Council Regulation (EC) No 1331/2007 of 13 November 2007 imposing a definitive anti-dumping duty on imports of dicyandiamide originating in the People’s Republic of China
Date: 2007-11-13
Institutions: Council of the European Union
Subjects: China, anti-dumping duty, anti-dumping legislation, chemical product, originating product

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is obligatory)

I

REGULATIONS

COUNCIL REGULATION (EC) No 1331/2007

of 13 November 2007
imposing a definitive anti-dumping duty on imports of dicyandiamide originating in the People’s
Republic of China

THE COUNCIL OF THE EUROPEAN UNION,

(3)

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

initiation (2)

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
(‘the
countries not members of the European Community (1)
basic Regulation’), and in particular Article 9 thereof,

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

Whereas:

(1)

(2)

1. PROCEDURE

1.1. Initiation

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
from which was
material
considered sufficient
a
the opening of
proceeding.

there
to justify

resulting

injury

(4)

(5)

(6)

(7)

1.2. Parties concerned by the proceeding and verifi-

cation visits

producer,

complainant
The Commission officially advised the
Community
producers,
exporting
the
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.

complainant Community

The
producers,
known. All
showed that
should be heard, were granted a hearing.

exporting
importers
views
interested parties, who so requested and
there were particular reasons why they

and users made

producer,

their

if

treatment

In order to allow exporting producers in the PRC to
submit a claim for market economy treatment (‘MET’)
(‘IT’),
or individual
the
Commission sent claim forms to the Chinese exporting
producers known to be concerned. Three exporting
producers
to
Article 2(7) of the basic Regulation and IT, should the
investigation establish that
the
conditions for MET.

in the PRC requested MET pursuant

they do not meet

they so wished,

the apparent high number of exporting
In view of
initiation the
producers in the PRC,
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 the notice of

(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 C 193, 17.8.2006, p. 3.

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(8)

if so,

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

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
injury covered the period from 1
the assessment of
January 2002 to the end of
the investigation period
(‘period considered’).

(9)

However, given that only three exporting producers
cooperated 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 them-
selves known within the deadlines set out in the notice
of initiation. Replies were received from the three coop-
erating exporting producers in the PRC and from the sole
Community producer, as well as from two users and four
importers.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(13)

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

(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
following
companies:

the premises of

the

(14) DCD is usually used as an intermediate to produce a
intermediates, such as
broad range of other chemical
applications —
pharmaceuticals,
leather — and diverse
water, pulp and paper, textile,
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.

industrial

various

(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,

(d) Community users

— Merck Santé, France,

— Lanxess GmbH, Germany.

(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.

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(18)

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

that the companies did not meet the requirements of
criteria one, two and three.

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 origi-
nating 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:

the

found that

it was
influence over

relating to management decisions

(23) As the main shareholder is in one case a State-owned
enterprise and in the second a member of the People’s
the State could exert
Congress,
companies’ business
significant
such as
decisions
profit distribution,
the issuing of new shares, capital
increases and the amendment of the Articles of Asso-
ciation,
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 substan-
tially reflect market values.

1. business decisions and costs are made in response to
market conditions and without significant State inter-
ference;

(24)

2. firms have one clear set of basic accounting records
which are independently audited in line with interna-
tional 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;

Furthermore, in all three cases, the companies’ accounts
failed to reflect the true financial situation. In particular,
there were numerous breaches of basic accounting prin-
ciples which are part of the International Accounting
Standards
these issues were
companies
mentioned in the
cannot be considered to have one clear set of accounts
in line with IAS and to be independently audited in line
with IAS.

(IAS) and as none of

auditor’s

report,

the

(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.

5. exchange rate conversions are carried out at market

rates.

(26)

(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.

The Advisory Committee was consulted and the parties
to
given an opportunity
concerned were
directly
comment on the above
findings. The Community
industry and the three exporting producers all received
disclosure of the MET assessment and were given the
exporting producers
opportunity to comment. The
made a number of comments against the findings and
the Commission replied to them without, however,
The
amending
exporting
producers
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.

the
claimed in particular

assessment.

overall

that

(22)

The investigation revealed that the MET claim had to be
rejected for all three exporting producers. The determi-
nation for the companies against each of the five criteria
set out in Article 2(7)(c) of the basic Regulation showed

(27)

Following the above, it was concluded that MET should
not be granted to the PRC producers.

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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 indi-
vidual duty shall be specified for companies that are able
in
to demonstrate that
Article 9(5) of the basic Regulation for receiving indi-
vidual treatment.

they meet all criteria set out

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.

(29)

(30)

(31)

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
in two cases, company
influence in such a way that,
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,
is
collectively-owned,
concerned, there are strong indications that there is still
substantial potential interference from the State leading
to possible risks of circumvention.

former State-owned company

The latter exporting producer claimed that potential State
interference would not be sufficient reason to reject indi-
vidual
treatment because such conclusion would be
merely based on assumptions.

such as

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 inter-
ference is not
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
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 inter-
ference 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.

(34)

(35)

(36)

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.

there was not

The three PRC producers objected to this proposal,
arguing that
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.

sufficient

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 demon-
strate 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
in the
production process
they were not
considered significant.

far as differences

concerned,

are

(37)

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

(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.

