Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of dicyandiamide originating in the People’s Republic of China
Date: 2007-10-16
Institutions: European Commission
Subjects: China, anti-dumping legislation, chemical salt, import, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.10.2007 
COM(2007) 624 final 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive anti-dumping duty on imports of dicyandiamide originating in the 
People’s Republic of China 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

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  21  December  2005  ('the  basic  Regulation')  in  the  proceeding 
concerning  imports  of  dicyandiamide  (DCD)  originating  in  the  People's  Republic  of 
China. 

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 

None 

Consistency with the other policies and objectives of the Union 

Not applicable. 

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. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

On 17 August 2006, the Commission opened an anti-dumping investigation regarding 
imports into the Community of dicyandiamide originating in the People’s Republic of 
China. 

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No  provisional  measures  were  imposed  since  certain  aspects  of  the  investigation 
required further analysis.  

The attached proposal for a Council Regulation is based on the definitive findings on 
dumping, injury, causation and Community interest. 

It is therefore proposed that the Council adopt the attached proposal for a Regulation 
which should be published in the Official Journal no later than 15 November 2007. 

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 of 21 December 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 for the following reason: 

The above-mentioned basic Regulation does not foresee alternative options. 

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 dicyandiamide originating in the 
People’s Republic of China 

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 9 thereof, 

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

Whereas: 

1. PROCEDURE 

1.1. Initiation 

(1) 

(2) 

(3) 

On 3 July 2006 the Commission received a complaint lodged pursuant to Article 5 of 
the basic Regulation by AlzChem GmbH ('the complainant') representing 100% of the 
Community production of 1-cyanoguanidine (dicyandiamide) ('DCD'). 

This complaint contained evidence of dumping of DCD from the People's Republic of 
China  ('PRC')  and  of  material  injury  resulting  there  from  which  was  considered 
sufficient to justify the opening of a proceeding.  

On  17  August  2006  the  proceeding  was  opened  by  the  publication  of  a  notice  of 
initiation2 in the Official Journal of the European Union. 

1.2. Parties concerned by the proceeding and verification visits 

(4) 

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

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2 

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 C 193, 17.8.2006, p. 3. 

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(5) 

(6) 

(7) 

(8) 

The  complainant  Community  producer,  exporting  producers,  importers  and  users 
made  their  views  known.  All  interested  parties,  who  so  requested  and  showed  that 
there were particular reasons why they should be heard, were granted a hearing. 

In  order  to  allow  exporting  producers  in  the  PRC  to  submit  a  claim  for  market 
economy  treatment  (‘MET’)  or  individual  treatment  (‘IT’),  if  they  so  wished,  the 
Commission  sent  claim  forms  to  the  Chinese  exporting  producers  known  to  be 
concerned. Three exporting producers in the PRC requested MET pursuant to Article 
2(7) of the basic Regulation and IT, should the investigation establish that they do not 
meet the conditions for MET. 

In view of the apparent high number of exporting producers in the PRC, in the notice 
of  initiation  the  Commission  indicated  that  sampling  might  be  applied  in  this 
investigation  for  the  determination  of  dumping  in  accordance  with  Article  17  of  the 
basic Regulation.  

In  order  to  enable  the  Commission  to  decide  whether  sampling  would  be  necessary 
and, if so, to select a sample, all exporting producers in the PRC were asked to make 
themselves  known  to  the  Commission  and  provide,  as  specified  in  the  notice  of 
initiation, basic information on their activities related to the product concerned during 
the investigation period (1 July 2005 to 30 June 2006). 

(9) 

However, given that only three exporting producers co-operated in the investigation, it 
was decided that sampling was not required. 

(10)  Questionnaires  were  sent  to  all  parties  known  to  be  concerned  and  to  all  other 
companies that  made  themselves  known within the deadlines set out in the notice of 
initiation.  Replies  were  received  from  the  three  co-operating  exporting  producers  in 
the PRC and from the sole Community producer, as well as from two users and four 
importers.  

(11)  The  Commission  sought  and  verified  all  the  information  deemed  necessary  for  the 
determination  of  dumping,  resulting  injury  and  Community  interest  and  carried  out 
verifications at the premises of the following companies: 

a) Community producer 

–  AlzChem GmbH, Germany 

b) Exporting producers in the PRC 

–  Ningxia Darong Chemical & Metallurgy Co., Ltd., PRC 

–  Ningxia Xingping Fine Chemical Co., Ltd., PRC 

–  Ningxia Yinglite Chemicals Co., Ltd, PRC 

c) Unrelated importers 

–  Lanxess GmbH, Germany 

–  Helm AG, Germany 

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d) Community users 

–  Merck Santé, France  

–  Lanxess GmbH, Germany 

1.3. Investigation period 

(12)  The  investigation  of  dumping  and  injury  covered  the  period  from  1  July  2005  to  30 
June 2006 (‘investigation period’ or ‘IP’). The examination of the trends relevant for 
the  assessment  of  injury  covered  the  period  from  1  January  2002  to  the  end  of  the 
investigation period (‘period considered’).  

2. PRODUCT CONCERNED AND LIKE PRODUCT 

2.1. Product concerned 

(13)  The  product  concerned  is  1-cyanoguanidine  (dicyandiamide)  ('DCD'),  falling  within 
CN  code  2926  20  00.  It  is  a  solid  substance  in  the  form  of  a  fine,  white,  crystalline 
powder,  usually  odourless.  It  is  produced  from  quick  lime  and  carbon  black  and 
appears after several production steps. 

(14)  DCD  is  usually  used  as  an  intermediate  to  produce  a  broad  range  of  other  chemical 
intermediates,  such  as  pharmaceuticals,  various  industrial  applications  -  water,  pulp 
and paper, textile, leather - and diverse fields of epoxy applications. It is a key element 
of  the  nitrogen  –  carbon  –  nitrogen  (NCN)  chain,  with  niche  end-products  such  as 
guanidine nitrate and other NCN derivatives.  

(15)  More than 90% of the DCD sold on the Community market is standard. The rest, so-
called  micro  DCD,  is  of  a  smaller  particle  size.  The  Chinese  exporting  producers 
provided data for the standard type only. 

2.2. Like product 

(16)  One  importer  argued  that  the  standard  type  of  DCD  produced  by  the  Community 
industry  is  of  higher  quality  than  that  produced  by  the  Chinese  exporting  producers, 
since the water content of the Chinese DCD is significantly higher and more volatile 
compared to the water content of the DCD produced in the Community. Allegedly, the 
Chinese DCD also has a higher content of impurities. 

(17)  The  investigation  showed,  however,  that  while  there  may  be  certain  quality 
differences, these cannot be quantified and moreover, do not affect the basic chemical, 
physical  and  technical  characteristics  of  DCD  produced  and  sold  by  the  Community 
industry  in  the  Community,  and  DCD  imported  into  the  Community  from  the  PRC, 
which were found to be the same and to have the same end-uses.  

(18) 

It  was  therefore  concluded  that  these  products  are  alike  within  the  meaning  of 
Article 1(4) of the basic Regulation. 

