Commission Regulation (EC) No 1447/2004 of 13 August 2004 imposing provisional safeguard measures against imports of farmed salmon
Date: 2004-08-13
Institutions: European Commission
Subjects: Ireland, United Kingdom, fish farming, fish product, import (EU), import price, market, protective clause, sea fish, tariff quota

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COMMISSION REGULATION (EC) No 1447/2004

of 13 August 2004

imposing provisional safeguard measures against imports of farmed salmon

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 1994 on common rules for imports
and repealing Regulation (EC) No 518/94 (1), as last amended by Council Regulation (EC) No 2474/2000 (2),
and in particular Articles 6 and 8 thereof,

Having regard to Council Regulation (EC) No 519/94 of 7 March 1994 on common rules for imports from
(EEC) No 1766/82 and (EEC)
certain third countries and repealing Regulations (EEC) No 1765/82,
3420/83 (3), as last amended by Regulation (EC) No 427/2003 (4), and in particular Articles 5 and 6 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)

(2)

(3)

(4)

(5)

1. PROCEDURE

On 6 February 2004, Ireland and the United Kingdom informed the Commission that trends in
imports of farmed Atlantic salmon appeared to call for safeguard measures under Regulations (EC)
No 3285/94 and 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.

Ireland and the United Kingdom provided evidence that imports into the European Community of
farmed Atlantic salmon are increasing rapidly both in absolute terms, and relative to Community
production and consumption.

They alleged that the increase in the volume of imports of farmed Atlantic salmon has, among other
consequences, had a negative impact on the prices of like or directly competitive products in the
Community, and on the market share held by the Community producers, resulting in damage to the
Community producers.

Ireland and the United Kingdom further advised that, based on the information submitted by the
Community producers, any delay in the adoption of safeguard measures by the European Community
would cause damage which it would be difficult to repair, and that measures should therefore be
adopted as a matter of urgency.

The Commission informed all Member States of the situation and consulted with them on the terms
import trends and the evidence as to serious injury, and the various
and conditions of imports,
aspects of the economic and commercial situation with regard to the Community product
in
question.

(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.

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(6)

(7)

(8)

(9)

On 6 March 2004, the Commission initiated an investigation relating to serious injury or threat
thereof to the Community producers of the product like or directly competitive with the imported
product, which has been defined as farmed salmon, whether or not filleted, fresh, chilled or frozen
(‘the product concerned’) (1), as explained below.

The Commission officially advised the exporting producers and importers as well as their represen-
the representatives of exporting countries and the
tative associations known to be concerned,
Community producers of
these
parties, to representative associations of salmon farmers in the Community, and to those parties
who made themselves known within the time limits set in the Notice of Initiation. Pursuant to
Articles 5 of Council Regulation (EC) No 519/94 and 6 of Council Regulation (EC) No 3285/94 the
Commission also gave parties directly concerned the opportunity to make their views known in
writing and to request a hearing.

the investigation. The Commission sent questionnaires to all

Certain governments, certain exporting producers and their
the
Community producers, suppliers, processors and importers and their representative associations
submitted comments in writing. The oral and written comments submitted by the parties were
considered and taken into account in reaching the provisional findings. All the information which
was deemed necessary for the purpose of a provisional determination was sought and verified.
Verification visits were carried out at the premises of eight Community producers.

representative associations,

All parties were informed of the essential facts and considerations on the basis of which it was
the proposed provisional
intended to impose provisional safeguard measures and the form of
measures. They were granted the opportunity to submit comments and these were considered,
and, where deemed appropriate, taken into account in the preliminary findings.

Producers

2. LIST OF COOPERATING PARTIES

Ardvar Salmon Ltd, Inverness, Scotland, United Kingdom.

Atlantic West, Western Isles HS7 5LZ, Scotland, United Kingdom.

Hennover Salmon, West George Street, Scotland, United Kingdom.

Pan Fish Scotland Ltd, Argyll, Scotland, United Kingdom.

Loch Duart Ltd, Scourie By Lairg Sutherland, Scotland, United Kingdom.

Marine Harvest (Scotland), Craigcrook Road, Scotland, United Kingdom.

Orkney Salmon Ltd, Bellshill, Scotland, United Kingdom.

Stolt Sea Farm Ltd, Western Isles, Scotland, United Kingdom.

West Minch Salmon Ltd, Western Isles, Scotland, United Kingdom.

Western Isles Seafood Co Ltd, Western Isles, Scotland, United Kingdom.

Sidinish Salmon Ltd, Western Isles, Scotland, United Kingdom.

Creevin Salmon, Mountcharles, Ireland.

Marine Harvest Ireland, County Donegal, Ireland.

(1) OJ C 58, 6.3.2004, p. 7.

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Importers/processors

Laschinger GmbH, Bischofsmais, Germany.

Syndicat National de l'Industrie du Saumon Fumé, Paris Cedex 14, France.

Vensy España SA, Malaga, Spain.

SIF France, Boulogne sur Mer, France.

Moulin de la Marche, Chateaulin, France.

Exporters

Aalesundfisk AS, Aalesund, Norway.

Marine Harvest Norway AS, Bergen, Norway.

Cultivos Yadran SA, Renca, Chile.

Invertec Pesquara Mar de Chiloe SA, Providencia, Chile.

Marine Harvest Chile SA, Puerto Montt, Chile.

Pesca Chile SA, Piso 6, Chile.

Compañia Pesquera Camanchaca SA, Puerto Montt, Chile.

Chilefood Sociedad Anonima, Montalva No 4.800, Chile.

Fjord Seafood Chile SA, Puerto Montt, Chile.

Pesquera Los Fiordos Ltda, Puerto Montt, Chile.

Salmones Pacific Star SA, Santiago, Chile.

Patagonia Salmon Farming SA, Puerto Montt, Chile.

Salmones Mainstream SA, Puerto Montt, Chile.

Yadran Quellon SA, Santiago, Chile.

Salmones Friosur, Puerto Chabuco, Chile.

Aguas Claras, Puerto Montt, Chile.

Pesquera EICOSAL, Puerto Montt, Chile.

Cultivos Marinos Chiloe, Chiloe Island, Chile.

Patagonia Salmon Farming, Puerto Montt, Chile.

Salmones Multiexport Ltda, Puerto Montt, Chile.

East Salmon P/F, Klaksvik, Faeroe Islands.

Faroe Seafood Prime, Torshavn, Faeroe Islands.

P/F Bakkafrost, Glyvrar, Faeroe Islands.

Landshandilin P/F, Torshavn, Faeroe Islands.

Viking Seafood P/F, Strendur, Faeroe Islands.

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S. A. Salmon Sp/f, Faeroe Islands.

PRG Export Limited, Gota, Faeroe Islands.

P/F Vestsalmon, Kollafjørdur, Faeroe Islands.

Samherji hf, Akureyri, Iceland.

Norwegian Seafood Federation, Bergen, Norway.

The Faeroe Fish Farming Association, Tórshavn, The Faeroe Islands.

Suppliers

Ewos, West Lothian, United Kingdom.

Havsbrun Ltd, Fuglafjordur, Faeroe Islands.

Landcatch Ltd, Argyll, United Kingdom.

(10)

The product in respect of which the Commission was informed that trends in imports appear to call
for safeguard measures is farmed Atlantic salmon, whether or not filleted, fresh, chilled or frozen.

3. PRODUCT CONCERNED

(11)

(12)

It is considered that to restrict the product concerned to farmed Atlantic salmon would be to define
the product concerned too narrowly. Based on the physical characteristics of different species of
salmon (size, shape, taste etc.), the production process, and the substitutability of all types of farmed
salmon from the perspective of the consumer, it is considered that all farmed salmon is a single
product. Similarly, whilst farmed salmon is sold in different preparations (whole fish gutted, whole
fish head-off and gutted, fillets), these different preparations all serve the same end-use and are readily
capable of being substituted.

Some parties argued that frozen salmon is a different product to fresh salmon and should not be
considered as part of the product concerned. One party claimed that it is preferred by processors
whilst consumers prefer fresh salmon. Another claimed that it is unsuitable as a raw material for
salmon smoking. These claims were found to be unsubstantiated. Processors use both fresh and
frozen farmed salmon and it was found that any differences are minimal. Further, both preparations
serve the same end-use. Therefore, this argument had to be rejected.