(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.

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

(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 cooperated in the present
investigation, such approach was not justified.

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(40)

(41)

incorrect.

These exporting producers’ allegation that normal value
was determined in accordance with Article 18 of the
basic Regulation is
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
claim was
therefore rejected.

third countries. This

3.3.2. Determination of normal value

a

plus

costs

quantities. However,

The like product was sold by the Community industry in
representative
the Community
industry’s domestic sales were loss-making. Therefore,
the normal value was based on the Community
industry’s manufacturing
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 addi-
transport costs due to the physical separation
tional
to raw
between production units, no direct access
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

3.6. Dumping margin

(44) On this basis,

country-wide dumping margin,
expressed as a percentage of the CIF import price at
the Community border, duty unpaid, is 91,8 %.

the

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.

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.

(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 estab-
lished in accordance with Article 2(8) of the basic Regu-
lation on the basis of the prices actually paid or payable.

(48)

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.

4.4. Community consumption

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.

Community consumption
(tonnes)

2002

2003

2004

2005

IP

13 258

15 594

13 119

12 469

13 417

Index 2002 = 100

100

118

99

94

101

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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 15-25 % to 40-50 % 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.

Import volumes (tonnes)

Index 2002 = 100

2002

2 476

100

2003

6 173

249

2004

4 283

173

2005

5 218

211

IP

6 002

241

Market share

15-25 %

35-45 %

30-40 %

35-45 %

40-50 %

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.

Import prices from the PRC
(EUR/tonne)

2002

1 149

2003

1 071

2004

1 338

2005

980

IP

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.

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(56)

(57)

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

The production capacity increased by 33 % between 2002 and the IP. The capacity increase occurred
in late 2002. The
during 2003 and 2004, after the closure of the Norwegian producer, ODDA,
additional production capacity should be viewed in the light of
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.

the fact

(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.

Production (Index)

Production capacity (Index)

Capacity utilisation

2002

100

100

84 %

2003

133

120

93 %

2004

143

133

91 %

2005

124

133

78 %

IP

137

133

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.

Stocks (Index)

2002

100

2003

151

2004

187

2005

91

IP

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.

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(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:

Sales volumes in the EC (Index)

2002

100

2003

123

2004

118

2005

104

IP

106

Market share (%)

50-60 %

50-60 %

60-70 %

50-60 %

50-60 %

(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)

2002

100

2003

109

2004

105

2005

108

IP

102

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.

Profitability

2002

2003

2004

2005

IP

– 20 % to
– 30 %

0 % to
– 10 %

– 10 % to
– 20 %

– 10 % to
– 20 %

– 20 % to
– 30 %

(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.

Cash flow (Index)

2002

– 100

2003

82

2004

– 136

2005

– 208

IP

– 244

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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.

Investments (Index)

2002

100

2003

171

2004

69

2005

44

IP

54

(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 abovementioned negative trend
for the profitability.

Return on investments

– 10 % to
– 20 %

0 % to
– 10 %

– 20 % to
– 30 %

– 20 % to
– 30 %

– 20 % to
– 30 %

2002

2003

2004

2005

IP

(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:

Number of employees (Index)

Productivity (tonnes/employee)
(Index)

Labour costs per employee
(Index)

2002

100

100

100

2003

128

104

100

2004

122

118

103

2005

117

106

103

IP

114

121

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.

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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.

(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.
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.

Indeed, as its financial situation shows,

(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.

5.1. Introduction

5. CAUSATION

(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.

(82)

(83)

5.2. Effect of the dumped imports

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 calcu-
lating the undercutting.

Imports from the PRC increased by 141 % over the period considered. As a result, their market share
increased from 15-25 % in 2002 to 40-50 % 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.

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Table 1

Imports from the PRC

(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

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Official Journal of the European Union

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(86)

(87)

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.

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

(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.

Table 4

Development of market shares

2002

2003

2004

2005

IP

Dumped imports from PRC

15-25 %

35-45 %

30-40 %

35-45 %

40-50 %

Community industry

50-60 %

50-60 %

60-70 %

50-60 %

50-60 %

15.11.2007

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Official Journal of the European Union

L 296/13

5.3. Effect of other factors

5.3.1. Preliminary remark

(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

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
the Chinese exporting
DCD producer, since none of
producers obtained MET. Nevertheless, the fact that the
CI made a small profit in 2001 and also that it is pro-
fitable 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.

(92)

for

during

sales of

It was examined whether exports by the CI to non-EU
countries may have contributed to the injury suffered
to non-EU
during the period considered. Exports
proportion,
significant
countries
a
accounted
the CI’s
the
between 30 % and 50 % of
concerned
product
considered.
the period
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
there is a strong
markets outside the Community,
the Community
for DCD produced
demand
industry,
the
those of
even at prices well above
the
Chinese exporters, although, as explained above,
higher average prices can be explained by the higher
prices obtained for micro DCD.

by

(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

it was examined whether

(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,
the losses are
in nature and (ii) the decision to invest in
structural
additional capacity has contributed to the injurious
the CI. The latter argument was also
situation of
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.

