B

Season

1998/99

1999/2000

2000/01

2001/02

2002/03

Satsumas and clementines

120 000

110 000

95 000

95 000

60 000

(85) As tables A and B illustrate, the supply of small fresh citrus fruit on the EU market was far greater

than the demand of the processing industry.

(86) Nevertheless, the processing industry is in competition with other purchasers of fresh satsumas and
clementines and its ability to compete appears to be hampered by the fall in prices achieved for the
like product. The price of fresh mandarins for processing is set by annual contracts between the
canners and the farmers agreed at the beginning of the season. Table C shows the price obtained by
the producers for mandarins sold as fresh product and for canning.

Table C

Season

1998/99

1999/2000

2000/01

2001/02

2002/03

Fresh (EUR/tonne)

Canning (EUR/tonne)

547

256

498

255

571

313

557

245

527

172

(87)

The price differential reflects two factors. First, that the Community producers are becoming less
able to afford to purchase the raw materials (fresh satsumas and clementines) at a price which
allows them to achieve a reasonable level of profitability. Second, because of the low prices offered
by the Community producers to growers for satsumas, which are principally used as raw material
for canning, growers are reorientating their production from satsumas towards clementines in an
effort to increase the profitability of their production. However, that process does not yet appear to
be sufficiently far advanced to have had an appreciable effect on the availability of supply to the
Community producers.

(88)

Therefore, the Commission determines that lack of supply did not contribute to the injury suffered
by the Community producers.

7.1.7. Other factors

(89) No causation factors (other than those dealt with in parts 7.1.1 to 7.1.6 above) were identified by

the Commission services or raised by interested parties during the definitive investigation.

7.2. ATTRIBUTION OF INJURIOUS EFFECTS

(90)

The serious injury suffered by the Community producers took the form mainly of reduced sales
volume, reduced unit prices and worsening profitability and financial losses. The Commission identi-
fied that three factors contributed to the injury apart from the increase in imports: decline in
consumption, decline in exports and increased capacity.

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(91)

First of all, there was a decline in consumption between 1998/99 and 2000/01 after which there
was a rise in consumption in 2001/02, followed by a further fall
in the most recent period.
However, the development of imports did not follow this consumption pattern at all and the
Commission considers that the decline in consumption between 1998/99 and 2000/01 did not play
a significant role either in volume or prices. The fall in consumption in 2002/03 coincided with a
fall in sales volumes, prices and profitability for the Community producers and the Commission has
concludes that that fall in consumption was a contributory factor in the serious injury suffered by
the Community producers.

(92)

The Commission also examined the decline in exports by the Community producers over the five-
year period. There was a decline over the earlier part of the five-year period. However, in the latter
part of the period, when serious injury was sustained, exports increased before falling slightly. There-
fore, the development in exports had a significantly smaller impact on the Community producers in
the periods 2001/02 and 2002/03 than the surge in imports.

(93)

The Commission also examined the increase in capacity which occurred in 1999/2000 and which
was thereafter retained. The cost of this additional capacity on an annual basis was not significant.

(94)

The Commission noted that, having ensured the effects of other factors are not attributed to
increased imports, that there is a genuine and substantial causal link between the decline in the
Community producers' sales volume, sales prices and profitability and the increase in imports,
which not only increased at a much faster rate than the increase in consumption between 2000/01
and 2001/02, but increased whilst consumption fell from 1998/99 to 2000/01 and in 2002/03.

7.2.1. Conclusion

(95) After having examined the injurious effects of the other known factors and separated and distin-
guished them from each other and from the injurious effects of the increased imports, and after
having ensured that injury caused by other factors is not attributed to imports, the Commission has
reached the conclusion that there is a genuine and substantial link between increased imports and
serious injury to the Community producers.

8. COMMUNITY INTEREST

8.1. PRELIMINARY REMARKS

(96)

The purpose of safeguard measures is to remedy serious injury and prevent a further deterioration
of the situation of the Community producers of the product concerned. In addition to unforeseen
developments,
increased imports, serious injury and causation, the Commission has examined
whether any compelling economic reasons exist which could lead to the conclusion that it is not in
the Community interest to impose definitive measures. For this purpose the impact of measures on
all parties involved in the proceedings and the likely consequences of taking or not taking measures
were considered on the basis of the evidence available.

8.2. INTEREST OF THE COMMUNITY PRODUCERS

(97)

The Community producers have invested heavily and have the most highly mechanised and auto-
mated production systems in the world. They are viable and competitive in normal market condi-
tions. During the period examined, the Community producers have suffered a significant fall in
production and sales as a result of which they are currently unable to operate profitably. The Com-
munity producers' position would continue to be jeopardised if the current high level of imports at
low prices continues.

