Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of solutions of urea and ammonium nitrate originating in Algeria, Belarus, Russia and Ukraine following an expiry review pursuant to Article 11(2) of Council Regulation (EC) No 384/96
Date: 2006-11-23
Institutions: European Commission
Subjects: Algeria, Belarus, Russia, Ukraine, anti-dumping duty, import, organic fertiliser, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.11.1006 
COM(2006) 720 final 

Proposal for a 

COUNCIL REGULATION  

imposing a definitive anti-dumping duty on imports of solutions of urea and ammonium 
nitrate originating in Algeria, Belarus, Russia and Ukraine following an expiry review 
pursuant to Article 11(2) of Council Regulation (EC) No 384/96 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  384/96  of 
22 December 1995 on protection against dumped imports from countries not members 
of  the  European  Community,  as  last  amended  by  Council  Regulation  (EC)  No 
2117/2005 of 23.12.2005 (‘the basic Regulation’) in the proceeding concerning imports 
of  urea  and  ammonium  nitrate  solutions  originating  in  Algeria,  Belarus,  Russia  and 
Ukraine. 

•  General context 

This proposal is made in the context of the implementation of the basic Regulation and 
is the result of an investigation which was carried out in line with the substantive and 
procedural requirements laid out in the basic Regulation. 

•  Existing provisions in the area of the proposal 

Council  Regulation  (EC)  No  1995/2000,  imposing  a  definitive  anti-dumping  duty  on 
imports  of  solutions  of  urea  and  ammonium  nitrate  ('UAN')  originating  in  Algeria, 
Belarus, Russia, Ukraine and Lithuania. 

•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Interested  parties  concerned  by  the  proceeding  have  already  had  the  possibility  to 
defend their interests during the investigation, in line with the provisions of the basic 
Regulation. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

This proposal is the result of the implementation of the basic Regulation. 

The  basic  Regulation  does  not  foresee  a  general  impact  assessment  but  contains  an 
exhaustive list of conditions that have to be assessed. 

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3)  LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

On 22 September 2005, the Commission initiated an expiry review of the anti-dumping 
measures  in  force  in  respect  of  imports  of  urea  and  ammonium  nitrate  solutions 
originating in Algeria, Belarus, Russia and Ukraine. 

The  purpose  of  this  investigation  was  to  examine  whether  there  is  continuation  or 
recurrence  of  dumping  regarding  imports  of  UAN  originating  in  Algeria,  Belarus, 
Russia  and  Ukraine,  thereby  causing  a  continuation  or  recurrence  of  injury  to  the 
Community industry. 

The  investigation  showed  that  imports  of  UAN  originating  in  Algeria  were  dumped, 
and a likelihood of recurrence of dumping for Belarus, Russia and Ukraine as well as a 
likelihood of recurrence of injury were established. It is therefore concluded that anti-
dumping measures have to be maintained on imports from Algeria, Belarus, Russia and 
Ukraine. 

It is therefore proposed that the Council adopts the attached proposal for a Regulation 
which  should  be  published  in  the  Official  Journal  of  the  European  Union  by 
21 December 2006 at the latest. 

•  Legal basis 

Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection  against 
dumped  imports  from  countries  not  members  of  the  European  Community,  as  last 
amended by Council Regulation (EC) No 2117/2005.  

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons. 

The form of action is described in the above-mentioned basic Regulation and leaves no 
scope for national decision. 

Indication  of  how  financial  and  administrative  burden  falling  upon  the  Community, 
national governments, regional and local authorities, economic operators and citizens is 
minimized and proportionate to the objective of the proposal is not applicable. 

•  Choice of instruments 

Proposed instruments: regulation. 

Other  means  would  not  be  adequate  because  the  basic  Regulation  does  not  foresee 
alternative options. 

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4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL REGULATION  

imposing a definitive anti-dumping duty on imports of solutions of urea and ammonium 
nitrate originating in Algeria, Belarus, Russia and Ukraine following an expiry review 
pursuant to Article 11(2) of Council Regulation (EC) No 384/96 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection 
against dumped imports from countries not members of the European Community1 (‘the basic 
Regulation’) and in particular Article 11(2) thereof, 

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

Whereas: 

A. 

PROCEDURE 

1.  Measures in force 

(1) 

On  23  September  2000  the  Council  imposed,  by  Regulation  (EC)  No  1995/20002, 
definitive  anti-dumping  measures  on  imports  of  solutions  of  urea  and  ammonium 
nitrate  ('UAN')  originating  in  Algeria,  Belarus,  Russia,  Ukraine  and  Lithuania.  The 
measures  imposed  on  imports  of  UAN  originating  in  Lithuania  lapsed  after 
enlargement of the European Union on 1 May 2004. The investigation that led to these 
measures will be referred to as ‘the original investigation’. 

(2) 

The measures applying to these imports consisted of specific duties, except for imports 
from one Algerian exporting producer from which an undertaking was accepted. 

2.  Request for a review 

(3) 

On 20 June 2005, a request for an expiry review pursuant to Article 11(2) of the basic 
Regulation, was lodged following the publication of a notice of impending expiry on 
17  December  20043.  This  request  was 
the  European  Fertilizer 
Manufacturers  Association  (EFMA)  (‘the  applicant’)  on  behalf  of  producers 

lodged  by 

1 

2 
3 

OJ  L  56,  6.3.1996,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  2117/2005  (OJ  L  340, 
23.12.2005, p. 17). 
OJ L 238, 22.9.2000, p. 15. 
OJ C 315, 17.12.2004, p. 5. 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

representing a major proportion, in this case more than 50 % of the total Community 
production of UAN. 

The  applicant  alleged  and  provided  sufficient  prima  facie  evidence  that  there  is  a 
likelihood  of  continuation  or  recurrence  of  dumping  and  injury  to  the  Community 
industry  with  regard  to  imports  of  UAN  originating  in  Algeria,  Belarus,  Russia  and 
Ukraine ('the countries concerned'). 

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed  for  the  initiation  of  an  expiry  review,  the  Commission  announced  on 
22 September  2005,  by  a  notice  of  initiation  published  in  the  Official  Journal  of  the 
European  Union4,  the  initiation  of  an  expiry  review  pursuant  to  Article  11(2)  of  the 
basic Regulation. 

3. 

Investigation 

3.1.  Investigation period 

The  investigation  of  continuation  or  recurrence  of  dumping  covered  the  period  from 
1 July 2004 to 30 June 2005 ('review investigation period' or ‘RIP’). The examination 
of the trends relevant for the assessment of a likelihood of a continuation or recurrence 
of injury covered the period from 2002 to the end of the review investigation period 
('period considered'). 

3.2.  Parties concerned by the investigation 

The  Commission  officially  advised  the  exporting  producers,  importers  and  users 
known  to  be  concerned  and  their  associations,  the  representatives  of  the  exporting 
countries, the complainant and the Community producers of the initiation of the expiry 
review.  Interested  parties  were  given  the  opportunity  to  make  their  views  known  in 
writing and to request a hearing within the time limit set out in the notice of initiation. 

All interested parties, who so requested and showed that there were particular reasons 
why they should be heard, were granted a hearing. 

In  view  of  the  large  number  of  Community  producers  and  of  importers  in  the 
Community not related to an exporting producer in one of the countries concerned, it 
was considered appropriate, in conformity with Article 17 of the basic Regulation, to 
examine  whether  sampling  should  be  used.  In  order  to  enable  the  Commission  to 
decide whether sampling would indeed be necessary and, if so, to select a sample, the 
above  parties  were  requested,  pursuant  to  Article  17(2)  of  the  basic  Regulation,  to 
make  themselves  known  within  15  days  of  the  initiation  of  the  investigation  and  to 
provide the Commission with the information requested in the notice of initiation. 

(10)  After  examination  of  the  information  submitted,  and  given  the  high  number  of 
Community producers which indicated their willingness to  cooperate, it was decided 
that sampling was necessary with regard to Community producers. Given the fact that 
only  one  importer  provided  the  information  requested  in  the  notice  of  initiation  and 

4 

OJ C 233, 22.9.2005, p. 14. 

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expressed  its  willingness  to  further  co-operate  with  the  Commission  services,  it  was 
decided that sampling was not necessary with regard to importers. 

(11)  Questionnaires were sent to the four sampled Community producers and to all known 

exporting producers. 

(12)  Replies  to  the  questionnaires  were  received  from  the  four  sampled  Community 
producers and six exporting producers in the countries concerned, as well as from their 
related traders. 

(13)  One producer in the analogue country provided a complete questionnaire reply. 

(14)  The  Commission  sought  and  verified  all  the  information  it  deemed  necessary  for  a 
determination of the likely continuation or recurrence of dumping and resulting injury 
and of the Community interest. Verification visits were carried out at the premises of 
the following companies: 

(a)  Exporting producer in Russia 

– 

JSC  Mineral  and  Chemical  Company  (‘Eurochem’),  Moscow,  Russia,  and  its 
two related manufacturing companies: 

– 

– 

PJSC Azot (‘NAK Azot’), Novomoskovsk, Russia, and  

PJSC Nevinnomyssky Azot (‘Nevinka Azot’), Nevinnomyssk, Russia; 

(b)  Related trader to Eurochem 

– 

Eurochem Trading GmbH, Zug, Switzerland – (‘Eurochem Trading’); 

(c)  Related trader to the Ukrainian producer Stirol  

– 

IBE Trading, New York, New York, USA; 

(d)  Producer in the analogue country 

– 

Terra Industries, Sioux City, Iowa, USA; 

(e)  Sampled Community producers 

– 

– 

– 

– 

Achema AB, Jonava, Lithuania, 

Grande Paroisse SA, Paris, France, 

SKW Stickstoffwerke Piesteritz GmbH, Wittenberg, Germany, 

Yara  SA,  Brussels,  Belgium  and  its  related  producer  Yara  Sluiskil  BV, 
Sluiskil, The Netherlands. 

3.3.  Sampling 

(15) 

10  Community  producers  properly  completed  the  sampling  form  within  the  deadline 
and formally agreed to co-operate further in the investigation. With regard to those ten 

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Community producers, the Commission selected in accordance with Article 17 of the 
basic  Regulation,  a  sample  based  on  the largest  representative  volume  of  production 
and sales of UAN in the Community which can reasonably be investigated within the 
time available. The four sampled Community producers accounted for 63% of the total 
Community  industry  production  during  the  RIP,  whilst  the  above  10  Community 
producers accounted for 75% of the total Community production during the RIP. 

(16) 

In accordance with Article 17(2) of the basic Regulation, the parties concerned were 
consulted on the sample chosen and raised no objection thereto.  

B. 

PRODUCT CONCERNED AND LIKE PRODUCT 

1. 

Product concerned 

(17)  The  product  concerned  is  the  same  as  in  the  original  investigation,  i.e.  a  solution  of 
urea  and  ammonium  nitrate,  a  liquid  fertiliser  commonly  used  in  agriculture, 
originating  in  the  countries  concerned.  It  consists  of  a  mixture  of  urea,  ammonium 
nitrate  and  water.  The  nitrogen  (N)  content  is  the  most  significant  ‘feature’  of  the 
product,  and  it  can  vary  between  28%  and  32%.  Such  variation  can  be  obtained  by 
adding  more  or  less  water  to  the  solution.  Most  of  the  imported  UAN  was  32%  N, 
which  is  more  concentrated,  and  therefore  cheaper  to  ship.  However,  whatever  their 
nitrogen  content,  all  solutions  of  urea  and  ammonium  nitrate  are  considered  to  have 
the same basic physical and chemical characteristics and therefore constitute a single 
product for the purpose of this investigation. The product concerned falls within CN 
code 3102 80 00. 

