2007/440/EC: Commission Decision of 25 June 2007 repealing Decision 2005/704/EC accepting an undertaking offered in connection with the anti-dumping proceeding concerning imports of certain magnesia bricks originating in the People's Republic of China
Date: 2007-06-26
Institutions: European Commission
Subjects: China, EC Decision, anti-dumping duty, anti-dumping legislation, brick, heat-resisting materials, import, originating product, repeal

L 164/32

EN

Official Journal of the European Union

26.6.2007

COMMISSION DECISION

of 25 June 2007

repealing Decision 2005/704/EC accepting an undertaking offered in connection with the anti-
dumping proceeding concerning imports of certain magnesia bricks originating in the People's
Republic of China

(2007/440/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 384/96 of 22
December 1995 on protection against dumped imports from
countries not members of the European Community (1)
(the
basic Regulation), and in particular Articles 8 and 9 thereof,

After consulting the Advisory Committee,

Whereas:

(1)

(2)

A. EXISTING MEASURES

In October 2005, the Council, by Regulation (EC) No
1659/2005 (2),
imposed a definitive anti-dumping duty
on imports of certain magnesia bricks originating in
the People's Republic of China (‘the product concerned’).

The Commission, by Decision 2005/704/EC (3), accepted
a price undertaking offered by Yingkou Qinghua Refrac-
tories Co. Ltd, (‘the Company’).

B. BREACHES OF THE UNDERTAKING

1. The undertaking

(a) Obligations of the company with regard to the undertaking

(3)

the undertaking,

In the framework of
the Company
agreed, inter alia, not to sell the product concerned to
the European Community below certain minimum prices
(MIPs) laid down in the undertaking.

(1) 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.)

(2) OJ L 267, 12.10.2005, p. 1.
(3) OJ L 267, 12.10.2005, p. 27.

(5)

(6)

(7)

(8)

(9)

The terms of the undertaking also oblige the Company to
provide the Commission with regular and detailed infor-
mation in the form of a quarterly report of its sales of
the product concerned to the European Community.

For the purpose of ensuring compliance with the under-
taking, the Company also undertook to allow on-the-
spot verification visits at its premises in order to verify
the accuracy and veracity of data submitted in the said
quarterly
information
all
and to provide
considered necessary by the Commission.

reports

(b) Other provisions of the undertaking

the

In addition, and as stipulated in the undertaking, the
acceptance of
European
undertaking
Commission is based on trust and any action which
would harm the relationship of trust established with
the European Commission shall
justify the immediate
withdrawal of the undertaking.

the

by

Furthermore, and as stipulated in the undertaking, any
changes in circumstances occurring during the period of
implementation of the undertaking from those circum-
stances prevailing at the time of acceptance of the under-
taking which were relevant to the decision to accept the
undertaking may give rise to the withdrawal of
the
undertaking by the European Commission.

2. Verification visit to the Company

In this regard, a verification visit was carried out at the
premises of the Company in the People's Republic of
China.

the Company
Two days before the verification visit,
the undertaking reports
submitted revised versions of
for the second and third quarter of 2006. The revisions
submitted concerned — inter alia — a prolongation of
the terms of payment
five transactions. These
for
adjustments for the time allowed for payment have led
to prices below the MIP.

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Official Journal of the European Union

L 164/33

(10)

(11)

(12)

(13)

(14)

(15)

Furthermore, the verification visit established a change in
the pattern of trade to the European Community after
imposition of anti-dumping measures. During the inves-
tigation period of the investigation that led to the impo-
sition of the existing measures, the Company sold to the
Community exclusively the product concerned. After
imposition of measures the Company started to sell
also other products to its clients in the Community.

3. Reasons to withdraw acceptance of the

undertaking

(16)

The obligation of the Company to respect the MIP for all
sales of the product covered by the undertaking was not
met, as described in recital 9 above.

Such a change in the pattern of trade affects the under-
taking insofar as it constitutes a serious risk of cross-
compensation, i.e. the product not covered by the under-
taking may be sold at artificially low prices in order to
compensate the MIP for the product covered by the
undertaking.

In order to further assess whether such compensation
the Company was requested to
actually took place,
provide copies of invoices of the product not covered
by the undertaking,
issued to other clients inside and
outside the European Community.

is

to

identify

not meaningful

these products may vary from client

The Company argued that an analysis of prices of other
products
cross-
compensation since the qualities and associated prices
of
In
order
the Company was
asked to provide a price list broken down by different
qualities and clients but refused to do so and alleged that
information for products not
it concerned confidential
covered by measures.

to address those concerns,

to client.

(17)

(18)

(19)

(20)

Furthermore, a change in the pattern of trade since the
imposition of measures has led to a significant risk of
cross-compensation which
the
Commission to effectively monitor the undertaking and
therefore renders the undertaking impractical.

longer

allows

no

It appears that this change in the pattern of trade allowed
the Company
the
compensate
Community for sales subject to the MIP by artificially
low prices for the product not covered by the under-
taking.

customers

to

in

This change in the pattern of trade is considered as a
relevant change in circumstances compared to those
prevailing at the time of acceptance of the undertaking
and should lead, taking into account the findings set out
above in recitals 10 to 12, to the withdrawal of the
undertaking.

In addition, by withholding the price lists for products
not covered by the undertaking, the Company failed to
comply with the obligation to provide relevant infor-
mation in accordance with Article 8(7) of the basic Regu-
lation and the provisions of the undertaking.