(13)

Therefore, it is considered that farmed (other than wild) salmon (whether fresh, chilled or frozen) in
the different preparations described is a single product. It is currently classified within CN codes
ex 0302 12 00, ex 0303 11 00, ex 0303 19 00, ex 0303 22 00, ex 0304 10 13 and ex 0304 20 13.

4. LIKE OR DIRECTLY COMPETITIVE PRODUCTS

(14) A preliminary examination has been undertaken to establish whether the product produced by the
Community producers (hereinafter referred to as ‘the like product’) is like or directly competitive with
the imported product concerned.

(15)

In reaching a preliminary determination, the following preliminary findings in particular were taken
into account.

(16)

(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. The domestic product is often marketed as a
premium quality product and often enjoys a price premium at the retail level. However, ‘likeness’
does not require products to be completely identical, and the minor variations in quality are not
sufficient to change the overall finding of likeness between the imported and domestic products;

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(b) the imported product and the Community product were sold via similar or identical sales
channels, 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.

(17)

Therefore, the preliminary conclusion reached is that the imported product and the Community
product are ‘like or directly competitive’.

5.1. Increase in imports

5.1.1. Introduction

5. IMPORTS

(18) A preliminary examination has been undertaken based on data for the period 2000 to 2003,
focusing on imports in the most recent period for which data are available, to establish 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 producers. One party claimed that the import
increase was due to the fact that imports of wild salmon were included in the import data. Eurostat
data does not distinguish between wild and farmed salmon. However, the available information (US
and Canadian export statistics) indicates that imports of wild salmon to the Community are small
and have, in any event, decreased over the period 2000 to 2003. One party also claimed that 2000
was an inappropriate base year, claiming that salmon prices were unusually high in that year.
However, the analysis focuses on the key developments in the most recent period, and changing
the base year to 1999 or 2001 would not change the outcome of that analysis.

(19)

The provisional findings set out below are thus based on the data from 2000 to 2003.

5.1.2. Volume of imports

Imports (t)

Year-on-year increase

Total Community production (tonnes)

Imports/production (t)

146 664

254 %

2000

2001

2002

2003

372 789

379 764

396 772

455 948

2 %

161 854

235 %

4 %

168 374

236 %

15 %

180 593

252 %

Source:

Import figures provided by Eurostat. Community production calculated from government data for Ireland and the United
Kingdom and industry data for France and Latvia.

(20)

Imports increased from 372 789 tonnes in 2000 to 455 948 tonnes in 2003, an increase of 22 %.
Between 2002 and 2003, imports increased by 15 %.

(21)

Relative to Community production, imports fell from 254 % in 2000 to 235 % in 2001, but have
since increased again to 252 % in 2003.

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(22) Quarterly figures for the years 2002 and 2003 show that in 2003 quarterly imports were higher than
in the same quarter in 2002, and that the highest increases (up to 20,8 %) occurred in the second half
of 2003.

Volume (t)

86 753

96 988

93 375

119 657

Q1 2002

Q2 2002

Q3 2002

Q4 2002

Q1 2003

Q2 2003

Q3 2003

Q4 2003

92 667

6,8 %

108 655

12,0 %

112 862

20,8 %

141 763

18,5 %

Volume (t)

Year-on-year increase

Source: Eurostat.

5.1.3. Conclusion

(23)

Based on the import data for the period from 2000 to 2003, it is concluded on a preliminary basis
that that there is a recent, sudden, sharp and significant increase in imports, both absolute and
relative to production.

5.2. Prices of imports

(24)

The conditions under which imports have been made have also been considered by reference to
Eurostat data. While the data includes a small quantity of wild salmon, this is considered to have had
no appreciable effect on prices.

(25)

farmed salmon from Norway (which has around 55 % of

it should be noted that between September 1997 and May 2003, a significant
In this regard,
proportion of
the
imports of
Community market) were subject to an MIP. In the course of 2002, violations of the MIP under-
takings by certain Norwegian exporting producers began to undermine the effectiveness of that
instrument and caused price falls. The proposed termination of the AD and CVD measures against
imports from Norway was then announced in December 2002 and those measures were terminated
in May 2003. Import prices during 2002 and the first half of 2003 fell partly due to violation of, or
voluntary withdrawal from, the MIP by some Norwegian exporters.

(26)

Import prices fell by 28,5 % between 2000 and 2003. This is considered to be outwith the normal
price fluctuation on the market because of the extent of the decrease in absolute terms, and because
exporting producers were not earning supernormal profits in the year 2000 and the cost of
production has not materially decreased between 2000 and 2003.

Import price

Source: Eurostat.

2000

3,55

2001

2,99

2002

2,87

2003

2,54

(27)

Recent price developments are more clearly illustrated by quarterly data. Having remained relatively
stable at between EUR 2,83 and EUR 2,93 in 2002, import prices dropped from EUR 2,87 in Q1
2003 to EUR 2,24 in Q3 2003 before making a partial recovery to EUR 2,48 in Q4 2003.

Import price

2,83

2,93

2,86

2,85

Q1 2002

Q2 2002

Q3 2002

Q4 2002

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Import price

Source: Eurostat.

Q1 2003

Q2 2003

Q3 2003

Q4 2003

2,87

2,62

2,24

2,48

(28) Whilst wholly reliable Eurostat data is not yet available for Q1 2004, currently available information
indicates that prices increased to average around EUR 2,53/kg in Q1 2004. This is slightly below
their average in 2003, and, the latest information available indicates that prices are again following a
downward trend and are very low. While some claim that there will be price increases in the coming
months, this was not substantiated and the current very low prices are indeed confirmed by industry
sources in exporting countries.

5.3. Market share of imports

(29)

The market share of imports fell from 73,5 % in 2000 to 71,9 % in 2001, and remained stable at
about this level in 2002 (72 %). In 2003, imports increased their market share from 72,0 % in 2002
in the period considered.
to 75,0 %, an increase of 3,0 percentage points and their highest level

Imports

2000

73,5 %

2001

71,9 %

2002

72,0 %

2003

75,0 %

6. DEFINITION OF THE COMMUNITY PRODUCERS

(30) Almost all production of the product concerned in the Community was made in Scotland and

Ireland, although there are also two producers in France and at least one in Latvia.

(31)

(32)

(33)

In the year 2003, total Community production of the product concerned was 180 593 tonnes, of
which the producers which cooperated fully in the provisional stage of the investigation accounted
for 85 231 tonnes, equivalent to 47 % of the total Community production. They therefore represent 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 the provisional determinations.

7. UNFORESEEN DEVELOPMENTS

Towards the end of 2002, Norwegian forecasts of their overall salmon production in 2003 were
around 446 000 tonnes. By February 2003, Kontali Analyse (an industry information provider) was
forecasting harvesting of 475 000 tonnes. This was 30 000 tonnes higher
than Norwegian
production in 2002, but it was expected that most of this increase would be directed to emerging
markets such as Russia and Poland and to markets in the Far East such as Japan, Hong Kong, Taiwan
and China. Growth in the Far East had been negative since 2000, but, Norway expected to reverse
this decline in 2003 by opening up the Chinese market.

In fact, actual Norwegian production in 2003 was 509 000 (around 63 000 tonnes higher than had
been forecast by the Norwegian Government), and harvesting was 6 % higher than Kontali’s
harvesting forecast. Production was also 64 000 tonnes (or 14 %) higher than Norwegian production
in 2002. At the same time, far from reversing the decline in sales in the Far East, the rate of decline
actually accelerated to -6,0 %. In addition, growth in emerging markets also declined — from 47 % to
32 % in the case of Russia, and from 50 % to 30 % in the case of European countries outwith the
Community. Indeed, overall global consumption grew by only 6 % compared to 9 % in 2002 and
14 % in 2001. This, as it turned out, erroneous forecast of production, combined with the devel-
opment of world consumption, was unforeseen.