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3. DUMPING 

3.1. Market economy treatment ('MET') 

(19)  Pursuant  to  Article  2(7)(b)  of  the  basic  Regulation,  in  anti-dumping  investigations 
concerning  imports  originating  in  the  PRC  normal  value  shall  be  determined  in 
accordance with paragraphs 1 to 6 of the said Article for those producers which were 
found to meet the criteria laid down in Article 2(7)(c) of the basic Regulation. 

(20)  Briefly,  and  for  ease  of  reference  only,  the  MET  criteria  are  set  out  in  summarised 

form below: 

1.  Business  decisions  and  costs  are  made  in  response  to  market  conditions  and 
without significant State interference;  

2.  Firms  have  one  clear  set  of  basic  accounting  records  which  are  independently 
audited  in  line  with  international  accounting  standards  and  are  applied  for  all 
purposes; 

3.  There  are  no  significant  distortions  carried  over  from  the  former  non-market 
economy system; 

4. Bankruptcy and property laws guarantee legal certainty and stability;  

5. Exchange rate conversions are carried out at market rates. 

(21)  Three  exporting  producers  in  the  PRC  requested  MET  pursuant  to  Article  2(7)(b)  of 
the  basic  Regulation  and  replied  to  the  MET  claim  form  for  exporting  producers 
within  the  given  deadline.  The  Commission  sought  and  verified  at  the  premises  of 
these  companies  all  necessary  information  submitted  in  the  MET  applications  as 
deemed necessary. 

(22)  The  investigation  revealed  that  the  MET  claim  had  to  be  rejected  for  all  three 
exporting  producers.  The  determination  for  the  companies  against  each  of  the  five 
criteria  set  out  in  Article  2(7)(c)  of  the  basic  Regulation  showed  that  the  companies 
did not meet the requirements of criteria one, two and three.  

(23)  As the main shareholder is in one case a State-owned enterprise and in the second a 
member  of  the  People's  Congress,  it  was  found  that  the  State  could  exert  significant 
influence  over  the  companies’  business  decisions  relating  to  management  decisions 
such  as  profit  distribution,  the  issuing  of  new  shares,  capital  increases  and  the 
amendment of the Articles of Association, therefore such decisions were not made in 
response to market signals. Significant differences in the electricity unit consumption 
and  unit  price  between  the  three  companies  were  found  and  none  of  the  three 
companies  could  demonstrate  that  its  electricity  costs  are  the  result  of  supply  and 
demand and that they substantially reflect market values. 

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(24)  Furthermore,  in  all  three  cases,  the  companies’  accounts  failed  to  reflect  the  true 
financial  situation.  In  particular,  there  were  numerous  breaches  of  basic  accounting 
principles which are part of the International Accounting Standards (IAS) and as none 
of  these  issues  were  mentioned  in  the  auditor’s  report,  the  companies  cannot  be 
considered to have one clear set of accounts in line with IAS and to be independently 
audited in line with IAS.  

(25)  As to the valuation of initial assets, the three companies were unable to provide any 
explanation of the basis on which such valuation was made. Finally, in two cases, the 
companies  were  unable  to  provide  proof  of  all  payments  for  land-use  rights.  Both 
deficiencies indicated that there were significant distortions carried over from the non-
market economy system. 

(26)  The Advisory Committee was consulted and the parties directly concerned were given 
an  opportunity  to  comment  on  the  above  findings.  The  Community  Industry  and  the 
three  exporting  producers  all  received  disclosure  of  the  MET  assessment  and  were 
given  the  opportunity  to  comment.  The  exporting  producers  made  a  number  of 
comments against the findings and the Commission replied to them without, however, 
amending  the  overall  assessment.  The  exporting  producers  claimed  in  particular  that 
their business decisions were free of State intervention. Furthermore, they objected to 
specific findings concerning costs and evaluation of assets. However no evidence was 
submitted to substantiate the claims, which had therefore to be rejected.  

(27)  Following  the  above,  it  was  concluded  that  MET  should  not  be  granted  to  the  PRC 

producers. 

3.2. Individual treatment ('IT') 

(28)  Article  9(5)  of  the  basic  Regulation  provides  that,  where Article  2(7)(a)  of  the  basic 
Regulation applies, an individual duty shall be specified for companies that are able to 
demonstrate that they meet all criteria set out in Article 9(5) of the basic Regulation 
for receiving individual treatment.  

(29)  The PRC producers to which MET could not be granted also claimed IT in the event 
that  they  were  not  granted  MET.  However,  the  State  was  found  to  exert  significant 
influence in such a way that, in two cases, company decisions could not be considered 
to be taken freely and State interference could be such that there would be a high risk 
of  circumvention.  As  far  as  the  third,  collectively-owned,  former  State-owned 
company  is  concerned,  there  are  strong  indications  that  there  is  still  substantial 
potential interference from the State leading to possible risks of circumvention. 

(30)  The  latter  exporting  producer  claimed  that  potential  State  interference  would  not  be 
sufficient  reason  to  reject  individual  treatment  because  such  conclusion  would  be 
merely based on assumptions. 

(31) 

In  accordance  with  Article  9(5)(e)  of  the  basic  Regulation,  where  Article  2(7)(a) 
applies, an individual duty can only be specified where an exporter can demonstrate, 
on the basis of properly substantiated claims, that State interference is not such as to 
permit  circumvention  of  measures  if  individual  exporters  are  given  different  rates  of 
duty.  First,  the  company  in  question  could  not  clarify  the  precise  role  and 
responsibilities  of  its  General  Manager.  It  could  neither  clarify  whether  the  current 

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shareholders  indeed  paid  for  the  shares  that  they  own  in  the  former  State-owned 
company.  On  this  basis,  it  was  a  reasonable  conclusion  that  significant  State 
interference  could  not  be  sufficiently  excluded.  The  risk  of  circumvention  was 
therefore considered too high and the exporting producer's claims in this regard had to 
be rejected.  

(32)  Consequently,  since  it  was  found  that  the  PRC  producers  did  not  meet  all  of  the 
requirements  for  being  granted  IT  in  accordance  with  Article  9(5)  of  the  basic 
Regulation, IT had to be rejected and a single country-wide duty imposed. 

3.3. Normal value 

3.3.1. Analogue country 

(33)  According  to  Article  2(7)(a)  of  the  basic  Regulation,  normal  value  for  the  exporting 
producers  not  granted  MET  has  to  be  established  on  the  basis  of  the  prices  or 
constructed  value  in  an  analogue  country  or  the  price  from  such  a  third  country  to 
other  countries,  including  the  Community,  or  where  those  are  not  possible,  on  any 
other reasonable basis, including the price actually paid or payable in the Community 
for the like product, duly adjusted if necessary to include a reasonable profit margin.  

(34) 

In the absence of production of the product concerned outside the Community and the 
PRC,  the  Commission  indicated  in  the  notice  of  initiation  its  intention  to  base  the 
normal value, in accordance with Article 2(7)(a) of the basic Regulation, on the prices 
actually paid or payable in the Community for the like product. 

(35)  The  three  PRC  producers  objected  to  this  proposal,  arguing  that  there  was  not 
sufficient  competition  within  the  Community  and  that  the  production  process  in  the 
Community was not comparable with that in the PRC. They claimed that normal value 
should be based on the export price of the complainant to the PRC or on the cost of 
production of DCD in the PRC. 

