Proposal for a Council Regulation amending Regulation (EC) No 1659/2005 imposing a definitive anti-dumping duty on imports of certain magnesia bricks originating in the People's Republic of China
Date: 2009-08-12
Institutions: European Commission
Subjects: China, anti-dumping duty, anti-dumping legislation, brick, heat-resisting materials, import, originating product

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.8.2009 
COM(2009) 426 final 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1659/2005 imposing a definitive anti-dumping duty on 
imports of certain magnesia bricks originating in the People's Republic of China  

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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’) in the proceeding concerning imports of 
certain magnesia bricks 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 

Council Regulation (EC) No 1659/2005, imposing a definitive anti-dumping duty and 
collecting  definitely  the  provisional  duty  imposed  on  imports  of  certain  magnesia 
bricks originating in the People's Republic of China ('the PRC').  

•  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 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. 

3. 

Legal elements of the proposal 

•  Summary of the proposed action 

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On 12 June 2008 the Commission initiated a partial interim review of the anti-dumping 
measures applicable to imports of certain magnesia bricks originating in the PRC. The 
investigation  was  limited  in  scope  to  the  examination  of  dumping  as  far  as  the 
applicant,  Dashiqiao  Sanqiang  Refractory  Materials  Company  Limited,  is  concerned. 
This exporting producer is currently subject to anti-dumping duty of 27,7%. 

The investigation confirmed that the applicant met the five market economy treatment 
('MET') criteria. Therefore the calculation of its individual dumping margin was based 
on its own data. On this basis the dumping margin found was 17,2%. 

It  was  also  concluded  that  the  circumstances  found  during  the  current  investigation 
period were of a lasting nature. 

It is therefore suggested that the Council adopts the attached proposal for a Regulation, 
which  should  be  published  no  later  than  11  September  2009,  in  order  to  amend  the 
anti-dumping duty applicable to imports of certain magnesia bricks from the applicant 
to 14,4%.  

•  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 reason: 

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 instrument: Regulation. 

Other means would not be adequate because the basic Regulation does not provide for 
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 1659/2005 imposing a definitive anti-dumping duty on 
imports of certain magnesia bricks 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 11(3) thereof, 

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

Whereas: 

A. PROCEDURE 

1. 

Existing measures 

(1) 

(2) 

(3) 

The Council, by Regulation (EC) No 1659/20052 ('the original Regulation'), imposed a 
definitive anti-dumping duty on imports of certain magnesia bricks originating in the 
People's Republic of China ('the PRC'). The measures consist of an ad valorem duty 
rate of 39,9%, with the exception of six companies expressly mentioned in the original 
Regulation which are subject to individual duty rates. 

2.  Request for a review 

In  2008,  the  Commission  received  a  request  for  a  partial  interim  review  pursuant  to 
Article  11(3)  of  the  basic  Regulation  ('the  interim  review').  The  request,  limited  in 
scope  to  the  examination  of  dumping,  was  lodged  by  a  Chinese  exporting  producer, 
Dashiqiao  Sanqiang  Refractory  Materials  Company  Limited  ('DSRM'  or 
'the 
applicant').  The  rate  of  the  definitive  anti-dumping  duty  applicable  to  products 
manufactured by DSRM is 27,7%. 

In its request for the interim review the applicant claimed that the circumstances on the 
basis of which the measure was imposed had changed and that these changes were of a 
lasting nature. The applicant argued that a comparison of its domestic prices and cost 
of production and export prices to the Community indicates that the dumping margin 

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OJ L 56, 6.3.1996, p. 1 
OJ L 267, 12.10.2005, p. 1.  

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(4) 

(5) 

(6) 

(7) 

(8) 

is substantially lower than the current level of measure. Therefore, it claimed that the 
continued application of the measure at its current level would no longer be necessary 
to offset dumping. In particular the applicant provided prima facie evidence showing 
that it meets the criteria for market economy treatment ('MET').  

3. 