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(34)

In consequence, Norway experienced a serious problem of overproduction, a problem which it
appeared to recognise. Indeed,
in an effort to remove excess product from the
market, certain Norwegian producers considered freezing 30 000 tonnes of farmed salmon. However,
this idea was later abandoned and the market continued to be oversupplied.

in August 2003,

(35)

In addition,
in December 2002 the Commission had announced its proposal to terminate anti-
dumping and anti-subsidy measures against Norway. These were subsequently terminated in May
2003. The measures had in large part taken the form of MIPs, which in effect guaranteed a minimum
price for exporting producers. When the proposed withdrawal of the measures was announced, many
Norwegian exporting producers either voluntarily gave up their undertakings or simply ceased to
observe them. Norwegian salmon producers as a whole are heavily indebted to the Norwegian banks.
As prices slid, and in the absence of MIPs, the banks lending to Norwegian producers began to take
steps to reduce their exposure by demanding repayment. This created a vicious circle which led to an
increase in harvesting, further pressure on prices and increased pressure to export. Although some
temporary and small adjustment of import prices was to be expected as a result of the termination of
the measures against Norway, the extent of the fall in prices (exacerbated by the problem of over-
production) and the vicious circle which that created because of the operation of the banking system
described above, were unforeseen.

(36) During 2003, the value of the Norwegian kroner fell by 13 % relative to the euro, by 12 % relative to
the Danish krone and by 14 % relative to the Swedish krone. Although currency movements are to
be expected, these were relatively large and sustained fluctuations and outwith the normal range of
currency fluctuations. Although the euro also strengthened by comparison with the British pound,
the British pound fell by only 6 % making farmed salmon produced in the United Kingdom more
expensive in the euro-zone relative to Norwegian imports than it had been at the beginning of that
year. The principal importers of Norwegian farmed salmon in the Community are Denmark, Sweden,
these imports are directly transported within the
Germany and Poland. However, much of
Community to euro-zone countries such as France and Spain. In addition, over half of the farmed
salmon imported to Denmark, and almost all of that imported to Poland and other new Member
States,
in the value of the
Norwegian kroner relative to the euro had an effect not only on Norwegian imports directly to
the euro-zone, but also on imports to those countries such as Denmark and Poland which process
farmed salmon to re-sell in the euro-zone. The effect of these currency movements was to make the
European Community market as a whole more attractive to Norwegian exporting producers, to some
extent insulating them from the effect of a decrease in their prices in euro and krone, and helping
them to maintain their export revenues in their domestic currency. Nevertheless, unit prices fell even
in Norwegian kroner. At the same time, these currency movements made imported salmon cheaper
in the European Community and made importing more attractive to importers and users such as the
processing industry. In consequence, much of the overproduction in Norway was exported to the
European Community.

is re-sold in the euro-zone after processing. In consequence, the fall

(37)

The preliminary analysis is that the unforeseen development which caused the increase in imports
was significant overproduction in Norway (despite lower forecasts), exacerbated by the failure of the
Norwegian industry to achieve forecast growth in exports to markets outwith the Community, the
unexpected extent of the effects of the termination of trade defence measures against Norway and the
operation of the Norwegian banking system as described above, together with the rise in the value of
the euro which made the Community market as a whole a more attractive destination for Norwegian
exports. These developments and their effect will be investigated further at the definitive stage of this
proceeding.

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(38)

(39)

8.1. Introduction

8. SERIOUS INJURY

In order to make a provisional determination of serious injury to the Community producers of the
like product, a preliminary evaluation of all relevant factors of an objective and quantifiable nature
having a bearing on their situation has been undertaken. In particular, for the product concerned, an
evaluation has been carried out of the development of global Community data for consumption,
production capacity, production, capacity utilisation, employment, productivity, overall sales and
market share. These global data are based on statistical
information gathered by the United
Kingdom and Ireland through comprehensive industry surveys. As concerns company specific data,
these are based upon data provided by the cooperating Community producers on cash flow, return
on capital employed, stocks, price, undercutting and profitability for the years 2000 to 2003.

It should be noted at the outset that in the Community salmon farming industry, as elsewhere, there
is a long and relatively inflexible production cycle leading to harvesting and that, once harvested, the
farmed salmon must be sold immediately since they can only be stored for more than a few days if
frozen. Freezing is expensive, and in any event, there is limited freezing capacity in the Community.
In consequence, the level of production must be planned at least two years in advance and, once
planned, cannot be altered except at the margins. Therefore, oversupply has a delayed effect on
production, but an immediate and severe effect on prices.

8.2. Analysis of the situation of the Community Producers

8.2.1. Consumption

Consumption (t)

Year-on-year increase

2000

2001

2002

507 705

527 970

550 943

4,0 %

4,4 %

2003

607 728

10,3 %

(40)

Consumption of the product concerned in the Community was provisionally established on the basis
of the total production by all producers in the Community and total
imports of the product
concerned into the Community as reported by Eurostat, less European Community exports.

(41)

Between 2000 and 2003, consumption in the Community increased by 19,7 % from 507 705 tonnes
to 607 728 tonnes.

(42)

It should be noted that salmon has a relatively high level of price elasticity and the markedly higher
increase in consumption in 2003 can therefore be at least partially explained by the fall in prices at
wholesale level.

8.2.2. Production capacity and capacity utilisation

Capacity (t)

Capacity utilisation

2000

2001

2002

2003

340 029

340 294

339 359

347 671

43 %

48 %

50 %

52 %

(43)

Farmed salmon production in the European Community is effectively limited by government licences
specifying the maximum amount of live fish which may be held in the water at any place at any
point in time. Capacity figures given are based on the total quantity licensed rather than the physical
fish-holding capacity of the cages operated by the Community producers. The cost of applying for
and maintaining licences is relatively low and therefore the cost of maintaining excess capacity is also
low.

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(44) Having remained stable between 2000 and 2002, the preliminary investigation showed that theo-

retical production capacity increased by 2,2 % between 2000 and 2003.

(45)

Capacity utilisation (i.e. the quantity of fish in the water compared to the quantity licensed) increased
from 43 % in 2000 to 48 % in 2001 and then increased steadily until 2003 when it reached 52 %.
This reflects the fact that production increased by 23 % between 2000 and 2003 whilst the licensed
capacity increased by only 2,2 %.

8.2.3. Production

Production (t)

146 664

161 854

168 374

180 593

2000

2001

2002

2003

(46)

Production (taken as fish harvested) grew by 23 % from 146 664 tonnes in 2000 to 180 593 tonnes
in 2003, following a single year increase of 7 %.

(47)

It should be noted that due to the long production cycle, production is planned at least two years in
advance and that, once the production cycle is commenced, production levels cannot be adjusted
except at the margins.

8.2.4. Employment

Employment (end of period)

2000

1 269

2001

1 162

2002

1 195

2003

1 193

(48)

Employment in relation to the product concerned fell by 6 % from 1 269 in 2000 to 1 193 in 2003.
There was a reduction in employment in 2001, employment partially recovered in 2002 and
remained stable in 2003.

8.2.5. Productivity

Productivity (tonnes/employee)

2000

115

2001

139

2002

141

2003

151

(49)

Productivity has consistently increased throughout the period under consideration from 115 tonnes
in 2000 to 151 tonnes in 2003. This reflects the increasing use of automated feed systems and other
labour saving devices, and the strong pressure to reduce costs in the face of mounting financial
losses.

8.2.6. Sales volume

Sales in the Community (tonnes)

134 916

148 206

154 171

151 780

2000

2001

2002

2003

(50)

Between 2000 and 2002, the Community producers’ sales of the like product increased by 14,3 %
from 134 916 to 154 171 tonnes. This increase occurred against a background of an increase in
consumption over the same period of 8,5 %. Between 2002 and 2003, the Community producers’
sales decreased by 1,6 % from 154 171 to 151 780 tonnes, notwithstanding an increase in
consumption between 2002 and 2003 of 10,3 %.

8.2.7. Market share

Market share

2000

26,5 %

2001

28,1 %

2002

28,0 %

2003

25,0 %

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(51)

The Community producers’ market share increased from 26,5 % in 2000 to 28,1 % in 2001 and
remained at about this level in 2002, but then fell by 3,0 percentage points to 25,0 % in 2003, its
lowest level in the period considered. This reflects the fact that imports increased not only in absolute
terms, but also relative to consumption, in 2003.

8.2.8. Cash flow

Financial year

Cash flow (index)

2000

100

2001
– 221

2002
– 384

2003
– 221

(52)

Cash flow could only be examined at the level of the cooperating companies which produced the
product concerned rather than in relation to only the product concerned itself. This indicator was
therefore seen as less meaningful than the other indicators shown. Nevertheless, it can be seen that
there was strongly negative cash flow in 2001, 2002 and 2003.

