CELEX: 51987PC0507
Language: en
Date: 1987-10-16
Title: Proposal for a COUNCIL REGULATION (EEC) imposing a definitive anti-dumping duty on imports of urea originating in Libya and Saudi Arabia and accepting undertakings given in connection with imports of urea originating in Czechoslovakia, the German Democratic Republic, Kuwait, the USSR, Trinidad and Tobago and Yugoslavia and terminating these investigations (presented by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (87) 507
Vol. 1987/0255
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 ---pagebreak---    COMMISSION OF THE EUROPEAN COMMUNITIES
              »
                                                      COM(87 ) 507 final
                                                     Brussels , 16 October 1987
                                 Proposai for a
                            COUNCIL REGULATION ( EEC )
 imposing a definitive anti-dumping duty on imports of urea originating in
   Libya and Saudi Arabia and accepting undertakings given in connection
        with imports of urea originating in Czechoslovakia , the German
          Democratic Republic , Kuwait , the USSR , Trinidad and Tobago
              and Yugoslavia and terminating these investigations
C0M(87 > 507 final
 ---pagebreak---                                                                           ORIGINAL
                            :  EXPLANATORY MEMORANDUM
                                                                   € oH -
I.   PROCEDURE
1.      By  notice   published    in  the  Official  Journal   of  the  European
Communities^ the Commission announced the initiation of an anti-dumping
proceeding concerning imports of urea originating in Czechoslovakia , the
German DemptTratic Republic , Kuwait , Libya , Saudi Arabia , the USSR, Trinidad
and Tobago and Yugoslavia .
2.     The Commission also published a notice2 concerning supplementary
allegations made by the complainants with regard to the conditions under
which anti-dumping measures may be taken with retroactive effect .
3 . By Regulation (EEC ) No 1289/87 of 8 May 1987^ the Commission imposed a
provisional anti-dumping duty on imports of urea originating in the
above-mentioned countries . This duty was extended for a maximum period of
two months by Regulation (EEC ) No 2691 /87 of 3 September 1987^.
1 0J No  C 254, 11.10.1986, p. 3 .
20J  No  C 34, 12.2.1987, p. 3 .
30J  No  L 121 , 9.5.1987, p. 11 .
*0J  No  L 254, 5.9.1987, p. 20 .
                                                                                   I
 ---pagebreak---                                        - 2 -
4.     By notice published      in the Official Journal of the European
Communities^ the Commission extended the anti-dumping proceedings in order
to include imports of urea originating in Austria , Hungary, Malaysia ,
Romania , the USA and Venezuela .
II .  DUMPING
The weighted average dumping margins for each of the exporters concerned
was finally established as follows :
                                             %
a)   Saudi Arabia
        SAMAD / SAFCO                        55
b)   Kuwait
        PIC                                  36
c)   Trinidad and Tobago
        NEC                                  37
d)   Yugoslavia
        INA-PETROKEMIJ A/ INA-COMMERCE       78
e)   Libya
        NAPETCO                              58
f)   Czechoslovakia
        PETRIMEX                             36
g)   German Democratic Republic
        CHEMIE-EXPORT- IMPORT                51
h)   USSR
        SOJUZPROMEXPORT                      60
5oJ No C 271 , 9.10.1987
 ---pagebreak--- III .   INJURY
The main final findings are as follows :
1 . Imports from the above-mentioned countries increased from 95 188 tonnes
in 1984 to 1 034 051 tonnes in 1986 representing an increase by 986.3% .
2 . The market share held by these countries in the Community increased
from 2.45% in 1984 to 20.28% during the first nine months of 1986 .
3 . The prices of the dumped imports were signif icantly below the sales
prices of the Community producers .
