Notice regarding consultations on the application of the safeguard measures imposed on imports concerning certain prepared or preserved citrus fruits by Commission Regulation (EC) No 658/2004
Date: 2005-12-17
Institutions: European Commission
Subjects: citrus fruit, fruit product, import, preserved product, protective clause

17.12.2005

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Official Journal of the European Union

C 322/7

Notice regarding consultations on the application of the safeguard measures imposed on imports
concerning certain prepared or preserved citrus fruits by Commission Regulation (EC) No
658/2004

(2005/C 322/06)

Definitive safeguard measures were imposed on the imports of
certain prepared or preserved citrus fruits (such as mandarins)
on 7 April 2004 pursuant to Commission Regulation (EC) No
658/2004 (1). By virtue of Council Regulation (EC) No
3285/94 (2) and Council Regulation (EC) No 519/94 (3), and in
particular Article 21 and Article 18 thereof, the Commission
has consulted the Member States on the application of the safe-
guard measures.

The Commission officially advised the Community producers
and their association, the importers and traders and their asso-
ciations, the suppliers, the exporting producers in China and
their associations, of the initiation of a mid-term review, by a
Notice of 4 June 2005 (4).

Following an examination of the effects, the appropriateness of
continuing the measures, and the pace of liberalization, the
Commission informed the Member States of the findings of the
investigation. Consultations were held within the Advisory
Committee established under Article 4 of Regulation (EC) No
3285/94 and Article 4 of Regulation (EC) No 519/94.

In compliance with the relevant provisions, the purpose of the
investigation has been to:

(a) examine the effects of the safeguard measures;

(b) determine whether and in what manner, it would be appro-

priate to accelerate the pace of liberalization; and

(c) ascertain whether its application is still necessary.

2.2 Period of investigation

In this sector of activity, the canning season starts in October
each year. Data are analysed on for each canning season,that is
to say, according to periods
to
September of the following year. The original
investigation
analysed the data relevant for the period 1998/1999 up to
2002/03. The current investigation covers the periods 2003/04
and 2004/05.

running from October

It is recalled that production of canned mandarins is concen-
trated in Spain.

1. Product concerned

2.3. Parties concerned by the proceeding

The product in question is prepared or preserved mandarins
(including tangerines and satsumas), clementines, wilkings and
other similar citrus hybrids, not containing added spirit, but
containing added sugar (‘the product concerned’).

Questionnaires were sent to all parties known to be concerned
by the proceedings and to all other companies that made them-
selves known within the deadlines set out in the Notice.

The product concerned is currently classified within CN codes
2008 30 55 and 2008 30 75. These CN codes are given for
information only.

2. Procedure

Replies were received from five Community producers, five
suppliers, eleven importers, seven exporters/traders and two
associations.

The Commission's services sought and verified all the informa-
tion deemed necessary for the purpose of the investigation and
verification inspections were carried out at the premises of the
following companies:

2.1. Scope of consultations

Community producers

Article 21(1) of Regulation (EC) No 3285/94 and Article 18(1)
of Council Regulation (EC) No 519/94 obliges the Commission
to consult on the application of the measures with Member
States no later than at the mid-point of the period of applica-
tion of the measures.

(1) OJ L 104, 8.4.2004, p. 67.
(2) OJ L 349, 31.12.1994, p. 53.
(3) OJ L 67, 10.3.1994, p. 89.
(4) OJ C 137, 4.6.2005, p. 11.

— Halcon Foods, S.A., Murcia, Spain

— Alcurnia Alimentacion, s.l., Murcia, Spain

— Conservas y Fruta S.A., Murcia, Spain

— Industrias Videca S.A., Valencia, Spain

— Agricultura y Conservas, S.A., Valencia

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Official Journal of the European Union

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Suppliers

4.1 Imports

— Cooperativa Agricola Ntra Sra del Oreto Coop. V, Valencia

4.1.1. Volume of imports

Unrelated importers

— Wünsche Handelsgesellschaft International mbH & Co., KG,

Hamburg, Germany

— I. Schröder KG (GmbH & Co), Hamburg, Germany

— Edeka Zentrale AG & Co. KG, Hamburg, Germany

— Hüpeden & Co. (GmbH & Co.) KG, Hamburg, Germany

The following tables present imports from China to the EU-25.
Imports from all other countries are negligible as they represent
imports, or 1 000 tons per year.
less than 2 % of the total
(Volume in Tonnes, seasonal data from October to September)

2002/03

2003/04

2004/05 (*)

50 500

63 900

46 600 (*)

Index

100

127

92

3. Restructuring

(*) Extrapolated on the basis of 10 months sales

(Source: Eurostat)

the original

As is envisaged in recital 120 of Regulation (EC) No 658/2004,
the restructuring efforts made by the Community's canned
mandarin producers were examined in the review. The main
result of the restructuring process thus far has been to cut last
season's capacity of 33 000 tonnes. This cut corresponds to
25 % of
total capacity. Efforts have also been
undertaken to rationalise the supply of raw material and to
establish more cost effective sales and distribution channels,
with the aim of achieving a more efficient production chain
whilst allowing greater economies of scale. Main features of the
activities carried out to date include the cessation of mandarin-
canning activities by certain producers, take-overs of compa-
nies,
the establishment of a cooperative company for the
purpose of joint purchasing, and the introduction of a new
production line system.