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(98)

The imposition of definitive safeguard measures would provide the Community producers with an
opportunity to restructure and thereby ensure the long term viability of their production of the
product concerned and of their businesses as a whole. It would provide them with the necessary
breathing space to restructure and benefit from greater expenditure on research and development
aimed at further reducing production costs. Plans are already well advanced for consolidation within
the sector but it will necessarily take time to carry out consolidation and for the benefits thereof to
flow through. In addition, a number of cost saving initiatives have been identified including greater
cooperation between the Community producers in the purchasing of raw materials other than the
fresh fruit itself (which is already subject to joint purchasing arrangements).

8.3. INTERESTS OF PRODUCERS OF FRESH SMALL CITRUS FRUIT IN THE COMMUNITY

(99)

It is in the interests of fresh fruit producers supplying raw material to the Community producers to
have strong and predictable demand for their product at a price at which they are able to make a
reasonable profit. It appears that one effect of the high level of low priced imports of the product
concerned is to drive down the price of the raw material (small fresh citrus fruit, especially satsumas)
on the EU market. Therefore, it is in the interests of the fresh fruit producers for measures to be
taken to reduce the volume of low priced imports of the product concerned to the EU.

8.4. INTEREST OF USERS AND IMPORTERS IN THE COMMUNITY

(100)

In order to evaluate the impact on importers and users of measures, the Commission sent question-
naires to the known importers and users of the product concerned on the Community market.
Responses were received from nine importers, but none was received from users other than those
related to importers.

(101) Some importers of the product concerned claimed that the imposition of measures was unnecessary
as the problems experienced by the Community producers were caused by high prices and a lack of
supply of
fresh mandarins for canning in the Community rather than by increased imports.
However, it is noted that, by the end of 2001/02, the year in which imports increased to 44 804
tonnes and the Community producers EU sales fell to 36 156 tonnes, the Community producers
stocks had increased by 6 074 tonnes to 17 279 tonnes. This appears to demonstrate that the fall in
sales suffered by the Community producers was not caused by an inability to supply on their part,
but by some other factor, and the most likely explanation appears to be the growing dominance of
increased imports at low prices.

(102) The importers also argued that it was better to maintain different supply sources and that,

if
measures were taken, those measures should not be in the form of a minimum price system or allo-
cation of a quota on a first come first served basis as to do so would further disrupt the market. In
particular, a first-come-first-served basis would encourage imports in the early part of the year until
the quota was utilised when demand would then turn to domestic supply. In addition, they stressed
the need for traders in the principal European markets and consumers to continue to have access to
good quality product at low prices.

(103) The definitive measures consist of a tariff quota which reflects the traditional level of imports. There-
fore, disadvantages likely to be suffered by users and importers, if at all, are not considered such as
to outweigh the benefits expected to accrue to the Community producers as a consequence of the
measures, which are considered the minimum necessary to prevent further deterioration in the situa-
tion of the Community producers.

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8.5. INTEREST OF CONSUMERS IN THE COMMUNITY

(104) As the product concerned is a consumer product, the Commission informed various consumer orga-
nisations of the opening of an investigation. No responses were received from consumer organisa-
tions and the impact on consumers is therefore considered to be minimal.

9. EU ENLARGEMENT

9.1. IMPORTS TO THE ACCESSION COUNTRIES

(105) Given that the measures will have effect after EU enlargement, scheduled to take place on 1 May
2004, the Commission also considered the increase in imports (both in absolute and relative terms)
as it relates to the EU-25.

Accession country imports
outside the EU-25

from

2 562

2000

2001

4 268

2002

5 350

2003

6 528

Accession country imports from the
EU-15

1 964

1 014

1 472

1 500 (*)

Total

4 527

5 283

6 821

8 028

(*) Estimate.

(106)

Imports to the accession countries from outside the EU-25 increased by 67 % from2 562 tonnes in
2000 to 4 268 tonnes in 2001, and continued to increase to 5 350 tonnes (a further increase of
25 %) in 2002. In 2003, such imports increased by a further 22 % to 6 528 tonnes.

(107)

In order to consider what would have been the likely increase in imports to the EU-25 in recent
years, it is necessary to add imports the EU together with accession country imports from outside
the EU-25.

EU imports (*)

17 573

20 335

44 804

44 813

2000

2001

2002

2003

Accession country imports
outside the EU-25

from

2 562

4 268

5 350

6 528

Total

20 135

24 603

50 154

51 341

(*) Data is for canning seasons — from 1 October in one year to 30 September in the following year.

