CELEX: 51996PC0103
Language: en
Date: 1996-03-08
Title: Proposal for a COUNCIL REGULATION (EC) imposing a definitive anti-dumping duty on imports of coumarin originating in the People' s Republic of China

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                    Brussels, 08.03.1996
                                                    COM(96) 103 final
                                     Proposal for a
                           COUNCIL REGULATION (EC)
imposing a definitive anti-dumping duty on imports of coumarin originating in the
                            People's Republic of China
                            (presented by the Commission)
 ---pagebreak---  ---pagebreak---                                        Explanatory memorandum
1.   The Commission Regulation (EC) No. 2352/95 *) imposed a provisional anti-
     dumping duty on imports of coumarin originating in the People's Republic of
     China.
2.   This provisional anti-dumping duty has been extended by a further period of two
     months by Council Regulation (EC) No. 212/96 2\
3.   After examining the arguments put forward by the interested parties, the
     Commission has definitively established the facts.
4.   In accordance with Article 12 of Council Regulation (EC) No. 2423/883), the
     Commission, after consultation of the Advisory Committee, proposes to impose
     a definitive duty of the same amount of the provisional duty and to collect
     definitively the provisional anti-dumping duty.
 ]
   )  OJNoL239, 7.10.1995, p. 4.
2
   >  OJN0L28, 6.2.1996, p. 1.
 3
   >  O J N o . L 209, 2.8.1988, p. 1.
                                                    fa
 ---pagebreak---                                              Proposal for a
                            COUNCIL REGULATION (EC) No            /....
                                           of.
 imposing a definitive anti-dumping duty on imports of coumarin 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 3283/94 of 22 December 1994 on
protection against dumped imports from countries not members of the European
Community 1, as last amended by Regulation (EC) No 1251/95 2and in particular
Article 23 thereof,
Having regard to Council Regulation (EEC) No 2423/88 of 11 July 1988 on protection
against dumped or subsidized imports from countries not members of the European
Economic Community *, as last amended by Regulation (EC) No 522/94 4, and in
particular Article 12 thereof,
Having regard to the proposal submitted by the Commission after consulting the
Advisory Committee,
Whereas:
         OJ No L 349,31.12.1994, p. 1.
        OJNOL122, 2.6.1995, p. 1.
        OJ No L 209, 2.8.1988, p. 1.
        OJ No L 66,10.3.1994, p. 10.
 ---pagebreak---                                    A. PROVISIONAL MEASURES
(1) The Commission, by Regulation (EC) No 2352/95 5f hereinafter referred to as
    "the provisional duty Regulation", imposed a provisional anti-dumping duty on
    imports into the Community of coumarin falling within the CN code ex 2932 21 00
    and originating in the People's Republic of China.
    By Regulation (EC) No 212/96 6, the Council extended the validity of these duties
    for a period of two months expiring on 9 April 1996.
                                 B. SUBSEQUENT PROCEDURE
(2) Subsequent to the imposition of the provisional anti-dumping duty the following
    interested parties submitted their comments in writing:
    -CEFIC on behalf of the Community industry
    -Tianjin No 1 Perfumery Factory, an exporter/producer from the People's
    Republic of China,
    -British Essential Oil Association and the importers united therein (BEOA), on
    behalf of the major part of users and importers in the Community.
    -Vereinigung der am Drogen- und Chemikalien- Gross- und Aussenhandel
    beteiligten Firmen (VDC), on behalf of Paul Kaders GmbH, Hamburg, Germany,
    importer.
(3) The written comments submitted by the interested parties were considered by the
    Commission services and taken account of where appropriate.
5
      OJ No L 239, 7.10.1995, p. 4.
6
      OJNoL28, 6.2.1996, p. 1.
 ---pagebreak---     C.     PRODUCT UNDER INVESTIGATION, LIKE PRODUCT AND COMMUNITY
                                             INDUSTRY
(4)    VDC has reiterated its claim that Chinese coumarin and coumarin produced by
       Rhône Poulenc-cannot be considered as like products. It claimed in particular that
       the Chinese product and the Community product were produced from different
       raw materials, used different production processes, and that the Chinese product
       was of a lower quality and could not be used for as many purposes as the
       Community product.
