CELEX: 51995PC0397
Language: en
Date: 1995-07-27
Title: Proposal for a COUNCIL REGULATION (EC) imposing a definitive anti-dumping duty on imports of ammonium nitrate originating in Russia

COMMISSION OF THE EUROPEAN COMMUNITIES
                                              Brussels, 27.07.1995
                                              COM(95) 397 final
                              Proposal for a
                    COUNCIL REGULATION (EC)
imposing a definitive anti-dumping duty on imports of ammonium nitrate
                       originating in Russia.
                     (presented by the Commission)
 ---pagebreak---  ---pagebreak---                          COUNCIL REGULATION (EC) No             /95
                                     of           1995
imposing a definitive anti-dumping duty on imports of ammonium nitrate
originating in Russia.
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 3283/94 of 22 December 1994 on
protection against dumped imports from countries not members of the European
Community 1 , as amended by Regulation (EC) No 355/95 2 , and in particular Article 23
thereof, which laid down that Regulation 2423/88 of 11 July 1988 on protection against
dumped or subsidised imports from countries not members of the European Economic
Community 3 as last amended by Regulation (EC) No 522/94 4 shall continue to apply to
proceedings in relation to which an investigation pending on 1 September 1994 has not
been concluded by the date of entry into force of Regulation (EC) No 3283/94,
Having regard to the proposal submitted by the Commission after consultation with the
Advisory Committee,
Whereas:
1
    O.J. No L 349, 31.12.1994, p. 1.
2
    O.J. No L 41, 23.2.1995, p. 2.
3
    O.J. No L 209,02.08.1988, p. 1.
4
    O.J. No L 66, 10.03.1994, p. 10
 ---pagebreak---                                       A. PROCEDURE
(1)      In June 1994, the Commission announced by a notice published in the Official
       Journal of the European Communities5, the initiation of an anti-dumping
       proceeding concerning imports into the Community of ammonium nitrate
       originating in Lithuania and Russia, and commenced an investigation.
(2)    Anti-dumping measures with regard to imports into the United Kingdom of
       ammonium nitrate originating in Lithuania and Russia have been in force since
       May 1994, following a regional anti-dumping proceeding6. These take the form of
       the acceptance of undertakings which limit exports from each country to the UK to
        100,000 tonnes per year.
(3)    The proceeding was initiated as a result of a complaint lodged by the European
       Fertilizer Manufacturers' Association (EFMA), on behalf of producers whose
       collective output of ammonium nitrate was alleged to represent a major proportion
       of Community production.
(4)    The complaint contained evidence of dumping of this product originating in
       Lithuania and Russia, and of material injury resulting therefrom, and was
       considered to be sufficient to justify opening a proceeding.
(5)    The Commission officially notified the producers, exporters and importers known
       to be concerned, the representatives of the exporting countries, and the
       complainant, and gave the parties directly concerned the opportunity to make their
       views known in writing and to request a hearing.
(6)    The Lithuanian exporter, some Russian exporters, certain importers and all
       complainant producers made their views known in writing. Several parties,
       including the Lithuanian and Russian authorities, requested a hearing; all such
       requests were granted. The European Fertilizer Importers Association (EFIA) also
       made known its views in writing and was granted a hearing.
5
  O.J. No. CI58 9.6.1994 p.3
6
  O.J. No L129 21.5.1994 p.24
 ---pagebreak--- (7)  The Commission sent questionnaires to parties known to be concerned and received
     detailed repliesfromthe complainant Community producers, the only producer and
     exporter in Lithuania and some importers in the Community. The Commission also
     received a detailed reply from one Community producer which was not party to the
     complaint; partial replies were receivedfromcertain producers in Russia.
(8)  The Commission sought and verified all information it deemed necessary for the
     purpose of its determination of dumping and injury, and carried out investigations
     at the premises of the following firms:
     (a)    Complainant Community producers:
            Grande Paroisse S.A., Paris-La-Défence, France
            Hydro-Agri-France S.A., Neuilly-sur-Seine, France
            Hydro-Agri (UK) Ltd., Immingham, UK
            Hydro-Agri, Sluiskil B.V., Netherlands
     (b)    Unrelated importers in the Community
           Noortrade GmbH, Viernheim, Germany
            Schweizerhall Fertilizer GmbH, Hamburg, Germany
            Unifert France SA, Sète, France
            Conagra Resources Europe Ltd, Tiverton, Devon, UK
     (c)    Producer in analogue country
            Zaklady Azotawe "Pulawy", Pulawy, Poland
(9)  The investigation of dumping covered the period from 1 April 1993 to 31 March
     1994 ("the investigation period").
(10) The Commission disclosed its preliminaryfindingsto all interested parties. Several
     parties submitted comments in writing; some requested and were granted a hearing.
 ---pagebreak--- (11) The Commission continued to seek all information it deemed necessary for its
     definitive findings. The parties were informed of the essential facts and
     considerations on the basis of which it was intended to recommend the imposition
     of definitive anti-dumping duties. They were also granted a period within which to
     make representations subsequent to these disclosures.
(12) The parties' comments were taken into consideration and the Commission's
     conclusions amended accordingly where justified.
        B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT
(13) The product concerned is ammonium mtrate, which is a fertilizer produced in prill
     or granular form, containing between 33 and 35% nitrogen plant nutrient.
(14) The ammonium nitrate produced by the Community industry is a like product as
     regards physical and technical characteristics to the ammonium nitrate exported to
     the Community by Russia and Lithuania, and as regards the ammonium nitrate
     produced and sold in Poland, which has been used as the analogue country
     (Recitals 22 to 24).
                            C. COMMUNITY INDUSTRY
(15) The complainant producers account for 94% of the Community production of
     ammonium nitrate and therefore constitute the Community industry in accordance
     with Article 4(5) of Regulation 2423/88.
(16) E.F.I.A., representing the Community importers, alleged that Hydro Fertilizers Ltd
     (UK) should be excluded from the Community industry because it allegedly
     imported ammonium nitrate from Russia and Lithuania through Fertrachem U.K., a
     related company. However, it was established that no such imports were made
     during the investigation period by Fertrachem.