(108) On this basis, total imports for the EU-25 would have increased by 22 % from 20 135 to 24 603
tonnes between 2000 and 2001, and then by 104 % to 50 154 tonnes between 2001 and 2002.
Imports would then have continued at this high level in 2003, and indeed there would have been
an increase of 2 % to 51 341 tonnes.

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(109) There is no production of the product concerned in the accession countries, and as noted above,
imports to the EU-25 developed in a similar way to imports to the EU-15. Therefore, it is considered
that the analysis of serious injury and causation for the EU-15 remains valid for the EU-25.

(110) The Commission has also considered the issue of Community interest as it relates to the EU-25.
There is no production of the raw material or the product concerned in the accession countries.
However, there are imports of the product concerned to the accession countries which represent
around 12 % of total imports to the EU-25. The interests of importers, users and consumers in the
accession countries are those of importers/users and consumers and do not diverge from those of
importers/users and consumers in the EU-15, which represent far greater numbers. The interests of
the importers/users and consumers in the EU-15 are identical to and fully representative of those for
the EU-25. Therefore, it is considered that the analysis of serious injury and causation for the EU-15
remains valid for the EU-25.

(111) Any interested party which considers that following EU enlargement the continuation of measures
in their present form is unjustified in relation to the EU-25 is invited to make representations to the
Commission by no later than 15 May 2004 setting out detailed reasons as to why the Commission
should open a review of the measures.

10. GENERAL CONSIDERATIONS

(112) By reason of the increased imports of the product concerned (as described in recitals 24 to 27) the
Community market in the product concerned, being one of the products listed in Article 1(2) of
Council Regulation (EC) No 2201/96 of 28 October 1996 on the common organisation of the
markets in processed fruit and vegetable products (1), as last amended by Commission Regulation
(EC) No 386/2004 (2), is affected by serious disturbance likely to jeopardise the achievement of the
objectives set out in Article 33 of the Treaty. The conditions set under Article 22 of Regulation (EC)
No 2201/96, if applicable, are therefore fulfilled.

11. FINAL CONSIDERATIONS

(113) The Commission's analysis of the findings of the investigation demonstrates that the conditions for

safeguard measures are met.

11.1. FORM AND LEVEL OF MEASURES

(114)

In order to keep the Community market open and ensure the availability of adequate supply to
meet demand it is appropriate to establish a system of tariff quotas in excess of which an additional
duty requires to be paid so that even imports in excess of the tariff quotas can enter the Community,
albeit upon payment of an additional duty. That additional duty should be set at a level which is
consistent with the aim of preventing serious injury to the Community producers. In this regard, it
is noted that the additional duty fixed under the provisional safeguard measures (Commission Regu-
lation (EC) No 1964/2003) proved to be inadequate to reduce the level of imports in the short term.
Indeed, in the period for which the provisional measures were applicable, 9 November 2003 to 10
April 2004, imports of the product concerned continued to increase and prices continued to fall.
Under the provisional measures, the rate of additional duty was fixed at EUR 155 per tonne.
Partially as a result of the increased strength of the euro, it is clear that this rate was absorbed by
reductions in the average price charged by exporting producers in PRC. Therefore, in order to have
the desired effect, the rate of additional duty should be greater than EUR 155 per tonne.

(1) OJ L 297, 21.11.1996, p. 29.
(2) OJ L 64, 2.3.2004, p. 25.

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(115) The level of the additional duty has been calculated on the basis of a target price at which the Com-
munity producers would achieve a profit of 6,8 % on turnover, adjusted to take account of transport
costs to ensure a proper comparison with imports delivered to the main geographical area for
consumption. This amount was then compared to the average import price in the period April
2003 to December 2003 at the same level of trade, adjusted to cif Community border, customs
duty, post importation costs and with importers' profit added. The abovementioned profit level was
based on an assessment of actual profits achieved by the Community producers in the period 1998/
99 to 2001/02. The level of underselling has been calculated at 57,9 % of the cif import price. In
terms of a fixed duty, the duty payable should therefore be EUR 301 per tonne. Given the recog-
nised effect of major changes in the strength of the euro relative to the Chinese yuan on the price of
imports, in the event that the euro later falls relative to the yuan so as to significantly affect prices,
the level of duty can be reviewed.