       However, it had provisionally been established that the two products appeared
       almost entirely interchangeable and that differences in quality had no effect on
       the definition of the "like product". This matter has been explicitly dealt with in
       recitals (11) and (12) of the provisional duty Regulation. Since VDC only
       reiterated the arguments submitted before the imposition of the provisional duty
       and did not provide new evidence, the findings for the provisional determinations
       are confirmed.
(5)    As no new arguments have been presented regarding the product under
       investigation, the like product and the Community industry, the findings set out in
       recitals (9) to (13) of the provisional duty Regulation are confirmed.
 ---pagebreak---                                   D     DUMPING
1.  Normal value
(6) For the provisional determinations the normal value was established on the basis
    of the average ex-factory price of coumarin sold on the United States market
    which was selected as an analogue country.
(7) VDC argued that the Commission's efforts to obtain information from India could
    not be considered sufficient and that other potential sources of information
    should have been tapped. The Council would point out that all four Indian
    companies known to be coumarin producers, were contacted by the Commission
    services. However, from the information received it was found that only one of
    them actually produced coumarin during the investigation period. This one, at the
    request of the Commission services, supplied some general information about
    the Indian market, but refused subsequently to fill out the questionnaire.
    Furthermore, on the basis of the information available, the domestic sales prices
    of the Indian producer in question were substantially higher than those of Rhône
    Poulenc Inc., as a result of very high tariff protection of the Indian coumarin
    market. It has been found that this would still be the case even if an adjustment
    for duty draw-back were applied on the raw materials used for the production of
    coumarin. Therefore the choice of India as analogue country would have led, on
    the basis of the information available, to the establishment of a normal value
    higher than that found by using the United States of America as analogue
    country. Hence, the conclusions of recital (14) of the provisional duty Regulation
    are confirmed.
 ---pagebreak--- (8) As regards the choice of the United States of America as analogue country, VDC
    reiterated the claim that the United States was unsuitable as analogue country
    owing to the monopoly position that the US manufacturer allegedly enjoyed in
    that market, allowing him to dictate the prices; as evidence, VDC referred to a
    price increase imposed by the producer in question in November 1991.
    The Council would point out that the US producer cannot be regarded by any
    means as being in a monopolistic situation, since, as explained in recital (15) of
    the provisional Regulation, during the investigation period China held a very
    substantial share of that market. As far as the above mentioned price increase is
    concerned, it should be noted that it was completely nullified by the middle of
    1993 under the pressure exerted on the US market by low priced imports from
    the People's Republic of China.
(9) In objecting to the choice of USA as analogue country, VDC has reiterated that a
    reference country should be comparable in terms of production conditions,
    methods and standards. The Council observes that the differences in production
    process between Rhône Poulenc Inc. and the Chinese producers have already
    been examined at the stage of the provisional determinations. In this respect no
    adjustment appeared then       to be justified, as stated in recital (15) of the
    provisional duty Regulation, 1st and 2nd paragraphs.
    As no new argument has been put forward in this respect, the Council maintains
    that the choice of USA as analogue country has been made in an appropriate
    and reasonable way. Therefore, recital (15) of the provisional duty Regulation is
    confirmed.
 ---pagebreak--- (10) Tianjin No 1 Perfumery Factory argued that, following innovations brought about
     in its production process, its plants have now a higher yield than the other
     companies in China and than Rhône Poulenc and therefore its production costs
     would be comparatively lower. It must be underlined that this statement has not
     been substantiated at all. However, the Council points out that costs and prices in
     China - a non-market economy - do not result from the free action of market
     forces, but are the subject of State intervention. Since Tianjin No 1 Perfumery
     Factory is owned by the State, which, as a consequence, has a determining
     influence on its business, it is not possible to establish reliable costs and prices in
     order to assess the comparative advantage that the producer in question claims
     to enjoy in respect of the other Chinese producers of coumarin, as well as in
     respect of Rhône Poulenc. It follows that the establishment of individual normal
     values and hence individual anti-dumping duties is not possible in the present
     case.
