Proposal for a Council Regulation amending Regulation (EC) No 1425/2006 imposing a definitive anti-dumping duty on imports of certain plastic sacks and bags originating in the People's Republic of China and Thailand
Date: 2008-02-28
Institutions: European Commission
Subjects: China, Thailand, anti-dumping duty, anti-dumping legislation, import, originating product, packaging product, plastics

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.2.2008 
COM(2008) 114 final 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1425/2006 imposing a definitive anti-dumping duty on 
imports of certain plastic sacks and bags originating in the People's Republic of China 
and Thailand 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

• 

Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  384/96  of  22 
December 1995 on protection against dumped imports from countries not members of 
the European Community, as last amended by Council Regulation (EC) No 2117/2005 
of  21  December  2005  ('the  basic  Regulation')  concerning  imports  of  certain  plastic 
sacks and bags originating in the People's Republic of China (PRC). 

• 

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 

Measures  are  in  force  against  imports  of  certain  plastic  sacks  and  bags  originating  in 
the  People's  Republic  of  China  (PRC)  and  Thailand  and  were  imposed  by  Council 
Regulation (EC) No. 1425/2006. 

• 

Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

• 

Consultation of interested parties 

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

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

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

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

3)  LEGAL ELEMENTS OF THE PROPOSAL 

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• 

Summary of the proposed action 

On  9  March  2007,  the  Commission  initiated  a  partial  interim  review  limited  to 
dumping  for  one  exporting  producer  of  certain  plastic  sacks  and  bags  originating  in 
the PRC on its own initiative. 

The  investigation  showed  that  the  company  concerned  was  entitled  to  Market 
Economy Treatment and to receive its own individual anti-dumping duty.  

It is therefore proposed that the Council adopts the attached proposal for a Regulation 
which should be published in  the Official Journal  of the European Union by  8 June 
2008 at the latest.  

• 

Legal basis 

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

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

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget.  

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Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1425/2006 imposing a definitive anti-dumping duty on 
imports of certain plastic sacks and bags originating in the People's Republic of China 
and Thailand 

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 Articles 9 and 11(3) thereof, 

Having regard to Council Regulation (EC) No 1425/2006 of 25 September 2006 imposing a 
definitive  anti-dumping  duty  on  imports  of  certain  plastic  sacks  and  bags  originating  in  the 
People's  Republic  of  China  and  Thailand,  and  terminating  the  proceeding  on  imports  of 
certain plastic sacks and bags originating in Malaysia2, 

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

Whereas: 

1. 

(1) 

EXISTING MEASURES 

Following  an  investigation  (‘the  original  investigation’),  the  Council,  by  Regulation 
(EC)  No  1425/2006,  imposed  a  definitive  anti-dumping  duty  on  imports  of  certain 
plastic sacks and bags originating, inter alia, in the People's Republic of China.  

1.1. 

Initiation of an interim review 

(2) 

On the initiative of the Commission, a partial interim review of the above-mentioned 
Regulation  was  initiated  for  Xinhui  Alida  Polythene  Limited  ('Xinhui  Alida'  or  'the 
company'),  a  Chinese  exporting  producer  subject  to  the  anti-dumping  measures  in 
force.  This  partial  interim  review  was  initiated  on  the  initiative  of  the  Commission 
based on prima facie evidence provided by the company. 

(3) 

This  review  was  initiated  pursuant  to  Article  11(3)  of  the  basic  Regulation.  In  the 
evidence that the Commission received from Xinhui Alida, the company claimed that 

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OJ  L  56,  6.3.1996,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  2117/2005  (OJ  L  340, 
23.12.2005, p. 17). 
OJ L 270, 29.9.2006, p. 4, as amended by Regulation (EC) No 1356/2007 (OJ L 304, 22.11.2007, p. 5). 

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(4) 

(5) 

(6) 

as far as they were concerned, the circumstances on the basis of which measures were 
established had changed and that these changes were of a lasting nature.  