8.2.9. Return on capital employed (ROCE)

Financial year

ROCE

2000

34

2001
– 1

2002

2

2003
– 20

(53)

ROCE could also only be examined on the level of the cooperating companies which produced the
product concerned rather than in relation to only the product concerned itself. This indicator was
therefore also seen as less meaningful than the other indicators. Nevertheless, it can be seen that
ROCE fell from 34 % in 2000 to close to zero in 2001 and 2002 before falling to –20 % in 2003.

8.2.10. Price of the like product

Unit prices of Community sales
(EUR 1 000/tonne) (*)

(*) Prices adjusted to ex Glasgow.

2000

3,50

2001

3,23

2002

3,02

2003

2,79

(54)

The average price of the like product fell by 20,3 % between 2000 and 2003, with a steady decline in
prices over that period. Prices reached their lowest point (EUR 2,79/kg) in 2003.

(55)

In Q1 2004, the information available indicates that the average unit price of the Community
producers’ sales increased slightly,
increase in average import prices.
in line with the slight
However, the latest information indicates that prices are again following a downward trend. One
party argued that (by reference to average annual exchange rates) price falls were less significant in
pounds sterling. Nevertheless,
it is considered that the Commission should not diverge from its
consistent practice in trade defence cases in using the euro as the unit of currency.

8.2.11. Costs

Average cost of production per tonne
(EUR/kilo)

2000

3,1

2001

3,2

2002

3,0

2003

3,1

(56)

In addition to price development, the development of costs has also been considered. Costs have
fluctuated between EUR 3,0 and EUR 3,2/kg over the period 2000 to 2003.

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8.2.12. Profitability

Net profit/loss on Community sales

2000

7,3 %

2001
– 3,3 %

2002
– 2,5 %

2003
– 17,1 %

(57)

The profitability of the Community producers’ sales in the Community fell from 7,3 % in 2000 to
–3,3 % in 2001. Losses became less pronounced in 2002 (–2,5 %) but then increased to –17,1 % in
2003. In 2003, as imports increased to their highest level and the average price of imports fell to its
lowest level (EUR 2,54/kg), the average price of the Community product also fell to its lowest level
(EUR 2,79/kg). The Community producers’ fall in profitability between 2000 and 2003 occurred at
the same time as the price per kilo of the Community producers’ product fell from EUR 3,50 to
EUR 2,79.

8.2.13. Stocks

Closing stock (t)

2000

36 332

2001

39 048

2002

53 178

2003

43 024

(58)

Stocks in this context refer to live fish in the water. The Community producers, as all others, have
negligible stocks of harvested fish as they have to be sold immediately. Therefore, a fall in closing
stock levels indicates a decrease in the quantity of live fish being on-grown for harvesting in the
following two years. Therefore, in this case, falling stock levels are an indicator of growing injury.

(59)

Stock levels increased from 36 332 tonnes in 2000 up to 53 178 tonnes in 2002 and then declined
in stocks between 2002 and 2003 of 19,1 %.
to 43 024 tonnes in 2003. This represents a fall

8.2.14. Conclusion

(60)

It is recalled that the investigation has shown that between 2000 and 2003, and in particular as
between 2002 and 2003, imports of the product concerned have taken place in increased quantities
and high volumes onto the Community market.

(61) As to the situation of the Community producers, between 2000 and 2002, theoretical production
capacity remained more or less stable, whilst production increased by 14,8 %.
In consequence,
capacity utilisation increased from 43 % to 50 % in this period. Stocks of live fish in the water
also increased. There was some loss of employment, whereas productivity increased mostly due to
greater use of automation.

(62)

Sales volumes increased by 14,3 % between 2000 and 2002 (compared to 8,5 % growth in
consumption), and the Community producers’ market share increased from 26,5 % to 28,0 %.

(63) However, even in this period prices fell by 13,7 % between 2000 and 2002, and despite a small
decrease in costs in 2002 (partly due to higher capacity utilisation and better productivity), this
appears to have led to a fall in profitability from 7,3 % in 2000 to losses of – 3,3 % and – 2,5 % in
2001 and 2002. ROCE and cash flow also developed negatively in this period.

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(64)

the Community producers worsened considerably.
the position of
Between 2002 and 2003,
Although production capacity and production increased (by 7,3 %)
in line with previously
developed production plans and this led to higher capacity utilisation and improved productivity,
all other indicators developed negatively. Stocks of fish in the water fell by 19,1 %. In the face of
10,3 % growth in consumption, the Community producers’ sales fell by 1,6 % and they lost market
share. In addition, prices fell by a further 7,6 %, whilst costs increased to their average level for the
four-year period. This led to a sharp drop in profitability and the Community producers incurred
losses of 17,1 %. These losses were reflected in an overall ROCE of – 20 %. Whilst cash flow appeared
to improve, this actually reflected reduction in stocks of fish in the water and an inability to reinvest.

(65)

Taking account of all of these factors the preliminary conclusion reached is that the Community
producers have suffered serious injury in terms of a significant overall impairment of the situation in
the position of the Community producers.

9. CAUSATION

(66)

In order to examine the existence of a causal link between the increased imports and the serious
injury, and ensure that injury caused by other factors is not attributed to increased imports, the
injurious effects of factors considered to be causing injury have been distinguished from each other,
the injurious effects have been attributed to the factors which are causing them, and, after having
attributed injury to all causal factors present, it has been determined whether increased imports are a
‘genuine and substantial’ cause of serious injury.

9.1. Analysis of causation factors

9.1.1. Effect of increased imports

(67) As shown above, between 2000 and 2003, and in particular as between 2002 and 2003, imports of
the product concerned have taken place in increased quantities and high volumes onto the
Community market.

(68)

(69)

(70)

(71)

Farmed salmon is essentially a commodity product, and the product concerned and the like product
compete mainly on price. It is generally accepted that imports, particularly from Norway, are the
market leader and price-setter.
In consequence, even low levels of undercutting result in price
depression for the Community producers.

In the current case, the most important injurious effect of increased imports was the large financial
losses to the Community producers. Due to the market and price leadership of imports, increased
imports drove down prices throughout the Community. Had imports increased to a lesser degree, this
price pressure would also have been lower. Had demand in the Community market been such as to
sustain such an increase in imports at substantially higher prices, albeit such an increase would have
resulted in lower sales and market share for the Community producers,
it is possible that the
Community producers would not have suffered serious injury.

Between 2000 and 2002, the price of
imports fell by 19 % and was closely followed by the
Community producers’ prices. Whilst the market share of the Community producers’ sales in the
Community increased in this period, this reflected production decisions taken in earlier years and in
both 2001 and 2002 the Community producers’ sales were made at a loss.

Between 2002 and 2003, imports grew by 15 %. The market share of imports grew from 72 % to
75 %, whilst the market share of the Community producers fell from 28 % to 25 %. Over the same
period imports grew from 236 % to 252 % of Community production. Thus, imports appear to have
increased relative to both Community production and consumption at
the
Community producers.

the expense of

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(72) However, the most important aspect of the increase in imports was its effect on the prices and
profitability of the Community producers. As noted above,
it is generally accepted that imports
(particularly from Norway) are the price leader in the Community market for farmed salmon. The
existence of undercutting has therefore been examined to establish whether indeed the low priced
imports have tended to depress the prices practised by the Community producers.

(73)

In order to reach a preliminary determination as to 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-Glasgow prices charged by the Community producers and by
exporting producers to the Community importers (cif European Community border including
customs duty), domestic prices were undercut in the three most recent years by between 3,1 %
and 7,1 %. This appears to have resulted in price depression for the Community producers
because, due to their large market share, prices are set by imports. In particular,
it can be seen
that the increase in imports at ever lower prices until Q3 2003 forced the Community producers to
continually reduce their prices until Q3 2003 leading to the losses sustained by them in that year.

(74) A direct comparison of import prices and the Community producers’ prices confirms this analysis.
Import prices fell by 28,5 % between 2000 and 2003, from EUR 3,62 to EUR 2,59/kg including duty.
fell by 20 % from EUR 3,50 to
Over the same period,
EUR 2,79/kg, with a steady decline in prices over that period.

the average price of

the like product

(75)

Between 2002 and 2003, the average unit price of imports fell from EUR 2,93 to EUR 2,59/kg
including duty. As imports increased to their highest level and the average price of imports fell to
its lowest level (EUR 2,59/kg including duty), import prices led Community producers’ prices in a
level
downward trend and the average price of
(EUR 2,79/kg). The average unit price of the Community product (adjusted ex-Glasgow) fell from
EUR 3,02 to EUR 2,79/kg, representing a fall of 8 %.

the Community product

to its lowest

fell

Unit prices of Community sales
(EUR 1 000/tonne) (*)

Unit prices of imports incl. customs duty
(EUR 1 000/tonne) (**)

(*)
(**)

Prices adjusted to ex Glasgow.
Import prices are cif including import duty of 2 %.