(11) Consequently, the Council confirms, for the purpose of the definitive findings, the
     single normal value for all Chinese producers established on the basis of
     domestic sales prices found in a market economy country, i.e. the USA,
     according to the rules set out in Article 2.(5) of Council Regulation (EEC)
     2423/88, as indicated in recitals (16) and (17) of the provisional duty Regulation.
2.   Export prices
(12) No new arguments were presented in relation to the findings set out in
     provisional duty Regulation about the export prices determinations. Recitals (18)
     and (19) are therefore confirmed.
 ---pagebreak--- 3.   Comparison
(13) BEOA pointed out that transport costs in the United States of America have not
     been deducted from the normal value for the purpose of the comparison of the
     latter with the export prices, as provided for by the Article 2(10) of the Basic
     Regulation. The Council notes that for the purpose of ensuring a fair comparison,
     the normal value and the Chinese export prices were established at fob level, US
     and Chinese border respectively. As regards the adjustment of US normal value,
     requested by BEOA, transport costs should have been added to the ex-factory
     level and not deducted, in order to establish a fob, US border, normal value level.
     However, it has been found that the transport cost of coumarin between the
     Rhône Poulenc Inc. production plants and the closest shipping harbour is lower
     than 0,5% of normal value. Therefore in conformity with Article 2.(10)(e) of Basic
     Regulation, this adjustment was considered insignificant and hence disregarded.
     In this respect, the determinations laid in recital (21) of the provisional duty
     Regulation are confirmed.
(14) With relation to the allowance for physical differences in the form of a downward
     adjustment of normal value, CEFIC argued that no real quality difference existed
     between the Chinese coumarin and that of Rhône-Poulenc. In CEFIC's view, any
     difference is simply a matter of perception on the part of certain users only,
     notably those using coumarin for fine fragrance production, who are of the
     opinion that Rhône-Poulenc's coumarin is more suitable for their applications.
 ---pagebreak---      The Commission, in its investigation, has found that tho Chinese product did not
     have a stable quality and needed to be submitted systematically to quality control
     tests by the traders; moreover, in certain cases the shipped batches differed
     sufficiently from the accepted sample to make them unsuitable for the use for
     which they were originally bought. Furthermore, as CEFIC itself admits in its
     submission, most fine fragrance makers have a clear preference for the Rhône
      Poulenc product; consequently the Chinese coumarin is excluded from several
     applications in the specific field of fine fragrances. In view of this the Council
     considers that the supplementary costs for quality control and rejected batches,
     as well as the slightly more limited scope of application of Chinese coumarin,
     justify an allowance for difference in quality.
(15) CEFIC contested also the methodology used by the Commission for establishing
     the allowance for quality differences as described in recital (22) of the provisional
     duty Regulation. In particular CEFIC alleged that the sales price difference in
      1988 between Rhône-Poulenc SA coumarin and Chinese coumarin was based
     on a sales price of Rhône-Poulenc SA yielding a profit margin on turnover higher
     than the 5% used by the Commission services to calculate the underselling
     during the investigation period. In substance, CEFIC argued that the
     Commission's approach linked the value of the quality difference to the level of
     profit achieved; hence CEFIC suggested to adjust Rhône-Poulenc SA sales price
     in 1988 by applying the profit margin of 5% used for establishing, during the
     investigation period, the injury elimination level through the underselling
     methodology
 ---pagebreak---      The Council points out that there is no link between the calculation method of the
     quality difference as perceived by the consumer and the determination of the
     profit required to reach the injury elimination level. On the one hand, the sales
     price difference in 1988 appears to represent the quality difference as perceived
     by the operators in a coumarin Community market not yet depressed by the
     Chinese low price policy, at a time when Chinese exporters held a significant
     market share of 21.3%, reflecting the existence of a certain degree of competition
     on the market. On the other hand, users and other operators purchase coumarin
     at a price level which corresponds to their perception of the quality of the product,
     independently from the production cost of the said product, which is unknown to
     them.
(16) As no further arguments were submitted concerning the comparison between
     normal value and export price, the Council confirms the conclusions set out in
     recitals (20) to (22) of the provisional duty Regulation.
4.   Dumping margin
(17) The dumping margin, which was higher than 50%, as indicated in recital (23) of
     provisional Regulation, is therefore confirmed.