Initiation of a partial interim review 

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed  for  the  initiation  of  an  interim  review,  the  Commission  decided  to  initiate  a 
partial interim review in accordance with Article 11(3) of the basic Regulation, limited 
in  scope  to  the  examination  of  dumping  as  far  as  DSRM  is  concerned.  The 
Commission published a notice of initiation on 12 June 2008 in the Official Journal of 
the European Union3 and commenced an investigation.  

4. 

Product concerned and like product  

The  product  concerned  by  the  interim  review  is  the  same  as  that  described  in  the 
original Regulation, i.e. chemically bonded, unfired magnesia bricks, whose magnesia 
component  contains  at  least  80%  MgO,  whether  or  not  containing  magnesite, 
originating in the PRC ('the product concerned'), currently falling within CN codes ex 
6815 91 00, ex 6815 99 10 and ex 6815 99 90 (TARIC codes 6815 91 00 10, 6815 99 
10 20 and 6815 99 90 20). 

The product produced and sold on the Chinese domestic market and that exported to 
the  Community,  as  well  as  that  produced  and  sold  in  the  USA  have  the  same  basic 
physical, technical and chemical characteristics and uses and are therefore considered 
to be alike within the meaning of Article 1(4) of the basic Regulation.  

5. 

Parties concerned  

The  Commission  officially  advised  the  Community  industry,  the  applicant  and  the 
authorities of the exporting country of the initiation of the interim review. Interested 
parties were given the opportunity to make their views known in writing and to request 
a hearing within the time limit set out in the notice of initiation. All interested parties, 
who so  requested and showed that  there were particular reasons  why they should be 
heard, were granted a hearing. 

A  market  economy  treatment  ('MET')  claim  form  and  a  questionnaire  were  sent  to 
DSRM and its related companies, all of which replied within the deadlines set for that 
purpose. The Commission sought and verified all the information it deemed necessary 
for  its  analysis  and  carried  out  verification  visits  at  the  premises  of  the  following 
companies: 

(a)  The PRC 

– 

Dashiqiao  Sanqiang  Refractory  Materials  Co.  Limited  (the  applicant), 
Dashiqiao, Liaoning Province  

(b) 

Italy 

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OJ C 146, 12.6.2008, p.30. 

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– 

Duferco Commerciale S.p.A., Genova 

(c)  France 

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Duferco, Aubervilliers 

(d)  Switzerland 

– 

Duferco SA, Lugano 

5. 

Investigation period 

(9) 

The  investigation  of  dumping  covered  the  period  from  1  January  2007  to  31  March 
2008 (the 'investigation period' or 'IP).  

B. 

RESULTS OF THE INVESTIGATION 

1.  Market Economy Treatment (MET) 

(10)  Pursuant  to  Article  2(7)(b)  of  the  basic  Regulation,  in  anti-dumping  investigations 
concerning  imports  from  the  PRC,  normal  value  shall  be  determined  in  accordance 
with  paragraphs  (1)  to  (6)  of  Article  2  of  the  basic  Regulation  for  those  producers 
which  were  found  to  meet  the  criteria  laid  down  in  Article  2(7)(c)  of  the  basic 
Regulation, i.e. where it is shown that market economy conditions prevail in respect of 
the manufacture and sale of the like product. These criteria are set out in a summarised 
form below:  

–  business  decisions  are  made  in  response  to  market  signals,  without  significant 

State interference, and costs reflect market values,  

–  firms  have  one  clear  set  of  basic  accounting  records  which  are  independently 
audited in line with International Accounting Standards ('IAS') and applied for all 
purposes,  

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

economy system,  

–  bankruptcy and property laws guarantee stability and legal certainty, 

–  currency exchanges are carried out at market rates. 

(11)  The  applicant  requested  MET  pursuant  to  Article  2(7)(b)  of  the  basic  Regulation  by 
submitting  a  duly  substantiated  MET  claim  form  within  the  given  deadline.  The 
information  and  data  presented  therein  was  subsequently  subject  to  an  on  spot 
investigation.  