2000

3,50

3,62

2001

3,23

3,05

2002

3,02

2,93

2003

2,79

2,59

(76)

The fall in the Community producers’ prices appears to have been the main cause of a significant fall
in their profitability. In 2000, when their costs per kilo were EUR 3,1 and their sales price (adjusted
ex-Glasgow) was EUR 3,50, the Community producers made a profit of 7,3 %. In 2001 and 2002,
although their capacity utilisation, production, productivity, stocks of live fish, sales and market share
all increased, they incurred financial losses, reduced overall ROCE and negative overall cash flow as
their sales prices (adjusted ex-Glasgow) fell to EUR 3,23 and EUR 3,02 respectively and costs first
slightly increased and then fell to EUR 3,2 in 2001 and EUR 3,0 in 2002, respectively. Employment
also fell.

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(77)

In 2003, as prices (adjusted ex-Glasgow) fell to EUR 2,79 under pressure from low priced imports,
and with costs at their 2000 level of EUR 3,1, the Community producers incurred a loss of 17,1 %.
This was reflected in the negative overall ROCE and cash flow. At the same time their sales volume
dropped by 1,6 % and their market share fell by 3,0 percentage points, as the volume and market
share of imports increased. Albeit capacity, capacity utilisation and production, productivity increased
and employment remained stable, the effect of the increase in low priced imports on capacity
utilisation and production and employment
is delayed. That production can be expected to
decrease as a result of the increase in imports is shown by the decrease in stocks of live fish in 2003.

(78)

For the foregoing reasons, the preliminary conclusion is that there is a correlation between the
increase in imports and the serious injury suffered by the Community producers, and that the
increase in low priced imports has had injurious effects on the Community producers, particularly
in terms of downward pressure on prices on the Community market resulting in large financial losses
to the Community producers.

9.1.2. Effect of changes in consumption in the United Kingdom

(79) One party argued that there had been an alleged fall in consumption in the United Kingdom in 2003
and that this had caused injury to the Community producers. However, the United Kingdom market
cannot be isolated from the overall Community market and European Community consumption
increased by 19,7 % between 2000 and 2003, and by 10,3 % between 2002 and 2003. Therefore, the
reason for the Community producers’ substantial losses in 2003 appears to have been the low prices
rather than an alleged fall in consumption.

9.1.3. Effect of changes in export performance

Exports (t)

2000

11 748

2001

13 648

2002

14 203

2003

28 813

(80)

The effect of variations in the level of exports has also been examined. Exports increased throughout
the period considered, and indeed doubled between 2002 and 2003 and it is therefore concluded,
despite a claim by one party to the contrary, that the changes in the level of exports were not a cause
of the serious injury suffered by the Community producers. In any event, data relating to profitability
is based on data relating to Community sales only.

9.1.4. Effect of any excess capacity

(81) Whether injurious effects may have resulted from excess capacity amongst the Community producers
has also been examined. Theoretical capacity increased during the period of the investigation by 2,2 %
between 2000 and 2003 – by considerably less than production and consumption. In addition, as
previously noted, the theoretical capacity is the total quantity of live fish for which government
licences are held. The cost of applying for and maintaining licences is low. Indeed, the main cost
drivers are the cost of smolts (baby fish), feed and labour. Therefore, the preliminary conclusion is
that the increase in theoretical capacity did not cause injurious effects to the Community producers.

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9.1.5. Effect of competition amongst the Community producers

(82)

Some exporters argued that the reason behind the fall in the price of salmon on the Community
market was an oversupply by the Community producers. However, imports increased by 15 % in
2003 whereas the Community producers’ sales in the Community decreased. Further, imports are the
price leader in this market, not the Community producers. Indeed, an examination of the pricing
behaviour of all parties in 2002 and 2003 clearly shows that imports were consistently sold at lower
prices than those of the Community producers, and that the Community producers’ prices followed
those of imports in a downward trend. The effect of competition amongst the Community producers
balances itself amongst them — losses incurred by one are offset by gains made by another ceteris
paribus. Therefore, the preliminary conclusion is that competition amongst the Community producers
was not a cause of the serious injury observed.

9.1.6. Effect of increased mortality on production costs

(83) One party argued that higher than normal fish mortality rates in Ireland and disease outbreaks in the
United Kingdom and Ireland in 2002 and 2003 could have increased production costs and inter-
rupted the normal production cycle for some producers. The information currently available suggests
that these phenomena were limited to a small number of farms. Further, as the table below shows,
the Community producers’ production costs fell in 2002 and were close to their four year average in
2003. Therefore, the preliminary conclusion is that higher than normal fish mortality rates were not
the cause of material injurious effects. Nevertheless, this argument will be further investigated in the
course of the definitive stage of the investigation.

Average cost of production
(EUR 1 000/tonne)

2000

3,1

2001

3,2

2002

3,0

2003

3,1

9.1.7. Effect of higher production costs generally

(84) One party argued that the Norwegian industry has lower production costs than the Community
producers and that this is a reason for increased imports and serious injury. The information
currently available suggests that whilst Norway enjoys advantages in relation to certain costs, the
Community producers enjoy advantages in relation to others. Overall,
it is noted that whilst the
Community producers are incurring significant losses in the current market, so too are Norwegian
producers. As noted in point 8.2.12, the Community producers made a loss of – 2,5 % in 2002.
Norwegian Government data indicate that in 2002 for a sample of 151 salmon and rainbow trout
farms losses were – 13 %. (No comparable data have yet been published for 2003.) In addition, they
were operating under a heavy burden of debt, representing a significant proportion of their total
costs. Their total debt (excluding equity and provisions) was NOK 6,8 billion compared to a total
turnover of NOK 5,7 billion (1). This situation has in some cases led to the Norwegian banks
effectively taking ownership of Norwegian producers. Therefore, the preliminary conclusion is that
Norwegian producers are not more efficient than the Community producers, but this argument will
be further investigated in the course of the definitive stage of the investigation.

9.1.8. Higher transport costs in Scotland

(85) One party argued that there is a less developed infrastructure in remote areas of Scotland and that
this increases costs and may cause injury to Community producers. In this regard, it is noted that fish
farming in Norway, which is the Community market leader, is often undertaken in remote locations
with relatively poor transport infrastructure.

(1) Norwegian Directorate of Fisheries Statistical Survey 2002.

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(86)

Transport costs are not a large part of the overall cost of production of farmed salmon and vary
according to the origin of goods and the destination to which they are to be delivered. Overall, there
is not considered to be a significant difference in the costs of transport to the Community market as
between Norway, the United Kingdom and Ireland.
In addition, exporting producers (which by
definition are located outside the European Community) are generally likely to have higher
transport costs when selling to the Community market. Therefore, it is not considered that higher
transport costs in Scotland have contributed to the injury to the Community producers.

(87)

Further and in any event, no evidence was produced to the effect that transport costs in Scotland
have increased in recent years, and therefore, higher transport costs could not explain the recent
increase in financial losses suffered by the Community producers.

9.1.9. Other factors

(88) No other causation factors of possible relevance were identified during the provisional stage of the

investigation.

9.2. Attribution of injurious effects

(89)

The increase in imports had only a limited negative effect on the quantities sold by the Community
producers, although their sales and market share dropped somewhat in 2003. However, most
importantly it appears that the considerable increase in imports had a devastating effect on the
profitability of the Community producers, given the accompanying price drop. Given that imports
(with around 70-75 % of the market) enjoy the position of price-leader, the downward spiral
in
import prices had a considerable depressing effect on Community producers’ prices. This resulted in
considerable losses to the Community producers. No other factors which could have contributed to
the injury apart from the increase in low-priced imports were identified at this stage.

9.3. Conclusion

(90)

injurious effects resulted from the other known
Therefore, having determined that no material
factors, the preliminary conclusion is reached that there is a genuine and substantial link between
increased low-priced imports and serious injury to the Community producers.