     It was also alleged that BASF, another complainant producer, should be excluded
     on the same grounds, since it allegedly imported Russian and Lithuanian
     ammonium nitrate into the Community through a related company, Kali (UK) Ltd.
     It was established that Kali (UK) Ltd. did import ammonium nitrate from Lithuania
     and Russia during the investigation period, but was not related to BASF, either
     directly or through a subsidiary during this period, and had no agreement with any
     company related to BASF as regards purchases of ammonium nitrate.
 ---pagebreak---      There is consequently no justification for considering the exclusion of either Hydro
     Fertilizers Ltd (UK) or BASF from the Community industry.
                                      D. DUMPING
(a)  Normal value
     (I)    Selection of analogue country
(17) Since the exporting countries involved are both non-market economies, normal
     value was based on prices or costs in an analogue country, in accordance with
     Article 2(5) of Regulation 2423/88.
(A) Proposal by the complainant Î Hungary
(18) The complainant alleged that Hungary, which had been used in the UK regional
     case (see recital 2), would be an appropriate analogue country for the purpose of
     this investigation. Contact was made with Nitrogenmuvek, Varpalota, Hungary; the
     details of the second producer in Hungary were not available to the Commission.
     Nitrogenmuvek replied to the Commission's questionnaire. On the basis of this
     reply, it appeared that the domestic sales of Nitrogenmuvek during the
     investigation period were significant compared to the volume of imports into the
     Community from Russia and Lithuania. 80% of domestic sales were bagged. The
     Hungarian producer uses domestic or imported gas purchased at market prices.
(19) However, Nitrogenmuvek did not respond to the Commission's request for a
     verification visit. In these circumstances, it did not appear possible to establish a
     reliable normal value on the basis of the Hungarian data available. In addition to
     there being only two domestic producers of ammonium nitrate in Hungary, imports
     are restricted by a 15% import duty and since 1993 by an annual import quota
     against CIS countries of 50.000 tonnes of ammonium nitrate and calcium
     ammonium nitrate combined. Consequently, competition is rather limited. For
     these reasons Hungary is not an appropriate analogue country.
(B)  Other countries
(20) The Commission also wrote to all known producers of ammonium nitrate in
     Australia, Bulgaria, Canada, Egypt, Mexico, Poland, Turkey and the USA. In
     addition, the European Fertilizer Importers' Association proposed Algeria and
     Romania as analogue countries, and the Commission wrote to the known producers
     in these countries.
                                             5
 ---pagebreak---      The following       producers co-operated and replied to the           Commission's
     questionnaire:
     Abu Qir Fertilizers Co, Alexandria, Egypt
     Zaklady Azotawe "Pulawy", Pulawy, Poland
(i)  Esm
(21) During the investigation period, the volume of domestic sales of ammonium nitrate
     in Egypt was in excess of the combined volume of imports into the Community
     from Russia and Lithuania. Domestic sales were 100% bagged, like the Russian
     and Lithuanian exports.
     However, although there are three domestic producers and no formal import
     restrictions, the 30% customs duty on imports of ammonium nitrate into Egypt has
     led to a situation where there is no import penetration. Therefore, there is only
     limited competition in the market.
(ii) £oJand
(22) During the investigation period, Pulawy's domestic sales of ammonium nitrate were
     almost the same as the combined import volume into the Community from Russia
     and Lithuania. The product is produced by Pulawy in prilled form. 100% of the
     domestic sales were bagged. Pulawy uses imported gas from Russia purchased at
     arms length prices expressed in hard currency.
     There are four domestic producers of ammonium nitrate. During the investigation
     period there were no import restrictions and the share of the market held by imports
     was 18.2%.
     Poland was therefore considered an open and competitive market for ammonium
     nitrate.
(C) Choice of analogue country
(23) Hungary cannot be chosen as an analogue country, in view of the conclusion
     reached in recital 19.
 ---pagebreak---       As to the other countries from whose producers the Commission obtained sufficient
      co-operation, although the volumes of domestic sales of the co-operating
      companies in both Egypt and Poland are significant in comparison with the
      volumes of imports from Russia and Lithuania, and access to raw materials is not
      dissimilar, it is considered that the more open nature of the Polish market makes it
      the more appropriate choice for the analogue country in this investigation, and
      Poland was accordingly chosen.
(II)    Determination of normal value
(24)    On the basis of the elements stated in recital 22, the domestic sales of Pulawy in
        Poland can be regarded as representative.
        The weighted-average domestic sales price of the Polish producer to independent
        customers during the investigation period was found to be profitable, in that it
        covered all costs incurred, which in this case were found to be representative of
        the normal cost structure of a company operating in a market economy.
(25)    EFMA alleged that the domestic price on which the normal value was based was
        incorrect, since it was lower than the reported level of prices in the Polish market.
        Furthermore, EFMA alleged that the domestic price inferred from the normal
        value could not cover the cost of production in Poland. EFMA provided some
        documentation to support these allegations.
 (26)   Further contact was made with the Polish manufacturer involved in order to
        clarify the price and cost situation in Poland. Most of the relevant information
         supplied by the company had already been verified by the Commission.
 (27)    The Polish company clarified the situation and provided evidence to show that the
         price information referred to by EFMA was based on standard ex-dealer prices to
         farmers, and was therefore well above the manufacturer's net ex-works price to
         the dealers. As regards costs, they provided further evidence to support the cost
         data verified by the Commission, to demonstrate that they covered the costs of the
         company relating to this product, and to show that they purchase gas at arms
         length prices. However, the Commission was also able to obtain confirmation that
         a cost normally borne by the company had been mistakenly netted out of the
         company's own normal value calculations. The normal value was therefore
         increased to reflect the fact that this cost should not have been deducted from the
          domestic price when calculating normal value.
 ---pagebreak--- (28) After having reviewed all the data, it is concluded that the net ex-works price
     provided by the Polish manufacturer, with the adjustment referred to in recital 27,
     was correct, and that this price was profitable, covering all costs incurred by the
     company at this stage of the operation.
     Normal value was therefore based on the net ex-works price of Pulawy to
     customers in Poland.