4.    As far as the impact on the Community industry is concerned :
-   total production of urea fell from 5 567 000 tonnes in 1984 to 4 313 000
    tonnes in 1986 corresponding to a decrease by 22.5%;
-   capacity utilisation decreased from 85% in 1984 to 66% in 1986;
- despite a significant increase in consumption of urea in the Community /
    the market share held by Community producers in the Community dropped
    from 89% in 1984 to 65% in 1986;
-   in particular in France / Italy/ the United Kingdom and Ireland / the
    sales prices of the Community producers dropped signif icantly between
    1 July 1985 and 30 June 1986 . This decline was more important than the
    decrease in the costs of production of the Community producers . This
    lead to a significant decline in the prof itabi lity of the Community
    producers / who started incurring significant losses in 1986.
 ---pagebreak---                                        - 4 -
For these reasons it is considered that the Community industry suffered
material injury by reason of the dumped imports .
IV .   COMMUNITY INTEREST
In view of the particularly serious difficulties facing the Community
industry, it is considered that it is in the Community 's interests that
definitive action be taken .
V.    DEFINITIVE MEASURES
1.     Producers / exporters of urea in Czechoslovakia , the German Democratic
Republic , Kuwait , Trinidad and Tobago , the USSR and Yugoslavia offered
satisfactory undertakings , the effects of which will be a significant
reduction of future imports of urea from these countries to a reasonable
share of the Community consumption of urea .            With regard to these
countries , the investigations may be terminated .
2 . With regard to imports of urea originating in the remaining countries ,
the following definitive anti-dumping duties should be imposed on the net
f ree- at -Community frontier price , before duty :
     Libya             34%
     Saudi Arabia      40% .
3 . The provisional anti-dumping duties should be definitively collected
except with regard to imports of urea originating in Trinidad and Tobago
and Yugoslavia .
4.      The conditions for the imposition of protective measures with
rétroactive effect are considered to be fulfilled with regard to Libya .
 ---pagebreak---                                Proposai for a
                                                                    ' .i ORIGINAL
                          COUNCIL REGULATION (EEC )
  imposing a definitive anti-dumping duty on imports of urea originating in
          Libya and Saudi Arabia and accepting undertakings given in
  connection with imports of urea originating in Czechoslovakia , the German
  Démocratie Republie , Kuwait , the USSR, Trinidad and Tobago and Yugoslavia
                       and terminating these investigations
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community,
Having regard to Council Regulation ( EEC ) No 2176/84 of 23 July 1984 on
protection against dumped or subsidized imports from countries not members
of the European Economic Community*!, as amended by Council Regulation (EEC )
No 1761 /87 of 22 June 1987^, and in particular Articles 10 and 12 thereof,
Having regard to the proposal submitted by the Commission ,
After consultations within the Advisory Committee as provided for by the
above Regulation ,
Whereas :
A. PROVISIONAL ACTION '
1 . The Commission, by Regulation (EEC ) No 1289 /87 of 8 May 1987^, imposed
a   provisional   anti-dumping    duty  on  imports  of  urea  originating    in
Czechoslovakia , the German oemocratic Republic , Kuwait , Libya, Saudi
Arabia , the USSR, Trinidad and Tobago and Yugoslavia .         That duty was
extended for a maximum period of two months by Regulation (EEC )
No 2691 /874-
10J  No L 201 , 30.07.1984, p.   1.
20J  No L 167,  26.06.1987, p.   9.
30J  No L 121 , 09.05.1987, p.  11 .
40J  No L 254,  05.09.1987, p.  20 .
 ---pagebreak--- B.  SUBSEQUENT PROCFDUiiE
2.    Following the imposition or the provisional anti 'dumping duty the
Community producers , several exporters , importers and users of the product
concerned reouesced , and were granted , an opportunity to be heard by the
Commission . The Community producers , most of the exporters , some importers
and users also made written submissions making known their views on the
provisional duty regulation .
3.    Certain exporters and importers also requested to be informed of
certain    facts  and  essential   considerations  on  thè basis  of  which  thè
Commi ssi on intended to recommend definitive action and these requests were
granted .