(116)

In order to maintain access to the Community market, the tariff quotas should be based on the
volume of imports during a recent period. The most recent three-year period for which import
statistics are available is 1999/2000 to 2001/02 (2002/03 is not considered representative as the
safeguard proceedings commenced during that period). The tariff quotas should therefore be based
on the average volume imported in these years (27 570 tonnes for the EU-15). Given a significant
build up of stocks by some importers and the continuing high level of imports most recently, it is
considered that this is the maximum volume which should be imported without additional duty. It
is considered that this volume is such as to allow the Community producers to continue to adjust
whilst avoiding a further deterioration in their situation.

(117) The Commission notes that the amounts of the tariff quotas will require to be revised in light of
enlargement which is scheduled for 1 May 2004. The amount of the tariff quotas for the first period
(27 570 tonnes for the EU-15) should therefore be increased by the average import quantity per
annum from non-EU countries to the accession countries in the years 2000 to 2002. This average
amounts to 4 060 tonnes. Therefore the EU-25 tariff quota for the first period should be 31 630
tonnes. As the final period is only 212 days, the actual imports quota for the final period should be
reduced proportionately.

(118)

In order to preserve traditional trade flows whilst ensuring that the Community market remains
open to new supplying countries, the amount of the tariff quotas should be divided amongst those
interest in supplying the product concerned to the Community
countries having a substantial
market, and a part should be reserved for those countries which do not currently have such a
substantial interest. After consultation with PRC, the only country having such a substantial interest,
the Commission considers it appropriate to assign a specific tariff quota to PRC based on the
proportions of the total quantity of the product supplied by that country during the three-year
period 1999/2000 to 2001/02. The vast majority of the imports in this period originated in PRC
and therefore a country specific tariff quota should apply to PRC and one to all other countries.

(119) On the basis outlined, the amount of the initial quota assigned to PRC for the EU-25 would be
30 843 tonnes for a period of one year, whilst the amount assigned to all other countries for that
period would be 787 tonnes. It is considered that if this were done, the quota assigned to all other
countries would be too small to allow competition or to allow newcomers to enter the market. It is
desirable that countries other than PRC should also have the opportunity to export the product
concerned to the Community. The quota assigned to all other countries should therefore be
increased to 3 % of average Community consumption over the period under consideration (or
2 314 tonnes for one year), giving an overall base for the tariff quotas of 33 157 tonnes.

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(120)

In view of the obligation to liberalise the measures, the overall annual amount of the tariff quotas
should be increased by 5 % in each of the following periods that is to say to 34 815 tonnes for the
period to 10 April 2006, to 36 556 tonnes for the period to 10 April 2007, and 22 294 for the
period to 8 November 2007 (212 days). The Commission will carry out a mid-term review in
accordance with Article 21 of Regulation (EC) No 3285/94 to examine the effects of the measure,
determine whether and in what manner it is appropriate to accelerate the pace of liberalisation, and
to ascertain whether application of the measure is still necessary. In the context of the mid-term
review, the Commission will also have regard to the steps taken by the Community producers by
way of restructuring.

(121)

In conformity with Community legislation and the international obligations of the Community, the
safeguard measures should not apply to any product originating in a developing country as long as
its share of imports of that product into the Community does not exceed 3 %. The only developing
country which does not meet the requirements to benefit from this derogation is PRC. The devel-
oping countries to which the definitive measures do not apply should therefore be specified and this
is done in Annex 2.

11.2. ADMINISTRATION OF THE TARIFF QUOTA

(122) Prior to the imposition of measures, certain importers and their associations requested that a system
be introduced which would allow importers who traditionally import the product concerned from
PRC to have guaranteed quantities based on their traditional level of imports from PRC. Other
importers argued that any system of quotas should operate on a first come first served basis in order
to avoid an unnecessary administrative burden and to maintain competition.

(123)

In order to obtain the information necessary to establish the appropriate method for managing the
quotas, the Commission published a notice on 2 October 2003 (1). On the basis of the information
provided, in each of the canning seasons 1999/2000, 2000/01 and 2001/02, the vast majority of
imports of the product concerned (more than 90 %) were imported by a small number of importers
who imported an average of 500 tonnes or more per canning season (hereafter referred to as tradi-
tional importers). The remainder was imported by importers other than traditional importers (here-
after referred to as other importers).

(124) Whilst some importers argued that the threshold for traditional importers should be lower (e.g. 300
tonnes or less), in the application of the provisional measures it was found that there were a large
number of importers who wished to import smaller quantities. Therefore, the interests of importers
of smaller quantities as a whole are better served by increasing the share of the tariff quota available
to non traditional importers rather than reducing the threshold to qualify as a traditional importer.