(b)  Export price
(29) The export price of ammonium nitrate originating in Russia and Lithuania was
     based on the price paid to exporters of the product sold for export to the
     Community. This was the FOB ex-frontier price charged by the exporter to an
     agent or importer in the Community.
(c)  Comparison
(30) The comparison between normal value and export price (both at ex-frontier) was
     made on a weighted-average basis at the same level of trade. In the case of all
     transactions, the export price was lower than the normal value, both adjusted for
     comparison purposes. The ex-works domestic price was increased to allow for the
     normal level of transport and handling costs between the factory and the port in
     Poland during the investigation period. This increase was calculated on the basis
     of transport and handling costs actually incurred by the Polish producer in
     question, supplemented by information from other operators in Poland relating to
     the handling costs for other types of bags.
(31) Normal value and export price were adjusted to take account of certain selling
     expenses specified in Article 2 (10)(c) of Regulation No 2423/88. The cost of
     bags used in the Polish producer's domestic sales was less than the price of the
     bags used to pack the Russian exports, and normal value and export price were
     both reduced to reflect these directly related packing costs. In the case of the
     Lithuanian exports, although the normal cost of bags was higher than for those
     used by the Polish producer, a significant proportion of the Lithuanian export
     sales to the Community during the investigation period were made in bulk, which
     incurred no bagging costs. Therefore, the appropriate adjustment was made only
     as regards the part of the exports made as bagged product.
 ---pagebreak---      The Russian authorities claimed that the normal value should be reduced to take
     account of the lower cost of transporting gas to the Russian plants compared to
     the Polish factory. In this regard, it is noted that no precise data has been
     produced on the distances involved and that the costs and prices in regard to gas
     and its distribution in Russia are not established on a market basis. In any event,
     such claims for reductions in normal value for alleged natural competitive
     advantage have to be considered on an overall basis. Therefore, even if it were to
     be established that the Russian producers had an advantage over the Polish
     manufacturer as regards the proximity of gas supplies, this would be
     counterbalanced by their much greater distance from the Baltic ports, involving a
     higher transport cost. Therefore this claimed adjustment cannot be accepted.
     The Russian authorities also claimed that normal value should be reduced to take
     account of the allegedly more efficient and larger production units in Russia.
     Concerning this claim, no evidence has been produced to show that those
      factories which sold ammonium nitrate to the Community during the investigation
     period operate more efficiently than the Polish manufacturer. Consequently, this
     claim is also rejected.
(d)   Dumping margin
(32)  The dumping margins, expressed as a percentage of the CIF price at the
      Community frontier, were 41.6% as regards imports originating in Russia and
      27.4% as regards imports originating in Lithuania. Expressed in ECU per tonne,
      the margins were 31.3 for Russia and 21 for Lithuania.
 ---pagebreak---                                     E.      INJURY
(a)  Market analysis
(33) The investigation period for dumping in the proceeding was 1 April 1993 to 31
     March 1994. In order to ensure a fair evaluation of the development of the factors
     pertaining to injury, data relating to this period is compared to the corresponding
     periods in previous years. For easy reference, the periods in question are
     described as follows in the text:
     1 April 1990 - 31 March 1991             "1990/91"
     1 April 1991 - 31 March 1992             "1991/92"
     1 April 1992 - 31 March 1993             "1992/93"
(i)  Total Community consumption
(34) Community consumption (i.e. sales of the Community producers in the
     Community plus imports) declined from 4.76 million tonnes in 1990/91 to 4.65
     million tonnes in the investigation period, an overall fall of 2.3%. Consumption
     in the investigation period was, however, 3.1% above the level of 1992/93, when
     sales of ammonium nitrate had dropped sharply to only 4.5 million tonnes.
                                             10
 ---pagebreak--- (ii)      Volume and market share of dumped imports
(35)      The combined imports of ammonium nitrate originating in Russia and Lithuania
          rose from 26.000 tonnes in 1990/91 to 489.000 tonnes in the investigation period.
          The EUROSTAT data does not provide separate import figures for Russia and
          Lithuania in 1990/91 but only one figure for the Former Soviet Union. However,
          given that exports from both countries are known to have taken place in this
          period, the most reasonable solution, on the basis of the available data from the
          exporters, is to allocate 50% of the Former Soviet Union figure to each country.
          On this basis, imports from Russia increased by 13.000 to 341.000 tonnes, and
           imports from Lithuania from 13.000 to 148.000 tonnes. (In any event, a different
          allocation of the import volumes between Russia and Lithuania in 1990/91 would
          not materially affect the conclusion reacted later in this Regulation).
(36)      The combined market share of imports from Russia and Lithuania increased from
           0.5% in 1990/91 to 10.5% during the investigation period. The market share of
          Russian imports rose from just below 0.3 to 7.3%; the share of imports from
           Lithuania rose from just below 0.3 to 3.2%7.
(iii)      Prices of dumped imports
(37)       The weighted average selling price of the imports from Russia and Lithuania were
           compared with the weighted average selling price of the Community producers in
          the Community on an ex-store basis, allowing for an appropriate mark-up for the
           imported material. All prices were compared at a net level, after excluding all
           discounts and rebates. An allowance was made for the fact that substantial sales of
           Community producers, particularly in the French market, were made in bulk,
           while imports are almost all bagged; the Community industry price was therefore,
           for comparison purposes, adjusted upwards.
           In calculating the weighted average price of the dumped imports, account was
           taken of the poor quality of a certain portion of the Russian product.
           On this basis, it was found that during the investigation period the Lithuanian and
           Russian imports were sold at 14.7 ECU and 16.2 ECU per tonne respectively
           below the price of the Community producers (equivalent to 12.6% and 13.9% of
           the Community producers' price).
7
      In the text, figures do not always add exactly, due to rounding.
                                                        11
 ---pagebreak--- (38)  However, the investigation has shown that the market in the Community dictates
      that imports will, even in conditions of normal competition, always have to be
      offered at a price below that of the domestic product in order to sell. The Russian
      and Lithuanian ammonium nitrate is perceived by farmers to be of a lower quality
      than the Community product, a perception which is reinforced in the publicity of
      certain Community manufacturers to this effect. Furthermore, importers cannot
      offer the same security of supply as domestic manufacturers, nor the same service
      to customers. Finally, most Community production of ammonium nitrate is
      granular, while the imported product from Russia and Lithuania is prilled;
      granular product normally commands a higher price. On the basis of the
      information obtained in the investigation, this "quality" gap is considered to be 10
      ECU per tonne. This is based on the figure of £8 per tonne (10.4 ECU) used in
      the UK regional proceeding (see recital 2), with a slight reduction being made to
      take account of the general decline in prices in the market during the present
      investigation period.