10. CRITICAL SITUATION

(91) A preliminary determination has been made that critical circumstances exist in which delay would
cause damage to the Community producers which it would be difficult to repair. They have suffered a
serious decline, notably in live fish stocks, unit prices, profitability and ROCE as a result of increased
low-priced imports of the product concerned.

(92)

losses in 2003 (–17,1 %).

The financial situation of the Community producers is extremely precarious. They have suffered
substantial
In consequence, a number of Community producers have
already gone into bankruptcy or receivership, and many others are planning either to reduce their
production or withdraw from the market altogether. A number of the Community producers are
trying to sell their businesses as going concerns. However, given that they are making losses and the
recent bankruptcies and receiverships there is little interest from potential purchasers. Others are
simply closing down their operations in order to stem their losses.

(93)

In 2003 and the first months of 2004, five Community producers have gone into bankruptcy or
receivership. A further two have been taken over by feed companies (to whom they owed substantial
debts) and are in the course of being run down. In addition, seven more Community producers have
closed down or are in the course of closing down their operations.

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(94)

losses in 2003 have resulted in certain Community producers, particularly inde-
The substantial
pendent companies which are unable to rely on financial support from a larger group, relying on
extended credit from feed companies and using overdraft facilities as a source of medium to long
term financing. Some companies are being forced to sacrifice profitability in order to secure sufficient
cash flow to meet their financial commitments (for example, by harvesting fish before they reach an
optimum size). Whilst this strategy may ensure their survival for a short period, it is further reducing
their profitability and thus their medium and long term viability.

(95) Without an immediate and significant upturn in the outlook for salmon farming in the Community
more Community producers will be forced into bankruptcy or receivership as feed companies and
banks seek to limit their exposure to bad debts. Some Community producers have already had their
overdraft facilities terminated or reduced. In the United Kingdom, the national authorities have held
discussions with the banks to determine the reasons for withdrawal of support. However, the banks
have stressed that they must operate according to commercial criteria.

(96)

It can be anticipated that without the application of provisional safeguard measures to the European
Community market, imports of the product concerned into the Community will continue at a high
level, and, particularly as a result of the price depression which this will continue to cause, the
Community producers will continue to sustain losses and more will be forced into bankruptcy. Such
damage would be difficult to repair given that businesses will have closed down, former employees
will have been forced to relocate to find work and lenders will be cautious about providing finance to
re-open failed ventures. If this is to be avoided, provisional safeguard measures must be taken.

10.1. Conclusion

(97)

Therefore, bearing in mind the precarious economic situation of the Community producers as a result
the large losses which they have sustained, and the continuing threat posed by exporting
of
producers, it is considered that there exists a critical situation in which any delay in the adoption
of provisional safeguard measures would cause damage which it would be difficult to repair. It is
therefore concluded that provisional safeguard measures should be adopted without delay.

11. FINAL CONSIDERATIONS

(98)

The preliminary analysis of the findings of the investigation confirms the existence of a critical
situation and the need for provisional safeguard measures in order to prevent further injury to the
Community producers which it would be difficult to remedy.

11.1. Form and level of provisional safeguard measures

(99)

Community production of farmed salmon is insufficient to meet demand and it is therefore necessary
to ensure that the measures taken are not such as to deny exporting producers access to the
Community market. As the main cause of damage to the Community producers appears to be
the large volume imports leading to low price and causing price depression and suppression, the
measures taken should be designed to increase prices but not to unnecessarily limit supply.

(100) Regulations (EC) No 3285/94 and (EC) No 519/94 provide that provisional safeguard measures
increases. Therefore, preference should be given to tariff based
should take the form of tariff
in order to keep the Community
measures where these are appropriate.
market open and ensure the availability of supply to meet demand, it is appropriate to establish
quotas free of safeguard duties reflecting traditional
levels of imports. Beyond those quotas, an
additional duty should be payable on imports. Traditional levels of imports of farmed salmon can
then continue without payment of any additional duty, and unlimited quantities can be imported
albeit upon payment of the additional duty.

In the current case,

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(101)

In order to preserve traditional trade flows and ensure that the Community market also remains open
to minor players, the tariff quotas should be divided amongst those countries/regions having a
substantial
interest in supplying the product concerned, and a part should be reserved to other
countries. After consultation with Norway and the Faeroes which have such a substantial interest
and represent substantial import shares, it is considered appropriate to assign a specific tariff quota to
each of these countries based on the proportions of the total quantity of the product supplied by that
country during the three year period 2001 to 2003. The vast majority of the imports in this period
originated in Norway and the Faeroes and therefore country specific tariff quotas should apply to
these countries and one other to all other countries. In order to avoid an unnecessary administrative
burden, the tariff quotas should operate on a first come first served basis.

(102)

It appears that in normal circumstances Community consumption of farmed salmon is growing at
between around 4 % to 5 % annually taking into account the high growth levels observed in the new
Member States. In order to take account of this growth, the tariff quotas (based on average imports in
2001 to 2003) should be increased by 5 %. As the salmon market is seasonal, with higher imports
and sales in the second semester than the first, the tariff quotas should be seasonally adjusted. The
quotas have been calculated on a whole fish equivalent basis (WFE) and conversion ratios to fillets
and non fillets actually imported are 1:0,65 and 1:0,9 respectively.

(103) The additional duty should be set at a level such as to provide adequate relief to the Community
producers but at the same time should not constitute an unnecessarily onerous burden on importers
and users. An ad valorem duty is considered unsuitable as it would act as an incentive to lower import
prices free of duty, and would increase in real terms if a price increase occurs. Therefore a fixed
amount of duty should be set.

(104) The level of underselling, which 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, is considered to be a reasonable basis for fixing the level of duty. In order to
take account of the principle of proportionality in this particular case (where 70-75 % of the product
concerned is imported), the level of underselling was provisionally calculated on the basis of the
weighted average non-injurious price per tonne of the Community product, based on the cost of
production of the Community product plus a minimal level of profit for this industry (5 %). This
non-injurious price was compared with the preliminary weighted average price per tonne of the
imported product concerned during Q1 2004 (1). The difference between these two prices was
expressed as a percentage of
the imported product, and
the CIF/Community border price of
resulted in underselling of 17,8 % which represents a duty payable of EUR 469 per tonne (WFE),
which, based on the conversion ratios shown above, is equivalent to EUR 522/tonne for gutted and
EUR 722/tonne for fillets.

(105) Provision should be made for review of the measures by the Commission if circumstances should

change.

(106)

In conformity with Community legislation and the international obligations of the Community, the
provisional 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 %. In this
regard it is noted that imports from Chile in the most recent period for which reliable data is
available (second semester 2003) are below 3 %, and therefore it is appropriate to exclude Chile
from the application of the additional safeguard duty under the provisional safeguard measures and
review the position at the definitive stage of the investigation. The developing countries to which the
provisional measures do not apply should therefore be specified and this is done in Annex II.

(1) Based on available information in the absence of reliable Eurostat data for this period.

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11.2. System of monitoring

(107) As noted above,

it is considered that the trend in imports of the product concerned has caused
serious injury to the Community producers. It is therefore considered that it is in the interests of the
Community to establish a system of retrospective surveillance in accordance with Article 11 of
Regulation (EC) No 3285/94 and Article 9 of Regulation (EC) No 519/94 in relation to imports
of the product concerned which have been put into free circulation in the Community. This will, in
particular, allow imports from countries which are outside the application of provisional measures to
be closely monitored. In order to ensure coherence, the surveillance should be in place for the same
duration as the provisional measures. The surveillance should be administered in accordance with the
scheme laid down in Article 308d of Commission Regulation (EEC) No 2454/93 of 2 July 1993
laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing
the Common Customs Code (1), as last amended by Regulation (EC) No 2286/2003 (2), and the
Member States should notify the information to the Commission on a weekly basis.

11.3. Duration

(108) The provisional measures should not last more than 200 days. The measures should enter into force
on 15 August 2004 and should remain in force for 176 days unless definitive measures are imposed
or the investigation is terminated without measures before that time.

12.1. Preliminary remarks

12. COMMUNITY INTEREST

(109)

In addition to unforeseen developments,
increased imports, serious injury, causation and critical
it has been examined whether any compelling reasons exist which could lead to
circumstances,
the conclusion that it is not in the Community interest to impose provisional measures. For this
purpose, the impact of possible provisional measures on all parties involved in the proceedings and
the likely consequences of taking or not taking provisional measures were considered on the basis of
the evidence available.