2. 

Like product 

(18)  As  established  in  the  original  investigation,  this  review  investigation  confirmed  that 
UAN  is a  pure commodity  product, and its quality and basic physical characteristics 
are identical whatever the country of origin. The product concerned and the products 
manufactured  and  sold  by  the  exporting  producers  on  the  domestic  market  in  the 
countries  concerned,  as  well  as  those  manufactured  and  sold  by  the  Community 
producers on the Community market and by the producer in the analogue country on 
the domestic market of the analogue country have thus been found to have the same 
basic  physical  and  chemical  characteristics  and  essentially  the  same  uses  and  are 
therefore considered to be like products within the meaning of Article 1(4) of the basic 
Regulation. 

C. 

LIKELIHOOD OF CONTINUATION OR RECURRENCE OF DUMPING 

(19) 

In accordance with Article 11(2) of the basic Regulation, it was examined whether the 
expiry  of  the  measures  would  be  likely  to  lead  to  a  continuation  or  recurrence  of 
dumping. 

(20)  During  the  RIP,  exports  to  the  Community  of  UAN  originating  in  the  countries 
concerned  only  took  place  from  Algeria.  Thus,  a  dumping  calculation  to  examine 
whether there was likelihood of continuation of dumping was carried out for the two 
cooperating  Algerian  exporting  producers.  For  the  other  co-operating  exporting 
producers in Belarus, Russia and Ukraine, the investigation focussed on the likelihood 
of recurrence of dumping. 

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Algeria 

General 

(21)  The  only  two  Algerian  producers  of  UAN,  Fertalge  and  Fertial,  cooperated  in  the 
investigation.  These  two  producers  represented  the  totality  of  exports  of  UAN 
originating  in  Algeria  to  the  Community  during  the  RIP,  which  corresponded  to 
177 383 tonnes. Imports into the Community of the product concerned originating in 
Algeria represented 4,8% of Community consumption which was 3 694 531 tonnes in 
the  RIP.  Imports  from  Algeria  thus  went  up  from  116 461  tonnes  by  52%  in 
comparison to the original investigation period. 

(22)  Therefore,  the  examination  of  dumping  based  on  the  information  provided  by  these 
two co-operating exporting producers was considered to also be representative for the 
country as a whole. 

Normal value 

(23) 

It was first established for each of the two cooperating exporting producers whether its 
total domestic sales of UAN were representative in accordance with Article 2(2) of the 
basic Regulation, i.e. whether they accounted for 5% or more of the total sales volume 
of the product concerned exported to  the Community. The investigation showed that 
both companies only sold one type of UAN to the Community and that this type was 
not sold in representative quantities on the domestic market. 

(24)  Therefore, for both exporting producers normal value could not be based on domestic 
sales  and  had  to  be  constructed  pursuant  to  Article  2(3)  of  the  basic  Regulation  by 
adding  to  each  exporter's  cost  of  manufacturing  of  the  product  exported  to  the 
Community a reasonable amount for selling, general and administrative costs (‘SG&A 
costs’) and a reasonable profit margin. 

(25)  Regarding  the  cost  of  manufacturing,  it  should  be  noted  that  energy  costs,  such  as 
electricity  and  gas  represent  a  major  proportion  of  the  manufacturing  cost  and  a 
significant proportion of the total cost of production. In accordance with Article 2(5) 
of  the  basic  Regulation,  it  was  examined  whether  the  costs  associated  with  the 
production and sales of the product under consideration were reasonably reflected in 
the records of the parties concerned. 

(26)  The  investigation  showed  no  indication  that  the  electricity  would  not  be  reasonably 
reflected in the records of the exporting producers. In this context, it is inter alia noted 
that electricity prices paid by the Algerian producers during the RIP were in line with 
international  market  prices,  when  compared  to  other  countries,  such  as  Canada  and 
Norway. However, the same could not be said with regard to gas prices.  

(27)  As concerns gas supplies, in fact, it was established on the basis of data published by 
internationally recognised sources specialised in energy markets, that the price paid by 
the Algerian producer was less than one fifth of the export price of natural gas from 
Algeria.  In  addition,  all  available  data  indicates  that  domestic  gas  prices  in  Algeria 
were  regulated  prices,  which  are  far  below  market  prices  paid  for  natural  gas,  for 
example  in  the  USA,  Canada,  Japan  and  the  EU.  These  four  markets  account  for  a 
total of 46% of world-wide gas consumption, and the prevailing domestic price levels 

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(28) 

in  these  four  markets  appear  to  reasonably  reflect  costs.  Moreover,  the  price  of  gas 
paid  by  the  companies  concerned  was  significantly  lower  than  the  gas  price  paid  by 
the Community producers.  

In view of the above, it was considered that the gas prices paid in Algeria during the 
review investigation period could not reasonably reflect the costs associated with the 
production  and  distribution  of  gas.  Therefore,  as  provided  for  in  Article  2(5)  of  the 
basic Regulation, the gas costs borne by one cooperating exporting producer, Fertial, 
were  adjusted  on  the  basis  of  information  from  other  representative  markets.  The 
adjusted  price  was  based  on  the  average  price  during  the  RIP  of  Algerian  liquefied 
natural gas ('LNG') when sold for export at the French border, net of sea freight and 
liquefaction costs, since this was considered to be the most appropriate basis, as this 
public information refers exclusively to gas of Algerian origin. France, being both the 
largest market for Algerian gas and having prices reasonably reflecting costs, can be 
considered  a  representative  market  within  the  meaning  of  Article  2(5)  of  the  basic 
Regulation. The other cooperating company, Fertalge, did not use natural gas as a raw 
material,  since  it  produces  UAN  from  ammonium  nitrate  ('AN'),  that  is  produced 
locally, and urea. Since the cost of AN produced locally reflected Algerian domestic 
gas price mentioned in recital (27) above, the costs of AN borne by this company were 
adjusted accordingly. 

(29)  The  manufacturing  costs  provided  by  the  cooperating  exporting  producers  were 
therefore recalculated in order to take account of the adjusted gas prices, using equally 
the  prices  of  gas  when  sold  at  the  French  border,  net  of  sea  freight  and  liquefaction 
costs. To the manufacturing cost so recalculated a reasonable amount for SG&A and a 
reasonable profit margin were added, in accordance with Article 2(3) and Article 2(6) 
of the basic Regulation. 

(30)  SG&A costs and profit could not be established on the basis of the chapeau of Article 
2(6)  of  the  basic  Regulation  because  the  two  cooperating  companies  did  not  have 
representative domestic sales of the product concerned in the ordinary course of trade. 
Article 2(6)(a) of the basic Regulation could not be applied, since the two cooperating 
producers  are  the  only  two  producers  of  UAN  in  Algeria.  Article  2(6)(b)  was  not 
applicable  either,  since  the  manufacturing  cost  for  products  belonging  to  the  same 
general category of goods would also need to be adjusted in respect of gas costs, for 
the  reasons  indicated  in  recital  (28)  above.  As  it  was  found  to  be  impossible  to 
establish the magnitude of the necessary adjustment for all products belonging to the 
same  general  category  of  goods  sold  domestically,  it  was  equally  impossible  to 
establish the profit margins after such adjustment. Therefore, SG&A costs and profit 
were established pursuant to Article 2(6)(c) of the basic Regulation. 

(31) 

In accordance with Article 2(6)(c) of the basic Regulation, the SG&A costs and profit 
were  determined  on  the  basis  of  a  reasonable  method.  As  the  Algerian  domestic 
market of products of the same general category is extremely small, information had to 
be obtained from other representative markets. In this respect, consideration was given 
to publicly available information relating to major companies operating in the nitrogen 
fertilizers  business  sector.  It  was  found  that  the  corresponding  data  from  North 
American (USA and Canada) producers would be the most appropriate for the purpose 
of  the  investigation,  given  the  large  availability  of  reliable  and  complete  public 
financial information from listed companies in this region of the world. Moreover, the 
North  American  market  showed  a  significant  volume  of  domestic  sales  and  a 

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considerable  level  of  competition  from  both  domestic  and  foreign  companies. 
Therefore,  SG&A  costs  and  profit  were  established  on  the  basis  of  the  weighted 
average  SG&A  costs  and  profit  from  three  North  American  producers,  which  were 
found to be amongst the largest companies in the fertilizers' sector, with regard to their 
North American sales of the same general category of products (nitrogen fertilizers). 
These three producers were considered to be representative of the nitrogen fertilizers' 
business (on average over 80% of the turnover of the company/business segment) and 
their  SG&A  costs  and  profit  as  representative  of  the  same  type  of  costs  normally 
incurred  by  companies  operating  successfully  in  that  business  segment.  The 
percentage  for  SG&A  costs  was  6,9%  of  turnover.  The calculated  average  profit 
margin was 9,1% of turnover. Furthermore, there is no indication suggesting that the 
amount  for  profit  so  established  exceeds  the  profit  normally  realized  by  Algerian 
producers on sales of products of the same general category in the Algerian market. 

Export price 

(32) 

In  accordance  with  Article  2(8)  of  the  basic  Regulation,  the  export  price  was 
established on the basis of the price actually paid or payable for the product concerned 
when sold for export to the Community. 

Comparison 

(33)  The  normal  value  and  export  price  were  compared  on  an  ex-works  basis.  For  the 
purpose of ensuring a fair comparison between the normal value and the export price, 
due allowance in the form of adjustments was made for differences affecting price and 
price  comparability  in  accordance  with  Article  2(10)  of  the  basic  Regulation. 
Accordingly,  adjustments  were  made  for  differences  in  transport,  handling,  loading 
and ancillary costs, where applicable and supported by verified evidence. 

Dumping margin 

(34)  The  dumping  margin  for  each  exporting  producer  was  established  on  the  basis  of  a 
comparison of a weighted average normal value with a weighted average export price, 
in accordance with Article 2(11) and (12) of the basic Regulation. 

(35)  The  investigation  showed  that  dumping  took  place  during  the  RIP  even  at  a  higher 
level  than  in  the  original  investigation.  The  dumping  margins  expressed  as  a 
percentage of the CIF Community frontier price, are in the range of 50% to 60%. 

D. 

DEVELOPMENT OF IMPORTS SHOULD MEASURES BE REPEALED 

1.  Algeria 

(36)  The two Algerian co-operating exporting producers represent the totality of imports of 
the  product  concerned  from  this  country  into  the  Community.  Therefore,  the 
examination of whether it would be likely that dumping continues should measures for 
Algeria be repealed was based on the information provided by these two co-operating 
exporting producers. 

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1.1.  Spare capacity 

(37)  Algerian  cooperating  producers  managed  to  double  their  production  capacity  while 
they  increased  their  production  by  around  20%  during  the  period  considered. 
Therefore,  their  spare  capacity  has  significantly  increased  from  less  than  100 000 
tonnes to 300 000 - 350 000 tonnes. 

(38)  Since the Algerian domestic market is insignificant and this is not likely to change in 
the future, any increase in production will be export oriented. By activating their spare 
capacity,  the  two  cooperating  exporting  producers  could  supply  10%-20%  of  the 
Community consumption. 

(39)  Given that dumping continued during the RIP and on the basis of the spare capacity 
that  the  Algerian  cooperating  producers  have  built  up,  it  is  likely that  the  volume  of 
Algerian exports into the Community will increase at dumped prices should measures 
lapse. 