(39)  Therefore, after taking account of the normal premium available to Community
       producers over imports, the prices of the Lithuanian and Russian imports undercut
       those of the Community product by 4.7 ECU and 6.2 ECU per tonne respectively
       during the investigation period (equivalent to 4.4% and 5.8% below the
       Community producers' price).
 (40)  EFI A argued that the quality gap of 10 ECU per tonne allowed for the difference
       between the selling price of Community product and the dumped imports was too
       low, since it was based on the UK regional case. In the context of a Community-
       wide case the quality gap in the other major market, France, should be higher in
       view of the traditionally protected nature of this market and the consequent
       suspicion of imports by farmers. In other words, it was alleged that imports had to
       be priced lower than the Commission has estimated in order to overcome
       perceived differences in quality and enter the market.
        This argument has to be rejected. Firstly, it was found that the price of the
        dumped imports was higher in France than in the UK, and that the level of
        undercutting of the domestic products' prices was lower in France. Secondly, the
        absolute level of prices in the market was lower during the investigation period
        for the Community-wide case than for the regional case. On both counts, there is
        no reason to increase the quality gap beyond 10 ECU and no other evidence has
        been presented in favour of such an increase.
                                             12
 ---pagebreak--- (ni) Cumulation of dumped imports
(41) In establishing the impact of the dumped imports on the Community industry, the
      question of whether the effect of dumped imports from Russia and Lithuania
      should be assessed cumulatively had to be addressed.
(42) At first sight several factors appear to militate in favour of cumulation.
      The volume of imports originating in both Russia and Lithuania is significant.
      During the investigation period, their market shares were 7.3% and 3.2%
      respectively.
      The physical characteristics of the normal quality ammonium nitrate from both
      countries are broadly similar;
      The Russian and Lithuanian products are in competition in the Community with
      each other and with the like product produced by the Community industry;
      The Russian and Lithuanian products use the same type of distribution channels in
      the Community and the selling price of good quality ammonium nitrate from both
      countries in the Community is broadly similar.
 (43) However, in this particular case, a number of other factors have to be
      considered;
      Although the combined volume of imports from Russia and Lithuania increased in
      the investigation period, the volume of Russian imports rose by 55% in the
       investigation period compared to 1992/93, while imports from Lithuania fell by
       28% in the same period, in spite of an overall increase of 3% in Community
       demand. The market share of Russia rose from 4.9% to 7.3% whilst that of
       Lithuania fell from 4.6% to 3.2%. Thus from a position of near parity in 1992/93,
       the Lithuanian and Russian imports diverged in the investigation period to a point
       where the former was equivalent to only about 40% of Russian imports.
                                             13
 ---pagebreak---      Although selling prices charged by importers in the Community for normal quality
     Russian and Lithuanian product are not too dissimilar, the Lithuanian product
     commands a small premium. The average cif import price of the Lithuanian
     product was 89 ECU per tonne in the investigation period, compared to 75 ECU per
     tonne for the Russian product. The average FOB export price of Lithuanian
     ammonium nitrate is also well above that of the Russian product. This difference in
     average prices is explained by the fact that certain shipments of the Russian product
     were of an inferior quality which commanded exceptionally low prices on arrival in
     the Community and served to reinforce the image of the Russian product as being
     inferior and less reliable than the Lithuanian ammonium nitrate, almost all of which
     arrived in good condition at the Community frontier.
     In addition, a particular feature of this case is the previous UK regional
     investigation, which has resulted in measures intended to remove injury in the UK
     market. Up to 1993 both Russian and Lithuanian imports had been concentrated in
     the UK. In the investigation period, the major part of the Lithuanian imports into
     the EC still went to the UK. This high concentration in the UK means that the
     Lithuanian market share in the rest of the Community was barely 2%, compared to
     4% in the UK. In contrast, less than 40% of Russian imports to the Community
     were made in the UK; and Russia's market share across the Community market was
     more uniform than Lithuania's.
     In the remainder of the Community market, excluding the UK, Russian imports
     increased dramatically during the investigation period, indicating a shift away from
     the UK market, while the trend in Lithuanian imports was downwards. Imports into
     the EC (minus the UK) from Lithuania declined from 33.153 tonnes (quarter
     ending March 1993) to 28.676 tonnes (quarter ending March 1994), a decrease of
      13.5%. Exports from Russia to the same destination increased from 22.768 tonnes
     to 105.830 tonnes, up by 364%, over the same period.
     Conclusion
(44) In view of the divergent development of imports from Russia and Lithuania, in
      terms of their overall volume and market share in the Community and their degree
      of concentration in the UK market, and the difference in terms of price, it is
      considered that the conditions of competition between the two do not make
      cumulation appropriate in this case.
                                              14
 ---pagebreak--- (b)   Situation of the Community industry
(i)   Prodiiction
(45)  The production of ammonium nitrate by the Community industry fell from 4.68
      million tonnes in 1990/91 to 3.69 million in the investigation period, a decline of
      21%. Production in the investigation period was, however, 6.7% above the level
      of 1992/93, when it had fallen to 3.46 million tonnes.
(ii)  Capacity utilisation
(46)  The production capacity of the Community industry declined from 9.12 million
      tonnes in 1990/91 to 8.58 million tonnes in the investigation period, a fall of 6%.
      Over the same period, the utilisation of capacity fell from 51% to 43%.
(iii) Stocks
(47)  The Community industry's stocks fell from 363.000 tonnes at the end of 1990/91
      to 201.000 tonnes at the end of the investigation period.
 (iv) Sales in the Community
 (48) Between 1990/91 and 1992/93, sales of the Community industry in the
      Community fell from 3.85 to 3.16 million tonnes. Although sales recovered to
      3.40 million in the investigation period, the volume was still 12% below the level
      of 1990/91.