12.2. Interest of the Community producers

(110) The Community producers have a combined annual turnover of over EUR 500 million, and,

in
addition to the direct employment of around 1 450 which they create, are estimated to indirectly
support a further 8 000 jobs in the processing and other sectors. They are part of a major growth
industry which has seen production double between 1995 and 2001. They are achieving increasing
efficiency in the production of a product
for which there is a growing market both in the
Community and globally. They are viable and competitive in normal market conditions, and show
increasing productivity.

(111) The Community producers’ position is clearly in jeopardy unless the current level of low-priced
imports is corrected. The proposed measures will apply to all imports of the product concerned
other than those from developing countries whose exports to the European Community are no more
than 3 % of imports to the Community. They would therefore apply to around 95 % of such imports.
it can be anticipated that the measures would be effective and allow the Community
Therefore,
producers prices to rise to a fair level.

12.3. Interest of the dependent industries

(112) The areas in which salmon farming is undertaken tend to be remote – mainly on the West coast of
Scotland and Ireland. There are limited employment opportunities and the economic activity
generated by salmon farming makes an important contribution to these local economies. Without
local business which supply goods and services to the
that contribution, many of
Community producers and their employees would cease to be viable.
is therefore in the
It
interests of dependent industries that effective provisional measures are taken.

the small

(1) OJ L 253, 11.10.1993, p. 1.
(2) OJ L 343, 31.12.2003, p. 1.

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12.4. Interests of producers of smolt and feed

(113)

It is in the interests of the major suppliers to the Community producers (such as smolt and feed
producers) to have strong and predictable demand for their product at a price which allows them to
make a reasonable profit. Given that a number of such suppliers have also extended substantial credit
to the Community producers, it is also in their interests that the Community producers remain in
business and able to service their debts. If the Community producers’ situation does not improve,
many of the smolt producers will suffer substantial bad debts which will reduce their profitability and
in some cases may threaten their ability to continue trading. The same applies to feed producers.
Therefore, it is in the interests of the smolt producers and feed producers for provisional measures to
be taken.

12.5. Interest of users, processors and importers in the Community

(114)

In order to evaluate the impact on importers, processors and users of taking or not taking measures,
questionnaires were sent to the known importers, processors and users of the product concerned on
the Community market. Importers/processors/users are normally one and the same and many are in
fact related to exporting producers outside the Community, particularly in Norway. Responses were
received from six importers/processors/users and from an association of processors. In addition, a
number of processors’ associations made representations to the Commission.

(115) Some argued that no measures should be taken because there had been only a short temporary fall in
farmed salmon prices in the two to three months following the termination of anti-dumping
measures against Norway in May 2003, and prices had since returned to normal. Processors
stressed that any increase in prices would increase their cost base, reduce their sales and profitability
and may lead to job losses and even de-localisation, stressing that employment in the fish processing
sector is far higher than in the fish farming industry and in some cases provides employment in areas
of low employment.

(116) Wholly reliable price data for Q1 2004 is not yet available from Eurostat. However, available
information indicates that both import prices have increased since Q4 2003 to average around
EUR 2,53/kilo in Q1 2004 and that the Community producers’ prices also increased slightly. Never-
theless, the Community producers’ prices remain substantially below a non-injurious price. Further,
the latest information indicates that prices are again following a downward trend.

(117) The main costs incurred by processors are the cost of the raw material and employment costs, and it
is true that an increase in raw material prices would increase the processors’ costs. However,
according to the information provided by processors, the cost of their raw material fell by 10 %
between 2002 and 2003, having already fallen by 18 % between 2000 and 2002. In 2003, it was
26 % cheaper than in 2000. At the same time, the information provided by them indicates that their
selling prices have remained about the same in 2002 and 2003. Three processors provided infor-
mation as to the profitability of their salmon processing operation. This indicated that profitability
had increased from 15 % in 2000 to 31 % in 2002, and 33 % in 2003. Although not necessarily
representative of the processing industry as a whole, this level of profitability is not believed to be
atypical. Some processors have contested this level of profitability, although they have not cooperated
in providing details of their own profitability. In these circumstances, it appears that the processing
industry is well able to absorb a modest increase in the cost of their raw material without any job
losses or de-localisation. In any event, it is clear that current price levels are unsustainable in the
medium to long term.

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(118) Processors also stressed the need for traders in the principal European markets and consumers to
continue to have access to good quality product at low prices. They expressed particular concern
about the possibility of speculative buying immediately after the introduction of a tariff quota, and
claimed that if the tariff quota is reached they might have to stop production. Finally, they stated that
if measures were to be taken, they should be such as to maintain adequacy of supply and help bring
price stability to the market in order that their costs could better be predicted. In this regard, whilst
some maintained outright opposition to any form of measures, others indicated that if measures were
to be imposed they would prefer a tariff quota system, certain expressing preference for a licensing
system.

(119)

It should be noted that the provisional measures proposed consist of tariff quotas based on average
imports to the Community (including the new Member States) in the period 2001 to 2003 plus 5 %,
the
beyond which an additional duty apply. Therefore,
Community should continue to have access to an adequate supply of raw material without any
additional duty.

the processing industry throughout

(120) Therefore, the disadvantages likely to be suffered by processors/users and importers, if any, are not
considered such as to outweigh the benefits expected to accrue to the Community producers as a
consequence of the proposed provisional measures, which are considered the minimum necessary to
prevent further serious deterioration in the situation of the Community producers.

12.6. Interest of consumers in the Community

(121) As the product concerned is a consumer product, the Commission informed various consumer
organisations of the opening of an investigation. No responses were received from consumer orga-
nisations. Given the magnitude of the margins between the whole fish ex-farm and the retail price of
processed salmon products, it is considered that the measures are unlikely to have a material effect
on retail prices and the impact on consumers is therefore considered to be minimal.

13. EXTENSION OF TIME LIMIT FOR THE CURRENT PROCEEDINGS

(122) Article 7 of Regulation (EC) No 3285/94 and Article 6 of Regulation (EC) No 519/94 provide that if
the Commission considers that surveillance or safeguard measures are necessary, it shall take the
necessary decisions no later than nine months from the initiation of the investigation, but that, in
exceptional circumstances, that time limit may be extended by a further maximum period of two
months.

13.1. Reasons for extension

(123) For the following reasons, it is considered that exceptional circumstances exist justifying the extension
of the time limit for completing the safeguard investigations in relation to the products concerned by
a further period of two months.

(124) On 1 May 2004, enlargement occurred and 10 new Member States joined the European Community.
Up until that date the investigation in relation to the current proceedings was restricted to the EU-15.
A large number of interested parties have cooperated in the investigation undertaken to date in
relation to the product concerned, and it is anticipated that economic operators in the new Member
States will also wish to fully cooperate in the further enquiries to be undertaken. In order to verify
the further information received, the Commission will send further questionnaires to Community
producers, feed and smolt producers, and importers, processors and users in the new Member States
in order to ascertain their specific situation. In order to allow the economic operators concerned the
opportunity to exercise their rights under Article 6 of Regulation (EC) No 3285/94 and Article 5 of
Regulation (EC) No 519/94, they should be given a reasonable period within which to reply to the
questionnaires. Moreover the Commission's services will thereafter require to verify the information
provided in reply to the questionnaires through on-the-spot investigations at the premises of the
parties concerned before proceeding to any conclusions.

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(125) Following the completion of the Commission’s further investigation, and prior to the adoption of
definitive safeguard measures in relation to the products concerned, if any, the European Community
would in addition be obliged to notify certain trade partners with which it has bilateral agreements
and also to notify WTO trade partners of any proposed measures in a timely manner.

(126) Further, were provisional measures (which should run in parallel with the investigation) to come to
an end in Q4 2004, this would create uncertainty in the market during its busiest period in the run
up to Christmas.