(40) 

In the light of the above, there is likelihood of continuation of dumped exports to the 
Community should measures be repealed. 

1.2.  Comparison between the Algerian normal value and the prevailing price level 

in the Community 

(41)  The  normal  value  established  for  both  companies  significantly  exceeded  EU  market 
prices during the RIP. It cannot be excluded that Algerian exporting producers would 
continue to sell to the Community at dumped prices, whether they have to pay duties 
or not. 

2.  Relationship between the constructed normal value in Belarus, Russia and 

Ukraine and export prices to third countries 

2.1  Belarus and Ukraine: domestic sales prices based on the analogue country  

(42)  A  comparison  of  domestic  sales  prices  of  UAN  in  Belarus  and  Ukraine  and  export 
prices to  third  countries was carried out. In this  respect it should  be noted that since 
Belarus  is  considered  a  non-market  economy  country  and  Ukraine  was  not  yet 
considered a market economy country at the time of the lodging of the request for the 
expiry review5, the normal value for these two countries had to be determined on the 
basis  of  data  obtained  from  producers  in  a  market  economy  third  country,  in 
accordance  with  Article  2(7)  of  the  basic  Regulation.  In  the  notice  of  initiation,  the 
USA  was  envisaged  as  an  appropriate  analogue  country,  being  an  open  competitive 
market,  where  producers  face  a  considerable  level  of  competition  from  foreign 
imports.  

(43)  All  interested  parties  were  given  the  opportunity  to  comment  on  the  choice  of  the 

analogue country. 

5 

Regulation (EC) No 2117/2005 (OJ L 340, 23.12.2005, p. 17), Article 2 

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(44)  The European Fertilizers Importers Association, EFIA, proposed Algeria or Russia as 
better options, given their privileged access to the main raw material, namely gas, and 
since  they  were  market  economy  countries  subject  to  the  same  investigation.  In  this 
respect,  it  should  be  pointed  out  that  Article  2(7)(a)  requires,  before  any  further 
considerations,  an  'appropriate'  market  economy  third  country.  While  access  to  raw 
materials is an important factor as regards the choice of the analogue country, it should 
also be noted that the existence of dual pricing in relation to gas in these two countries 
made  in  fact  these  two  countries  an  inappropriate  choice.  Indeed,  the  gas  prices 
charged  in  these  two  countries  to  their  domestic  customers  do  not  reflect  the  market 
value. 

(45)  Some  interested  parties  alleged,  although  without  substantiating  their  claim,  that 
Russian and Algerian production processes are more similar to the ones in Belarus and 
Ukraine. Algeria was also suggested as having a more similar level of production to 
Ukraine. In this respect, it must be stressed that Belarus, Ukraine and the USA have all 
fully vertically integrated producers, which is definitely not the case for Algeria. 

(46)  A Ukrainian cooperating producer proposed Bulgaria or Romania rather than the USA. 
However,  its  proposal  was  not  substantiated.  In  addition,  an  important  factor  against 
Bulgaria or Romania is that their domestic markets are small with a limited number of 
manufacturers, contrary to the USA. 

(47)  Therefore,  the  investigation  confirmed  that  the  USA  was  an  appropriate  analogue 
country. Various producers and producers' associations in the USA were contacted and 
invited  to  cooperate  through  the  completion  of  a  questionnaire.  One  producer  in  the 
USA fully cooperated in the investigation. Consequently, calculations were based on 
the  verified  information  from  the  sole  USA  cooperating  producer,  which  provided  a 
complete questionnaire reply. 

2.2.  Belarus 

Preliminary remarks 

(48)  The  sole  cooperating  producer  in  Belarus was the only exporting producer from that 

country, but it had no export sales to the Community in the RIP. 

(49)  Since there were no exports to the Community for a representative dumping finding in 
the  RIP,  and  in  order  to  establish  whether  dumping  would  be  likely  to  recur  should 
measures be repealed, the pricing behaviour of the cooperating exporting producer to 
the  USA,  its  sole  export  market,  and  its  production  capacity  and  stocks  were 
examined.  The  analysis  was  based  on  the  information  provided  by  the  co-operating 
exporting producer mentioned in recital (48). 

Comparison 

(50)  Data  from  the  co-operating  exporting  producer  showed  that  export  prices  to  third 
countries (USA) were lower than the constructed normal value for Belarus. In fact, the 
investigation established that overall this price difference ranged in the RIP between 
10% and 15%. This may indicate a likelihood of recurrence of dumping on exports to 
the Community should measures be repealed. Stocks and production capacity, as well 

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as  a  comparison  of  these  export  prices  with  the  prevailing  price  level  in  the 
Community, are examined below. 

2.3.  Ukraine 

Preliminary remarks 

(51)  Two exporting producers co-operated in the investigation, but none of them had export 
sales  to  the  Community  in  the  RIP.  There  are  no  indications  that  there  were  more 
exporting producers in Ukraine. 

(52)  Since there were no exports to the Community for a representative dumping finding in 
the  RIP,  and  in  order  to  establish  whether  dumping  would  be  likely  to  recur  should 
measures be repealed, the pricing behaviour of the cooperating exporting producer to 
the  USA,  its  sole  export  market,  and  its  production  capacity  and  stocks  were 
examined.  The  analysis  was  based  on  the  information  provided  by  the  two  co-
operating exporting producer mentioned in recital (51). 

(53)  The two cooperating exporting producers represented 48% of imports into the USA of 
the  product  concerned  originating  in  Ukraine  during  the  RIP.  The  remainder  of  the 
imports  in  the  USA  originating  in  Ukraine  were  also  produced  by  one  of  the  co-
operating producers, but exported by an unrelated Ukrainian company, which does not 
produce UAN. 

Comparison 

(54)  Data  from  the  co-operating  exporting  producers  showed  that  export  prices  to  third 
countries  were  lower  than  the  constructed  normal  value  for  Ukraine.  In  fact,  the 
investigation established  that overall this price difference ranged in the RIP between 
20% and 30%. This may indicate a likelihood of recurrence of dumping on exports to 
the Community should measures be repealed. Stocks and production capacity, as well 
as  a  comparison  of  these  export  prices  with  the  prevailing  price  level  in  the 
Community, are examined below. 

2.4.  Russia 

Preliminary remarks 

(55)  Two exporting producers belonging to the same group of companies co-operated in the 
investigation,  but  no  exporting  producer  had  export  sales  to  the  Community  in  the 
RIP. 

(56) 

It is known that there was one producer in Russia in the RIP which did not co-operate 
in the investigation. For those non-co-operating exporting producer(s), the information 
available  from  Eurostat  and  other  sources  was  analysed.  On  that  basis  it  was  found 
that  exports  of  UAN  to  the  Community  from  other  than  the  cooperating  producers 
were also non-existent. However, no reliable information as to the production capacity 
and  production  volumes,  stocks  and  sales  was  available  for  the  non-cooperating 
company. In this respect, and in the absence of any indication of the contrary, it was 
considered that findings for the non-cooperating company would be in line with those 
established for cooperating companies. 

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(57)  Since there were no exports to the Community for a representative dumping finding in 
the RIP, and in order to establish whether dumping would be likely to recur should the 
measures be repealed, the pricing behaviour of the cooperating exporting producers to 
other  export  markets  and  their  production  capacity  and  stocks  were  examined.  The 
analysis  was  based  on  the  information  provided  by  the  co-operating  exporting 
producers mentioned in recital (55). 

Comparison 

(58) 

It  was  examined  whether  the  costs  associated  with  the  production  and  sales  of  the 
product  under  consideration  were  reasonably  reflected  in  the  records  of  the  parties 
concerned. As regards gas costs, it was found that the domestic gas price paid by the 
Russian producers was around one fifth of the export price of natural gas from Russia. 
In  this  regard,  all  available  data  indicates  that  domestic  gas  prices  in  Russia  were 
regulated  prices,  which  are  far  below  market  prices  paid  in  unregulated  markets  for 
natural gas. Therefore, as provided for in Article 2(5) of the basic Regulation, the gas 
costs borne by the Russian producers were adjusted on the basis of information from 
other  representative  markets.  The  adjusted  price  was  based  on  the  average  price  of 
Russian  gas  when  sold  for  export  at  the  German/Czech  border  ('Waidhaus'),  net  of 
transport costs. Waidhaus being the main hub for Russian gas sales to the EU, which is 
both the largest market for Russian gas and has prices reasonably reflecting costs, can 
be considered a representative market within the meaning of Article 2(5) of the basic 
Regulation. 

(59)  The construction of the normal value was done on the basis of the manufacturing costs 
of the product type exported, after the adjustment for the gas cost mentioned in recital 
(58), plus a reasonable amount SG&A costs and for profits, in accordance with Article 
2(3) and Article 2(6) of the basic Regulation. 

(60)  As  for  Algeria,  SG&A  costs  and  profit  could  not  be  established  on  the  basis  of  the 
chapeau  of  Article  2(6)  first  sentence  of  the  basic  Regulation  because  the  related 
manufacturers did not have representative domestic sales of the product concerned in 
the  ordinary  course  of  trade.  Article  2(6)(a)  of  the  basic  Regulation  could  not  be 
applied, since there are only these two producers subject to the investigation. Article 
2(6)(b) was not applicable either, since the manufacturing costs for products belonging 
to the same general category of goods would also need to be adjusted in respect of gas 
costs, for the reasons indicated in recital (58) above. As it was found to be impossible 
to  establish  the  magnitude  of  the  necessary  adjustment  for  all  products  belonging  to 
the  same  general  category  of  goods  sold  domestically,  it  is  equally  impossible  to 
establish the profit margins after such adjustment. Therefore, SG&A costs and profit 
were established pursuant to Article 2(6)(c) of the basic Regulation. 

(61)  As in the case of Algeria and for the same reasons as explained in recital (31) above, 
SG&A costs and profit were established on the basis of the weighted average SG&A 
costs and profit from the same three North American producers. It should be noted that 
the amount for profit so established did not exceed the profit realized by the Russian 
producers on sales of products of the same general category on their domestic market. 

(62) 

It was found that the export sales of the two cooperating producers were made on the 
basis  of  an  agent  agreement  through  two  related  traders,  one  located  in  Switzerland 
and  the  other  one  on  the  British  Virgin  Islands.  The  latter  ceased  to  operate  at  the 

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beginning  of  2005.  The  export  price  was  established  on  the  basis  of  export  prices 
actually  paid  or  payable  to  the  first  independent  customer  in  the  USA,  their  major 
export market. 

(63)  Data  from  the  two  related  traders  showed  that  export  prices  to  third  countries  were 
lower  than  the  constructed  normal  value  in  Russia.  In  fact,  the  investigation 
established  that  overall  this  price  difference  ranged  in  the  RIP  between  2%  and  6%. 
This may indicate a likelihood of recurrence of dumping on exports to the Community 
should measures be repealed. 

3. 

Spare capacity in Belarus, Russia and Ukraine 

(64)  The possible effects of existing spare capacity were also examined. Neither Russia nor 
Ukraine  has  a  relevant  domestic  market  for  UAN.  On  the  contrary,  Belarus  is 
considered to have a considerable domestic market for this product. 

(65)  The  Belarusian  sole  producer  managed  to  increase  its  production  by  14%  during  the 
period  considered,  and  was  producing  close  to  full  capacity  during  the  RIP.  Its 
production capacity during the same period remained stable. It sold around 60% of its 
production  domestically,  the  remainder  being  exported  to  the  USA.  It  therefore 
appears  that  this  producer  does  not  have  any  spare  production  capacity  readily 
available. 