Finally, the Company provided copies of five invoices for
products not covered by the undertaking, issued in 2005
and 2006. One invoice was issued to a customer buying
at the same time the product covered by the undertaking,
another
the
Community that did not buy the product concerned
from the Company. The remaining invoices were issued
to customers outside the Community.

concerned a

customer

invoice

inside

Taking into account the various qualities purchased by
these five customers, it was found that the price charged
to the customer in the Community, who bought also the
product covered by the undertaking, was significantly
lower than the price charged for similar qualities to the
other client in the Community who did not buy the
product covered by the undertaking. A similar price
difference applied to the other clients outside the
Community. This pricing policy is therefore considered
as a clear indication that cross-compensation actually
took place.

(21)

the unwillingness of

Furthermore,
the Company to
provide these price lists harmed the relationship of
trust which formed the basis for the acceptance of the
undertaking.

4. Written submissions

(a) Proportionality

(22) With regard to the price violation,

the Company
admitted that a price violation occurred. The Company
argued, however, that the sales prices of all other trans-
actions were strictly in compliance with the MIP.
Moreover, it was submitted that the final price was not
significantly lower than the MIP. The Company claimed
that, on this basis, the withdrawal of the undertaking
would be disproportionate to the breaches that occurred.

(23)

In response to these arguments, regarding the issue of
proportionality,
in
it
accordance with
the Company
undertook to ensure that the Net Sales Price of all sales
covered by the undertaking shall be at or above the MIPs
set out in the undertaking.

should be pointed out
the

undertaking,

that

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Official Journal of the European Union

26.6.2007

(24) Moreover,

the basic Regulation contains no direct or
indirect requirement
that a breach of an undertaking
must relate to a minimum percentage of sales or must
relate to a minimum percentage of the MIP.

(31)

(25)

This approach has also been confirmed by the juris-
prudence of the Court of First Instance which has ruled
that any breach of an undertaking is sufficient to justify
the withdrawal of acceptance of an undertaking (1).

(26) Accordingly, the arguments presented by the Company
with regard to proportionality do not alter the Com-
the undertaking
a breach of
mission's view that
occurred and that
the undertaking
the withdrawal of
would be proportionate to that breach.

(b) Change in the pattern of trade

(27) With regard to the change in the pattern of trade, the
Company submitted that it did not deliberately change its
pattern of trade in order to compensate customers in the
Community for sales subject to the MIP by artificially low
prices for the product not covered by the undertaking.

(28)

(29)

It was argued that the price increase caused by the impo-
sition of anti-dumping measures and the consequential
decline in sales to the EU of the product concerned has
led the Company to develop new products outside the
scope of measures in order to maintain trade with the
Community.

It

is

standing practice of
to accept price undertakings if

In response to these arguments, it should be underlined
that the change in the pattern of trade as such constitutes
a serious risk of cross-compensation, regardless for what
the
reason it occurred.
the
Commission not
risk of cross-compensation is high. Consequently,
if
such a change in the pattern of trade occurs during the
period of application of an undertaking, the change in
the Commission to
enough for
itself
withdraw the undertaking, because it renders a proper
monitoring of the undertaking impractical, regardless of
whether or not a cross-compensation actually took place.

sufficient

is

(30) Accordingly, the arguments presented by the Company
in this respect do not alter the Commission's view that
the change in the pattern of trade had led to a significant
risk of cross-compensation.

(1) In this context, see case T-51/96 Miwon v Council

(ECR 2000,
II-1841) paragraph 52; case T-340/99 Arne Mathisen AS v

p.
Council (ECR 2002, p. II-2905) paragraph 80.

(c) Compensation scheme

and

common business practice

The Company further submitted that it is a reasonable
strategy
to offer
favourable prices when trying to penetrate a market
therefore it cannot be
with a new product and that
concluded that compensation actually took place,
in
particular since the volume of sales of the new product
were nowhere near enough to fully compensate the loss
in sales of the product covered by the undertaking.

(32)

In response to this submission, it has to be stressed that
a favourable price was only offered to a client buying
both the product covered by the undertaking and other
products. It was not offered to another client in the EU
which does not buy the product covered by the under-
taking. Therefore,
the very high price charged to the
other client in the EU for a similar quality undermines
this argumentation and strengthens the argument that
cross-compensation actually took place.

(33)

Furthermore, as concerns the issue of materiality and
proportionality,
it should be stressed that there is no
requirement on the Commission to demonstrate that a
drop in sales of the product concerned has been offset by
rise in sales of new products when
an equivalent
assessing whether cross-compensation has taken place.

(d) Information to be provided

(34) Additionally,

the Company contested having denied
providing a price list for products not covered by the
undertaking but argued that it does not have a universal
price
apply to different
customers in different regions.

since different prices

list

(35)

In reply to this submission, it has to be recalled that the
Company has been asked to provide those price lists that
are available in order to overcome that problem, but was
unwilling to do so since it was alleged that it concerned
confidential
information for products not covered by
measures.

(36) Accordingly, the arguments presented by the Company
in this respect do not alter the Commission's view that
the Company failed to comply with the obligation to
permit verification of pertinent data in accordance with
Article 8(7) of the basic Regulation.

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C. REPEAL OF DECISION 2005/704/EC

Article 2

(37)

In view of the above, the acceptance of the undertaking
should be withdrawn and Decision 2005/704/EC should
be repealed. Accordingly,
the definitive anti-dumping
duty imposed by Article 1(2) of Regulation (EC) No
1659/2005 on imports of the product concerned from
the Company should apply,

HAS DECIDED AS FOLLOWS:

Article 1

Decision 2005/704/EC is hereby repealed.

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

Done at Brussels, 25 June 2007.

For the Commission

Peter MANDELSON
Member of the Commission