The results of the restructuring are now becoming visible, and
should over time encourage the initiation of even further
restructuring activities. Expected activities include the finalisa-
tion of processes leading to technical
the
production. Further effects and economies of scale resulting
from the consolidation of such activities as the reduction of
production and establishment of cooperative companies are
also envisaged.

improvement of

4. Results of the investigation

Analysis of the measures in place is based on data gathered for
the three last canning seasons. Figures supplied for the year
2002/03 are those reported in the Regulation (EC) No
658/2004 setting the definitive safeguard measures on imports
of canned mandarins. These figures are reported here as a
reflection of the situation in the industry at the time of initia-
tion of the proceeding, before the original investigation took
place. The data reported for the year 2003/04, which were
checked during the current mid-term review, relate to a period
when investigation leading to the imposition of the measures
was underway. The data relating to the year 2004/05 corre-
spond to a period falling after the measures were imposed.

During the season of 2004/05,
import volumes stabilised at
around 47 000 tonnes. Approximately 60 % of the 2004/05
imports took place in March and April 2005, just before the
expiry of the licence period. This stabilisation in the imports
followed a period of rise in imports, reaching a level of 63 900
tonnes in 2003/04. The import peak in 2003/04 was probably
due to the anticipation of
the imposition of definitive
measures.

Imports into some Member States more than tripled between
the 2002/03 season and the 2004/05 season. Other Member
States, traditionally not importers, started to import canned
mandarins from China. On the other hand, some of the acces-
sion countries imported big quantities during the two months
leading up to the accession and then, in some cases, imports
completely stopped after the enlargement of
the European
Union in May 2004.

It will be recalled that imports were subjected to a system of
tariff quotas of around 32 000 tonnes for imports from China
and of around 2 000 tonnes for imports originating in other
countries. When the quota is exhausted a duty of EUR 301 per
tonne (‘EUR/T’) is payable. On these grounds, it is clear that
imports were made both within the quota and outside it, then
the duty. This
the latter being subject
demonstrates that EU demand is satisfied.

to the payment of

4.1.2. Import prices

2002/03

2003/04

2004/05
(10 months)

595

524

520

Index

100

88

87

(Source: Eurostat)

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Import prices at cif EU border
level were found to be
decreasing and fell from 595 EUR/T in 2002/03, down to 524
EUR/T in 2003/04 and further down to 520 EUR/T during the
season 2004/05. Prices dropped by a total of 13 % between the
season 2002/03 and the season 2004/05. This drop was
mainly the result of the depreciation of the US dollar against
the euro. It is recalled that imported canned mandarins are
invoiced in US dollars, which depreciated by 18 % over the
period. The increase of the invoiced price in US dollars of 5 %
was therefore counterbalanced by the depreciation, resulting in
an effective price drop of 13 % (18 %-5 %). A slight increase in
the import price was, however, observed as from January
2005.

4.2 Situation of the Community producers

In order to assess the effect of the measures, an examination of
the relevant economic factors has been conducted by the
Commission. The fact that the production volume is decided
once a year at the start of the canning season in November
must be taken into account when analysing the findings of the
investigation.

Production volume is still mainly determined by the relation-
ship between the cost of production and the expected sale
price. The expected sale price is in turn mainly determined by
the price level of imports from China. Imports from the quota
allocated to countries other than China are minimal, and are
therefore not having a material impact on Community produ-
cers' sale prices.

4.2.3. EU sales

Tonnes

Index

2002/03

2003/04

2004/05 (e)

28 000

23 000

28 000

100

82

100

(e) Extrapolated on the basis of 9 months sales

Owing to increased competitiveness and a moderate raise of
the import prices during the last months, sales recovered
during the 2004/05 season. This recent positive development
follows a negative trend that had persisted until the 2003/04
season.

4.2.1. Production capacity and capacity utilisation

4.2.4. Consumption

2002/03

2003/04

2004/05

Capacity

129 000

129 000

96 000

Capacity utilisation

31 %

22 %

40 %

Tonnes

Index

2002/03

2003/04

2004/05 (e)

79 000

82 000

84 000 (e)

100

104

106

Production capacity remained stable between the seasons
2002/03 and 2003/04 and decreased by around 25 % in the
season 2004/05 (see point 3 above — restructuring) This led
to a slight improvement of capacity utilisation from 20 % in
2003/04 to 40 % in 2004/05.