(125) Having examined the request in the light of experience gained during the application of the provi-

sional measures, the Commission notes the following:

— without a system of guaranteed licences, the price of the imported product from PRC is likely to
rise dramatically in the early part of the tariff quota period, and might subsequently collapse
when importers reach or exceed the level of imports necessary to fulfil their orders (windfall
effects). The ‘windfall’ effects of the allocation of the tariff quotas on a first-come-first-served
basis risk harming Community producers as demand will be focused on imports from PRC in
the early part of the canning season and will only transfer to the Community producers' product
after the tariff quota is exhausted. This risks reducing the Community producers' sales in the
early part of the canning season, and they would also suffer from the uncertainty created by
severe price fluctuations. Were this to occur,
it would jeopardise achievement of the aim
pursued in establishing the definitive measures,

(1) OJ C 236, 2.10.2003, p. 30.

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— it is in the interests of existing importers who normally import substantial quantities of the
product concerned from PRC that provision is made to ensure that traditional trade flows are
preserved and that they continue to be able to import a certain quantity of the product
concerned from PRC free of additional duty. It is also in the interests of new importers that they
have some opportunity to import the product concerned from PRC free of additional duty,

— it is in the interests of retailers and consumers that there should continue to be an adequate
supply of the product concerned on the Community market and that the market price should be
stabilised,

— the form of the definitive measures should be such as to achieve their objective whilst mini-
mising unnecessary market disruption in the form of severe price fluctuations and negative
effects on the Community producers, as well as ensuring least administrative burdens on impor-
ters. In this regard it is noted that during the period of application of the provisional measures,
imports of the product concerned actually increased whilst the retail price charged by the at
least one major player was reduced by 17 %,

— the measures should be in such a form as to encourage competition amongst importers to an
increasing degree and ensure that new non traditional importers have the opportunity to join
the market.

(126) Having taken account of these considerations, the Commission considers that it would not be appro-
priate to administer the tariff rate quota on a first-come-first-served basis. Rather, those economic
operators who have traditionally imported a substantial quantity of the product concerned to the
Community or accession countries ( traditional importers) should have the opportunity to apply for
a licence to import a quantity of the product concerned free of additional duty, based on their tradi-
tional
level of imports from PRC. At the same time, other importers who wish to import the
product concerned into the Community from PRC, but who do not meet this criteria (other impor-
ters), should have the opportunity to apply for a licence to import a quantity of the product
concerned free of additional duty.

(127) Therefore a system of licences could be established whereby the right to import the product
concerned free of duty is subject to presentation of an import licence. The detailed rules for that
system should be complimentary to, or derogate from, those laid down by Commission Regulation
(EC) 1291/2000 of 9 June 2000 lying down common detailed rules for the application of the
system of import and export licences and advance fixing certificates for agricultural products (1), as
last amended by Regulation (EC) No 322/2004 (2).

(128)

In order that the system can operate effectively, the right to apply for a licence should be restricted
to operators, natural or legal persons,
individuals or groups who have recent experience of
importing into the Community or accession countries. Measures are also needed to keep to a
minimum speculative applications for import licences which may result in the tariff quotas not
being fully utilised. Therefore,
in order to qualify to apply for a licence, importers should have
recently imported into the Community a reasonable minimum quantity of similar products. Given
the nature and value of the product concerned, it is considered reasonable that in order to qualify to
apply for a licence, importers must have imported at least 50 tonnes of processed fruit and vegetable
products as referred to in Article 1(2) of Regulation (EC) No 2201/96 in one or more of the last
three canning seasons (2000/01, 2001/02 and 2002/03 for the first period of the definitive
measures (11 April 2004 to 10 April 2005). Further, provision should be made to require the
payment of a security in respect of each tonne of the product concerned for which an application
for a licence to import is made. That security should be at a level sufficiently high to discourage
speculative applications but not so high as to discourage those engaged in genuine commercial
activity in relation to processed fruit and vegetable products. It is considered that a security equal to
around 20 % of the value of the imported product concerned is reasonable in this context.

(1) OJ L 152, 24.6.2000, p. 1.
(2) OJ L 58, 26.2.2004, p. 3.

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(129)

In the provisional measures, traditional importers received 85 % of the tariff quota (23 435 tonnes
on an annual basis), whilst other importers received 15 % (4 135 tonnes on an annual basis). The
measures should be such as to preserve the position of traditional importers, whilst at the same time
maintaining competition and providing access to the market for other importers. There are a signifi-
cant number of importers who have a history of importing canned satsumas from PRC but who do
importers. Given the variety of
not meet the 500-tonne threshold to be treated as traditional
volumes imported by these importers, it was found to be more equitable to increase the amount of
the tariff quota for such importers than to reduce the amount of the volume threshold.