(36)  The export price of the Community Industry to third countries could not be taken as it 
could  not  be  excluded  that  these  prices  were  equally  dumped.  Thus,  the  exporting 
producers  in  question  could  not  demonstrate  that  this  methodology  would  be  more 
reasonable than the one used by the Community Institutions. In particular, it could not 
be demonstrated nor was there otherwise any evidence available that the competition 
in the Community market was insufficient and that, as a consequence, data relating to 
the Community industry would be unreliable. As far as differences in the production 
process are concerned, they were not considered significant.  

(37)  Furthermore,  none  of  the  three  companies  was  granted  MET  and  therefore  costs  of 
manufacturing of the Chinese exporting producers were not considered reliable.  

(38)  On this basis, it was considered that the most reasonable basis for determining normal 
value was to use the Community industry's cost of manufacturing of the like product 
adjusted where necessary, in particular to take into account differences in production 
processes and access to raw materials.  

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(39)  The exporting producers claimed that the determination of the normal value was based 
on  facts  available  and  thus  on  Article  18  of  the  basic  Regulation.  It  was  further 
claimed  that  since  they  fully  co-operated  in  the  present  investigation,  such  approach 
was not justified.  

(40)  These exporting producers' allegation that normal value was determined in accordance 
with  Article  18  of  the  basic  Regulation  is  incorrect.  Indeed,  as  mentioned  above, 
normal  value  was  established  in  accordance  with  Article  2(7)(a)  of  the  basic 
Regulation, which allows to use any other reasonable basis should it not be possible to 
base normal  value on costs  and prices from an analogue country or on export  prices 
from such a country to other third countries. This claim was therefore rejected.  

3.3.2. Determination of normal value 

(41)  The  like  product  was  sold  by  the  Community  industry  in  representative  quantities. 
However, the Community industry's domestic sales were loss-making. Therefore, the 
normal  value  was  based  on  the  Community  industry's  manufacturing  costs  plus  a 
reasonable  amount  for  selling,  general  and  administrative  costs  and  profit. 
Adjustments  were  made  on  the  Community  industry's  manufacturing  costs  so  as  to 
offset the additional transport costs due to the physical separation between production 
units,  no  direct  access  to  raw  materials,  which  must  be  transported  from  remote 
production  sites  and  disposal  of  the  by-product  (black  lime).  Furthermore,  an 
estimated  profit  corresponding  to  the  profit  achieved  by  the  Community  industry  in 
2001, was added, together with 4.3% for SG&A based on information provided by the 
Community industry.  

3.4. Export prices 

(42)  All  export  sales  to  the  Community  by  the  PRC  producers  were  made  directly  to 
independent  customers  in  the  Community  and  therefore  the  export  price  was 
established in accordance with Article 2(8) of the basic Regulation on the basis of the 
prices actually paid or payable. 

3.5. Comparison 

(43)  The  weighted  average  normal  value  as  established  above  was  compared  with  the 
weighted  average  export  price  of  sales  to  the  Community  of  the  cooperating 
companies not granted MET, as provided under Article 2(11) of the basic Regulation. 

3.6. Dumping margin 

(44)  On this basis, the country-wide dumping margin, expressed as a percentage of the CIF 

import price at the Community border, duty unpaid, is 91.8%. 

4. INJURY 

4.1. Preliminary remark 

(45)  As  the  analysis  concerns  only  one  company,  for  reasons  of  confidentiality  most 

indicators are given in indexed form or ranges.  

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4.2. Community production 

(46)  Total Community production in the IP ranged between 15 000 and 20 000 tonnes.  

4.3. Definition of the Community industry 

(47)  The production of the Community producer AlzChem GmbH represents 100% of the 
DCD  produced  in  the  Community.  It  is  therefore  considered  that  it  constitutes  the 
Community  industry  ('CI')  within  the  meaning  of  Articles  4(1)  and  5(4)  of  the  basic 
Regulation.  

4.4. Community consumption 

(48)  Community consumption was established on the basis of the sales volume of the CI on 
the Community market plus imports from the PRC and other third countries under the 
relevant CN code according to Eurostat. As shown in the table below, the Community 
consumption  of  the  product  concerned  remained  stable  (+1%)  over  the  period 
considered.  In  this  context,  it  has  to  be  noted  that  the  data  concerning  2002  also 
include imports for the Norwegian producer, ODDA, which ceased activity the same 
year.  

(49)  According to an importer, ODDA's closure led some of its larger customers to stock-

pile in 2003, which may also explain why consumption peaked that year.  

2002 

2003 

2004 

2005 

IP 

Community 
(tonnes) 

consumption

13 258 

15 594 

13 119 

12 469 

13 417 

Index 2002 = 100 

100 

118 

99 

94 

101 

4.5. Imports into the Community from the PRC 

4.5.1. Volume and market share of imports from the PRC 

(50) 

Imports from the PRC according to Eurostat increased from 2 476 tonnes in 2002 to 
6 002 tonnes in the IP. The market share increased from 19% to 45% during the same 
period, as the Chinese producers took over a major part of the market share previously 
held  by  the  Norwegian  producer  ODDA.  The  increase  in  imports  was  particularly 
marked in 2003. 

2002 

2003 

2004 

2005 

IP 

Import volumes (tonnes) 

2 476 

6 173 

4 283 

5 218 

6 002 

Index 2002 = 100 

100 

249 

173 

211 

241 

Market share  

15-25% 

35-45% 

30-40% 

35-45% 

40-50% 

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4.5.2. Prices of imports and undercutting 

(51)  Based on Eurostat, the prices of imports decreased by 11% over the period considered, 

from EUR 1 149/tonne in 2002 to EUR 1 022/tonne in the IP.  

2002 

2003 

2004 

2005 

IP 

Import prices from the PRC (EUR/tonne) 1 149 

1 071  1 338  980 

1 022 

Index 2002 = 100 

100 

93 

116 

85 

89 

(52)  To determine price undercutting, a comparison was made between the sales prices of 
the  CI  on  the  Community  market  during  the  IP  and  those  charged  by  the  Chinese 
exporting  producers.  Since  the  Chinese  producers  did  not  export  the  so-called  micro 
DCD, this type was excluded from the calculation of the price undercutting.  

(53)  The  relevant  sales  prices  of  the  CI  were  those  to  independent  customers,  adjusted 
where  necessary  to  an  ex-works  level.  These  prices  were  compared  with  the  sales 
prices  charged  by  the  exporting  producers  net  of  discounts  and  adjusted  where 
necessary  to  CIF  Community  frontier  prices  with  an  appropriate  adjustment  for  the 
customs clearance costs and post-importation costs. The applicable conventional third 
country  duty  of  6.5%  was  added  to  the  CIF  price  to  obtain  the  free-circulation  unit 
price. 

(54)  During the IP the weighted average undercutting margin expressed as a percentage of 
the CI's average ex-works sales price, was between 25% and 35% for the cooperating 
Chinese producers.  