(66)  The  Russian  sole  cooperating  producer  increased  its  production  by  78%  during  the 
period  considered.  Its  production  capacity  during  the  same  period  remained  stable. 
However,  according  to  the  information  submitted,  this  producer  still  has  significant 
available  capacity  of  around  600 000  to  700 000  tonnes  to  increase  its  production  of 
UAN,  and  could,  should  measures  be  repealed,  use  this  spare  capacity  to  increase 
exports to the Community market. Investment made by the company during the period 
considered suggests a potential further increase in production capacity. It is estimated 
that  Russian  overall  spare  capacity  is  at  least  the  known  600 000  to  700 000  tonnes, 
which constitutes around 20% of Community consumption. Exports to third countries 
grew by 79% during the period considered. 

(67)  At  the  same  time,  the  domestic  sales  of  the  sole  cooperating  Russian  producer 
remained at a low level, representing on average less than 5% of total sales. Since the 
domestic market cannot absorb the increase in production, any increase in production 
is likely to be exported. 

(68)  As  to  Ukraine,  the  two  cooperating  producers  managed  to  increase  production  by 
twelve fold during the period considered. Production capacity during the same period 
increased  by  almost  fivefold.  In  addition,  they  have  considerable  spare  capacity  to 
increase exports to the Community market in significant volumes should measures be 
repealed. It is estimated that Ukrainian overall spare capacity  amounts to 700 000 to 
800 000  tonnes,  which  constitutes  around  20%  of  Community  consumption.  Exports 
to third countries increased by eightfold during the period considered. 

(69)  Ukrainian  domestic  sales  remained  at  a  low  level  during  the  period  considered, 
representing on average less than 2% of total sales. It should be noted that growth of 
the  domestic  market  cannot  absorb  the  increase  in  production  and  therefore  any 
increase in production is likely to be exported. 

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(70)  On the basis of the above, it can be concluded that the cooperating producers, with the 
exception  of  Belarus,  have  substantial  spare  capacity  to  increase  their  exports  to  the 
Community market should measures be repealed. 

4.  Relationship  between  export  prices  to  third  countries  and  the  prevailing 

price level in the Community 

(71) 

It  should  be  noted  that  the  generally  prevailing  price  level  of  the  Community 
producers  in  the  Community  was  lower  than  the  average  export  price  level  of  the 
exporting producers to third countries during the RIP, especially to the USA. This is 
explained  by  the  fact  that  gas  prices,  which  constitute  more  than  50%  of  the 
manufacturing  costs,  and  thus  UAN  prices,  were  higher  in  the  USA  than  in  Europe, 
and that accordingly UAN traded at a higher price in the USA. 

(72) 

It should be noted that the export prices from the countries concerned to the USA were 
on average lower than the respective normal values, even though the prevailing price 
level  in  the  USA  was  higher  than  prices  in  the  Community.  It  can  therefore  be 
concluded that any sales to the EC market would most probably be at dumped prices. 

5. 

Incentive to shift sales from other markets to the Community 

(73)  With regard to Belarus, there is a rapidly growing domestic market on which the sole 
producer sells two thirds of its production. Given that the domestic price is less than a 
half of the prevailing price in the Community during the RIP, there is likelihood that a 
rational  economic  decision  leads  the  Belarusian  producer  to  redirect  significant 
quantities currently sold on the domestic market to the Community market at dumped 
prices. 

(74) 

In  this  respect,  it  should  also  be  noted  that  the  Belarusian  producer  who  is  currently 
exporting the remaining third to other markets would have considerable transport cost 
advantages  when  exporting  to  the  Community  instead,  given  its  proximity  to  the 
Community  border  compared  to  other  potential  export  markets  for  the  Belarusian 
producer such as the USA, Argentina or Australia. 

(75) 

In  the  light  of  the  above,  there  is  likelihood  that  the  Belarusian  producer  would 
redirect  significant  parts  of  its  sales  to  the  Community  at  dumped  prices,  should 
measures be repealed, as there are strong economic incentives.  

Conclusions on the likely export behaviour for Belarus, Russia and Ukraine  

(76)  As  already  explained  in  recital  (20),  in  the  absence  of  exports  to  the  Community 
during the RIP by Belarus, Russia and Ukraine, dumping from these countries could 
not be established in respect of exports to the Community. However, as explained in 
section 2 above, the investigation has shown that on the basis of calculations carried 
out by using data relating to actual exports from these countries to their major export 
market, the USA, that there was a likelihood of recurrence of dumping. 

6.  Conclusion on the likelihood of continuation or recurrence of dumping  

(77)  On the basis of the analysis carried out in Sections 1 to 5 above, it is concluded that 
should  measures  be  repealed, there  is  likelihood  that  additional  production  would  be 
exported  to  the  Community,  or  sales  currently  exported  to  countries  outside  the 

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Community  or  sold  on  the  domestic  markets  would  be  redirected  towards  the 
Community  market  in  significant  quantities.  It  is  likely  that  these  exports  to  the 
Community will be made at dumped prices, in particular to regain lost market shares 
in  the  Community.  It  can  therefore  be  concluded  that,  should  measures  be  repealed, 
future  exports  to  the  Community  would  be  made  in  increased  quantities  at  dumped 
prices.  Moreover,  it  should  be  noted  that  overseas  markets  are  subject  to  higher 
transportation costs than the Community market, namely when considering sales from 
neighbouring countries, such as Belarus and Ukraine to Eastern Europe or Algeria to 
Southern Europe. 

(78)  As  regards  imports  into  the  Community  originating  in  Algeria,  since  they  are  still 
made  at  dumped  prices,  and  also  on  the  above  analysis  of  spare  capacities  and  the 
comparison of price levels, dumping from Algeria is likely to continue in the future. 
Given that the Community was the only export market for Algeria during the RIP, it is 
highly  likely  that  Algerian  exporters  would  direct  their  increased  export  volumes 
mainly to this market. 

(79) 

In the light of the above, it is concluded that there is likelihood of continuation (from 
Algeria)  and  recurrence  (from  Russia,  Belarus  and  Ukraine)  of  dumping  should 
measures be repealed. 

D. 

INJURY 

1.  Definition of the Community industry 

(80)  Within the Community, the product concerned is manufactured by 12 producers whose 
output constitutes the total Community production within the meaning of Article 4(1) 
of the basic Regulation.  

(81) 

It  should  be  noted  that  as  compared  to  the  original  investigation,  the  “Hydro  Agri” 
companies  have  been  renamed  “Yara”.  Five  companies  have  become  part  of  the 
Community industry due to the enlargement of the European Union in 2004. 

(82)  Out of the 12 Community producers, 10 companies co-operated with the investigation 
out of which nine were mentioned in the review request. The remaining two producers 
('other  Community  producers')  remained  silent.  Accordingly,  the  following  10 
producers agreed to co-operate:  

– 

– 

– 

– 

– 

– 

– 

Achema AB (Lithuania), 

AMI Agrolinz Melamine International GmbH (Austria), 

DSM Agro (The Netherlands), 

Duslo AS (Slovakia), 

Fertiberia SA (Spain), 

Grande Paroisse SA (France), 

Lovochemie AS (Czech Republic), 

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– 

– 

– 

Nitrogénművek Rt (Hungary), 

SKW Stickstoffwerke Piesteritz GmbH (Germany), 

Yara (The Netherlands, Germany, Italy and the United Kingdom). 

(83)  As  these  10  Community  producers  accounted  for  75%  of  the  total  Community 
production  during  the  RIP,  it  is  therefore  considered  that  the  above  10  Community 
producers  account  for  a  major  proportion  of  the  total  Community  production  of  the 
like product. They are therefore deemed to constitute the Community industry within 
the  meaning  of  Article  4(1)  and  Article  5(4)  of  the  basic  Regulation  and  will 
hereinafter be referred to as the ‘Community industry’. 

(84)  As  indicated  under  recitals  (10),  (15)  and  (16)  above,  a  sample  consisting  of  four 
companies  was  selected.  All  sampled  Community  producers  cooperated  and  sent 
questionnaire  replies  within  the  deadlines.  In  addition,  the  remaining  complainant 
producers  and  producers  supporting  the  investigation  duly  provided  certain  general 
data for the injury analysis. 

2. 

Situation on the Community market 

2.1.  Consumption in the Community market 

(85)  The  apparent  Community  consumption  was  established  on  the  basis  of  the  sales 
volumes of the Community industry on the Community market, the sales volumes of 
the other Community  producers  on the  Community market, and Eurostat data for  all 
EU  imports.  Given  the  enlargement  of  the  European  Union  in  2004,  for  the  sake  of 
clarity and consistency of the analysis, the consumption was established on the basis 
of the EU-25 market throughout the period considered. 

(86)  Between  2002  and  the  RIP,  Community  consumption  increased  moderately  by  8%. 
The  increase  recorded  in  2004  is  mainly  attributed  to  the  implementation  of  the 
common  agricultural  policy  in  the  new  Members  States  after  their  accession  to  the 
European  Union.  From  2004,  farmers  in  the  new  Member  States  had  additional 
funding available to them which led to increased usage of fertilisers.  

2002 

2003 

2004 

RIP 

Total EC consumption in tonnes 

3 425 381 

3 579 487 

3 740 087 

3 694 532 

Index (2002=100) 

100 

104 

109 

108 

2.2.  Imports from the countries concerned 

2.2.1. Cumulation 

(87) 

In the original investigation imports of the product concerned  originating in Algeria, 
Belarus,  Russia  and  Ukraine  were  assessed  cumulatively  in  accordance  with  Article 
3(4)  of  the  basic  Regulation.  It  was  examined  whether  a  cumulative  assessment  was 
also appropriate in the current investigation.  

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(88) 

In this respect, it was found that there were no imports of the product concerned from 
Ukraine throughout the period considered and no imports from Belarus and Russia in 
2004  and  the  RIP.  Therefore,  the  conditions  set  out  in  Article  3(4)  of  the  basic 
Regulation  to  assess  cumulatively  imports  of  the  product  concerned  from  these 
countries with imports of the product concerned from Algeria were not fulfilled.  

(89) 

In the light of the above, it was considered that all four countries should be examined 
separately.  

2.2.2.  Volume,  market  share  and  prices  of  imports  from  each  of  the  countries 

concerned 

(90)  With respect to the three countries concerned with exports to the Community during 
the  period  considered,  the  volumes,  market  shares  and  average  prices  per  country 
developed  as  set  out  below.  The  following  quantity  and  price  trends  are  based  on 
Eurostat. 

2002 

2003 

2004 

RIP 

imports 

from  Algeria 

97 378 

239 348 

219 680 

177 383 

2,8% 

6,7% 

5,9% 

4,8% 

imports 

from  Algeria 

96 

99 

117 

131 

imports 

from  Belarus 

101 479 

44 438 

3,0% 

1,2% 

imports 

from  Belarus 

74 

64 

imports 

from  Russia 

81 901 

81 809 

2,4% 

2,3% 

imports 

from  Russia 

64 

70 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Volume  of 
(tonnes) 

Market share 

Prices  of 
(EUR/tonne) 

Volume  of 
(tonnes) 

Market share 

Prices  of 
(EUR/tonne) 

Volume  of 
(tonnes) 

Market share 

Prices 
(EUR/tonne) 

of 

(91)  The  volume  of  imports  from  Algeria,  although  decreasing  slightly  as  from  2003 
onwards,  gained  a  further  2  percentage  points  of  market  share  during  the  period 
considered,  whereas  the  prices  evolved  positively  from  96  to  131  EUR/tonne. 
Regarding Belarus and Russia, their respective import volumes decreased substantially 
and completely ceased from 2004 onwards. 