(12)  The investigation found that the applicant met all five MET criteria. It was found that 
during  the  IP,  DSRM  made  its  business  decisions  without  any  State  interference  or 
distortions  related  to  non-market  economy  conditions.  DSRM  is  subject  to  Chinese 
bankruptcy  and  property  laws  without  any  derogation.  The  company  has  one  set  of 
independently audited accounting records and accounting system and its practice was 
found  to  be  in  line  with  internationally  accepted  general  accounting  principles  and 

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IAS.  Costs  and  prices  were  found  to  reflect  market  values  and  exchange  rate 
conversions were carried out at market rates. 

(13)  Based on the above facts and considerations, the applicant could be granted MET . 

(14)  The  Community  industry,  the  applicant  and  the  authorities  of  the  exporting  country 
the  findings  concerning  MET. 

were  given  an  opportunity 
to  comment  on 
Subsequently, the applicant and the Community industry submitted their comments.  

(15)  The Community industry argued that the applicant failed on criterion one because the 
various  export  restrictions  imposed  by  the  Chinese  Government  on  the  main  raw 
material  to  produce  the  product  concerned  led  to  distorted  prices  of  raw  material  on 
the domestic market. As a result the Chinese producers of magnesia bricks can obtain 
the raw material at better conditions compared to their competitors in other countries.  

(16)  For  the  investigation  of  this  claim  the  purchase  prices  of  the  main  raw  material, 
magnesia, by DSRM and the publically quoted prices for Chinese magnesia (source: 
Price Watch/Industrial minerals) provided by the Community industry were examined. 
The comparison showed that the price difference in the IP could not be considered as 
significant.  Moreover,  it  could  be  verified  during  the  investigation  that  DSRM  was 
free  to  purchase  magnesia  from  various  suppliers,  and  that  prices  were  negotiated 
without any State interference. On that basis it appears that any distortions concerning 
raw  material  prices  did  not  have  any  significant  impact  on  this  specific  company 
during the IP. 

(17)  On the basis of the above, the findings and the conclusion that MET should be granted 

to DSRM are confirmed.  

2.  Normal value 

(18)  For  the  determination  of  normal  value  it  was  first  established  whether  DSRM's  total 
volume of domestic sales of the like product was representative in comparison with its 
total volume of export sales to the Community. In accordance with Article 2(2) of the 
basic Regulation, domestic sales are considered representative when the total domestic 
sales  volume  is  at  least  5%  of  the  total  volume  of  corresponding  export  sales  to  the 
Community. It was found that all sales by DSRM on the domestic market were sold in 
representative volumes.  

(19)  Subsequently, those types of the like product sold on the domestic market by DSRM 
that  were  identical  and  directly  comparable  to  the  types  sold  for  export  to  the 
Community, were identified. 

(20)  For  each  type  sold  by  DSRM  on  the  domestic  market  and  found  to  be  directly 
comparable with the type sold for export to the Community, it was established whether 
domestic sales were sold in representative volume for the purposes of Article 2(2) of 
the basic Regulation. Domestic sales of a particular type were considered sufficiently 
representative  when  the  total  domestic  sales  volume  of  that  type  during  the  IP 
represented 5% or more of the total sales volume of the comparable type exported to 
the Community. 

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(21) 

It  was  also  examined  whether  the  domestic  sales  of  each  type  could  be  regarded  as 
having been made in the ordinary course of trade, pursuant to Article 2(4) of the basic 
Regulation.  This  was  done  by  establishing  the  proportion  of  profitable  sales  to 
independent  customers  on  the  domestic  market  of  each  exported  type  of  the  product 
concerned during the IP. 

(22)  Where the sales volume of a product type, sold at a net sales price equal to or above 
the calculated cost of production, represented more than 80% of the total sales volume 
of that type, and where the weighted average price of that type was equal to or above 
the unit cost of production, normal value was based on the actual domestic price. This 
price was calculated as a weighted average of the prices of all domestic sales of that 
type made during the IP, irrespective of whether these sales were profitable or not. 