4.6. Situation of the Community industry 

(55) 

In accordance with Article 3(5) of the basic Regulation, the examination of the impact 
of the dumped imports on the CI included an analysis of all economic factors having a 
bearing on the state of the industry from 2002 to the IP. 

(56)  The  injury  factors  presented  below  only  concern  sales  on  the  free  market,  which 
represent  85%  of  the  production  of  DCD  of  the  CI.  It  has  to  be  noted  that  the 
remaining 15% of the production of DCD is internally used as captive transfer. The CI 
is an integrated producer using DCD for further processing and transforming DCD for 
the production of downstream products, without issuing any commercial invoices. The 
captive  consumption  remained  rather  stable  over  the  period  considered  and  could 
therefore not have impacted on the situation of the Community industry.  

4.6.1. Production, production capacity and capacity utilisation 

(57)  The  production  capacity  increased  by  33%  between  2002  and  the  IP.  The  capacity 
increase occurred during 2003 and 2004, after the closure of the Norwegian producer, 
ODDA, in late 2002. The additional production capacity should be viewed in the light 
of the fact that ODDA ceased production and that this company had already a share of 
around 25% on the Community market and sold also to other markets. The increased 
production capacity was achieved through investments and technical improvements. 

EN 

12 

   EN 

 
 
(58)  As  a  result  of  increased  capacity  and  sales,  production  volumes  increased  by  37% 
between  2002  and  the  IP.  The  largest  increase  occurred  between  2002  and  2003. 
Production  volumes  peaked  in  2004  after  which  they  decreased  sharply  in  2005 
followed by an increase in the IP.  

(59)  Capacity utilisation increased by 3 percentage points over the period considered.  

2002 

2003 

2004 

2005 

IP 

Production (Index) 

Production capacity (Index) 

100 

100 

133 

120 

143 

133 

124 

133 

137 

133 

Capacity utilisation  

84% 

93% 

91% 

78% 

87% 

4.6.2. Stocks 

(60)  Stocks increased significantly during the period considered. This was due to the fact 
that,  because  of  the  dumped  imports,  the  CI  could  not  increase  its  sales  volume  as 
much as it anticipated following the closure of ODDA, as explained further below.  

2002 

2003 

2004 

2005 

IP 

Stocks (Index) 

100 

151 

187 

91 

178 

4.6.3. Sales volume, market shares and average unit prices in the Community 

(61)  While  Community  consumption  remained  stable,  sales  of  DCD  by  the  CI  to 
independent  customers  on  the  Community  market  increased  by  6%  over  the  period 
considered. They reached a peak in 2003 and decreased steadily in 2004 and 2005 to 
increase  slightly  again  during  the  IP.  However,  these  sales  were  made  constantly  at 
prices significantly below the costs of production, with the exception of sales of micro 
DCD, which represent between 0% and 10% of the total sales [no precise figure given 
for  reasons  of  confidentiality]  on  the  Community  market,  and  which  were  very 
profitable.  

(62) 

In  addition,  it  is  worth  recalling  that  the  CI  uses  its  own-produced  DCD  for  the 
production of other downstream chemical products, e.g. NCN derivates. This captive 
use represents approximately 15% of the CI's production of DCD.  

(63)  Sales volumes and market shares were as follows: 

2002 

2003 

2004 

2005 

IP 

Sales volumes in the EC (Index) 

100 

123 

118 

104 

106 

Market share (%) 

50-60% 

50-60%

60-
70% 

50-
60% 

50-60%

EN 

13 

   EN 

 
 
 
 
(64)  The  CI's  market  share  increased  by  3  percentage  points  over  the  period  considered. 
This,  however,  should  be  viewed  in  the  light  of  the  gap  left  on  the  market  by  the 
closure of ODDA in late 2002, which held a market share of around 25% prior to its 
closure.  

(65)  Despite  the  competition  from  Chinese  DCD  and  price  fluctuation  between  2002  and 
the end of the IP, the CI managed to increase its average unit sales prices to unrelated 
customers on the Community market by 2% over the period considered. It should be 
noted,  however,  that  these  prices  also  include  micro  DCD,  for  which  there  is  no 
competition from the Chinese exporting producers and for which higher prices can be 
obtained.  

Sales price in the EC (Index) 

100 

109 

105 

108 

102 

2002 

2003 

2004 

2005 

IP 

4.6.4. Profitability and cash flow 

(66)  During the period considered the profitability of the CI was always negative. Losses 
peaked in the IP when they were in the range of -20% to -30%. According to the CI, 
the reference year, 2002, has to be considered exceptional due to the particular market 
situation  following  ODDA's  closure.  In  2003  the  CI  managed  to  reduce  its  losses 
despite the fact that imports from the PRC reached their peak.  

2002 

2003 

2004 

2005 

IP 

Profitability 

-20% 
-30% 

to 

0 
-10 % 

to 

-10%  to  -
20% 

-10% 
 -20% 

to 

-20% 
30% 

to  -

(67)  Cash flow was always negative over the period considered with the exception of 2003, 

in line with the reduction of the CI's losses in that year.  

2002 

2003 

2004 

2005 

IP 

Cash flow (Index) 

-100 

82 

-136 

-208 

-244 

4.6.5. Investments, return on investments, and ability to raise capital 

(68)  The  CI  recorded  significant  levels  of  investment  in  particular  in  2003.  Those 
investments were mainly linked to the increase in production capacity, as stated above. 

2002 

2003 

2004 

2005 

IP 

Investments 
(Index) 

100 

171 

69 

44 

54 

EN 

14 

   EN 

 
 
 
 
 
(69)  The  return  on  investment  from  the  production  and  sales  of  the  like  product  was 
negative  and  decreased  substantially  during  the  period  considered,  reflecting  the 
above-mentioned negative trend for the profitability.  

2002 

2003 

2004 

2005 

IP 

Return 
investments  

on 

-10%  to  -
20% 

0% 
10% 

to  -

-20%  to  -
30% 

-20% 
 -30% 

to 

-20% 
-30% 

to 

(70)  The CI’s ability to raise capital was not found to be significantly affected during the 
period considered given that DCD represented only a small fraction of the CI’s total 
business. 

4.6.6. Employment, productivity, growth and wages 

(71)  The evolution of employment, productivity and labour costs of the CI were as follows: 

2002 

2003 

2004 

2005 

IP 

Number of employees (Index) 

100 

128 

122 

117 

114 

Productivity (tonnes/employee) (Index) 100 

104 

118 

106 

121 

Labour costs per employee (Index) 

100 

100 

103 

103 

106 

(72)  The  CI  increased  its  number  of  employees  between  2002  and  the  IP  by  14%.  In 
parallel, productivity increased as a result of the rationalisation process and increased 
output. 

(73)  Average wage levels increased by 6% during the period considered. 

4.6.7. Magnitude of the dumping margin and recovery from past dumping 

(74)  As  concerns  the  impact  on  the  Community  industry  of  the  magnitude  of  the  actual 
dumping margin, given the volume and prices of the dumped imports from the PRC, 
this impact cannot be considered negligible. 

(75)  Furthermore,  there  were  no  indications  that  the  Community  industry  was  recovering 

from the effects of any past dumping.  