(92)  The  investigation  showed  that  imports  from  Algeria  were  not  undercutting  the 
Community  industry  prices  during  the  RIP.  As  for  the  remaining  countries,  in  the 

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absence  of  imports  during  the  RIP,  a  comparison  of  their  export  prices  to  third 
countries  during  the  RIP  with  the  Community  industry  prices  on  the  Community 
market has equally shown no undercutting.  

2.3.  Imports from other countries  

(93)  The  volume  of  imports  from  other  third  countries  during  the  period  considered  are 
shown in the  table below.  The  following quantity and price trends are also based on 
Eurostat. 

2002 

2003 

2004 

RIP 

imports  from  Romania 

69 733 

79 137 

257 113 

142 288 

Volume  of 
(tonnes) 

Market share 

Market share 

Prices 
of 
(EUR/tonne) 

Prices  of 
(EUR/tonne) 

imports 

from  Romania 

Volume of imports from USA (tonnes) 

2% 

94 

2,2% 

6,9% 

3,9% 

102 

112 

123 

26 024 

57 

20 

6 

0,7% 

0,0% 

0,0% 

0,0% 

imports 

from  USA 

86 

289 (*) 

1 101 (*) 

1 664 (*) 

* given the negligible quantities, these prices cannot be considered reliable 

(94) 

In the case of Romania, a substantial increase of imports was recorded in 2004 gaining 
a market share of 6,9%, which nevertheless dropped down to 3,9% during the RIP in 
spite  of  favourable  Community  market  conditions.  This  development  should  be  seen 
against the background of the sharp increase of Romanian exports to the USA market, 
which,  in  terms  of  volume,  represented  more  than  three  times  the  volumes  of 
Romanian exports to the Community during the RIP. As regards the prices, they have 
increased steadily throughout the period considered and were consistently higher than 
the sampled Community industry's prices in 2004 and the RIP. On this basis, it is not 
considered  that  Romanian  exporting  producers  can  constitute  a  threat  of  material 
injury  to  the  Community  industry.  Import  from  the  USA,  which  only  had  a  market 
share  of  0,7%  in  2002,  decreased  dramatically  to  6  tonnes  in  the  RIP.  This  trend 
reflects the fact that sales prices in the USA were higher than sales prices to the EC 
until the end of the RIP so that there was no incentive for USA producers to export to 
the EC. 

(95)  The European Fertilizer Import Association ('EFIA') argued that since the Romanian 
exports to the Community market do not constitute a threat of material injury although 
their increase in volume is higher than that of Algerian exports and their prices lower 
than  those  charged  by  Algerian  exporters,  equally  the  Algerian  exports  should  not 
constitute a threat of material injury. In this respect, it should be noted that indeed for 

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Algeria, as indicated in recital (92) above, no undercutting was found and Algeria was 
not found to have caused material injury to the Community industry during the period 
considered.  However,  the  analysis  for  that  country  developed  in  section  4  below 
showed that there is a likelihood of recurrence of injury. In contrast, as antidumping 
duties  were  not  applicable  to  imports  of  UAN  originating  in  Romania,  this  country 
was  not  subject  to  an  injury  recurrence  test  pursuant  to  Article  11(2)  of  the  basic 
Regulation. On this basis, the argument was rejected. 

3. 

Economic situation of the Community industry  

(96)  Pursuant  to  Article  3(5)  of  the  basic  Regulation,  the  Commission  examined  all 
relevant economic factors and indices having a bearing on the state of the Community 
industry.  

3.1.  Preliminary remarks 

(97) 

In  view  of  the  fact  that  sampling  had  been  used  with  regard  to  the  Community 
industry, the injury has been assessed both on the basis of information collected at the 
level of the entire Community industry (‘C.I.’ in the enclosed tables) and on the basis 
of  information  collected  at  the  level  of  the  sampled  Community  producers  (‘S.P.’  in 
the enclosed tables). 

(98)  Where recourse is made to sampling, in accordance with established practice, certain 
injury indicators (production, production capacity, stocks, sales, market share, growth 
and  employment)  are  analysed  for  the  Community  industry  as  a  whole,  while  those 
injury  indicators  relating  to  the  performances  of  individual  companies,  i.e.  prices, 
costs of production, profitability, wages, investments, return on investment, cash flow, 
ability to raise capital are examined on the basis of information collected at the level of 
the sampled Community producers. 

3.2.  Data relating to the Community industry as a whole 

(a) Production 

(99)  The Community industry’s production increased by 5% between 2002 and the RIP, i.e. 
from a level of around 2,8 million tonnes in 2002 to a level of around 3 million tonnes 
in the RIP. Specifically, production decreased by 3% in 2003, before increasing by 2 
percentage points in 2004 and by a further 7 percentage points in the RIP. 

2002 

2003 

2004 

RIP 

C.I. Production (tonnes) 

2 843 529 2 768 258 2 823 972  3 003 918

Index (2002 = 100) 

100 

97 

99 

106 

Source: Complainants, sampling questionnaire replies and verified questionnaire replies 

(b) Capacity and capacity utilisation rates 

(100)  Production  capacity  remained  practically  stable  throughout  the  period  considered.  In 
view of the growth in production, the resulting capacity  utilisation increased, from  a 
level  of  57%  in  2002  to  a  level  of  60%  in  the  RIP.  As  already  noted  in  the  original 

EN 

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investigation,  capacity  utilisation  for  this  type  of  production  and  industry  can  be 
affected  by  the  production  of  other  products  which  can  be  produced  on  the  same 
production equipment. 

2002 

2003 

2004 

RIP 

C.I. Production capacity (tonnes) 

4 984 375 

4 944 575 

4 941 975 

4 955 075 

Index (2002 = 100) 

C.I. Capacity utilisation 

Index (2002 = 100) 

(c) Stocks  

100 

57% 

100 

99 

56% 

98 

99 

57% 

100 

99 

61% 

106 

(101)  The  level  of  closing  stocks  of  the  Community  industry  increased  progressively 
throughout the period considered. At the end of the RIP (30 June 2005), the stock level 
was relatively low but this is due to the fact that for this type of product, always, the 
stock levels are much lower in summer than in winter as the sales' peak is in spring 
and early summer. By the end of 2004, the level of stocks was 13% higher than by the 
end of 2002. 

2002 

2003 

2004 

RIP 

C.I. Closing stocks (tonnes) 

276 689 

291 085 

313 770 

159 926 

Index (2002 = 100) 

100 

105 

113 

58 

(d) Sales volume  

(102)  The  sales  by  the  Community  industry  on  the  Community  market  decreased  by  3% 
between  2002  and  the  RIP.  This  development  is  opposite  to  the  evolution  of 
consumption  on  the  Community  market,  which  increased  by  8%  during  the  same 
period  (see  recital  (86)  above).  The  overall  increase  in  production  volumes  is 
explained  by  the  strong  export  performance  of  the  Community  industry  during  the 
same period. The table below shows the export volumes of the sampled Community 
producers whose main destination was the USA market. 

2002 

2003 

2004 

RIP 

C.I. EC sales volume (tonnes)  

2 800 226 

2 641 000 

2 604 215 

2 722 174 

Index (2002 = 100) 

100 

94 

93 

97 

sales  volume 

S.P. 
countries (tonnes) 

to 

third 

176 269 

194 543 

228 937 

328 796 

Index (2002 = 100) 

100 

110 

130 

187 

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(e) Market share 

(103)  The  market  share  held  by  the  Community  industry  decreased  substantially  between 
2002  and  the  RIP.  Specifically,  the  Community  industry  lost  8  percentage  points  of 
market  share  during  the  period  considered,  while  the  Algerian  producers  increased 
their market share from 2,8% to 4,8% during the same period. 

2002 

2003 

2004 

RIP 

Market 
industry 

share  of  Community 

81,7% 

73,8% 

69,6% 

73,7% 

Index (2002 = 100) 

100 

90 

85 

90 

(f) Growth  

(104)  The Community industry lost a significant part of its market share, to the benefit of the 
Algerian, Romanian and other Community producers who gained market share during 
the same period. 

(105)  The  loss  of  market  share  can  also  be  attributed  to  the  rational  decision  made  by  the 
Community industry to increase its exports to the USA market in order to benefit from 
the much higher UAN prices prevailing on that market. However, in view of its large 
spare production capacity, the Community industry could not benefit from the growth 
of the Community market which was observed during the period considered. 

(g) Employment 

(106)  The level of employment of the Community industry increased by 5% between 2002 
and the RIP. This relatively small increase should be mainly attributed to the improved 
export performance of the Community industry. 

2002 

2003 

2004 

C.I. Employment product concerned  827 

Index (2002 = 100) 

100 

819 

99 

790 

96 

RIP 

867 

105 

(h) Productivity  

(107)  Productivity  of  the  Community  industry's  workforce,  measured  as  output  per  person 

employed per year, remained fairly stable between 2002 and the RIP.  

2002 

2003 

2004 

RIP 

C.I. Productivity (tonnes per employee)  3 437 

3 380 

3 573 

3 463 

Index (2002 = 100) 

100 

98 

104 

101 

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(i) Magnitude of dumping margin  

(108)  As  concerns  the  impact  on  the  Community  industry  of  the  magnitude  of  the  actual 
margin of dumping, given the volume of the imports from Algeria (accounting for up 
to 6,7% of the Community market during the period considered), this impact cannot be 
considered  to  be  negligible,  especially  in  a  highly  volatile  market  in  terms  of  prices 
like  the  one  of  the  product  concerned.  No  conclusion  can  be  drawn  with  regard  to 
Belarus, Russia and Ukraine as imports from these countries ceased in 2003. 

3.3.  Data relating to the sampled Community producers 

(a) Sales prices and factors affecting domestic prices 

(109)  The  sampled  Community  industry  producers'  average  net  sales  price  increased 
substantially  in  2004  and  the  RIP  reflecting  thus  the  prevailing  favourable 
international market conditions of the product concerned during the same period. This 
growing trend should be seen in conjunction with the similar evolution of the cost of 
the principal raw material, i.e. gas, as the below table illustrates. 

2002 

2003 

2004 

RIP 

S.P. Unit price EC market (EUR/tonne)  85 

Index (2002 = 100) 

S.P. Gas price/MBTU (indexed) 

100 

100 

89 

105 

107 

109 

128 

111 

114 

134 

126 

(b) Wages  

(110)  Between 2002 and the RIP, the average wage per employee increased by 9%, as the 

table below shows. 

2002 

2003 

2004 

RIP 

S.P. Annual labour cost per employee (000 EUR)  23,4 

25,4 

27,0 

25,6 

Index (2002 = 100) 

100 

108 

115 

109 

(c) Investments  

(111)  The  annual  flow  of  investments  in  the  product  concerned  made  by  the  four  sampled 
producers  developed  positively  during  the  period  considered.  These  investments 
referred  mainly  to  replacement  of  old  machines.  This  shows  the  efforts  of  the 
Community  industry  to  continuously  improve  its  productivity  and  competitiveness. 
However, the results are not apparent in the evolution of productivity which remained 
rather  stable  (ref.  recital  (107)  above)  during  the  same  period  reflecting  thus  the 
difficulties of the Community industry to boost its production output. 