 (v)  Market share
 (49) The Community industry's share of the Community market dropped from 81% in
       1990/91 to 69% in 1992/93, before increasing slightly to 73% in the investigation
       period.
 (vi)  Prices
 (50)  The weighted average net selling price of the Community industry fell from 145.4
       ECU per tonne in 1990/91 to 117.1 ECU per tonne in 1992/93, and then dropped
       further to 106.9 ECU per tonne in the investigation period. Therefore, prices in
       the investigation period were 26.5% below the level of 1990/91.
                                            15
 ---pagebreak--- (vii)  Profitability
(51)   The Community industry made a weighted-average profit of 15.6% on sales in
       1990/91. By 1992/93, this had become a loss of 2.7%, and in the investigation
       period this loss worsened to 6.8% on sales.
(viii) Employment
(52)   The number of people directly employed by the Community industry in the
       ammonium nitrate sector fell from 2.444 in 1990/91 to 1.810 in the investigation
       period, a loss of 634 jobs and a decline of 26%. In this regard, employment fell in
       line with production, which dropped by just over 21%.
(c)    Conclusion
(53)   It is clear that the situation of the Community industry has worsened between
       1990/91 and the end of the investigation period. The development of most of the
       main indicators was negative.
       Over this period, production, capacity utilisation, domestic sales and market share
       all fell, while prices dropped by 26% and the industry's financial performance
       slumped from a healthy profit in 1990/91 to a serious loss in the investigation
       period.
       Although the Community industry's production and sales volume did improve in
       the investigation period compared to 1992/93, this reflected a general
       improvement in total demand as much as any improvement in its market
       penetration, since the market share of the Community industry increased by only
       4 percentage points while the sales volume rose by almost 8%. At the same time
       the industry had to decrease prices further in the investigation period and suffered
       a heavier loss than in 1992/93.
       Furthermore, the combined effect of the declining sales volume and the drop in
       the price level led to a fall of the Community industry's turnover for ammonium
       nitrate in the investigation period to only 65% of the level of 1990/91.
(54)    In view of the above factors, it is concluded that the Community industry has
        suffered material injury.
                                              16
 ---pagebreak---                                 F.      CAUSATION
(a)  Injury caused by dumped imports originating in Russia
(i)  Saks
(55) Between 1990/91 and the investigation period, the sales of the Community
     industry fell by 452.000 tonnes, while the volume of imports from Russia
     increased by 328.000 tonnes. Although a small part of the Russian imports were
     made up of poor quality product that had to be sold off cheaply for solutions, it is
     clear that the major part of the loss of domestic sales of the Community industry
     can be attributed to the dumped imports from Russia, which replaced them.
(ii) Market share
(56) Between 1990/91 and the investigation period the market share of the dumped
     imports from Russia rose from 0.3% to 7.3%. During this period, the market
     share of the Community industry fell by eight percentage points from 81% to
     73%.
(57) The market share of the Community industry did improve from 69% to 73%
     between 1992/93 and the investigation period, but this increase was achieved at
     the expense of imports from other sources (including Lithuania), which declined
     by seven percentage points, back to the level of 1990/91. The market share of
      imports from Russia continued to increase between 1992/93 and the investigation
     period. In these circumstances, it is clear that the fall in market share suffered by
     the Community industry between 1990/91 and the investigation period was due
     mainly to the increase in the dumped imports from Russia.
                                            17
 ---pagebreak--- (iii) Production
(58)  Production of ammonium nitrate fell by almost 1 Million tonnes between
      1990/1991 and the investigation period. The 328.000 tonne increase in the
      volume of the dumped imports from Russia contributed to a major part of this
      decline in production, and to a corresponding part of the fall in capacity
      utilisation, even allowing for the portion of poor quality product, referred to in
      recital 56.
(iv)  Prices and profitability
(59)  Between 1990/91 and the investigation period, the average net selling price of the
      Community industry fell from 145 to 107 ECU per tonne. At the same time, the
      volume of dumped imports from Russia increased by 328.000 tonnes and
      displaced an equivalent volume of Community producers' sales. Since 1990/91,
      these dumped imports were consistently offered at prices which, even allowing
      for a quality difference between the Community and imported product, were
      significantly below the Community industry's cost of production.
      The investigation has established, on the basis of documented evidence, that many
      customers have switched from the Community product to Russian imports purely
      on the basis of price.
(60)  It is therefore concluded that the Community producers have had to reduce their
      prices to well below cost in order to maintain a certain level of sales in the face of
      the low prices of the dumped imports from Russia. Therefore the modest level of
      price undercutting by the Russian imports during the investigation period, as
      previously indicated in recital 39, after an adjustment for quality, only reflects the
      extent to which the Community industry has had to depress its own prices in order
      to compete, to a point where prices were almost 7% below cost.
      Therefore the dumped imports from Russia have obviously been a significant
       cause of the fall in the Community industry's prices, and have consequently
      played a large part in the decline from profit into a considerable loss.
                                             18
 ---pagebreak--- (d)   Injury caused bv dumped imports from Lithuania
(i)   Saks
(61)  Between 1990/91 and the investigation period, the sales of the Community
      industry fell by 452.000 tonnes, with the volume of imports from Lithuania
      increased by 135.000 tonnes. Consequently, a part of the loss of domestic sales of
      the Community industry appears to be linked to the dumped imports from
      Lithuania, although in the investigation period the Community industry's sales
      rose by 287.000 tonnes compared to 1992/1993, while imports of the Lithuanian
      product fell by 58.000 tonnes. Consequently, the overall impact of Lithuanian
      imports appears to have been rather limited.
(ii)  Market share
(62)  Between 1990/91 and the investigation period the market share of the dumped
      imports from Lithuania rose from 0.3% to 3.2%. During this period, the market
      share of the Community industry, as previously mentioned, fell by eight
      percentage points from 81% to 73%.
(63)  In these circumstances, it is clear that the fall in market share suffered by the
      Community industry is in part linked to the increase in the dumped imports from
      Lithuania. However, it should be recalled that between 1992/93 and the
      investigation period, the market share of Lithuanian imports fell from 4.6% to
      3.2%. Overall, therefore, it is concluded that the contribution of Lithuania to the
      decline in the Community industry's market share is small.