4.7. Conclusion on injury 

(76)  Apart from a peak in 2003, consumption remained stable over the period considered. 
During  the  same  period  the  volume  of  dumped  imports  of  the  product  concerned 
increased  dramatically  and  likewise  their  market  share  rose  from  between  15%  and 
25% in 2002 to between 40% and 50% in the IP. The average prices of the dumped 
imports  were  significantly  lower  than  those  of  the  CI  throughout  the  period 
considered. On a weighted average basis, the prices of these imports undercut those of 
the CI by 25-35% in the IP. 

EN 

15 

   EN 

 
 
 
(77)  During the same period the Community industry suffered severe losses, reaching their 
peak  in  the  IP  when  they  ranged  between  -20%  and  -30%.  In  line  with  the  negative 
development in profitability, the related indicators such as return on investments and 
cash flow showed a negative trend.  

(78)  Certain  injury  indicators,  such  as  the  production  volumes,  production  capacity,  sales 
volumes, market share and selling prices on the Community market showed a positive 
trend  during  the  period  considered.  In  this  assessment  the  captive  use  was  not  taken 
into account as it remained stable throughout the period considered, hence not having 
any impact on the injury analysis.  

(79)  However,  the  positive  development  of  certain  injury  indicators  should  be  viewed  in 
the  light  of  the  closure  of  the  Norwegian  producer,  ODDA,  in  late  2002  and  the 
subsequent  competition  between  the  CI  and  the  Chinese  exporting  producers  to  take 
over  the  market  share  held  by  ODDA.  In  fact,  it  is  noteworthy  that  the  Chinese 
imports  filled  most  of  the  gap  left  by  ODDA's  closure:  Initially,  in  2003,  the  CI 
managed to capture around 1/3 of the market share held by ODDA. This diminished 
considerably  to  about  1/7  in  the  IP.  Thus,  even  though  some  indicators  showed  a 
slightly positive trend, in reality they could have been expected to develop much more 
favourably, had they not been affected by the dumped imports from the PRC. In any 
event,  the  indicators  related  to  the  financial  performance  of  the  Community  industry 
(profit, ROI, cash flow) showed such a negative trend that they outweigh largely any 
positive  developments.  Indeed,  as  its  financial  situation  shows,  the  Community 
industry could not benefit at all from ODDA's cessation of production and is now in a 
state where its viability is at stake in the absence of any measures. 

(80) 

In the light of the foregoing, it is concluded that the CI suffered material injury within 
the meaning of Article 3 of the basic Regulation. 

5. CAUSATION  

5.1. Introduction 

(81) 

In  accordance  with  Article  3(6)  and  (7)  of  the  basic  Regulation,  it  was  examined 
whether there was a causal link between the dumped imports of the product concerned 
originating in the PRC and the injury suffered by the CI. Known factors other than the 
dumped  imports,  which  could  at  the  same  time  have  injured  the  CI,  were  also 
examined  to  ensure  that  the  possible  injury  caused  by  these  other  factors  was  not 
attributed to the dumped imports.  

5.2. Effect of the dumped imports 

(82) 

It  is  recalled  that  all  imports  of  the  product  concerned  from  the  PRC  refer  to  the 
standard  type  of  DCD,  which  also  accounts  for  the  majority  of  the  CI's  sales  on  the 
Community  market.  CI's  sales  of  the  so-called  micro  DCD,  not  exported  by  the 
Chinese producers, had to be excluded when calculating the undercutting. 

EN 

16 

   EN 

 
(83) 

Imports from the PRC increased by 141% over the period considered. As a result, their 
market share increased from 19% in 2002 to 45% in the IP. It is worth noting that the 
volume of dumped imports peaked in 2003, at 6 173 tonnes, reflecting the effects of 
the closure of the Norwegian producer, then fell in 2004 to steadily increase again in 
2005 and in the IP, when they reached 6 002 tonnes. 

Table 1: Imports from the PRC 

VOLUME (MT)

7.000
6.000

5.000
4.000

3.000
2.000

1.000
0

2002

2003

2004

2005

IP

(84)  The average prices of the dumped imports were significantly lower than those of the 
Community  industry,  undercutting  them  by  25-35%  in  the  IP.  The  Chinese  export 
prices  decreased  by  11%  during  the  period  considered  but  did  not  follow  a  clear 
downward  trend.  Indeed,  the  Chinese  exporting  producers  decreased  their  prices  by 
7%  in  2003,  in  their  effort  to  take  over  the  market  share  held  by  ODDA.  Having 
obtained the majority of it, they increased their prices by 25% in 2004, decreased them 
by 27% in 2005 and then increased them again by 4% in the IP.  

(85)  At the same time, while the prices of the dumped imports decreased by 11% over the 
period considered, the CI managed to keep its overall prices relatively stable (increase 
of 2%). However, it should be borne in mind that these prices include micro DCD for 
which there is no competition from the PRC and which has a much higher price. Thus, 
the  average  annual  CI  sales  prices  are  affected  by  the  variation  in  sales  volume  and 
prices of standard and micro DCD respectively. 

Table 2: Evolution of unit prices 

2002

2003

2004

2005

IP

PRC unit selling price

CI unit selling price

EN 

17 

   EN 

 
 
 
(86) 

In  view  of  the  significant  undercutting  established  for  the  standard  DCD,  which 
amounted  to  25-35%  in  the  IP,  it  is  clear,  that  the  dumped  imports  have  exerted  a 
strong  downward  pressure  on  the  CI's  sales  prices  for  the  standard  DCD,  which 
accounts for the majority of its sales, and have thus prevented the CI from setting its 
prices at levels which would cover its production costs. This in turn has had a negative 
impact  on  the  CI's  profitability,  causing  a  substantial  part  of  the  significant  losses 
throughout the period considered. 

(87)  Since the CI made losses on sales of DCD already in 2002, it was examined whether 
the losses are structural in nature rather than caused solely by the dumped imports. In 
this respect, it has to be borne in mind that the dumped imports had a strong presence 
on  the  Community  market  already  in  2002,  with  a  market  share  of  15-25%. 
Furthermore,  the  CI  provided  evidence  which  showed  that  due  to  a  cost-cutting 
programme it managed to keep its unit costs stable over the period considered, despite 
the increase in raw material prices. However, because of the price depression caused 
by the Chinese imports this did not have the desired impact of reducing losses but only 
prevented them from increasing.  

(88)  Thanks to the cost cutting efforts and ODDA's exit from the market in late 2002, the 
CI was in the process of recovering prior to the peak in the Chinese imports in 2003. 
Following this peak, which allowed the Chinese to take over the majority of ODDA's 
market  share,  the  CI's  losses  increased  to  between  -10%  and  -20%  in  2004  and 
continued  to  increase  steadily  in  2005  and  in  the  IP,  in  line  with  the  increase  in 
dumped import volumes and the decrease in the average import prices. 

Table 3: Profitability of CI 

Profitability

2002

2003

2004

2005

IP

-

-20 

-40 

-60 

-80 

-100 

-120 

(89)  The  causal  link  between  the  dumped  imports  and  the  deterioration  of  the  CI's 
economic situation appears to be further reinforced by the fact that the CI is profitable 
on the type (micro DCD) where there are no Chinese imports whereas it makes heavy 
losses on the standard type of DCD where it faces unfair competition from the PRC.  