(Source: Eurostat data and companies estimate)

EU-25 consumption has increased moderately in the last two
seasons, mainly owing to a growing consumption as a conse-
quence of the enlargement of the European Union in 2004.

4.2.2. Production

Tonnes

Index

2002/03

2003/04

2004/05

39 600

28 200

38 000

100

71

96

Production recovered during 2004/05 — the season that
followed the imposition of the definitive measures. EU produc-
tion had, prior to this time, been in sharp and constant decline
due to massive imports from China. The lowest point of
production was reached in the season 2003/04 when the
output was down to 28 200 tonnes. This downturn in produc-
tion coincided with the period where definitive safeguard
measures were not yet in place.

At the time, many of the Community producers were consid-
ering stopping the production of canned mandarins altogether,
as they were close to bankruptcy.

4.2.5. Market share

2002/03

2003/04

2004/05

Community producers

35 %

28 %

33 %

The Community producer market share partially recovered to
33 % after the imposition of definitive safeguard measures in
2004/05. The recovery followed a decrease from 35 % in
2002/03 down to 28 % in 2003/04.

4.2.6. Employment, hours worked and productivity

2002/03

2003/04

2004/05

Employment

2 343

2 224

1 970

Hours worked

675 000

475 000

580 000

Hours worked/tonne

17,0

16,8

15,3

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the workforce is accordingly made up of

The production of canned mandarins is seasonal and a majority
of
temporary
employees. Productivity for this mature product is fairly stable
and variances are mainly linked to yield and the characteristics
of
the fresh product. The restructuring process during the
investigated season of 2004/05 has, however, added technical
improvements as a factor enhancing productivity and has
resulted in a decrease in hours worked per tonne produced.

4.2.7 Undercutting

The investigation revealed that the price undercutting increased
after the imposition of definitive safeguard measures. The main
factor contributing to this development would be the deprecia-
tion of the US dollar ( refer to part 4.1.2 above).

(Source: Eurostat and companies' data)

4.2.8 Profitability

2002/03

2003/04

2004/05

Net profit/loss EU sales

– 4,3 %

– 6,5 %

– 5,5 %

(Source: Companies' results)

During the 2004/05 season, results of the Community Produ-
cers started to recover slowly as production increased and
import prices first stabilised. As from January 2005, the prices
started to increase. This positive development followed a period
increasing
of poor results in 2003/04. Weak sales volumes,
import volumes at an extremely low price, and the fact that the
provisional safeguard measures were yet not effective, were all
factors that contributed to these weak results in 2003/04.

4.3. Situation of other interested parties

4.3.1. Exporters

More than 98 % of the total exports originate in the People's
Republic of China. Questionnaires were sent to the exporters,
and the information gathered represented around 20 % of the
total volume exported to the EU and therefore had to be
complemented by data
information
obtained in the questionnaires roughly confirmed the data
obtained through Eurostat.

from Eurostat. The

4.3.2. Importers/retail chains

On average, 75 % of the imports of canned satsumas to the EU
are made by German importers and retail chains while the
remaining 25 % is split mainly between the Czech Republic,
the Netherlands, United Kingdom and Belgium. The current
investigation confirmed that the licence system in place is func-
tioning properly and that licenses are fully used by the tradi-
tional importers. The financial situation for the importers has
continued to be secure with inter alia an average profitability of
approximately 15 % for the canned mandarins sector.

5. Analysis of the findings

5.1 Assessment of the effect of the measures

Positive effects have been observed as a result of the measures
imposed.

The imposition of the measures allowed the Community produ-
cers to embark on a restructuring process. The substantial cut
in capacity achieved as a result thereof, in combination with
measures still to be enacted, should allow the sector to become
increasingly competitive, to maximise productivity and to take
advantage of economies of scale.

Imports have stabilised after the peak in 2003/04 and in the
2004/05 season, the measures resulting in a decrease in the
volume of imports. Import prices that previously had been
decreasing began to increase in 2005.

The overall results of the Community producers for the investi-
gated period are still negative, but are improving when
compared to the previous
combination of
increased competitiveness of the Community industry and the
increase in import prices have resulted in a recovery of the EU
producer's sales and production. Profitability, which in the
season 2003/04, was down to -6,5 % has recovered to -5,5 %
in the season 2004/05.

season. The

Considering the ongoing restructuring process,
the import
trends and the improving situation of the Community produ-
cers, the conclusion to be drawn is that the measures enacted
under Commission Regulation (EC) No 658/2004 are effective.