(iii) Production
(64)  Production of ammonium mtrate fell by almost 1 Million tonnes between
       1990/1991 and the investigation period. The 135.000 tonne increase in the
      volume of the dumped imports is considered to have played only a very minor
      part in this decline in production, as well as in the fall in capacity utilisation. In
      the investigation period, Community production rose by 232.000 tonnes and
      Lithuanian imports fell by 58.000 tonnes.
                                            19
 ---pagebreak--- (iv) Prices and profitability
(65) The price of Lithuanian imports is above that of Russian imports, and only a
     limited volume of Community production appears to have been displaced by the
     Lithuanian imports. In addition, the price of the Community producers' sales fell
     9% during the investigation period, while at the same time the volume of imports
     of the Lithuanian product fell by 28%, and their c.i.f. price rose by 9%.
(66) In view of the above, it is concluded that imports from Lithuania have not had a
     significant impact on the prices and profitability of the Community producers.
(c)  Injury caused by other factors.
(i)  Imports from other sources
(67) Between 1990/91 and the investigation period, the volume of imports from
     countries other than Russia and Lithuania declined from 629.000 to 537.000
     tonnes, a decline of 92.000 tonnes, equivalent to 15%. Over this period, the
     market share of these imports, sourced mainly from Eastern Europe and North
     Africa, declined from 13.2 to 11.6%. In addition, although they were priced below
     the level of the Community producers, these imports were consistently sold at
     prices above those of the imports originating in either Russia or Lithuania.
(68) In these circumstances, it is concluded that the imports from other sources made
     no significant contribution to the injury suffered by the Community industry
     during the investigation period.
(ii) Decline in total demand
(69) Total EC consumption of ammonium nitrate fell by 109.000 tonnes between
     1990/91 and the investigation period. Over the same period sales of the
     Community industry fell by 452.000 tonnes, while imports from Russia and
     Lithuania rose by 463.000 tonnes. In view of the above, it is concluded that the
     part played by the decline in total Community demand in the fall in the
     Community industry's sales is only marginal.
                                          20
 ---pagebreak--- (iii)  Strategy of Community producers
(70)   Since the production volume of the Community industry fell by 1 million tonnes
       between 1990/91 and the investigation period while the dumped imports increased
       by 463.000 tonnes, it is clear that other factors must have played a part in the
       decline in production and the consequent fall in capacity utilisation and
       employment. The investigation has established that two factors were responsible
       for the remainder of the fall in production -
(i)    A reduction in stocks by the Community industry (see recital 47).
(ii)   A fall in the amount of ammonium nitrate used for internal consumption by the
       Community producers, mainly for blending into compound fertilizers.
       It is clear that these two factors have played a significant role in the decline in the
       Community industry's production.
(71)   The investigation has further established that the Community industry has
       maintained a level of production capacity in excess of market demand between
       1990/91 and the investigation period. While is accepted that in some factories part
       of the declared capacity for ammonium nitrate can also be used to manufacture
       other nitrogen products and that overall capacity has been reduced by 6%, it is
       clear that in general the capacity of the Community industry would still
       comfortably exceed market demand in the Community, even in the absence of the
       dumped imports from Russia and Lithuania. This state of affairs appears to have
       contributed to maintaining a higher than necessary level of fixed costs for this
       product.
(d) Conclusion
 (72) The other factors identified above (Recitals 67-71) have played a part as regards the
      decline in the Community industry's production, capacity utilisation and
      employment, and the maintenance of an excessive level of capacity may have
      contributed to a higher than necessary production cost, and therefore to a negative
      impact on profits. Nevertheless, it should be noted that between 1990/91 and the
      investigation period, the Community industry was able to reduce its average
      production cost from 126 to 115 ECU per tonne, and in spite of this effort was still
      not able to compete with the dumped imports.
                                              21
 ---pagebreak--- (73) The dumped imports from Lithuania have had a certain impact on the Community
     industry's sales and market share and played a small part in the fall in production
     and capacity utilisation (Recitals 61-66). However, in view of the small volume of
     imports from Lithuania and their considerable decline in the investigation period,
     their contribution to injury to the Community industry as a whole must be
     considered to be a minor one. As has been stated earlier, Lithuanian imports have
     achieved significant penetration only in the UK market, where regional anti-
     dumping measures against Lithuanian ammonium nitrate remain in force.
(74) The remaining injury, caused by the dumped imports from Russia, consists of the
     main part of the decline in sales and market share, and by far the major part in the
     fall in the Community industry's prices and profits. The Russian imports have also
     had a significant impact on production and capacity utilisation, and also on
     employment (recitals 55-60). The impact of Russian imports was felt by the
     Community industry as a whole, since their market penetration was significant and
     increasing across the whole of the Community.
(75) In conclusion, it is found that a certain part of the injury to the Community industry
     has been caused by factors other than the dumped imports. The minor part of the
     injury attributable to dumped imports from Lithuania cannot be considered to be
     material. However, in view of the gravity of the overall injury in this case, it has to
     be concluded that the remaining injury, caused by dumped imports from Russia,
     taken in isolation, is material.
                            G.    COMMUNITY INTEREST
1.   ££nexal
(76) In examining whether the interest of the Community calls for the taking of anti-
     dumping measures, the need to eliminate the trade-distorting effects of injurious
     dumping and to restore effective competition is given special consideration.
2.   Consequences for Community industry
(77) With regard to this proceeding, without measures to correct the effects of dumped
     imports, one or more Community producers may be forced to close plants and
     perhaps to shut down altogether, especially in view of the large volume of surplus
     capacity in Russia, and the dumping practices identified during the investigation
     period. This would lead to a considerable loss of employment in the Community
     and would reduce the amount of competition in the market.
                                              22
 ---pagebreak--- (78) EFIA alleged that there is no large surplus capacity of ammonium nitrate in Russia.
     However, this allegation is contradicted by the replies of the co-operating
     exporters, which between them showed an unused capacity of over 1 million tonnes
     during the investigation period, and which furthermore represent only a minority of
     ammonium nitrate production in Russia. An independent study published in
     January 1995 concluded that there was 5 million tonnes of excess ammonium
     nitrate capacity in Russia.