Information at the Commission's disposal indicated that prima facie market economy 
conditions prevailed for the company as demonstrated by the company's claim that it 
had fulfilled the criteria of Article 2(7)(c) of the basic Regulation. The company also 
alleged that their sales pattern, both in terms of quantity and destination, had changed 
in a lasting way since the period on which the original measures were established, as 
did  the  installed  capacity.  They  further  alleged  that  a  comparison  of  normal  value 
based on their own costs and prices and their export prices to the Community would 
lead  to  a  reduction  of  dumping  significantly  below  the  level  of  the  current  measures 
and provided prima facie evidence thereof.  

In this context, they claimed that the continued imposition of measures at the existing 
level, which were based on the level of dumping previously established, was no longer 
necessary to offset dumping. 

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed for the initiation of a partial interim review, the Commission published a notice 
(‘Notice  of  Initiation’)3  and  commenced  an  investigation,  limited  in  scope  to  the 
examination of dumping. 

1.2. 

Parties concerned by the investigation 

(7) 

(8) 

The Commission officially advised Xinhui Alida and its related companies, as well as 
the representatives of the exporting country, of the initiation of the review. Interested 
parties were given the opportunity to make their views known in writing and to request 
a hearing. 

The  Commission  also  sent  questionnaires  to  the  applicant  and  its  related  companies 
and received replies within the deadlines set for that purpose. The Commission sought 
and verified all the information it deemed necessary for the determination of dumping 
and Market Economy Treatment and carried out verification visits at the premises of 
the following companies: 

–  Xinhui Alida Polythene Limited, Xinhui, China 

–  Horneman Chemplas (Far East) Limited, Hong Kong 

–  British Polythene Industries plc, Stockton-on-Tees, United Kingdom 

–  Thai Plastic Bags Industries Co., Ltd, Nakonpathom, Thailand 

–  Thai Griptech Co., Ltd, Samae-Dum, Bangkok, Thailand 

–  Sahachit Watana Co., Ltd, Nongkaem, Bangkok, Thailand 

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OJ C 54, 9.3.2007, p. 5. 

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1.3. 

Review investigation period 

(9) 

The  investigation  of  dumping  covered  the  period  from  1  July  2005  to  30  June  2006 
(‘the review investigation period’ or ‘RIP’). 

2. 

PRODUCT CONCERNED AND LIKE PRODUCT 

2.1. 

Product concerned 

(10)  The  product  concerned  by  the  current  review  is  the  same  as  that  in  the  original 
investigation,  i.e.  plastic  sacks  and  bags,  containing  at  least  20%  by  weight  of 
polyethylene  and  of  sheeting  of  a  thickness  not  exceeding  100  micrometres  (μm); 
originating in the PRC; and currently classifiable within CN codes ex 3923 21 00, ex 
3923 29 10 and ex 3923 29 90 (TARIC codes 3923 21 00 20, 3923 29 10 20 and 3923 
29 90 20).  

2.2. 

Like product 

(11)  The  current  review  has  shown  that  Xinhui  Alida  made  no  sales  on  the  Chinese 

domestic market and therefore no like product was produced. 

3. 

MARKET ECONOMY TREATMENT ('MET') 

(12) 

In all anti-dumping investigations concerning imports originating in the PRC, normal 
value  for  exporting  producers  found  to  meet  the  criteria  laid  down  in  Article  2(7)(c) 
shall  be  determined  in  accordance  with  paragraphs  1  to  6  of  Article  2  of  the  basic 
Regulation.  Briefly,  and  for  ease  of  reference  only,  these  criteria  are  summarised 
below: 

–  business  decisions  and  costs  are  made  in  response  to  market  conditions  and 

without significant State interference; 

–  accounting  records  are 

independently  audited, 

in 

line  with 

international 

accounting standards and applied for all purposes; 

–  there  are  no  significant  distortions  carried  over  from  the  former  non-market 

economy system; 

–  legal certainty and stability is provided by bankruptcy and property laws; 

–  currency exchanges are carried out at the market rate. 