5.2 Assessment of the necessity to continue the application of the

measures

It is only the most recent trends that have shown that the posi-
tive results of the safeguard measures have begun to materia-
lise. This is, however, to be expected, since definitive measures
have only been effective for one canning season.

The restructuring process has begun and has so far resulted in
a cut of capacity of 25 %. Further activities are to be expected
in the coming years and the finalisation of this process will
consequently require more time.

Although the volume of imports has decreased, the quota of
32 000 tonnes is exceeded regularly and price undercutting has
increased, mainly on account of the depreciation of the US
dollar.

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for

the

As was concluded in Part 5 above, the financial results of the
are
Community producers
investigated period
improving in comparison to the previous season, but
the
the production,
overall results are still negative. Similarly,
market
in
2004/05 are starting to recover but are still equal to, or slightly
below, the figures in 2002/03.

the Community producers

share and sales of

recognising the increasingly positive effect of

the
Whilst
measures, the Community producers have asked for an increase
of the additional duty to a level which could prevent imports
beyond the quota. Producers would, moreover, be in favour of
the introduction of a minimum price system set at a reasonable
level in order to prevent erratic import prices.

However, no provision for increasing the level of the protection
as a result of the mid-term investigation is contained in Article
21 of the basic Regulation (EC) No 3285/94 on the common
rules for imports or in the relevant WTO rules

The cooperating importers have opposed the establishment of
a minimum price, arguing that such a system would be inap-
propriate, owing to the risk of cross-subsidisation between
mandarins and other canned items that are imported. Further-
more, some of the traditional importers would prefer that their
present ratio of 75 % allocated be increased to 95 % in order to
prevent speculation on licences. As to the amount of the tariff
quota, some of the importers ask for a substantial increase, alle-
ging that the EU producers lack sufficient raw materials (fresh
mandarins) to meet the demand of the domestic market.

The investigation has conversely revealed that the crop of fresh
satsumas, although slightly decreasing,
is available on the
market in sufficient quantities and at reasonable prices. As to
the arguments relating to the calculation and allocation of the
amounts within the tariff quota, established practice in these
cases requires that sufficient possibilities remain open to other
actors on the market in order to ensure that competition is
maintained. An amendment to the allocation and calculation of
the quota would consequently be inappropriate.

the measures would endanger

Considering the existing Chinese capacities and the fact that
the Community producers' situation is still fragile, the abolition
the
of
ongoing restructuring process. China has the capability to
simultaneously supply the markets of Japan, USA and Europe
and can easily adapt to world demand.

the completion of

sary to facilitate the adjustment of Community producers and
to allow the continuation of the restructuring process as well as
the further recovery from the current negative economic situa-
tion.

5.3 Assessment of the pace of liberalization

imports are above the ceiling of

As foreseen by the WTO and the Community legal framework,
a gradual liberalization of the measures is already in place. To
this end, an annual 5 % increase of the quota is provided
through Commission Regulation (EC) No 658/2004. Despite
the additional duty,
the
tariff quota. The investigation has
32 000 tonnes a year
demonstrated that improvement of the economic indicators of
the EU producers and their ongoing restructuring process does
not exceed the pace foreseen and matches the reasonable
expectations of the time when the measures were imposed.
Thus the recovery and restructuring process needs more time
to achieve its effects than one single canning season. The situa-
tion of the importers has not changed and remains positive.

An expansion of the import tariff quota would indeed jeopar-
dise the ongoing restructuring processes and would undermine
the effect of the measures. On this basis, the Commission
considers that the pace of liberalization of the imports foreseen
in Regulation (EC) No 658/2004 is adequate and that it would
be inappropriate to accelerate it.

6. Final considerations

The above findings demonstrate that the situation of the Com-
munity producers is gradually improving as a result of the
measures. A restructuring process in line with the expectations
of the current proceeding is also ongoing; the full effects are
expected to materialise in the next years.

The established tariff quota has been exceeded throughout the
period investigated, demonstrating that the specific duty is not
excessive and allows ample outsourcing of the Community
market. The current pace of liberalization should not be further
accelerated if measures are to remain effective so as to allow
the recovery of Community producers.

7. Conclusion

The additional duty, to be paid once the quota is used up, must
similarly still be considered appropriate when taking into
account the big gap between the Chinese prices at cif EU
border level and European prices and the underselling found to
exist.

In view of the above, the Commission therefore concludes that
the application of the present safeguard measures is still neces-

analysis,

supported by the Advisory
The Commission's
Committee, therefore concludes that the application of the safe-
guard measures in force is effective, still necessary and that the
current pace of liberalization is appropriate.

The measures in place should therefore continue in their
current form and at their present level, without any amend-
ments.