(130)

It is considered that, notwithstanding the high percentage of the product concerned imported by
traditional importers in recent canning seasons, in order to keep the market open, maintain compe-
tition and provide the opportunity for importers of smaller quantities to participate in the market,
25 % of the tariff quota for goods originating in PRC should be available to ‘other importers’ By allo-
cating 75 % to traditional importers in the definitive measures the initial annual amount of the tariff
quota available to them would be maintained at 23 132 tonnes. This would preserve the position of
traditional importers whilst allowing a higher percentage to be allocated to non-traditional importers
than was allocated in the provisional measures. Therefore the amount allocated to other importers
should be increased to 7 711 tonnes (25 % of the tariff quota).

to traditional

to objective criteria,

(131) Licences for the relevant percentage of the tariff quota allocated to traditional importers for the
period concerned for imports of the product concerned originating in PRC should be made available
upon application and subject
importers. Licences for the
remainder of the tariff quota for the period concerned should be made available upon application
and subject to objective criteria to ‘other importers’. Such criteria are necessary to ensure that each
traditional importer has the opportunity to preserve his position vis à vis other traditional importers,
that no single importer is able to control the market and that competition between importers is
preserved. In this respect, the most appropriate objective criteria for traditional importers is the
maximum quantity (net weight) of the product concerned imported per canning season by the tradi-
tional importer in the last three canning seasons (2000/01, 2001/02 and 2002/03 for the first
period of the definitive measures (11 April 2004 to 10 April 2005). The most appropriate objective
criteria for other importers is a limit of 20 % of the tariff quota available to other importers for
goods of Chinese origin (id est 3 % of the tariff quota for goods of Chinese origin).

(132) As regards imports of the product concerned originating in countries other than PRC, as traditional
importers do not import substantial quantities of the product concerned from countries other than
PRC, and as the tariff quota to be established is substantially higher than imports in previous
canning seasons, it is considered that the whole of the tariff quota should be available to all impor-
ters on the same basis, and that (for the reasons abovementioned) the most appropriate objective
criteria for limiting applications for import licences is a limit of 20 % of the tariff quota available for
goods of that origin.

(133) The eligibility of imported goods from developing countries to be excluded from the tariff quotas is
dependent on the origin of the goods. The eligibility of imported goods for the tariff quota assigned
to imports originating in PRC, and for the tariff quota for imports originating in all other countries,
is also dependent on the origin of the goods. The criteria for determining origin currently in force
in the Community should therefore be applied, and in order to ensure that the tariff quotas are
administered efficiently, presentation of a certificate of origin at the Community frontier should be
required for imports of the product concerned except where imports of the product concerned are
covered by a proof of origin issued or made out in accordance with the relevant rules established in
order to qualify for preferential tariff measures.

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11.3. DURATION

(134) The definitive measures should not last more than four years including the period of the provisional
measures which came into force on 9 November 2003. They should therefore expire no later than 8
November 2007,

HAS ADOPTED THIS REGULATION:

Article 1

System of tariff quotas

A system of tariff quotas is hereby opened in relation to imports into the Community of certain
1.
prepared or preserved mandarins (including tangerines and satsumas), clementines, wilkings and other
similar citrus hybrids, not containing added spirit, containing added sugar, currently classifiable within CN
codes 2008 30 55 and 2008 30 75 (hereinafter canned mandarins). The volume of each of the tariff
quotas, and the period for which they apply, are specified in Annex 1.

The conventional rate of duty provided in Council Regulation (EC) No 2658/87 (1), or any preferen-
2.
tial rate of duty, shall continue to apply to canned mandarins imported under the quotas referred to in
paragraph 1.

3.
Subject to Article 9, imports of those canned mandarins which are made without presentation of a
licence such as is referred to in Article 3(1) relating to the country from which those canned mandarins
originate shall be subject to an additional duty of EUR101 per tonne.

Article 2

Definitions

For the purposes of this Regulation:

(a) ‘canning season’ means a: period of 12 months from 1 October in one year to 30 September in the

next year;

(b) ‘accession countries’ means Latvia, Lithuania, Estonia, Poland, Hungary, the Czech Republic, Slovakia,

Slovenia, Malta and Cyprus;

(c) ‘importer’ means an operator, natural or legal person, individual or group having imported into the
Community or the accession countries, in one or more of the last three canning seasons, at least 50
tonnes per canning season of processed fruit and vegetable products as referred in Article 1(2) of Regu-
lation (EC) No 2201/96, irrespective of the origin of those imports;

(d) ‘traditional importer’ means an importer who has imported an average of 500 tonnes or more of
canned mandarins per canning season into the Community or the accession countries in the last three
canning seasons, irrespective of the origin of those imports;

(e) ‘reference quantity’ means the maximum quantity of canned mandarins imported per canning season

by a traditional importer during one of the last three canning seasons.