                                              to
 ---pagebreak---                                         E. INJURY
(18) It was provisionally determined that the prices of coumarin originating in the
     People's Republic of China have consistently undercut the prices of the
     Community product since 1990. During the investigation period the undercutting
     practised by the Chinese exporters has been found to be as high as 28 7% on
     the price of Community industry coumarin. VDC argued that falling prices of
     imports of coumarin from China between 1990 and the investigation period
     cannot be considered as undercutting the Community producer prices within the
     meaning of Article 4(2)(b) of the basic Regulation, in so far as they simply passed
     on to the consumer the effects of the declining prices of the raw materials, in
     particular orthocresol which is used only by Chinese producers for producing
     coumarin.
     It has been observed that Chinese prices, which in 1988 and 1989 were
     practically at the same level of the Community product, have been undercutting
     Rhône Poulenc SA. prices throughout the period 1990/1994, regardless of the
     evolution of the prices of the raw materials, in particular orthocresol, whose
     prices, in fact, during the period under examination (1990/1994), though
     declining, were substantially higher than in the years prior to 1990, when no
     undercutting was recorded. Therefore, it is maintained that significant price
     undercutting has been observed between 1990 and the investigation period
     within the meaning of Article 4(2)(b) of the basic Regulation. The findings of
     recital (29) of the provisional duty Regulation are therefore confirmed.
                                             H
 ---pagebreak--- (19) No other argument concerning the injury suffered by the Community industry has
      been submitted. The injury findings and the conclusion that the Community
      producer has suffered material injury within the meaning of Article 4 (1) of the
      basic Regulation, as stated in recitals (24) to (38) of the provisional duty
      Regulation, are therefore confirmed in view, in particular, of the dramatic erosion
      of market shares and of the heavy financial losses suffered by the Community
      industry during the period under examination.
                               F. CAUSATION OF INJURY
(20) With regard to the effect of dumped imports, VDC maintained that no clear link
      existed between the imports from China and any injury to the Community
      producer. To support this statement, VDC pointed out that imports from China
     decreased by 33 tonnes between 1991 and 1992, while those from the USA
     increased by the same volume during the same period.
     This argument, however, is unconvincing. Indeed VDC omitted to consider that
     the two quoted developments are simply episodic and limited fluctuations which
     contrast with the overall growing trend of imports from China in the five year
     reference period and the mainly stable imports from the USA. In absolute terms,
     the increase of 132 tonnes in imports from China between 1990 and the
     investigation period (1 April 1993 - 31 March 1994) at low undercutting prices has
     clearly had a negative impact on the Community industry. The development of
     imports from China has to be seen in the context of the Community market which
     amounts to a few hundred tons a year and in which the Community industry saw
     its sales decreasing by 58.5%. Consequently, the findings of recital (39) of the
     provisional duty Regulation are confirmed.
                                           t2
 ---pagebreak--- (21) With regard to the effect of other factors, VDC claimed that imports from third
     countries were a major factor in the Community industry's loss of market share. In
     this respect, VDC pointed out that imports from third countries climbed from 38
     tonnes in 1990 to 71 tonnes in the investigation period.
     It is observed that only imports from Russia and Japan, which were also made at
     low prices comparable to those of the imports from China, could have contributed
     to the injury suffered by the Community industry. However, given their low
     volume, representing less than 7% of the Chinese imports, it must be concluded
     that the sharp decline in sales and market share of the Community industry is
     principally attributable to the massive dumped imports from China which
     increased their market share by 32 percentage points between 1990 and the
     period of investigation, compared to an increase of 1,8 percentage points from
     Russia and 3,7       percentage points from Japan over the same period.
     Consequently, the Council maintains that a possible contribution to the injury by
     low priced imports from other third countries can only be considered as marginal,
     given their much smaller volume compared to that of the Chinese. The
     conclusions of recital (43) of the provisional duty Regulation are therefore
     confirmed.
(22) As no further aspects concerning other possible injury factors have been found
     and no further argumente have been submitted, it is maintained that the low
     priced imports of coumarin from the PRC, taken in isolation, caused material
     injury to the Community industry through their continuous erosion of the
     Community industry's market share and the depressing effect on its prices. The
     provisional findings on the causation of injury as expressed in recitals (40) to (42)
     and (44) to (46) of the provisional duty Regulation are therefore confirmed.