(13)  The  Commission's  services  concluded  that  Xinhui  Alida  demonstrated  that  they 
fulfilled  the  five  criteria  of  Article  2(7)(c)  of  the  basic  Regulation,  and  proposed 
therefore that they be granted MET.  

(14)  Both  Xinhui  Alida  and  the  Community  industry  were  given  an  opportunity  to 

comment on the above findings. 

(15)  The Community industry contested the granting of MET to Xinhui Alida, stating that 
the  governance  of  the  company  was  unclear  and  that  the  company  had  destroyed 
certain documents required for them to prove their eligibility for MET. 

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(16)  The Articles of Association of the company provide for the nomination of directors by 
the  shareholders  in  proportion  to  their  shareholding  in  Xinhui  Alida,  but,  at  present, 
the  two  shareholders  appoint  the  same  number  of  directors,  despite  not  having  the 
same number of shares. This does not, however, make the governance of the company 
unclear.  The  smaller  shareholder  is  majority-owned  by  the  larger  one,  thus  the 
composition of the Board of Directors reflects the actual ownership of Xinhui Alida. 

(17) 

In  addition,  it  was  argued  that  the  company  was  unable  to  provide  original  bank 
transfer slips for the original payment of capital, the payment of the land use right, and 
the  payment  to  the  State  for  their  shareholding  when  the  company  became  entirely 
privately owned, since it is not company policy to retain documents for more than 7 
years.  However,  the  company  was  able  to  provide  evidence  from  audited  sources 
regarding these transactions and, given the passage of time since they took place, the 
absence of the original bank transfer slips was not considered exceptional.  

(18)  These  arguments  were  considered,  but,  as  no  evidence  was  submitted  to  change  the 
Commission's decision to grant the company MET, the arguments of the Community 
industry were therefore rejected. 

(19)  The  Advisory  Committee  was  consulted  and  the  parties  directly  concerned  were 
informed  accordingly.  The  main  arguments  raised  by  the  Community  industry  have 
already been addressed above. 

4. 

DUMPING 

4.1. 

Normal value 

4.1.1.  Methodology applied for the determination of normal value 

(20) 

In accordance with Article 2(2) of the basic Regulation, it was first examined whether 
the  domestic  sales  of  the  like  product  to  independent  customers  by  the  exporting 
producer were representative, i.e. whether the total volume of such sales was equal to 
or  greater  than  5%  of  the  total  volume  of  the  corresponding  export  sales  to  the 
Community. Given that Xinhui Alida had no domestic sales during the RIP the normal 
value  of  the  company  was  constructed  in  accordance  with  Article  2(3)  as  described 
below. 

4.1.2.  Determination of normal value 

(21)  Given the absence of any domestic sales, normal value was constructed on the basis of 
the  provisions  of  Article  2(3)  of  the  basic  Regulation  by  adding  selling,  general  and 
administrative (‘SGA’) expenses incurred and weighted average profit to the average 
manufacturing cost of Xinhui Alida during the RIP.  

(22)  Xinhui Alida claimed that their cost of manufacturing should be adjusted to take into 
account the difference in depreciation policy between them and their parent company 
in  the  United  Kingdom,  British  Polythene  Industries  plc  ('BPI')  with  whom  their 
accounts are consolidated. Xinhui Alida provided evidence to show that BPI adjusted 
the  depreciation  of  their  assets  as  part  of  the  consolidation  process  and  also  claimed 
that the depreciation rates in China were fixed by law, thereby stopping the company 
from aligning their depreciation policies. 

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(23)  This  claim  was  rejected,  partially  because  the  law  in  China  changed  in  2001  and  no 
longer  fixes  depreciation  rates,  and  partially  because  the  cost  of  manufacturing  of 
Xinhui  Alida  for  the  RIP  is  that  set  out  in  their  audited  accounts,  and  not  a  cost 
adjusted  to  allow  consolidation  to  take  place  in  the  United  Kingdom.  Moreover,  the 
assets concerned were also examined and found to be mainly still in use after 10 years. 