13.2. Extension of time limit

(127)

It is therefore considered that, in the circumstances outlined above, exceptional circumstances exist
and the time limit for completion of the safeguard investigation in relation to farmed salmon should
be extended by two months from 6 December 2004 to 6 February 2005,

HAS ADOPTED THIS REGULATION:

Article 1

System of tariff quotas and their additional duties

frozen,

1.
A system of tariff quotas is hereby opened for the period 15 August 2004 to 6 February 2005 in
relation to imports into the Community of farmed (other than wild) salmon, whether or not filleted, fresh,
chilled or
ex 0303 19 00,
ex 0303 22 00, ex 0304 10 13 and ex 0304 20 13 (hereinafter farmed salmon). The volume of the tariff
quotas and the countries to which they apply are specified in Annex I. The quotas have been calculated on a
whole fish equivalent basis (WFE) and conversion ratios to fillets (Group 2) and non-fillets (Group 1)
actually imported are 1:0,65 and 1:0,9 respectively.

classified within CN codes

ex 0302 12 00,

ex 0303 11 00,

2. Wild salmon shall not be subject, or allocated, to the tariff quotas. For the purpose of this Regulation,
wild salmon shall be that in respect of which the competent authorities of the Member State where the
customs declaration for free circulation is accepted are satisfied, by means of all appropriate documents to
be provided by interested parties, that it was caught at sea for Atlantic or Pacific salmon or in rivers for
Danube salmon.

3.
For the purposes of determining the level of additional duty payable, farmed salmon falling within CN
codes ex 0302 12 00, ex 0303 11 00, ex 0303 19 00, ex 0303 22 00 shall fall within Group 1 in Annex I,
whilst those falling within ex 0304 10 13 and ex 0304 20 13 shall fall within Group 2.

Subject to Article 2, imports of farmed salmon beyond the level of the tariff quota shall be subject to

4.
the additional duty specified in Annex I for the group to which they belong.

The conventional rate of duty provided in Council Regulation (EC) No 2658/87 (1), as last amended by
5.
Commission Regulation (EC) No 2344/2003 (2) or any preferential rate of duty, shall continue to apply to
imports of farmed salmon.

6.

If circumstances should change, these measures may be reviewed by the Commission.

Article 2

Developing countries

Imports of farmed salmon originating in one of the developing countries specified in Annex II shall not be
subject, or allocated, to the tariff quotas.

(1) OJ L 256, 7.9.1987, p. 1.
(2) OJ L 346, 31.12.2003, p. 38.

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Article 3

General provisions

The origin of the farmed salmon to which this Regulation applies shall be determined in accordance

1.
with the provisions in force in the Community.

Subject to paragraph 3, any release into free circulation in the Community of farmed salmon origi-

2.
nating in a developing country shall be subject to:

(a) presentation of a certificate of origin issued by the competent national authorities of that country

meeting the conditions laid down in Article 47 of Regulation (EEC) No 2454/93; and

(b) the condition that the product has been transported directly, within the meaning of Article 4, from that

country to the Community.

The certificate of origin referred to in paragraph 2(a) shall not be required for imports of farmed
3.
salmon 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.

Proof of origin shall be accepted only if the farmed salmon meet the criteria for determining origin set

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

Article 4

Direct transport

1.

The following shall be considered as transported direct to the Community from a third country:

(a) products transported without passing through the territory of any third country;

(b) products transported through one or more third countries other than the country of origin, with or
without transshipment or temporary warehousing in those countries, provided that such passage is
justified for geographical reasons or exclusively on account of transport requirements and provided that
the products:

— have remained under the supervision of the customs authorities of the country or countries of transit

or warehousing,

— have not entered into commerce or been released for consumption there, and

— have not undergone operations there other than unloading and reloading.

Proof that the conditions referred to in paragraph 1(b) have been satisfied shall be submitted to the
2.
Community authorities. That proof may be provided, in particular, in the form of one of the following
documents:

(a) a single transport document issued in the country of origin covering passage through the country or

countries of transit;

(b) a certificate issued by the customs authorities of the country or countries of transit containing:

— a precise description of the goods;

— the dates of their unloading and reloading or their lading or unlading, identifying the vessels used.

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Article 5

Imports in the process of shipment to the Community

This Regulation shall not apply to products in the process of shipment to the Community within the

1.
meaning of paragraph 2.

2.

Products shall be deemed to be in the process of shipment to the Community if they:

— left the country of origin before the date this Regulation begins to apply, and

— are shipped from the place of loading in the country of origin to the place of unloading in the
Community under cover of a valid transport document issued before the date this Regulation begins
to apply.

The parties concerned shall provide, to the satisfaction of the customs authorities, proof that the

3.
conditions laid down in paragraph 2 have been met.

However, the authorities may regard the products as having left the country of origin before the date this
Regulation begins to apply if one of the following documents is provided:

— in the case of transport by sea, the bill of lading showing that loading took place before that date,

— in the case of transport by rail, the consignment note that was accepted by the railway authorities in the

country of origin before that date,

— in the case of transport by road, the CMR contract for the carriage of goods or any other transport

document issued in the country of origin before that date,

— in the case of transport by air, the air consignment note showing that the airline took the products over

before that date.

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

Article 6

Article 7

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the
European Union and apply until 6 February 2005.

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

Done at Brussels, 13 August 2004.

For the Commission

Pascal LAMY
Member of the Commission

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ANNEX I

Origin
(for
groups 1
and 2)

Tariff quota
(for groups
1 and 2)
in tonnes
(WFE)

Order
Number
for
group 1

Order
Number
for
group 2

Additional duty
EUR/tonne

Group 1

Group 2

Norway

163 997

90.780

90.788

522

722

Faeroes

22 230

90.694

90.695

Other

20 108

90.077

90.078

CN code

TARIC code

Group

ex 0302 12 00

0302 12 00 21

0302 12 00 22

0302 12 00 23

0302 12 00 29

0302 12 00 39

0302 12 00 99

ex 0303 11 00

0303 11 00 19

0303 11 00 99

ex 0303 19 00

0303 19 00 19

0303 19 00 99

ex 0303 22 00

0303 22 00 21

0303 22 00 22

0303 22 00 23

0303 22 00 29

0303 22 00 89

ex 0304 10 13

0304 10 13 21

0304 10 13 29

0304 10 13 99

ex 0304 20 13

0304 20 13 21

0304 20 13 29

0304 20 13 99

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

2

2

2

2

2

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ANNEX II

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, American Samoa, Anguilla, Antarctica,
Aruba, Barbados, Bangladesh, Burkina Faso, Bahrain, Burundi, Benin, Brunei Darussalam, Bolivia, Brazil, Bahamas, Bhutan,
Botswana, Belize, Bermuda, Bouvet Island, British Virgin Islands, British Indian Ocean Territory, Democratic Republic of
Congo, Central African Republic, Congo, Côte d'Ivoire, Chile, Cameroon, Chad, Colombia, Costa Rica, Cuba, Cape Verde,
Cayman Islands, Christmas Island, Cocos Islands (or Keeling Islands), Cook Islands, Djibouti, Dominica, Dominican
Republic, Algeria, Ecuador, Egypt, Eritrea, Ethiopia, Fiji, Federated States of Micronesia, Falkland Islands, French
Polynesia, French Southern Territories, Gabon, Grenada, Ghana, Gambia, Guinea, Equatorial Guinea, Guatemala,
Guinea-Bissau, Guyana, Gibraltar, Guam, Honduras, Hong Kong, Haiti, Heard Island and McDonald Islands, 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 Jamahiriya, Morocco,
Islands, Mali, Myanmar, Mongolia, Mauritania, Mauritius, Maldives, Malawi, Mexico, Malaysia,
Madagascar, Marshall
Mozambique, Macau, Mayotte, Montserrat, Namibia, Niger, Nigeria, Nicaragua, Nepal, Nauru, Netherlands Antilles, New
Caledonia and Dependencies, Niue Island, Norfolk Island, Northern Mariana Islands, Oman, Panama, Peru, Papua New
Guinea, People’s Republic of China, Philippines, Pakistan, Palau, Paraguay, Pitcairn, Qatar, Rwanda, Samoa, Saudi Arabia,
Solomon Islands, Seychelles, Sudan, Sierra Leone, Senegal, Somalia, Suriname, São Tomé and Príncipe, El Salvador, Syrian
Arab Republic, Swaziland, South Georgia and South Sandwich Islands, St Helena and Dependencies, St Pierre and
Miquelon, Togo, Tunisia, Tonga, East Timor, Trinidad and Tobago, Tuvalu, Tanzania (United Republic of), Chinese
Taipei, Tokelau, Turks and Caicos Islands, United States minor outlying islands, Uganda, Uruguay, St Vincent and the
Northern Grenadines, Venezuela, Vietnam, Vanuatu, Virgin Islands of the United States of America, Wallis and Futuna
Islands, Yemen, South Africa, Zambia and Zimbabwe.