EN 

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2002 

2003 

2004 

RIP 

S.P. Net investments (000 EUR) 

12 512  20 087  12 611  17 047 

Index (2002 = 100) 

100 

161 

101 

136 

(d) Profitability and return on investments 

(112)  Profitability  of  the  sampled  producers  shows  a  gradual  improvement  notably  since 
2003  and  reached  the  level  of  13,8%  during  the  RIP.  At  the  end  of  the  period 
considered  the  profitability  reached  its  peak  on  this  price  cyclical  market.  Indeed, 
numerous  factors,  including  external  ones  can  affect  world  markets  prices  for  UAN 
and other nitrogenous fertilisers. Such factors can result in either additional supply or 
reduced  demand  for  these  products,  thereby  influencing  product  pricing.  During  the 
period  considered,  due  to  tight  supply  the  world  markets  prices  moved  upwards.  In 
2002 and 2003, the profit levels found were, however, moderate and below the levels 
considered reasonable by the Community industry in view of the fact that this industry 
is highly capital intensive. The return on investments (ROI), expressed as the profit in 
percent of the net book value of investments, broadly followed the above profitability 
trend over the whole period considered. 

2002 

2003 

2004 

RIP 

S.P.  Profitability  of  EC  sales 
customers (% of net sales) 

to  unrelated 

8,1% 

6,0% 

12,3% 

13,8% 

Index (2002 = 100) 

100 

74 

151 

170 

S.P.  ROI  (profit  in  %  of  net  book  value  of 
investment) 

22% 

24% 

50% 

58% 

Index (2002 = 100) 

100 

111 

229 

265 

(e) Cash flow and ability to raise capital  

(113)  Cash-flow has increased significantly during the period considered. This development 
is  in  line  with  the  development  of  the  overall  profitability  during  the  period 
considered. 

S.P. Cash flow (000 EUR) 

23 532 

19 625 

39 767 

50 823 

2002 

2003 

2004 

RIP 

Index (2002 = 100) 

100 

83 

169 

216 

(114)  The  investigation  did  not  reveal  any  difficulties  encountered  by  the  sampled 
Community  producers  in  raising  capital.  In  this  respect,  it  should  be  noted  that  as 
several of these companies are part of large groups, they finance their activities within 
the group to which they belong either through cash-pooling schemes or through intra-
group loans granted by the mother companies.  

EN 

26 

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3.4.  Conclusion 

(115)  Between 2002 and the RIP, the following indicators developed positively: production 
volume  of  the  Community  industry  increased,  unit  sales  prices  of  the  Community 
industry  increased  and  profitability  improved  substantially  in  line  with  the  prices. 
Exports  to  third  countries increased and return on investment and cash-flow evolved 
positively  as  well.  Wages  developed  moderately  and  the  Community  industry 
continued to invest. 

(116)  Conversely,  the  following  indicators  developed  negatively:  sales  volumes  on  the 
Community  market  decreased  by  3%  as  opposed  to  a  growing  market.  Accordingly, 
the market share of the Community industry decreased substantially by 8 percentage 
points  during  the  period  considered.  The  productivity  remained  rather  stable  despite 
the efforts of the Community industry to improve it through investments.  

(117)  Overall,  the  situation  of  the  Community  industry  has  improved  significantly  as 
compared  to  its  situation  prior  to  the  imposition  of  the  anti-dumping  measures  on 
imports of UAN from the countries concerned in 2000. It is therefore clear that these 
measures had a positive impact on the economic situation of the Community industry. 
Nevertheless, it should be stressed that the positive development of certain indicators 
can also be partly attributed to the market of the like product, which was, due to the 
tight  worldwide  supply,  very  favourable  during  the  two  last  years  of  the  period 
considered.  Furthermore,  also  the  positive  development  of  the  Community  industry's 
export performance has contributed to the overall positive evolution of the Community 
industry  counterbalancing  to  a  certain  extent  the  shrinking  market  share  within  the 
Community.  

(118)  It is therefore concluded that the situation of the Community industry has improved, as 
compared to the period preceding the imposition of measures, but is still fragile. 

4. 

Likelihood of recurrence of injury 

4.1.  General 

(119)  Since  there  is  no  continuation  of  material  injury  caused  by  imports  from  the  four 
countries concerned, the analysis focused on the likelihood of recurrence of injury. In 
this  respect,  two  main  parameters  were  analyzed:  (i)  the  gas  cost  in  the  countries 
concerned  and  its  impact  on  the  UAN  production  cost  and  (ii)  the  effect  of  the 
projected  export  volumes  from  the  countries  concerned  to  the  Community  on  the 
Community industry, taking into account the conditions of competition.  

4.2.  Likely  evolution  of  sales  prices:  Gas  prices  and  cost  of  production  in  the 

countries concerned 

(120)  The  likelihood  of  the  recurrence  of  injury  will  depend  strongly  on  the  likely  price 
evolution of UAN. As gas is by far the most important cost element representing more 
than 50% of the UAN cost of production when purchased at world market prices, and 
is therefore a determining factor in the selling price of UAN. The gas cost in the UAN 
production depends on the gas efficiency use and the unit price. An analysis of these 
two  parameters  in  the  production  cost  of  UAN  for  the  Community  industry,  on  one 
side, and for Russia and Algeria, on the other side, has been conducted.  

EN 

27 

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(121)  From  this  analysis  it  was  firstly  shown  that  gas  efficiency  is  an  important  factor  in 
establishing the cost of gas per tonne of UAN produced. In this respect, it was found 
that the gas efficiency of the Community industry was relatively high, reaching up to 
15% lower consumption of gas per tonne of UAN produced than that of the producers 
in  Russia  and  Algeria.  This  is  the  result  of  the  Community  industry's  efforts  to 
continuously  improve  its  productivity  and  competitiveness  through  appropriate 
investments requiring a yearly capital inflow approximating in average one third of its 
total net book-value assets. This comparative advantage should benefit the Community 
industry and result in a lower cost of production of UAN. 

(122)  Despite  this  efficiency,  the  Community  industry  ends  with  a  gas  cost  per  tonne  of 
UAN produced around threefold higher than that of Russia and Algeria because of the 
gas price difference. The artificially low gas prices in these two countries fully explain 
the  difference.  The  consequent  price  difference  of  UAN  in  these  two  countries  as 
compared  to  producers  purchasing  gas  at  world  market  prices,  like  those  in  the 
Community, is unlikely to be reduced in the near future. On the contrary, should the 
current pattern in the development of the world market gas prices in the forthcoming 
years be maintained, this gap may be further broadened. On this basis, it is considered 
that  producers  in  Russia  and  Algeria  will  continue  to  have  this  artificial  cost 
advantage,  which  overcomes  largely  the  high  transport  costs  due  to  the  weight  of 
UAN.  This  renders  the  Community  market  attractive  to  producers  even  located  in 
remote areas in these countries bearing transport costs higher than 20% of the price.  

(123)  In the light of those low gas prices, the exporting producers in Russia and Algeria will 
thus very likely have the possibility to export the product concerned to the Community 
at lower prices than the Community industry's cost of production. Therefore, it is very 
likely that those imports would undercut the CI's prices substantially. 

(124)  As for Belarus and Ukraine, they are not included in this analysis since for the purpose 
of  this  investigation  both  were  considered  to  be  non  market  economy  countries  and 
therefore their data on cost of production were not requested. However, specific data 
concerning  gas  prices  in  these  two  countries  was  acquired  and  the  investigation  has 
shown that the producers in these countries were being supplied with gas in the RIP at 
substantially  lower  prices  than  the  prices  charged  to  the  Community  industry.  It  is 
therefore considered that both countries will equally have the possibility to export the 
product  concerned  at  lower  prices  than  the  Community  industry's  cost  of  production 
and it can also be concluded that there is likelihood that those prices would undercut 
the CI's prices. 

(125)  Should measures lapse, the fact that the Belarusian, Russian and Ukrainian exporters 
would  need  to  re-establish  themselves  on  the  Community  market  and  the  Algerian 
exporters  would  need  to  strengthen  their  market  position  may  also  support  the  view 
that there is a likelihood that those producers would charge lower prices than the CI in 
order to regain lost market share or broaden their customer base.  

(126)  EFIA and certain exporting producers argued that lower costs of production could not 
be considered as a valid reason to justify the likelihood of recurrence of injury. It was 
further submitted that the possibility to undercut is not the legal standard to establish 
whether  injury  is  likely  to  recur.  Moreover,  Algeria  charged  prices  above  the 
Community  industry's  prices  and  Belarus,  Russia  and  Ukraine  did  not  export  to  the 
Community at all in 2004 and the RIP and their prices to third countries were above 

EN 

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the  Community  industry's  prices,  which  are  considered  to  be  non-injurious.  This 
evidence would demonstrate, according to EFIA, that the exporting producers are not 
relying  on  their  lower  gas  cost  by  setting  lower  prices,  but  on  the  contrary  charge 
higher prices and rather aim to maximise their profit margin. 

(127)  The rationale behind the establishment of likelihood of recurrence of injury is indeed 
whether the expiry of the measures would create conditions that would encourage the 
recurrence  of  injury.  In  this  respect,  it  should  be  firstly  noted  that,  as  the  parties 
acknowledge, the exporting producers in the countries concerned benefit from low gas 
prices,  which  offer  them  the  discretion  to  undercut  the  Community  industry's  prices. 
On  the  other  side,  the  investigation  showed  that  their  exports  during  the  RIP  were 
dumped.  This  pricing  behaviour  was  seen  in  the  light  of  i)  the  exporters'  significant 
spare  export  capacity,  and  ii)  their  substantially  lower  cost  of  production.  The  first 
indicates  their  strong  incentive  to  find  the  markets  for  selling  their  production.  The 
second shows their capability to undercut severely the Community industry prices, in 
order to meet their sales requirements in volume.  

(128)  With  regard  to  the  prices,  it  should  be  recalled  that  during  the  last  two  years  of  the 
period  considered,  favourable  market  conditions  kept  the  prices  at  a  very  high  level 
irrespective  of  the  applicable  anti-dumping  measures.  Indeed,  during  that  period,  a 
tight  worldwide  supply  demand  balance  resulted  in  high  prices  for  all  nitrogen 
fertilisers.  UAN  is  alike  the  other  nitrogen  fertilisers  a  commodity  whose  pricing  is 
influenced  by  numerous  factors  going  from  the  volatile  gas  price  having  a 
considerable impact on the supply as being the most important costing element, to the 
weather  conditions,  crops  and  grain  stock  levels  resulting  in  reduced  or  increased 
demand.  With  particular  regard  to  the  Community  market,  the  demand  of  nitrogen 
fertilisers is expected to slightly decrease in the forthcoming years6. The maintenance 
of  such  high  prices  depends  therefore  on  a  tight  supply,  which  is  nevertheless  very 
unlikely, as the investigation showed, given the spare export capacity of the countries 
concerned and the likelihood of  redirection of part of their exports to third countries 
during the RIP, should the measures be lapsed. This scenario will very likely lead the 
exporting  producers  to  lower  their  prices  undercutting  the  prices  of  the  Community 
industry, in order to gain market share and meet their requirements in export volumes. 
Under such circumstances, the Community industry would be forced either to lower its 
prices at a level close at or below the cost of production given the maintained high cost 
of  gas  or  to  lose  significant  market  share  and  thus  revenue,  or  both.  An  increase  of 
exports to the USA market is highly unlikely due to the reasons set out in recital (135) 
below.  Therefore,  a  deterioration  of  the  Community  industry's  overall  performance 
would be the inevitable consequence of the repeal of the measures. 