(i)

it has

(96) With regard to the CI’s decision to increase
to be noted that

its
production capacity,
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)

(98)

it

is clear that even if

From the above,
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

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.

(95) With regard to the levels of losses, data obtained from
the CI demonstrates
cost-cutting
that due
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

to its

(100)

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

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6. COMMUNITY INTEREST

(107)

(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
interested parties and also
impact of measures on all
the
imposing measures were
consequences of not
analysed.

6.1. Interest of the Community industry

the

imposition of measures

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
the Community
significantly undercutting those of
level
the
industry,
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
terms.
Moreover, competition between the Chinese exporters
and the Community industry on the Community
market will
continuous
thus
supply from several sources.

to compete on equal

guaranteeing

remain,

at

(102) The injurious

situation of

the Community industry
to compete with the
resulted from its difficulty
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 profit-
ability 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 cooperating exporting producers, as well as some
users and importers have argued that the imposition of
the Chinese
anti-dumping measures would exclude
imports
in the
from the Community market and,
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.

this particular business,

(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
leading to the opposite
for
scenario,
the Chinese imports.
Both scenarios,
i.e. a monopoly by either of the two
sources of supply have to be avoided. Indeed, both coop-
erating users have emphasised the need for two sources
of supply.

the monopoly of

i.e.

(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.

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 defi-
nitive
investigation by providing
comments on the expected effects of the imposition of
anti-dumping duties.

findings of

the

of

imposition

from the

(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
anti-dumping
measures would have a negative effect on its competi-
tiveness 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
and competitiveness.
impact on its market
However,
to the
the
Commission on the above user’s costs and profitability
indicates that the duty at the proposed level could at least
partly be absorbed.

information made

available

shares

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Official Journal of the European Union

L 296/15

(112)

the definitive
In its comments to the disclosure of
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
the Community industry. The
with its main supplier,
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,

it

should be

that even if

stressed that

in the Community is

it
the imposition of duties
cannot be contested that
the above user negatively in terms of
would affect
sales on the
lower margins with regard to its
Community market,
a
significant portion of the metformine produced by this
user
further exported, hence
exempted from any duties. Thus the imposition of a
the metformine
affect part of
duty would only
business. Moreover,
the profit margin
in view of
disclosed by this user in its questionnaire response, it is
clear that the duty could at least partly be absorbed and
increases of
lead to significant price
should not
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.

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 nega-
since anti-dumping measures would
tively. However,
only restore competition on the Community market,
since end-users have emphasised the
and moreover,
need for two sources of supply,
it is considered that
the level proposed below
anti-dumping measures at
should not prevent importers from selling the product
concerned in the Community.

(118)

a

the

the

cost of

end-product,

sectors, where DCD constitutes

In addition, since importers supply several different end-
variable
user
is
it
proportion of
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.

(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
a questionnaire
did not
further
reply or
impossible to assess or
is
substantiate its claim,
quantify the effect of a duty on its business.

submit

it

(115)

is recalled, however,

It
that as described above, both
cooperating users underlined the importance of main-
taining 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
supply source would be
the
eliminated.

risk that one

treatment and fertiliser

(119) One importer which supplies DCD to the textile, paper,
industries claimed that
water
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 investi-
gation 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
it must be stressed, that in
prices to their customers,
the absence of cooperation by these end-users
this
claim cannot be assessed and must hence be disregarded.

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Official Journal of the European Union

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(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.

(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.
the constantly dete-
In view of
riorating 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 with-
drawing 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.

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 excep-
tional 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.

(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.

(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.

(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
the specific market situation of
to adequately reflect
DCD,
anti-
is
dumping measures.

considered appropriate

to adopt

it

(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)

It has been considered that the circumstances of this
particular case necessitate a special approach for the
In this
determination of

the injury elimination level.

(130) Under these circumstances, a more meaningful method
had to be used for the determination of the injury eli-
It was
mination level related to the dumped imports.
considered appropriate to focus on the injurious effects
directly resulting from the undercutting practices of the
Chinese exporting producers and to base the injury eli-
mination 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 allow the 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 me-
thodology 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.

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(132)

the

eliminate

It is therefore maintained that the duty based on the
undercutting plus profit will
injury
directly caused by the dumped imports, even if it does
not remove fully all the financial and economic diffi-
the CI. Covering all costs of production
culties of
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 imme-
diately address the situation by initiating an ex officio
review on the basis of Article 11(3) of the basic Regu-
lation and/or by applying Article 14(4) of the basic Regu-
lation.

7.2. Definitive measures

(135)

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

(136) As the injury elimination level is lower than the dumping
the definitive measures should be

margin established,
based on the injury elimination level.

(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

Company

Rate of duty (%)

PRC

All companies

49,1 %

HAS ADOPTED THIS REGULATION:

Article 1

A definitive anti-dumping duty is hereby imposed on
1.
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 %.

Unless otherwise

3.
concerning customs duties shall apply.

specified,

the provisions

in force

Article 2

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

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

Done at Brussels, 13 November 2007.

For the Council
The President

F. TEIXEIRA DOS SANTOS