                                            13
 ---pagebreak---                                G. COMMUNITY INTEREST
1.   Interest of the Community industry
(23) According to a submission by VDC, the extent to which an anti-dumping measure
      is in the Community interest has to be judged in the light of the overall economic
     situation of the Community industry, whose consolidated profit has increased
     considerably in the first half of 1995 compared to the same period of 1994.
     While it may be correct that the overall situation of Rhône Poulenc SA has
     improved after the investigation period, no indication has been given that the
     profitability of the coumarin business by Rhône Poulenc SA has improved.
     Moreover, it should be recalled that, following a longstanding practice of the
     Community institutions, all aspects of a given case are only examined in relation
     to the product in question, i.e. in this case coumarin. For these reasons, the
     argument of VDC cannot be accepted.
(24) VDC further argued that the imposition of an anti-dumping duty would have
     repercussions on the Community's exports of orthocresol to China, as 80% of this
     raw material for Chinese coumarin originates in the Community. This statement
     has not been substantiated; however, it should be noted that any increase in
     Community orthocresol exports to China by Community producers of that product
     may be attributed to an increase of Chinese exports of coumarin to the
     Community as a result of unfair Chinese trading practices. In addition it has to be
     observed that any decrease of Community exports of orthocresol to China due to
     lower coumarin imports from China would be compensated by a higher
     production volume of phenol in the Community to feed the anticipated increase in
     production of coumarin by the Community industry.
                                            f4
 ---pagebreak--- 2.   Interest of users
(25) Moreover, VDC and some users raised the argument that the decline in imports
     of coumarin from China following the imposition of an anti-dumping duty would
     cause difficulties to users of Chinese coumarin which will have to bear
     considerable costs in changing their formulas as a result of switching from
     Chinese coumarin to that made by the Community industry; in addition, importers
     would allegedly encounter problems in satisfying customer demand for Chinese
     quality coumarin.
     The Council notes that neither VDC nor the users have given any information
     about the incidence of these costs for changing formulas on the production costs
     of perfume compounds; in any case it must be stressed that Chinese coumarin
     would still be available on the Community market if an anti-dumping duty was
     imposed, but at a non-injunously dumped price. Therefore 'switching' costs would
     not necessarily have to be incurred.
(26) VDC expressed the concern that, in the long run the imposition of a definitive
     anti-dumping duty would place in a monopolistic position the sole producer of
     coumarin in the Community, a producer whose subsidiary in the USA allegedly
     controls the US market.
     It is recalled that the aim of the anti-dumping duty is not to eliminate from the
     Community market the imports originating in a given third country, but to remove
     trade-distorting effects of injurious dumping and to restore effective competition.
     In this respect it should be observed that the duty has been fixed at a level which
     should not prevent the Chinese coumarin from remaining competitive on the
     Community market (see recital (55) of the provisional duty Regulation).
                                             15
 ---pagebreak---      Moreover, it should be stressed that during the investigation period the Chinese
     producers held a very substantial share of the Community market which was
     consistently higher than that of the Community producer. Hence, the concrete
     risk exists that the Chinese producers themselves could acquire a monopolistic
     position should no measures be taken. The risk of the creation of such a
     monopoly would also not be in the Community interest. Furthermore, the world
     coumarin industry appears currently to be concentrated in two poles, one
     Community producer with its US subsidiary and the production in the People's
     Republic of China; however, there are indications that other coumarin production
     regions are emerging, e.g. in India. Consequently, it is very unlikely that the
     Community producer would find itself in a monopolistic situation as a
     consequence of the imposition of an anti-dumping duty. Finally, as far as the
     alleged dominant position of Rhône Poulenc Inc. in the US market is concerned,
     it is pointed out that    during the investigation period the exporters from the
     People's Republic of China held a very substantial share of the US market. In this
     regard, it also has to be mentioned that Chinese exports of coumarin to the USA
     are now subject to anti-dumping measures, which could lead to a diversion of
     Chinese exports to the Community market.