(129)  With regard to the profit maximising argument, it should be noted that this is based on 
the positive price differential observed during the period considered between the USA 
and  the  Community  market,  which  nevertheless  cannot  be  considered  as  an 
appreciation element for the future prices of a highly volatile commodity as UAN. On 
the  basis  of  the  above,  it  was  established  that  there  is  a  high  risk  of  recurrence  of 
injury, should the measures be repealed, and therefore the argument was rejected.  

6 

Source: "Global fertilisers and raw materials supply and supply/demand balances:2005-2009", A05/71b, 
June 2005, International Fertiliser Industry Association 'IFA'. 

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4.3.  Impact on the Community industry of the projected export volumes and price 

effects in case of repeal of measures 

4.3.1. Preliminary remarks - Conditions of competition 

(130)  UAN  is  a  liquid  fertiliser  supplying  nitrogen  to  crops.  It  is  mainly  used  as  a  pre-
planting  fertiliser  for  arable  crops,  which  require  UAN  usually  in  the  spring  time. 
UAN has a limited inter-changeability with the other nitrogen fertilisers as farmers use 
different equipment for applying UAN and it can be mixed with other solutions, such 
as  pesticides  for  a  single  application.  Demand  is  therefore  characterised  by  seasonal 
peaks and is relatively inelastic.  

(131)  Although UAN is generally consumed seasonally, it is produced throughout the year 
as  this  is  more  efficient  than  ceasing  production.  As  a  result,  Community  producers 
are found with peak inventories during fall and winter. Massive imports of the product 
concerned  at  depressed  prices  during  spring  and  summer  will  very  likely  have  a 
significant adverse effect on the Community industry's prices for such a highly volatile 
commodity as the product concerned, for which prices are set on a weekly basis.  

4.3.2. Exports from the countries concerned 

(132)  Given the absence of exports from the countries concerned except Algeria during the 
RIP, the analysis is focused on the likelihood of redirection of exports made to other 
countries  during  the  RIP  towards  the  Community  market  in  the  imminent  future.  In 
addition, the likely evolution of sales prices of UAN has to be analysed.  

(133)  Regarding the likely evolution of exports to the Community market, it should be noted 
that imports of UAN into the USA market originating in Belarus, Russia and Ukraine 
were  subject  to  anti-dumping  measures  until  their  repeal  in  April  2003.  The  table 
below shows the export development of these three countries to the USA market as of 
2003: 

Exports  to  the  USA 
market from:  

2003 (*) 

2004 

RIP(**) 

Belarus in tonnes 

156 596 

244 526

227 772

Russia in tonnes 

179 993 

614 395

699 100

Ukraine in tonnes 

111 321 

103 440

145 828

Total in tonnes  

447 910 

962 361

1 072 700

Source: "Foreign Trade Statistics", published by the U.S. Census Bureau 

(*):  the  figures  include  the  first  three  months  of  2003,  i.e.  the  period  within  which  the 
measures were still in place  

(**): the RIP is considered for the sake of comparison with the overall analysis  

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(134)  On  this  basis,  it  is  shown  that  these  countries  increased  significantly  their  exported 
volume from 2003 to 2004. In the case of Russia, in particular, the export volume rose 
from 180 thousand tonnes in 2003 to about 600 thousand tonnes in 2004 representing a 
more than threefold increase. The above trade statistics also show that the sharp and 
sudden  increase  in  export  volumes  from  these  countries  to  the  USA  came  to  a  halt 
during  the RIP,  where  the  increase in comparison  to 2004 was  less profound (11%). 
The  stabilisation  of  their  collective  exports  volumes  to  the  USA  market  to  around  1 
million tonnes was confirmed by these countries' post-RIP export performance to the 
USA. 

(135)  In  the  Final  Report  of  the  USA  anti-dumping  investigation  on  UAN  imports  from 
Belarus, Russia and Ukraine, the reason for this stabilisation is described in detail7. In 
this  report,  it  is  specifically  stated  that  the  high  ratio  of  inland  transportation  costs 
entail that the market for imports is virtually limited to the coastal areas and that these 
costs  make  final  sales  of  imported  UAN  to  many  areas  of  the  USA,  including  the 
important UAN consumption States in the so-called "farm belt" area, far too expensive 
as compared to locally produced UAN. In other words, there is a limit on the size of 
the  USA  market  with  regard  to  imports,  and  the  most  significant  areas  in  terms  of 
consumption  remain  shielded  from  imports  due  to  their  location.  In  view  of  the 
observed  stabilisation  of  imports  from  Belarus,  Russia  and  Ukraine,  as  described  in 
recital  (134)  above,  it  is  therefore  concluded  that  the  USA  market  cannot  absorb 
import volumes significantly higher than those registered in the RIP. 

(136)  In the above context, and in view of the relative proximity of the Community market, 
it can be concluded that significant sales or spare capacity in the countries concerned, 
will  be  very  likely  directed  toward  the  Community  market,  should  the  measures  be 
allowed to lapse. Given the lower level of transport costs as compared to exports to the 
USA market, their export prices can be substantially lower than those prevailing in the 
USA market. Furthermore, as shown in recitals (50), (54) and (63) above, it was found 
that the sales of the co-operating exporting producers on the USA market were made 
at prices lower than the respective normal values. 

4.3.3. Impact of spare capacities 

Algeria 

(137)  It  is  recalled  that  the  domestic  market  of  the  product  concerned  in  Algeria  is 
insignificant and that virtually all production capacity is export oriented. Furthermore, 
the  investigation  showed  that  the  current  spare  capacity  of  the  Algerian  producers 
represent  10-20%  of  the  consumption  on  the  Community  market  The  total  current 
spare capacity is estimated to be around 300 000 – 350 000 tonnes.  

(138)  In particular in view of the proximity of the Community market, it is very likely that, 
if  the  measures  were  allowed  to  lapse,  this  spare  production  capacity  would  be  used 
for  production  of  the  product  concerned  for  export  to  the  Community  (Algeria  only 
has 4,8% market share). The expected high volumes would likely be at dumped prices 
and likely cause injury to the Community producers.  

7 

"Urea Ammonium Nitrate Solutions From Belarus, Russia, and Ukraine – Investigations Nos. 731-TA-
1006, 1008, and 1009 (Final), Publication 3591", April 2003, U.S. International Trade Commission, p. 
25, V-4, V-5. 

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31 

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Belarus 

(139)  It  was  found  that  there  is  a  rapidly  growing  domestic  market,  on  which  the  sole 
producer  sold  two  thirds  of  its  production  during  the  RIP.  Moreover,  there  were  no 
exports to the Community in 2004 and the RIP and the exports to USA market have 
decreased  despite  the  absence  of  anti-dumping  measures  and  favourable  market 
conditions.  

(140)  If the measures were allowed to lapse, the situation with regard to Belarus would most 
likely  change  dramatically.  In  view  of  the  fact  that  the  domestic  price  was  less  than 
half  of  the  prevailing  market  price  in  the  Community  during  the  RIP,  a  rational 
economic  decision  would  lead  the  Belarusian  producer  to  redirect  significant 
quantities currently sold on the domestic market to the Community market at dumped 
prices.  A  recurrence  of  injury  caused  by  high  volumes  of  low  prices  imports  from 
Belarus would likely be the result. 

Russia 

(141)  The  Russian  domestic  market  is  relatively  small  as  compared  to  the  spare  capacity 
which,  as  already  mentioned  in  recital  (66)  above,  amounts  to  600  000  to  700  000 
tonnes  and  which  may  be  substantially  increased  if  the  capacities  of  the  non  co-
operators  or  capacities  utilized  currently  in  producing  and  exporting  urea  and 
ammonium nitrate, the two other nitrogen fertilisers, are added.  

(142)  In this respect, it is also worth noting that there are currently trade defence measures 
imposed by the Community on imports of upstream products, namely solid urea and 
ammonium  nitrate,  from  Russia8.  Regarding  the  measures  on  urea,  an  expiry  review 
investigation is currently being carried out9. Moreover, an interim review investigation 
limited  to  one  major  Russian  exporting  producer  is  currently  being  carried  out  with 
regard  to  the  measures  on  ammonium  nitrate10.  Therefore,  depending  on  the  final 
outcome of these review investigations, there is a risk of shifting of production from 
those products to UAN, which could then result in an additional substantial increase of 
the estimated spare capacity of the Russian producers. 

(143)  In view of the above there is a strong likelihood that exports to the Community will 
resume  if  measures  were  allowed  to  lapse.  The  volumes  of  such  imports  can 
conservatively  be  estimated  to  represent  close  to  20%  of  the  Community  market, 
considering  the  consumption  on  that  market  (see  recital  (86))  and  the  actual  spare 
capacities in Russia. In view of the extremely low gas prices being paid by the Russian 
producers  and  the  consequent  pricing  advantage  for  the  product  concerned,  such 
imports would likely cause severe injury to the Community industry. 

8 

9 
10 

Urea: Regulation (EC) No 901/2001 (OJ L 127, 8.5.2001, p. 11). Ammonium nitrate: Regulation (EC) 
No 658/2002 (OJ L 102, 18.4.2002, p. 1), as last amended by Regulation (EC) No 945/2005 (OJ L 160, 
23.6.2005, p. 1). 
OJ C 105, 4.5.2006, p. 12. 
OJ C 300, 30.11.2005, p.  

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Ukraine 

(144)  Among the countries concerned, Ukraine is at this moment the country with the largest 
spare  capacity  which  is  estimated  in  the  range  of  700  000  to  800  000  tonnes.  The 
current spare capacity alone accounts for around 20% of the Community consumption.  

(145)  In  the  absence  of  a  significant  domestic  market  and  in  view  of  the  proximity  of  the 
Community market, it is likely that, should the measures lapse, massive exports will 
be directed to the Community market. These exports will as shown above probably be 
at dumped levels and thereby cause major injury to the Community industry. 

4.4.  Conclusion on likelihood of recurrence of injury 

(146)  In view of the artificially low prices the producers in the countries concerned pay for 
the basic raw material gas, and the impact this has on the production cost of UAN, it is 
likely  that,  if  the  measures  were  allowed  to  lapse,  the  producers  in  the  countries 
concerned  will  have  the  possibility  to  export  the  product  concerned  at  lower  prices 
than the Community industry's production cost.  

(147)  All  countries  concerned  but  Belarus  have  a  surplus  capacity  which  could  be  turned 
towards  the  Community  market,  should  the  measures  lapse.  As  concerns  Belarus, 
given the high sales volumes on the domestic market at much lower prices than those 
prevailed on the Community market during the RIP, it is very likely that at least part 
of  them  would  be  redirected  on  the  Community  market,  should  the  measures  lapse. 
The lower transport costs for sales to the Community as compared to the USA could 
also stimulate a redirection of sales to the Community market. In addition, for all four 
countries  a  redirection  of  part  of  their  current  exports  from  other  countries  to  the 
Community  is  likely  if  the  current  measures  were  repealed  as  was  demonstrated  in 
Recitals (132) - (136).  

(148)  EFIA and certain exporting producers submitted that the assumption of shifting from 
urea and ammonium nitrate production to UAN  ignores the basic  economic fact that 
producers  can  not  simply  switch  production  without  additional 
investments. 
Furthermore,  they  claimed  that  producers  will  not  give  up  more  profitable  products 
just because anti-dumping measures on a less profitable product are removed. 