(f) ‘other importers’ means importers who are not traditional importers;

(g) ‘origin’ refers to the country from which an import originates, being either PRC on the one hand, or a

country other than PRC on the other.

(1) OJ L 256, 7.9.1987, p. 1. Regulation as last amended by Commission Regulation (EC) No 2344/2003 (OJ L 346,

31.12.2003, p. 38).

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Article 3

System of import licences

All imports under the quotas referred to in Article 1(1) shall be subject to the presentation of an
1.
import licence (hereinafter the licence) issued in accordance with Regulation (EC) No 1291/2000, subject
to the provisions of this Regulation.

Article 8(4) of Regulation (EC) No 1291/2000 shall not apply to the licences. Box 19 of licences shall

2.
be marked ‘0’.

In derogation from Article 9 of Regulation (EC) No 1291/2000, the rights accruing from licences

3.
shall not be transferable.

The amount of the security referred to in Article 15(2) of Regulation (EC) No 1291/2000 shall

4.
be EUR10 per tonne net.

Article 4

Validity of licences

1.
Box 8 of licence applications and licences shall indicate the country of origin of the product. The
word ‘yes’ in box 8 shall be marked with a cross. Licences shall be valid only for the products originating
in the country indicated in that box.

2.
Licences shall be valid only for the period for which they have been issued. Box 24 thereof shall
contain an entry indicating the period of validity of the licence (e.g. ‘licence valid only from 11 April 2004
to 10 April 2005’).

Article 5

Licence applications

1.

Only importers may lodge licence applications.

Applications shall be lodged with the competent national authorities. In support of their applications,
importers shall provide information verifying to the satisfaction of the competent national authorities
compliance with Article 2(c) and (d).

2.
Licence applications for the period to 10 April 2005 may be lodged during the period 1 to 7 May
2004. Licence applications for any later period may be lodged from 1 to 8 February immediately prior to
the beginning of the relevant period in all other cases.

3.
Licence applications lodged by traditional importers shall cover a quantity no greater than the refer-
ence quantity for the traditional importer concerned in relation to imports of canned mandarins originating
in PRC, and no more than 20 % of the tariff quota specified in relation to imports of canned mandarins
originating in all other countries.

4.
Licence applications lodged by other importers shall cover a quantity no greater than 3 % of the tariff
quota specified in Annex 1 in relation to imports of canned mandarins originating in PRC, and no more
than 20 % of the tariff quota specified in relation to imports of canned mandarins originating in all other
countries.

Box 20 of licence applications shall indicate ‘traditional importer’ or ‘other importer’ as appropriate,

5.
and ‘request under Regulation (EC) No 658/2004’.

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Article 6

Allocation of the tariff quotas

For imports of Chinese origin, the tariff quota defined in Article 1(1) for each period shall be allo-

1.
cated as follows:

(a) 75 % to traditional importers;

(b) 25 % to other importers.

If in any period the quantity allocated is not fully exhausted by one category of importers, the remainder
may be allocated to the other category.

For imports other than of Chinese origin, the quota defined in Article 1(1) shall be available to tradi-

2.
tional importers and other importers.

Article 7

Member States communications to the Commission

The Member States shall notify the Commission whether import licence applications have been

1.
lodged and the quantities covered by the licence applications;

For the period 11 April 2004 to 10 April 2005, the information referred to in paragraph 1 shall be

2.
notified by no later than 12.00 (Brussels time) on 11 May 2004.

For each subsequent period, the information referred to in paragraph 1 shall be notified by no later

3.
than 12.00 (Brussels time) on 10 February immediately prior to the beginning of the relevant period.

4.
The communication referred to in paragraph 1 shall be effected by electronic means on the form
sent for that purpose by the Commission to the Member States. The information contained therein shall be
broken down by type of importer and by origin within the meaning of Article 2.

Article 8

Issue of licences

1.
On the basis of the information notified by the Member States pursuant to Article 7, the Commission
shall decide, by means of a regulation, for each origin and each type of importer within the meaning of
Article 2, and taking into account paragraph 2, the proportion in which the licences are to be issued. That
decision shall be taken by no later than 2 June 2004 in the case of the period 11 April 2004 to 10 April
2005, and no later than 15 March immediately prior to the beginning of the relevant period in all other
cases.