(90) 

In  view  of  the  above,  and  in  particular  the  development  of  the  market  share  of  the 
dumped  imports,  as  demonstrated  below,  at  prices  which  significantly  undercut  the 
prices of the CI, it is concluded that the dumped imports played a determining role in 
the injurious situation of the Community industry.  

EN 

18 

   EN 

 
 
 
Table 4: Development of market shares 

Dumped imports from PRC 

Community industry 

5.3. Effect of other factors 

5.3.1. Preliminary remark 

2002 

2003 

2004 

2005 

IP 

15-25% 35-45% 30-40% 

50-60% 50-60% 60-70% 

35-
45% 

50-
60% 

40-50%

50-60%

(91) 

In  view  of  a  stable  Community  consumption  over  the  period  considered  and  the 
absence of imports from any other third countries, the only known producers of DCD 
being the CI and a few Chinese producers, there are very few other known factors that 
could have contributed to the injurious situation of the CI. 

5.3.2. Export performance of the Community industry 

(92) 

It was examined whether exports by the CI to non-EU countries may have contributed 
to  the  injury  suffered  during  the  period  considered.  Exports  to  non-EU  countries 
accounted for a significant proportion, between 30% and 50% of the CI's sales of the 
product  concerned  during  the  period  considered.  Exports  increased  substantially  by 
58% in volume between 2002 and the IP whereas the average unit price decreased by 
2%. This shows that despite the fierce competition from the Chinese exporters also on 
markets  outside  the Community, there is a strong demand for  DCD produced by  the 
Community  industry,  even  at  prices  well  above  those  of  the  Chinese  exporters, 
although, as explained above, the higher average prices can be explained by the higher 
prices obtained for micro DCD.  

(93) 

In order to be able to compete with the low-priced Chinese standard DCD also on non-
EU markets, the CI's export sales were made at prices well below cost of production, 
thus  undermining  its  overall  profitability.  However,  these  exports  did  not  directly 
affect profitability on the Community market.  

5.3.3. Alleged self-inflicted injury 

(94)  Given  that  the  Community  industry  has  made  losses  on  the  product  concerned  for 
several  years,  and  nevertheless  decided  to  invest  in  additional  capacity  in  2003  and 
2004 leading to increased production volumes and stocks, it was examined whether (i) 
the losses are structural in nature and (ii) the decision to invest in additional capacity 
has  contributed  to  the  injurious  situation  of  the  CI.  The  latter  argument  was  also 
brought  forward  by  one  importer,  who  claimed  that  the  CI's  decision  to  increase  its 
production capacity by one third with the knowledge of already existing imports from 
China has added significant pressure on the market. 

EN 

19 

   EN 

 
 
(95)  With regard to the levels of losses, data obtained from the CI demonstrates that due to 
its cost-cutting  programme the CI  has managed to keep its unit costs stable over the 
period considered, despite the rise in raw material prices. However, the CI is suffering 
from some cost disadvantages, such as three different production sites, no proximity to 
coal  mines  and  expensive  production  process,  even  though  it  is  not  possible  to 
compare the CI's cost structure with that of any other DCD producer, since none of the 
Chinese exporting producers obtained MET. . Nevertheless, the fact that the CI made a 
small profit in 2001 and also that it is profitable on the product type (micro DCD) not 
exported  by  the  Chinese  producers  clearly  shows  that  in  normal  conditions  of 
competition, the CI might be in a much better shape, and therefore that the amount of 
losses is not purely structural. 

(96)  With regard to the CI's decision to increase its production capacity, it has to be noted 
that this occurred after the closure of ODDA, which, prior to its exit, held a significant 
market share on the Community market. In the absence of the Chinese imports which 
managed to take over the majority of ODDA's lost market share due to dumped prices, 
the CI could have expected to capture a much larger portion of it. On the other hand, 
an operator can never expect that all increase in consumption in its area will turn to it 
for supply and not to foreign sources.  

(97)  From the above, it is clear that even if the difficult financial and economic situation of 
the CI cannot be considered to be self-inflicted, the lack of profitability on the product 
concerned is also partly the result of high production costs and investment decisions. 

5.4. Conclusion on causation 

(98) 

In conclusion, it is confirmed that the Chinese dumped imports, which increased their 
market share significantly over the period considered, at prices undercutting those of 
the CI have substantially contributed to the difficult financial and economic situation 
of  the  CI.  This,  viewed  in  isolation,  caused  material  injury.  However,  it  cannot  be 
denied that the significant losses incurred throughout the period considered have also 
to be partly attributed to the CI's cost structure.,  

(99)  The  investigation  showed  that  the  other  known  factors,  such  as  costs,  increased 
capacity  and  export  performance  of  the  Community  industry  even  if  they  have 
contributed to the injury do not  break  the  causal  link  between the  injury suffered by 
the CI and the dumped imports from the PRC.  

(100)  It is therefore concluded that the dumped imports originating in the PRC have caused 
material injury  to the Community industry within the meaning of Article 3(6) of  the 
basic Regulation. 

6. COMMUNITY INTEREST 

(101)  In  accordance  with  Article  21  of  the  basic  Regulation  it  has  been  examined  whether 
compelling  reasons  exist  for  concluding  that  it  is  not  in  the  Community  interest  to 
impose  anti-dumping  measures  in  this  case.  The  likely  impact  of  measures  on  all 
interested parties and also the consequences of not imposing measures were analysed.  

EN 

20 

   EN 

 
6.1. Interest of the Community industry 

(102)  The  injurious  situation  of  the  Community  industry  resulted  from  its  difficulty  to 
compete with the dumped imports, which increased sharply over the period considered 
and  caused  strong  price  depression  on  the  Community  market,  preventing  the 
Community  industry  from  setting  its  prices  at  a  level  which  would  have  covered  its 
costs.  

(103)  It is considered that the imposition of measures would enable the Community industry 
to  increase  the  price  of  DCD  to  a  level  that  would  allow  it  to  turn  the  business 
profitable and thus maintain its presence on the Community market. 

(104)  Should  measures  not  be  imposed,  the  Community  industry  would  be  forced  to 
continue to align its prices with those of the dumped  imports  in order to  stay on the 
market.  This  would  result  in  further  financial  losses.  As  the  current  situation, 
characterised by a lack of profitability over several years, is not sustainable, the non-
imposition of measures would eventually lead to the disappearance of this product line 
and consequent job losses.  

(105)  In view of the above, it is concluded that the imposition of anti-dumping measures is 

in the interest of the Community industry.  

6.2. Competition and trade distorting effects 

(106)  The  co-operating  exporting  producers,  as  well  as  some  users  and  importers  have 
argued  that  the  imposition  of  anti-dumping  measures  would  exclude  the  Chinese 
imports  from  the  Community  market  and,  in  the  absence  of  imports  from  any  other 
countries, result in the monopoly of the Community industry. The exporting producers 
and one importer have further pointed to the risk of a critical supply situation on the 
Community  market  should  measures  be  imposed  at  a  level  which  would  prohibit 
imports from the PRC. 