(23)  Where the volume of profitable sales of a product type represented 80% or less of the 
total sales volume of that type, or where the weighted average price of that type was 
below  the  unit  cost  of  production,  normal  value  was  based  on  the  actual  domestic 
price,  which  was  calculated  as  the  weighted  average  price  of  only  the  profitable 
domestic sales of the type in question made during the IP. 

(24)  Wherever  domestic  prices  of  a  particular  product  type  sold  by  DSRM  could  not  be 
used in order to establish the normal value, another method had to be applied. In this 
regard,  the  Commission  used  constructed  normal  value.  In  accordance  with  Article 
2(3)  of  the  basic  Regulation,  normal  value  was  constructed  by  adding  to  the 
manufacturing costs of the exported types a reasonable amount for selling, general and 
administrative  expenses  (‘SG&A’)  and  a  reasonable  margin  of  profit.  Pursuant  to 
Article  2(6)  of  the  basic  Regulation,  the  amounts  for  SG&A  and  profit  margin  were 
based on the average SG&A and profit margin of DSRM sales in the ordinary course 
of trade of the like product.  

3. 

Export price 

(25)  Since  all  export  sales  to  the  Community  were  made  via  DSRM's  related  companies 
either  in  the  Community  or  in  Switzerland,  the  ex-works  export  price  had  to  be 
constructed in accordance with Article 2(9) of the basic Regulation, on the basis of the 
price at which the imported products were first resold to the first independent buyer in 
the Community, adjusted for all costs incurred between importation and resale, as well 
as a reasonable margin for SG&A and for profits. In this regard the SG&A costs of the 
related importers were used.  

(26)  As regards a reasonable importer's profit to be used for this purpose, in the absence of 
data  from  unrelated  importers,  since  the  current  interim  review  is  limited  to  the 
examination of dumping in relation to one company, the profit margin was based on 
the profit achieved by a cooperating unrelated importer from the original investigation.  

(27)  Further  to  the  final  disclosure  DSRM  claimed  that  the  SG&A  ratio  used  when 
constructing the export price for one of its related importers did not reflect the reality, 
since it was calculated as a ratio of the total turnover without taking into account the 
fact that the majority of the sales made by this company were on a commission basis 
and that only the amount of the commission had been reported in the turnover. 

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(28) 

In  this  respect  the  Commission  re-examined  the  evidence  collected  during  the 
inspection at the premises of this related importer. On this basis, the claim of DSRM 
was  found  to  be  warranted  and  the  SG&A  ratio  used  for  the  calculation  of  the 
constructed  export  price  via  this  related  importer  was  subsequently  revised.  This 
revised  SG&A  ratio  was  also  found  to  be  in  line  with  the  findings  in  respect  of  the 
other related importers. 

4.  Comparison  

(29)  The  average  normal  value  and  the  average  export  price  for  each  type  of  the  product 
concerned were compared on an ex-works basis and at the same level of trade and at 
the  same  level  of  indirect  taxation.  In  order  to  ensure  a  fair  comparison  between 
normal value and export price, account was taken, in accordance with Article 2(10) of 
the basic Regulation, of differences in factors which were claimed and demonstrated 
to  affect  prices  and  price  comparability.  For  this  purpose,  adjustments  for  transport 
costs, insurance,  handling  and loading  charges, credit costs, and actual anti-dumping 
duties paid were made where applicable and justified.  

(30)  The investigation has established that the VAT paid on export sales was not refunded 
(not even partially, which was the case in the original investigation). In the disclosure 
which was provided to the applicant pursuant to Article 20 of the basic Regulation, it 
was  therefore  indicated  that  both  the  export  price  and  the  normal  value  would  be 
established on a VAT paid or payable basis. The applicant argues that this approach 
would be unlawful. Regarding his arguments, the following can be noted. 