(149)  With regard to the additional investments required, it should be noted that most of the 
major producing exporters of nitrogen fertilisers are integrated producers and therefore 
the  decision  on  producing/exporting  one  or  the  other  product  depends  mainly  on  the 
market  conditions.  As  for  the  profitable  products,  the  producers  will  indeed  look  for 
the most profitable products. In this respect, the anti-dumping measures play a major 
role  in  their  decision,  as  this  is  demonstrated  by  the  significant  increase  in  dumped 
exports  of  UAN  to  the  USA  market  during  2004  and  the  RIP,  once  the  USA  anti-
dumping measures were repealed in 2003. Therefore, sound economic decisions made 
by the exporting producers will in all likelihood lead them to switch from one product 
to the other for maintaining or increasing their overall sales of nitrogen fertilisers and 
profits thereof. On this basis, the above arguments were rejected. 

(150)  The  above  leads  to  the  conclusion  that  should  measures  lapse,  exports  from  the 
countries concerned would very likely occur in significant volumes and at prices that 
undercut  the  Community  industry’s  prices  in  view  of  their  distorted  and  artificially 

EN 

33 

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low cost of production. This would in all likelihood have the effect of reinforcing the 
price-depressive  trend  on  the  market,  with  an  expected  negative  impact  on  the 
economic situation of the Community industry. This would, in particular, impede the 
financial  recovery  that  was  achieved  in  2004  and  the  RIP,  leading  to  a  likely 
recurrence of injury. In other words, the more the market conditions turn bearish, the 
sharper  the  price  depression  can  be  expected  from  the  countries  concerned,  account 
being  taken  of  their  significant  difference  in  cost  of  production  and  their  spare 
capacity. 

E. 

COMMUNITY INTEREST 

1. 

Introduction 

(151)  According to Article 21 of the basic Regulation, it was examined whether maintenance 
of the existing anti-dumping measures would be against the interest of the Community 
as a whole. The determination of the Community interest was based on an appreciation 
of all the various interests involved. 

(152)  It should be recalled that, in the original investigation, the adoption of measures was 
considered not to be against the interest of the Community. Furthermore, the fact that 
the present investigation is a review, thus analysing a situation in which anti-dumping 
measures  have  already  been  in  place,  allows  the  assessment  of  any  undue  negative 
impact on the parties concerned by the current antidumping measures. 

(153)  On  this  basis,  it  was  examined  whether, despite  the conclusions  on the likelihood of 
recurrence of injurious dumping, compelling reasons existed which would lead to the 
conclusion  that  it  is  not  in  the  Community  interest  to  maintain  measures  in  this 
particular case. 

2. 

Interest of the Community industry 

(154)  The  Community  industry  has  proven  to  be  a  structurally  viable  industry.  This  was 
confirmed  by  the  positive  development  of  its  economic  situation  observed  after  the 
imposition of anti-dumping measures in 2000. In particular, the Community industry 
improved its profit situation between 2002 and the RIP. 

(155)  It  can  reasonably  be  expected  that  the  Community  industry  will  continue  to  benefit 
from the measures currently imposed and further recover by reversing the downward 
trend in market share and improving further its profitability. Should the measures not 
be maintained, it is likely that increased imports at dumped prices from the countries 
concerned will occur thereby causing injury to the Community industry by exerting a 
downward pressure on the sales prices which will endanger its currently positive but 
still fragile financial situation. 

3. 

Interest of importers  

(156)  As mentioned in recital (10) above, only one importer indicated its willingness to be 
included  in  the  sample  and  provided  the  basic  information  required  in  the  sampling 
form.  However,  after  sending  the  full  questionnaire  to  the  said  importer,  it  informed 
the Commission that it did not wish to further cooperate with the investigation.  

EN 

34 

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(157)  It  is  recalled  that  in  the  original  investigation  it  was  found  that  the  impact  of  the 
imposition of measures would not be significant to the extent that the imports would 
continue to take place albeit at non-injurious prices and that as a rule, importers do not 
only  deal  in  UAN  but  also,  to  a  significant  extent,  in  other  fertilisers.  Regarding  the 
presumption  that  imports  would  continue  to  take  place,  this  was  only  confirmed  by 
imports  from  Algeria  where  an  undertaking  is  in  place  for  one  exporting  producer. 
This  leads  to  the  conclusion  that  some  importers  may  indeed  have  had  negative 
consequences  from  the  imposition  of  measures,  as  indicated  in  recital  (66)  of 
Commission Regulation (EC) No 617/2000. However, the investigation did not show 
that  some  of  the  importers  completely  ceased  their  activities,  but  rather  appeared  to 
have  focussed  on  different  fertilisers  as  projected.  Thus,  the  imposition  of  measures 
appears to have had an overall limited impact on the majority of importers/traders. 

(158)  In the absence of cooperation from importers, there is no reliable information available 
indicating that the maintenance of the measures will have a significant negative effect 
on importers or traders. 

(159)  EFIA submitted that the non co-operation of importers should not be considered as a 
lack  of  interest  from  their  side  but  as  a  reflection  of  the  unfair  situation  given  the 
significant  resources  required  by  an  anti-dumping  investigation  as  opposed  to  their 
limited  resources  due  to  their  small  or  medium  size  enterprises.  Furthermore,  they 
claimed  that  the  investigation  ignored  the  cumulative  effect  of  the  numerous  anti-
dumping measures on fertilisers on importers, and thus failed to apply a fair analysis 
of the effects on importers and farmers. 

(160)  In  this  respect,  it  should  be  noted  that  for  importers  dealing  with  a  wide  range  of 
fertilisers,  UAN  being  one  of  them,  there  is  the  possibility  of  supplying  with  the 
different nitrogen fertilisers from other sources not presently subject to anti-dumping 
measures.  On  this  basis,  it  was  concluded  that  any  negative  impact  from  the 
continuation of measures on importers would not be a compelling reason against the 
continuation of measures. 

4. 

Interest of users 

(161)  Users of UAN are farmers in the Community. Demand for nitrogen fertilisers appears 
to  be  relatively  inelastic  and  farmers  tend  to  buy  from  the  cheapest  source.  In 
examining the possible effect of the imposition of measures on users, it was concluded 
in the original investigation that given the small incidence of the cost of UAN on the 
farmers, any increase in these costs was unlikely to have a significant adverse effect on 
them. The fact that no users or user association provided any information contradicting 
the  above  finding  in  the  framework  of  the  current  review  investigation  seems  to 
confirm that: (i) UAN represents a very small part of total production costs for these 
farmers;  (ii)  the  measures  currently  in  force  did  not  have  any  substantial  negative 
effect  on  their  economic  situation;  and  (iii)  the  continuation  of  measures  would  not 
adversely affect the financial interests of the users. 

5.  Conclusion on Community interest 

(162)  Given  the  above,  it  is  concluded  that  there  are  no  compelling  reasons  against  the 

maintenance of the current anti-dumping measures. 

EN 

35 

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F. 

ANTI-DUMPING MEASURES 

(163)  All  parties  were  informed  of  the  essential  facts  and  considerations  on  the  basis  of 
which  it  is  intended  to  recommend  that  the  existing  measures  be  maintained.  They 
were also granted a period to make representations subsequent to this disclosure.  

(164)  It  follows  from  the  above  that,  as  provided  for  by  Article  11(2)  of  the  basic 
Regulation,  the anti-dumping  measures applicable  to  imports  of  UAN,  originating  in 
Algeria,  Belarus,  Russia  and  Ukraine  should  be  maintained.  It  is  recalled  that  these 
measures  consist  of  specific  duties,  with  the  exception  of  the  imports  of  the  product 
concerned  which  are  manufactured  and  sold  for  export  to  the  Community  by  one 
Algerian company from which an undertaking has been accepted, 

HAS ADOPTED THIS REGULATION: 

Article 1 

1. 
A definitive anti-dumping duty is hereby imposed on imports of mixtures of urea and 
ammonium nitrate in aqueous or ammoniacal solution falling within CN code 3102 80 00 and 
originating in Algeria, Belarus, Russia and Ukraine. 

2. 

The amount of duty in euro per tonne shall be as follows: 

Country  

Manufacturer 

Amount of 
duty (per 
tonne) 

TARIC 
additional code 

Algeria 

All companies 

EUR 6,88 

A999 

Belarus 

All companies 

EUR 17,86 

- 

Russia 

JSC Nevinnomyssky Azot 
357030 Russian Federation 
Stavropol region 
Nevinnomyssk, Nizyaev st. 1 

All other companies 

EUR 17,80 

A176 

EUR 20,11 

A999 

Ukraine 

All companies 

EUR 26,17 

- 

3. 
In  cases  where  goods  have  been  damaged  before  entry  into  free  circulation  and, 
therefore,  the  price  actually  paid  or  payable  is  apportioned  for  the  determination  of  the 
customs  value  pursuant  to  Article  145  of  Commission  Regulation  (EEC)  No  2454/9311,  the 
amount  of  anti-dumping  duty,  calculated  on  the  amounts  set  above,  shall  be  reduced  by  a 
percentage which corresponds to the apportioning of the price actually paid or payable.  

Notwithstanding  paragraph  1,  the  definitive  anti-dumping  duty  shall  not  apply  to 

4. 
imports released into free circulation in accordance with Article 2. 

11 

OJ L 253, 11.10.1993, p. 40. 

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36 

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Unless  otherwise  specified,  the  provisions  in  force  concerning  customs  duties  shall 

5. 
apply. 

Article 2 

1. 
Imports  declared  for  release  into  free  circulation  under  the  following  TARIC 
additional codes which are produced and directly exported (i.e. shipped and invoiced) by the 
company named below to a company in the Community acting as an importer shall be exempt 
from the anti-dumping duty imposed by Article 1 provided that such imports are imported in 
conformity with paragraph 2 of this Article. 

Country  

Company 

Algeria 

Fertalge Industries spa 
12, Chemin AEK Gadouche 
Hydra, Alger 

TARIC 
additional 
code 

A107 

2. 
The exemption shall be conditional upon presentation to the relevant Member State's 
customs services of a valid undertaking invoice issued by the exporting company containing 
the essential elements listed in the Annex to this regulation. 

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

Article 3 

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

Done at Brussels,  

For the Council 
The President 

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37 

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Elements to be indicated in the undertaking invoice referred to in Article 2(2): 

ANNEX 

1. 

2. 

The TARIC additional code under which the goods on the invoice may be customs 
cleared at Community borders (as specified in the Regulation). 

The exact description of the goods, including: 

– 

– 

– 

CN code, 

The nitrogen ('N') content of the product (in percentages), 

quantity (to be given in tonnes). 

3. 

The description of the terms of the sale, including: 

– 

– 

– 

– 

price per tonne, 

the applicable payment terms, 

the applicable delivery terms, 

total discounts and rebates. 

4. 

5. 

The  name  of  the  unrelated  importer  to  which  the  invoice  is  issued  directly  by  the 
company. 

The name of the official of the company that has issued the undertaking invoice and 
the following signed declaration: 

`I, the undersigned, certify that the sale for direct export to the European Community of the 
goods  covered  by  this  invoice  is  being  made  within  the  scope  and  under  the  terms  of  the 
undertaking  offered  by  [company],  and  accepted  by  the  European  Commission  through 
Regulation  (EC)  No  617/2000.  I  declare  that  the  information  provided  in  this  invoice  is 
complete and correct.’ 

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38 

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