(107)  It is considered, however, that in view of the strong market position that the Chinese 
exporting  producers  have  obtained  due  to  dumping  practices  and  prices  significantly 
undercutting those of the Community industry, the imposition of measures at the level 
described  below  would  not  drive  them  out  of  the  Community  market  but  merely 
restore  a  level  playing  field  allowing  the  Community  industry  and  the  Chinese 
exporting  producers  to  compete  on  equal  terms.  Moreover,  competition  between  the 
Chinese exporters and the Community industry on the Community market will remain, 
thus guaranteeing continuous supply from several sources. 

(108)  On  the  other  hand,  should  anti-dumping  measures  not  be  imposed,  it  cannot  be 
excluded  that  the  Community  industry  would  have  to  cease  its  manufacturing 
activities  for  this  particular  business,  leading  to  the  opposite  scenario,  i.e.  the 
monopoly of the Chinese imports. Both scenarios, i.e. a monopoly by either of the two 
sources of supply have to be avoided. Indeed, both cooperating users have emphasised 
the need for two sources of supply.  

(109)  Hence,  it  is  considered  that  the  imposition  of  anti-dumping  measures,  at  the  level 
described  below,  would  guarantee  the  maintenance  of  two  sources  of  supply  on  the 
Community market. 

EN 

21 

   EN 

 
6.3. Interest of users 

(110)  Two  industrial  users,  one  active  in  the  pharmaceuticals  sector  and  the  other  one  in 
leather  tanning,  cooperated  in  the  investigation.  Both  users  purchase  the  product 
concerned directly from the PRC and also from the Community industry. A third user, 
producing  specialised  paper  chemicals,  reacted  to  the  disclosure  of  the  definitive 
findings  of  the  investigation  by  providing  comments  on  the  expected  effects  of  the 
imposition of anti-dumping duties.  

(111)  The user in the pharmaceuticals sector, where DCD is an important raw material in the 
production  of  metformine,  a  diabetes  medicine,  argued  that  any  price  increases 
resulting from the imposition of anti-dumping measures would have a negative effect 
on  its  competitiveness  vis-à-vis  producers  outside  the  Community,  mainly  in  India. 
Given  that  DCD  accounts  for  a  relatively  important  proportion  of  its  cost,  this  user 
estimates  that  even  a  small  price  increase  of  DCD  would  affect  the  sales  prices  of 
metformine,  and  consequently  have  a  negative  impact  on  its  market  shares  and 
competitiveness. However, the information made available to the Commission on the 
above user's costs and profitability indicates that the duty at the proposed level could 
at least partly be absorbed. 

(112)  In  its  comments  to  the  disclosure  of  the  definitive  findings  of  the  investigation,  the 
above user argued that it would not be able to absorb the increase in raw material costs 
resulting from the imposition of an anti-dumping duty at the proposed level. It claimed 
that in order to maintain its competitiveness and stay on the market it has been obliged 
to constantly reduce its production costs. To this end it already had to restructure in the 
past.  In  addition,  it  has  negotiated  price  reductions  with  its  main  supplier,  the 
Community industry. The same user concludes that the imposition of an anti-dumping 
duty at the proposed level presents a concrete risk that it will have to close down its 
two  production  sites  in  France,  both  specialised  in  the  production  of  metformine. 
Allegedly, this would result in 270 people losing their jobs. 

(113)  The  Commission  maintains,  however,  that  even  if  it  cannot  be  contested  that  the 
imposition of duties would affect the above user negatively in terms of lower margins 
with  regard  to  its  sales  on  the  Community  market,  it  should  be  stressed  that  a 
significant  portion  of  the  metformine  produced  by  this  user  in  the  Community  is 
further  exported,  hence  exempted  from  any  duties.  Thus  the  imposition  of  a  duty 
would  only  affect  part  of  the  metformine  business.  Moreover,  in  view  of  the  profit 
margin  disclosed  by  this  user  in  its  questionnaire  response,  it  is  clear  that  the  duty 
could at least partly be absorbed and should not lead to significant price increases of 
metformine sold on the Community market. Hence, any risk of job-losses seems very 
distant.  It  should  also  be  noted,  that  the  non-imposition  of  duties  could  lead  to  a 
situation  where  this  user's  main  supplier  would  have  to  close  down  its  activities, 
leaving this user with only one source of supply.  

(114)  The  user  in  the  paper  chemicals  sector  also  alleged  that  an  anti-dumping  duty  at  the 
proposed  level  would  reduce  its  capability  to  stay  competitive  on  the  Community 
market, since its competitors outside the Community would continue to have access to 
DCD without having to pay any anti-dumping duties. However, since this user did not 
submit a questionnaire reply or further substantiate its claim, it is impossible to assess 
or quantify the effect of a duty on its business.  

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(115)  It is recalled, however, that as described above, both cooperating users underlined the 
importance of maintaining two sources of supply. Therefore, it is considered that the 
imposition of anti-dumping measures at the level explained below would guarantee the 
long-term  existence  of  alternative  supply  sources  for  the  end-user  sectors.  The  non-
imposition of measures, on the other hand, would entail the risk that one supply source 
would be eliminated.  

6.4. Interest of unrelated importers 

(116)  Four  importers,  one  of  them  also  using  the  product  concerned,  cooperated  in  the 
investigation.  The  largest  of  them,  whose  imports  represented  around  30%  of  the 
totality of DCD imported from the PRC in the IP, pointed out that the imposition of 
anti-dumping duties would have an inevitable negative impact on its activities, leading 
eventually  to  its  withdrawal  from  the  DCD  business,  since  in  the  absence  of  DCD 
production in other third countries it does not have an alternative supply source. This 
could lead to some organisational changes within the company. 

(117)  It cannot be excluded that the imposition of anti-dumping measures would affect some 
importers  negatively.  However,  since  anti-dumping  measures  would  only  restore 
competition  on  the  Community  market,  and  moreover,  since  end-users  have 
emphasized  the  need  for  two  sources  of  supply,  it  is  considered  that  anti-dumping 
measures  at  the  level  proposed  below  should  not  prevent  importers  from  selling  the 
product concerned in the Community.  

(118)  In  addition,  since  importers  supply  several  different  end-user  sectors,  where  DCD 
constitutes  a  variable  proportion  of  the  cost  of  the  end-product,  it  is  considered  that 
any  price  increases  resulting  from  the  imposition  of  anti-dumping  measures  could  at 
least partly be passed on to users. It should also be noted in this context, that according 
to the information available, importers do not supply the biggest end-user sector, i.e. 
the pharmaceuticals, where allegedly any additional cost increases would be difficult 
to pass on to end-customers due to the competition with third countries. 

(119)  One importer which supplies DCD to the textile, paper, water treatment and fertilizer 
industries  claimed  that  these  industries  do  not  require  the  higher  quality  DCD 
produced by the CI. It further argued that the above industries would have difficulties 
to pass any additional cost increases to their end-customers.  