(31)  Firstly, regarding the argument that in the original investigation another methodology 
was used (i.e. the deduction of VAT both from the normal value and the export price), 
it must be emphasised that the circumstances which were applicable during the review 
investigation period ('RIP') were not the same as those applicable during the original 
investigation period. Whereas during the original investigation period, as stated above, 
VAT  was  partially  refunded,  which  necessitated  an  adjustment  pursuant  to  Article 
2(10), during the RIP, no VAT on export sales was refunded. Therefore, no adjustment 
in  respect  of  VAT,  neither  to  the  export  price  nor  to  normal  value,  was  necessary. 
Even if this could be qualified as a change in methodology, it is justified under Article 
11(9) of the basic Regulation since the circumstances have changed.  

(32)  The second argument which the applicant makes is that the method used in this review 
would artificially inflate the dumping margin. This argument cannot be accepted. The 
method used is neutral. It has the same effect, also if, for instance for certain products 
or transactions, the company sells to the Community at an export price which does not 
result in dumping. In other words, even assuming that the inclusion of VAT on both 
sides  of  the  equation  would  increase  the  difference  between  the  two  elements,  that 
would  also  be  the  case  for  those  models  for  which  there  was  no  dumping.  5.

Dumping margin  

(33)  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. This comparison showed the existence 
of dumping.  

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(34)  DSRM's  dumping  margin  expressed  as  a  percentage  of  the  net,  free-at-Community-

frontier price, duty unpaid, was found to be 14,4%. 

C. 

LASTING NATURE OF CHANGED CIRCUMSTANCES 

(35) 

(36) 

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

In  this  respect  it  is  recalled  that  in  the  original  investigation,  DSRM  did  not  obtain 
MET because its accounting was not in line with internationally accepted accounting 
principles and IAS. It was, however, granted individual treatment.  

(37)  Since the original investigation, on 8 December 2006, DSRM became a Sino-foreign 
joint-venture with the Duferco group as foreign shareholder, with a 25 % ownership. 
The current investigation showed that this shareholding led to fundamental changes in 
DSRM's  management  and  accounting  practices.  Indeed,  DSRM  acquired  Duferco's 
know-how  and  support  regarding  management  accounting  and  financial  control  and 
became part of Duferco's international sales network. Evidence obtained and verified 
during  the  investigation  also  shows  that  these  changes  in  the  applicant's  corporate 
structure are of a lasting nature. 

(38) 

(39) 

(40) 

(41) 

In  contrast  to  the  original  investigation,  where  the  normal  value  was  based  on  data 
obtained from the analogue country, the data collected and verified during the present 
review  showed  that  DSRM  could  be  granted  MET  and  consequently  the  dumping 
calculation could be based on its own data. The result of this calculation indicates that 
the continued application of the measure at its current level is no longer justified.  

In the light of the above, it is therefore considered that the circumstances that led to 
the  initiation  of  this  review  are  unlikely  to  change  in  the  foreseeable  future  in  a 
manner that would affect the findings of the current review. Therefore it is concluded 
that the changes are considered to be of a lasting nature. 

D. 

ANTI-DUMPING MEASURES 

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  DSRM  to 
14,4%.  

Interested parties were informed of the essential facts and considerations on the basis 
of which it was intended to recommend an amendment of Council Regulation (EC) No 
1659/2005 and were given an opportunity to comment. The comments were taken into 
account where appropriate. 

HAS ADOPTED THIS REGULATION: 

The  table  in  Article  1(2)  of  Council  Regulation  (EC)  No  1659/2005  shall  be  amended  as 
follows, as far as Dashiqiao Sanqiang Refractory Materials Co. Ltd. is concerned: 

Article 1 

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Manufacturer 

Anti-dumping duty 

TARIC 
additional code 

Dashiqiao Sanqiang Refractory 
Materials Co. Ltd., Biangan Village, 
Nanlou Economic Development 
Zone, Dashiqiao City, Liaoning 
Province, 115100, PRC 

14,4% 

A638 

Article 2 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  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,  

For the Council 
The President 

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