2. Where, on the basis of the information notified by the Member States pursuant to Article 7, the
Commission finds that licence applications exceed the quantities established in accordance with Articles 1
and 6, it shall fix a single percentage reduction to be applied to the licence applications in question.

Licences shall be issued by the competent national authorities on the fourth working day following

3.
the entry into force of the regulation foreseen in paragraph 1.

4. Where, pursuant to paragraph 1, the quantity for which a licence is issued is less than the quantity
requested, the licence application may be withdrawn within three working days of the entry into force of
the measures adopted pursuant that paragraph. In the event of such a withdrawal, the security shall be
released immediately.

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Article 9

Developing countries

Imports of canned mandarins originating in one of the developing countries specified in Annex 2 shall not
be subject, or allocated, to the tariff quotas.

Article 10

General provisions

The origin of the canned mandarins to which this Regulation applies shall be determined in accord-

1.
ance with the provisions in force in the Community.

2.
Subject to paragraph 3, any release into free circulation in the Community of canned mandarins
originating in a third country shall be subject to presentation of a certificate of origin issued by the compe-
tent national authorities of that country meeting the conditions laid down in Article 47 of Commission
Regulation (EEC) No 2454/93 (1).

3.
The certificate of origin referred to in paragraph 2 shall not be required for imports of canned
mandarins covered by a proof of origin issued or made out in accordance with the relevant rules estab-
lished in order to qualify for preferential tariff measures.

Proof of origin shall be accepted only if the canned mandarins meet the criteria for determining

4.
origin set out in the provisions in force in the Community.

The Member States and the Commission shall cooperate closely to ensure compliance with this Regulation.

Article 11

This Regulation shall enter into force on 11 April 2004 and apply until 8 November 2007.

Article 12

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

Done at Brussels, 7 April 2004.

For the Commission

Pascal LAMY

Member of the Commission

(1) OJ L 253, 11.10.1993, p. 1. Regulation as last amended by Regulation (EC) No 2286/2003 (OJ L 343, 31.12.2003,

p. 1).

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Period

11.4.2004 to 10.4.2005

11.4.2005 to 10.4.2006

11.4.2006 to 10.4.2007

11.4.2007 to 8.11.2007

ANNEX I

Quota — PRC
(tonnes)

30 843

32 385

34 004

20 738

ANNEX II

Quota — all other countries
(tonnes)

2 314

2 430

2 551

1 556

List of Developing Countries — excluded from the measures as they export less than 3 % of imports to the Community.

United Arab Emirates, Afghanistan, Antigua and Barbuda, Angola, Argentina, Barbados, Bangladesh, Burkina Faso,
Bahrain, Burundi, Benin, Brunei Darussalam, Bolivia, Brazil, Bahamas, Bhutan, Botswana, Belize, Democratic Republic of
Congo, Central African Republic, Congo, Côte d'Ivoire, Chile, Cameroon, Colombia, Costa Rica, Cuba, Cape Verde,
Djibouti, Dominica, Dominican Republic, Algeria, Ecuador, Egypt, Eritrea, Ethiopia, Fiji, Federated States of Micronesia,
Gabon, Grenada, Ghana, Gambia, Guinea, Equatorial Guinea, Guatemala, Guinea-Bissau, Guyana, Honduras, Haiti, Hong
Kong, Indonesia, India, Iraq, Iran (Islamic Republic of), Jamaica, Jordan, Kenya, Cambodia, Kiribati, Comoros, St Kitts
and Nevis, Kuwait, Lao People's Democratic Republic, Lebanon, St Lucia, Sri Lanka, Liberia, Lesotho, Libyan Arab Jama-
hiriya, Morocco, Madagascar, Marshall Islands, Mali, Myanmar, Mongolia, Mauritania, Mauritius, Maldives, Malawi,
Mexico, Malaysia, Mozambique, Namibia, Niger, Nigeria, Nicaragua, Nepal, Nauru, Oman, Panama, Peru, Papua New
Guinea, Philippines, Pakistan, Palau, Paraguay, Qatar, Rwanda, Saudi Arabia, Solomon Islands, Seychelles, Sudan, Sierra
Leone, Senegal, Somalia, Suriname, Sao Tomé and Principe, El Salvador, Syrian Arab Republic, Swaziland, Chad, Togo,
Thailand, Tunisia, Tonga, East Timor, Trinidad and Tobago, Tuvalu, Tanzania (United Republic of), Chinese Taipei,
Uganda, Uruguay, St Vincent and Northern Grenadines, Venezuela, Viet Nam, Vanuatu, Samoa, Yemen, South Africa,
Zambia and Zimbabwe.