(120)  It  is  not  contested  that  the  DCD  produced  by  the  CI  may  be  of  superior  quality 
compared  to  the  DCD  produced  by  the  Chinese  exporting  producers.  However,  the 
investigation has shown that the product concerned and the like product are essentially 
the same and have the same basic chemical, physical and technical characteristics and 
the same uses. Regarding the claim that the above industries could not pass an increase 
in  raw  material  prices  to  their  customers,  it  must  be  stressed,  that  in  the  absence  of 
cooperation  by  these  end-users  this  claim  cannot  be  assessed  and  must  hence  be 
disregarded.  

(121)  It is also noteworthy that the profit margins amongst the cooperating importers vary. 
According  to  data  provided  by  the  importers  at  least  part  of  any  price  increases 
resulting from the imposition of anti-dumping duties could be absorbed. 

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(122)  Therefore,  it  is  considered  that  the  imposition  of  anti-dumping  measures  would  not 

have a serious negative impact on importers.  

6.5. Conclusion on Community interest 

(123)  The imposition of anti-dumping measures can be expected to enable the Community 
industry  to  regain  profitability  of  the  DCD  business,  thus  allowing  it  to  stay  on  the 
market.  In  view  of  the  constantly  deteriorating  financial  situation  of  the  Community 
industry which has turned the entire business line unprofitable, there is a high risk that 
should  measures  not  be  imposed,  the  Community  industry  would  have  to  consider 
withdrawing  from  the  DCD  business,  resulting  in  inevitable  job-losses.  This  would 
create a monopoly for the Chinese exporting producers, which would be detrimental to 
the end-users of DCD, who have underlined the importance of maintaining a source of 
supply in the Community.  

(124)  In  view  of  the  significant  undercutting  established  for  the  dumped  imports,  it  is 
considered that the imposition of anti-dumping measures would merely restore a level-
playing field, maintaining two sources of supply for the users.  

(125)  It  is  therefore  concluded  that  there  are  no  compelling  reasons  on  the  grounds  of 

Community interest not to impose anti-dumping measures.  

7. DEFINITIVE ANTI-DUMPING MEASURES 

7.1. Injury elimination level  

(126)  In  view  of  the  findings  as  described  above  and  in  order  to  adequately  reflect  the 
specific market situation of DCD, it is considered appropriate to adopt  anti-dumping 
measures. 

(127)  The  measures  should  be  imposed  at  a  level  sufficient  to  restore  a  situation  of  fair 

competition between the CI and the exporting producers in the PRC.  

(128)  In  the  disclosure  sent  to  the  parties  concerned  it  has  been  considered  that  the 
circumstances  of  this  particular  case  necessitate  a  special  approach  for  the 
determination of the injury elimination level. In this respect there are three significant 
aspects that must be taken into account: 

(i)  Given  the  conclusion  on  causation,  the  measures  should  not  compensate  for 
factors, which cannot be attributed to the dumped imports. However, it is impossible 
to precisely determine the contribution of these elements.  

(ii) The dumping margin was calculated in an exceptional way: since MET/IT could 
not be granted to the cooperating exporting producers in the PRC and in the absence 
of  an  analogue  country,  the  normal  value  had  to  be  constructed,  based  on  the 
Community industry's cost of production.  

(iii)  There  are  only  two  supply  sources  of  DCD  in  the  world:  the  Community 
industry located in Germany and some exporting producers in the PRC. This calls for 
a  cautious  approach  in  order  not  to  create  a  monopoly  and/or  a  critical  supply 
situation on the Community market.  

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(129)  It  should  also  be  noted  that  as  of  1  July  2007  the  VAT  refund  rate  applicable  to 
exports of DCD originating in the PRC was reduced from 13% to 5%. This will most 
likely lead to an increase in export prices of Chinese DCD, since the cost of producing 
DCD for exports will be higher. 

(130)  Under  these  circumstances,  a  more  meaningful  method  had  to  be  used  for  the 
determination  of  the  injury  elimination  level  related  to  the  dumped  imports.  It  was 
considered  appropriate  to  focus  on  the  injurious  effects  directly  resulting  from  the 
undercutting  practices  of  the  Chinese  exporting  producers  and  to  base  the  injury 
elimination  level  on  the  amount  sufficient  to  eliminate  the  actual  price  undercutting 
and to add an element of profit (between 0 and 5%) corresponding to the profit margin 
achieved  by  the  Community  industry  in  2001  for  the  product  concerned.  This 
approach  will  allowthe  CI  to  charge  higher  prices  and  therefore  to  improve  its 
financial and economic situation as far as it has been clearly impacted by the dumped 
imports.  

(131)  Following the disclosure of the definitive findings of the investigation, the CI claimed 
that the proposed level of duty would not ensure its viability, since it would not allow 
it to increase its prices to a level that would cover all of its cost of production. Instead 
it  proposed  a  methodology  which  would  provide  a  break-even  point  for  the  whole 
DCD  production  chain.  However,  this  method  had  to  be  rejected  as  it  was  based  on 
largely non-verified data  and would have included  other  products  beside the  product 
concerned. 

(132)  It  is  therefore  maintained  that  the  duty  based  on  the  undercutting  plus  profit  will 
eliminate the injury directly caused by the dumped imports, even if it does not remove 
fully  all  the  financial  and  economic  difficulties  of  the  CI.  Covering  all  costs  of 
production  would  be  an  overcompensation  in  view  of  the  factors  other  than  dumped 
imports.  It  should  also  be  taken  into  consideration  that  the  CI  benefits  from  a 
particular position in the market characterised by its proximity to customers.  

(133)  On the basis of  the above,  the necessary price increase was determined by using the 
weighted  average  import  price,  as  established  for  the  undercutting  calculation,  and 
adding an additional element of profit. The result was then expressed as a percentage 
of the total CIF import value.  

(134)  In view of the special circumstances, as described above, the Commission will closely 
monitor the market. Should the measure prove to be inadequate, or alternatively, lead 
to  a  shortage  on  the  Community  market  and/or  a  monopoly  by  either  party,  the 
Commission will immediately address the situation by initiating an ex officio review 
on the basis of Article 11(3) of the basic Regulation and/or by applying Article 14(4) 
of the basic Regulation.  

7.2. Definitive measures 

(135)  In the light of the foregoing, it is considered that in accordance with Article 9 of the 
basic  Regulation,  definitive  anti-dumping  measures  on  imports  of  the  product 
concerned should be imposed.  

(136)  As  the  injury  elimination  level  is  lower  than  the  dumping  margin  established,  the 

definitive measures should be based on the injury elimination level.  

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(137)  On  the  basis  of  the  above,  the  duty  rate,  expressed  as  a  percentage  of  the  CIF 

Community border price, customs duty unpaid, is as follows:  

Country 

PRC 

Company 

Rate of duty (%) 

All companies 

49.1% 

HAS ADOPTED THIS REGULATION: 

Article 1 

1.  A  definitive  anti-dumping  duty  is  hereby  imposed  on  imports  of  1-cyanoguanidine 
(dicyandiamide), falling within CN code 2926 20 00, originating in the People’s Republic of 
China.  

2.  The  rate  of  the  definitive  anti-dumping  duty  applicable  to  the  net,  free-at-Community-
frontier price, before duty, of the product described above shall be 49.1%. 

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

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

Article 2 

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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