3.   Impact on users
(79) It is true that farmers in the Community have benefited in the short term from the
     low price of dumped imports. However, it must also be borne in mind that
     fertilizers account for only about 12% of the cost of farmers' total inputs in the
     Community, the price of fertilizers having fallen considerably in recent years.
     Therefore, any adjustment in prices resulting from an anti-dumping measure is
     unlikely to have a major impact on farmers' budgets, particularly in view of the
     relatively modest nature of the measures required to prevent injurious dumping,
     and on balance is not a sufficient reason to deny legitimate protection to the
     Community producers in this case.
4.   Impart on trade with Russia
(80) When assessing Community interest and formulating proposals in this case, proper
     consideration must be given to the Community's stated commitment to encourage
     trade with Russia in order to facilitate its transition to a market economy. This
     does not of course mean that anti-dumping measures should not be taken where
     warranted; it does mean, however, that the solution proposed should attempt to
     minimise any conflict between preventing injury to Community industry from
     dumped imports and the need to encourage continued and increased trade with
     Russia.
5.   Conclusion
(81) It is concluded that anti-dumping measures are in the interest of the Community in
     this case; nevertheless, full account should be taken of the arguments in recital 80
     when considering the measures to be taken.
                                            23
 ---pagebreak---                                           H. CONCLUSION
1.     Termination of Community-wide proceeding as regards Lithuania
(82) In view of the conclusion that the Lithuanian imports have not caused material
       injury to the Community industry, the proceeding for Lithuania has been
       terminated, by Commission Decision 95/.../EC8
2.     Existing measures concerning the UK market
(83) The current Community-wide investigation concerning ammonium nitrate from
       Lithuania and Russia has established that, in the case of Russia, anti-dumping
       measures at Community level are warranted. At the same time, it should be noted
       that since May 1994 anti-dumping measures have also been in force with regard to
       imports of Russian and Lithuanian ammonium mtrate into the UK, following the
       regional case referred to in recital 2.
       These measures have taken the form of quantitative undertakings which limit
       annual imports into the UK from Lithuania and Russia to 100.000 tonnes for each
       country.
(84) With regard to imports from Russia, the regional measure does not provide
       adequate protection to the Community industry as a whole, since during the
       investigation period 60% of Community imports of ammonium nitrate from Russia
       were made in Member States other than the UK. In volume terms, this represented
       over 200.000 tonnes, and showed a sharp rise compared to 1992/93.
        It should also be noted that during this period Member States other than the UK
        accounted for 55% of Community production and 60% of demand, and that the
        producers in question suffered sharper declines in prices and profitability than the
        producers in the UK.
 8
   See page .... of this Official Journal
                                                24
 ---pagebreak--- 3.     Definitive measures at Community level for imports from Russia.
(85) Anti-dumping measures at Community level are therefore justified for imports
       from Russia. It is therefore clear that the UK regional measures concerning these
       imports have to be removed, otherwise the UK market would benefit
       simultaneously from two separate protective measures.
       Thus UK regional proceeding concerning imports of ammonium nitrate originating
       in Russia has been terminated by Commission Decision 96/.../EC9.
(86) Several parties alleged that the prices of ammonium nitrate in the Community, and
       consequently the situation of the Community producers, have improved since the
       end of the investigation period. They allege that this improvement makes protective
       measures unnecessary, and should be taken into account.
       Although not the subject of a formal investigation, it does seem that the ammonium
       nitrate market, in common with the nitrogen fertilizer market as a whole, has
        improved since the end of the investigation period. However, this does not in any
       way invalidate the need to remedy injurious dumping, although the type of measure
       proposed should take this situation into account.
4.     Type of measure
(87) It is concluded that definitive anti-dumping on imports of ammonium nitrate
       originating in Russia be imposed in the form of a variable duty. This would have
       the advantage of increasing export prices to a level at which injurious dumping is
        eliminated, while at the same time not imposing any extra burden on exporters
        which have subsequently increased export prices to or beyond a non-injurious
        level.
        This approach best reconciles the need to eliminate injurious dumping with the
        considerations in recitals 80 and 86.
   See page ... of this Official Journal
                                               25
 ---pagebreak--- (88) EFIA was concerned that a minimum price duty could make it difficult for
     exporters to sell in the Community in the event of a fall in market prices or a
     change in the rate of the US Dollar. To offset this possibility, in either case, the
     Council notes that the Commission would be prepared to consider the initiation of a
     prompt review of the measure, if sufficient evidence was provided to this effect,
     even less than one year following its imposition.
5.   Rate of duty
(a)  Target price for Community industry
(89) In order to establish the price increase of the dumped imports required to remove
     injury to the Community industry, the weighted average per tonne cost of
     production of the Community industry for bagged ammonium nitrate has been
     calculated, and a profit of 5% added in order to arrive at a target price at which
     injury is eliminated.
     A profit of 5% on cost has been used in recent anti-dumping cases concerning urea
     and UAN solutions, and was therefore considered as a reasonable profit margin for
     nitrogen fertilizers in anti-dumping proceedings.
(90) EFMA alleged that the target profit of 10% on cost used in the UK regional case,
     would be a more appropriate level of profit.
(91) The profit margin used in the regional proceeding was not applied on the actual
     costs of production of the UK industry, but on the costs adjusted to exclude the
     impact of factors other than the dumped imports. In any event, the UK industry
     represents only a minority of Community production of ammonium nitrate, and has
     lower costs than the rest of the Community producers. Therefore the cost structure
     of the UK industry appears to lend itself to the reasonable expectation of a higher
     level of profit under normal market conditions than is the case for the Community
     industry as a whole. Furthermore, it has been established that the Community
     industry's fixed costs are slightly inflated by the maintenance of over-capacity
     (recital 71). EFMA also claimed that the use of a higher profit figure was more
     appropriate because of certain costs associated with ammonium nitrate which are
     not present in the production of urea or UAN solutions. However, EFMA did not
      forward sufficient evidence to substantiate this claim. In view of these factors, and
     after considering this matter carefully, it is concluded that 5% on actual costs
     remains an appropriate level of profit.