(24)  Xinhui  Alida  also  claimed  that  the  cost  of  raw  materials  should  be  adjusted  to  take 
account of the fact that part of the amount paid to their supplier, Horneman Chemplas 
(Far  East)  Limited,  was  in  fact  paid  to  their  holding  company  Venture  Hong  Kong, 
which is part-owned by Horneman Chemplas and the remainder by British Polythene 
Industries  plc  (BPI).  This  claim  was  also  rejected.  Firstly,  although  Horneman 
Chemplas  and  Xinhui  Alida  are  related  parties,  the  price  charged  by  Horneman 
Chemplas  to  Xinhui  Alida  was  found  to  be  a  reasonable  market  price,  including  a 
small mark-up by Horneman on the price at which it had purchased the goods in order 
to cover its costs. Moreover, the amounts were not paid straight back by Horneman to 
Xinhui Alida in the form of e.g. a volume rebate or credit notes, but to Venture Hong 
Kong  which  transferred  them  to  Xinhui  Alida  as  capital  injection(s)  and  other 
payments. They therefore can not be qualified as a standard price rebate granted by a 
seller to a buyer. 

(25)  The data for selling, general and administrative expenses and weighted average profit 
were taken from companies who responded to a questionnaire sent to companies in the 
analogue country as set out below. 

4.1.3.  Analogue Country 

(26)  Data  from  the  analogue  country  was  used  to  construct  the  normal  value  for  Xinhui 
Alida given the absence of domestic sales, in line with the provisions of Article 2(6)(c) 
of the basic Regulation. The Notice of Initiation made provision for Malaysia to be the 
analogue  country,  but  no  companies  agreed  to  cooperate  with  the  investigation. 
However  cooperation  was  received  from  three  companies  in  Thailand  who  had 
domestic sales. Weighted average SGA and profit was calculated from data received 
from them and verified at their premises. 

4.2. 

Export price 

(27)  Whenever the exports of Xinhui Alida were made directly to independent customers in 
the  Community,  the  export  price  was  established  on  the  basis  of  the  prices  actually 
paid or payable for the product concerned in the RIP in accordance with Article 2(8) of 
the basic Regulation. 

(28)  However,  the  vast  majority  of  sales  by  Xinhui  Alida  were  either  to  their  related 
company  in  Hong  Kong,  Horneman  Chemplas,  for  final  onward  sale  to  the 
Community,  or  to  their  related  company  in  the  United  Kingdom,  BPI,  for  final  sale 
within  the  Community.  As  regards  these  export  sales  to  the  Community,  the  export 
price was established on the basis of Article 2(9) of the basic Regulation, i.e. using the 
resale prices actually paid or payable to the related company by the first independent 
buyer in the Community in the RIP adjusted for all costs incurred between importation 
and resale and for profits. 

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4.3. 

Comparison 

(29)  The comparison between the normal value and the export price was made on an ex-
factory  basis  and  at  the  same  level  of  trade.  In  order  to  ensure  a  fair  comparison, 
account  was  taken,  in  accordance  with  Article  2(10)  of  the  basic  Regulation,  of 
differences 
to  affect  prices  and  price 
comparability.  On  this  basis,  allowances  for  differences  in  discounts,  rebates, 
commissions,  transport  costs,  insurance,  handling  charges,  packaging,  credit  costs, 
bank charges and import duties were made where applicable and justified. 

in  factors  which  were  demonstrated 

(30)  As  the  related  importer  in  the  United  Kingdom  has  functions  similar  to  those  of  an 
agent  working  on  a  commission  basis,  an  adjustment  to  the  export  price  for  a 
commission was made in accordance with Article 2(10)(i) of the basic Regulation. The 
level  of  the  commission  was  calculated  based  on  direct  evidence  pointing  to  the 
existence of a mark-up and selling expenses related to such functions. 