(27) BEOA maintained its allegation about the threat of abuse of a dominant position
     by Rhône-Poulenc S.A in relation to its marketing policy, consisting allegedly of
     guaranteeing the delivery of a predetermined volume of coumarin only to users
     which agree to enter into a five-year purchase contract. This allegation, which
     was already rejected at the stage of the provisional determinations, has not been
     further substantiated. Moreover, no formal complaint has been lodged with the
     appropriate authorities and, according to the information gathered in the course
     of the investigation, it has been found that'the marketing policy in question has
     not been implemented at all. The conclusions expressed in recital (51) of the
     provisional duty Regulation are therefore confirmed.
                                           16
 ---pagebreak--- 3.   Conclusions
(28) No other arguments were made with respect to Community interest. After
     carefully examining all the arguments made, the Council is of the opinion that
     there are no compelling reasons not to take anti-dumping action in this case. It
     can therefore be considered that it is in the Community interest to impose an anti-
     dumping duty as set out in recitals (47) to (54) of the provisional duty Regulation.
                                          H. DUTY
(29) BEOA argued that the Commission made a methodological error in calculating
     the underselling margin for the transactions occurring directly between the
     Chinese exporter and the user in the Community, since they did not add a
     distributor mark-up to the CIF import price. BEOA claimed that, in doing this the
     trade level difference would not be removed for sales of this kind, because the
     injury elimination level established for Rhône Poulenc SA included SG&A and
     profits of its distributors, while no mark-up was taken into account for the users
     purchasing directly from the Chinese exporters. In this respect, it should be
     observed that the Commission established the injury elimination level             by
     including all the costs and profits of Rhône Poulenc SA distributors which
     themselves sell directly to users. Therefore no mark-up needs to be added to the
     CIF import price of      users because the transactions were taking place at the
     same level of trade . Furthermore, it has been found that the average CIF import
     prices for all distributor-importers fall within a narrow scope, and on average, at a
     significantly lower level than that found for the users. In particular, this price
     difference is of a magnitude corresponding tp the mark-up applied by distributor
     importers for their resales to thé users.
                                               17
 ---pagebreak---      This fact is clear evidence that the PRC producer/exporters differentiate their
     sales prices according to the level of trade at which their customer is situated
     Consequently, the Council considers that the comparison has been made at the
     same level of trade and adding a mark-up to the CIF import price of users would
     constitute double counting. The claim for adjustment for trade level difference is
     therefore rejected. The underselling determination as described in recitals (54)
     and (55)of the provisional duty Regulation is confirmed.
(30) Provisional measures consisted of an anti-dumping duty in the form of a specific
     amount per tonne. The duty was imposed at the injury elimination level since this
     was lower than the dumping margin and was established as set out in recitals
     (56) and (57) of the provisional duty Regulation. No further arguments were put
     forward to contradict this approach. The relevant findings as expressed in recitals
     (23) and (55) are therefore confirmed. Accordingly the rate of the definitive duty
     should be at the same level as the provisional duty.
                   I. COLLECTION OF THE PROVISIONAL DUTY
(31) In view of the dumping margin established, and the seriousness of the injury
     caused to the Community industry, it is considered necessary that amounts
     secured by way of the provisional anti-dumping duty should be definitively
     collected,
                                           18
 ---pagebreak--- HAS ADOPTED THIS REGULATION:
                                       Article 1
1.  A definitive anti-dumping duty is hereby imposed on imports of coumarin falling
    within CN code ex 2932 21 00 (Taric code 2932 21 00* 10) and originating in the
    People's Republic of China.
2.  The rate of the duty applicable is ECU 3 479 per tonne.
3.  Unless otherwise specified, the provisions in force concerning customs duties
    shall apply.
                                       Article 2
    The amounts secured by way of the provisional anti-dumping duty pursuant to
    Regulation (EC) No. 2352/95 shall be definitively collected in full.
                                       Article 3
    This Regulation shall enter into force on the day following 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 at Brussels,
                                          19
 ---pagebreak---                                                                   ISSN 0254-1475
                                                            COM(96) 103 final
                                              DOCUMENTS
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                                                             ISBN 92-78-01424-9
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