                                             26
 ---pagebreak--- (92) Using the 5% profit, and taking into account the 10 ECU "quality gap" established
     in recital 38, the price increase of the dumped imports required to remove injury is
     20.4 ECU per tonne for imports from Russia.
(b)  Duty based on injury elimination
(93) The dumping margin as regards ammonium nitrate from Russia is 31.3 ECU per
     tonne.
     Since the dumping margin is above the price increase required to eliminate injury
     ("injury margin"), the rate of anti-dumping duty will be determined by the injury
     margin of 20.4 ECU per tonne.
(c)  Calculation of minimum price for the determination of a variable duty
(94) The minimum price threshold is calculated by taking the export price (ex-frontier)
     and adding the injury margin plus the costs of freight, insurance and traders'
     margin, in order to arrive at a c.i.f. Community frontier price before duty. Anti-
     dumping duty will only be collected if the c.i.f. import price falls below this level.
(95) In order to calculate the costs incurred between export and import , it is not
     sufficient to take the difference between the ex-Russian frontier export price and
     the EUROSTAT c.i.f. price, since the average c.i.f. price of Russian imports is
     brought down by a portion of sub-standard product, while the export price is based
     on good quality ammonium nitrate only. The above comparison would under-
     estimate the cost incurred and result in a minimum price which did not fully
     eliminate injury.
     In the absence of full co-operation from importers and exporters of Russian
      ammonium nitrate, the most reasonable method would be to take the costs incurred
     between export and imports into the Community of the Lithuanian product, which
      were established on the basis of verified data in the investigation. This is a
      uniformly good quality product and is shipped roughly the same distance and under
      the same conditions as the Russian ammonium nitrate.
      The Russian Ministry of Foreign Economic Relations alleged that the figure of 24.7
      ECU per tonne resulting from this method was too high. They produced certain
      data from exporters indicating lower freight rates.
                                              27
 ---pagebreak---      These data cannot be accepted, since they were submitted very late in the
     proceeding and were not subject to verification, they concerned only a small part of
     total exports and because they omitted any cost element for agents or other
     intermediaries which buy and sell the product between the Russian f.o.b. and
     Community c.i.f. stages. This is the normal selling route for Russian ammonium
     nitrate, on the basis of the information supplied during the verification.
     When applied to the Russian ammonium nitrate, this results in the following
     calculation:
       Export price (ex-frontier)       57.8 ECU per tonne
       Injury margin                    20.4 ECU per tonne
       Freight, insurance etc.          24.7 ECU per tonne
       Total                           102.9 ECU per tonne
(96) The minimum price for bagged imports from Russia should therefore be 102.9
     ECU per tonne.
(97) E.F.LA. has claimed that the minimum price should be reduced if the ammonium
     nitrate is imported in bulk. On this point, it is considered that the existence of a
     lower minimum price for bulk product would inevitably open up the possibility of
     avoidance of anti-dumping duty on bagged imports by means of compensatory
     arragements for the costs of bags.
     Therefore, it is concluded that in order to maintain the effectiveness of the
     measures, the same minimum price of 102.9 ECU per tonne must be imposed on
     both bagged and on a bulk product.
6.   Undertaking
(98) The Russian Ministry of Foreign Economic Relations has offered to limit exports to
     the Community to 300.000 tonnes per year and to issue licences only at or above an
     indicative price which will reflect the "market price" in the Community. The
     undertaking is not acceptable, given that the 100.000 tonne limit in the quantitative
     undertaking covering the UK market, accepted by Decision 94/293/EC, had already
     been exceeded by February 1995, in spite of the fact that the Russian authorities
     had undertaken to limit exports to 100.000 tonnes for the 12-month period ending
     21 May 1995.
                                             28
 ---pagebreak---       In the li^ht of these circumstances, the Russian authorities have not adequately
      demonstrated their ability to satisfy the monitoring requirements of the undertaking
      concerning exports of ammonium nitrate.
In addition :
(99) The figure of 300.000 tonnes is too high. It represents only a 27% reduction on the
      volume imported in the investigation period, even if the 70.000 tonnes of Russian
      ammonium nitrate imported into Austria, Finland and Sweden are included. This is
      not sufficient to remove injury to the Community industry.
(100) In any event, in this case, given that a 100.000 tonne limit is still in force for
      imports from Lithuania into the UK, the acceptance of a higher figure for Russian
      imports to the whole of the Community would give Russia the opportunity of
      exporting more than 100.000 tonnes to the UK, thus rewarding the Russian
      exporters for having caused injury in the past, especially in view of having
      exceeded the above limit in the regional undertaking.
(101) The "indicative price", although reflecting the highest prices on offer, would not
      always be equal to, or exceed, the minimum price which eliminates injurious
      dumping: the Russian authorities request market - related flexibility. In any event,
      the Ministry would not in practice be able to control the actual price paid.
7.    Conclusion
(102) It is concluded that the above undertaking should not be accepted; the variable anti-
      dumping duty should therefore be imposed.
                                              29
 ---pagebreak--- HAS ADOPTED THIS REGULATION:
                                           Article 1
1.    A definitive anti-dumping duty is hereby imposed on imports of ammonium nitrate
      originating in Russia and falling within CN Codes 31 02 30 90 and 31 02 40 90.
2.    The amount of anti-dumping duty shall be the difference between ECU 102.9 per
      tonne nel of product and the net CIF price, Community frontier before customs
      clearance, in all cases where this is lower.
3.    Unless otherwise specified, the provisions in force concerning customs duties shall
      apply.
                                           Article 2
This Regulation shall enter into force on the day following that of its publication in the
Official Journal of the European Communities.
This Regulation shall be binding in its entirety and directly applicable in all Member
States.
Done in Brussels,
For the Council
                                               30
 ---pagebreak---  ---pagebreak---                                                                   ISSN 0254-1475
                                                           COM(95) 397 final
                                             DOCUMENTS
EN                                                                       02 11
                                     Catalogue number : CB-CO-95-424-EN-C
                                                             ISBN 92-77-92613-9
Office for Official Publications of the European Communities
L-2985 Luxembourg
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