4.4. 

Dumping margin 

(31)  As  provided  for  under  Article  2(11)  of  the  basic  Regulation,  the  weighted  average 
normal  value  by  type  was  compared  with  the  weighted  average  export  price  of  the 
corresponding type of the product concerned. 

(32)  Xinhui  Alida’s  dumping  margin  expressed  as  a  percentage  of  the  net,  free-at-

Community-frontier price, duty unpaid, was found to be 4,3 %. 

5. 

LASTING NATURE OF CHANGED CIRCUMSTANCES 

(33) 

In  accordance  with  Article  11(3)  of  the  basic  Regulation,  it  was  also  examined 
whether the changed circumstances could reasonably be said to be of a lasting nature. 

(34)  Firstly, it should be noted that the company was able to prove that it should be granted 
MET, and was therefore eligible for its own individual dumping margin. The grounds 
on which they were granted MET are to be considered lasting as they refer to the long-
term  structure  and  business  model  of  the  company.  Secondly,  information  was 
requested regarding the evolution of product types and price fluctuation after the end 
of the  RIP  in  June  2006. The  company provided evidence to  show that raw  material 
prices  increased  in  the  latter  half  of  2006,  falling  back  to  the  end  of  2006  but  still 
above their level during the RIP. Given the parent company's policy on transfer pricing 
between Xinhui Alida and themselves, it is clear that during the latter half of 2006 the 
transfer price remained stable whilst raw material prices rose substantially. BPI have 
also demonstrated that their onward sales prices remained stable during the latter half 
of  2006,  making  the  dumping  margin  calculated  for  the  RIP  clearly  valid  for  the 
remainder of the calendar year 2006. 

(35)  The company alleged that their sales pattern, both in terms of quantity and destination, 
changed in a lasting way since the original investigation period of April 2004 to March 
2005. 

(36)  Evidence obtained during the investigation showed that the behaviour of the company, 
including  the  circumstances  that  led  to  the initiation  of  this  review,  were  unlikely  to 
change  in  the  foreseeable  future  in  a  manner  that  would  affect  the  findings  of  the 

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current  review.  This  would  therefore  suggest  that  the  changes  concerned  were  of  a 
lasting nature and therefore the conclusions of the review were long-lasting. 

6. 

ANTI-DUMPING MEASURES 

(37) 

In the light of the results of the investigation, it is considered appropriate to amend the 
anti-dumping duty applicable to imports of the product concerned from Xinhui Alida 
to 4,3 %. 

7. 

DISCLOSURE 

(38) 

Interested parties were informed of the essential facts and considerations on the basis 
of which it was intended to recommend an amendment to Council Regulation (EC) No 
1425/2006 and were given an opportunity to comment. 

(39)  The company contested the findings disclosed where various adjustments claimed by 
the  company  had  been  rejected,  being  the  calculation  of  depreciation  in  China,  the 
treatment of an exchange rate gain made in the United Kingdom and an alleged raw 
material rebate. However the company provided no new evidence to substantiate their 
claims and therefore these claims were again rejected. 

(40)  The  Community  industry  requested  further  information  regarding  the  calculation  of 
the  constructed  normal  value  using  data  from  Thailand,  but  provided  no  evidence  to 
dispute or contest the calculation or methodology used, 

HAS ADOPTED THIS REGULATION: 

Article 1 

The  table  in  Article  1(2)  of  Council  Regulation  (EC)  No  1425/2006  is  hereby  amended  by 
adding the following: 

Country 

Company 

Rate 
duty (%) 

of 

TARIC 
additional code 

The People's 
Republic of 
China 

Xinhui Alida Polythene Limited, 
Xinhui 

4,3 % 

A854 

The  list  of  companies  in  Annex  I  of  Council  Regulation  (EC)  No  1425/2006  is  hereby 
amended by removing the following: 

XINHUI ALIDA POLYTHENE LIMITED 

Xinhui 

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

Article 2 

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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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