4.      In   addition  to   the   investigations  leading  to  the   provisional
détermination the     Commission carried out further investigations at the
premises of the following companies :
EEC producers
Nitrogen Eireann Teoranta ( Dublin )
Importers
Ferchimex NV ( Antwerpen ), importer related to Sojuzpromexport ( USSR )
USC ( Industrial ) Ltd ( London )
Cerealtoscana SpA ( Altopascio )
Sadepan Chimica (Viadana )
SIPA ( Paris )
Unifert France SA ( Paris )
 ---pagebreak---                                        - 3 -
C.   DUMPING
i ) Nornal value
a ) Saudi Arabia
5.   Normal value was definitively determined on thè basis of thè domestic
prices of SAFCO, which sold thè urea produced by SAMAD during thè period of
investigation and provided sufficient evidence .
6.    For this purpose the sales prices charged by SAFCO to independent
customers were used .      This approach was adopted because it is considered
inappropriate to take account of any transfer price between related
companies or branches of any exporter when establishing normal value by
means of domestic prices , these prices not being those paid or payable in
the ordinary course of trade for the like product .           Accordingly, only
prices to independent purchasers were used for the determination of normal
value .
The evidence gathered during the investigation showed that SAMAD and SAFCO
form an integral part of one corporate group ( SABIC ) . The fact that they
are legally separate entities does not alter the existence of a single
economic entity .   What , is relevant is not the legal structure , but the fact
that SAFCO acts as sales company with regard to the product concerned
manufactured by SAMAi> and has functions similar to that of an internal
sales department .
The exporter claimed that because of the differences in the quantities sold
on the domestic market and for export to the Community, normal value should
be based on a restricted sample of transactions which most resembled the
quantities sold for export .
The Council agreed with the Commission that such a claim was tantamount to
a claim for allowances to be made for differences allegedly affecting price
comparability and that such allowances should only be granted in conformity
with the objective criteria laid down in Article 2(10 ) of Regulation ( EEC )
No 2176 /84 . Therefore , normal value was finally determined on the basis of
the prices relating to all domestic transactions during the period under
investigation .    As for the question of allowances, see recitals 18-21
below .
 ---pagebreak--- 7.    Given that on the domestic market both treated and untreated urea was
sold , normal value was determined separately for each of these types .
b ) Kuwait
8 . In seeking to determine the normal value account was taken of the fact
that there were no significant sales of the like product on the domestic
market of this country .    It was therefore decided that the normal value
should be established on the basis of the constructed value .
The constructed value was determined by adding cost of production and a
reasonable margin of profit . The cost of production was computed on the
basis of all costs , both fixed and variable , in the ordinary course of
trade , in the country of origin , of materials and manufacture , plus a
reasonable amount for selling , administrative and other general expenses .
For the provisional determination of normal value a profit margin of 10%
had been added to the cost of production . The exporter argued, however ,
that this margin was too high , given the losses this company and other
producers of urea in the world had incurred for a considerable period of
time .    In fact , it was suggested that for this reason no profit margin
should be added .
However , in the light of the clear wording of Article 2(3)(b)(ii ) of
Regulation ( EEC ) No 2176 / 84 providing that constructed value shall be
determined by adding cost of production and a reasonable profit margin , the
question is not one of whether or not a profit margin should be added , but
rather of what constitutes a reasonable margin of profit . On the basis of
the facts available it is considered that it would be unreasonable to add
less than 2.5%, this being the absolute minimum required for the sector
concerned in order to allow a producer to earn the funds necessary to
maintain a plant in up- to-date technical conditions .
 ---pagebreak---                                     - 5 -
The producer of urea in Kuwait had suggested, as an alternative , that
normal value be established on the basis of export prices to third
countries rather than on the basis of constructed value . This suggestion
could not be followed because it was made at an extremely late stage of the
investigation and, given the situation of greatly depressed prices on the
world market , it appeared inappropriate to use export prices to third
countries . Indeed, under depressed world market prices there is a strong
probability that if an exporter dumps on one market , he will also be
dumping on other markets .
c ) Trinidad and Tobago
9 . In seeking to determine the normal value account was taken of the fact
that there were no significant sales of the like product on the domestic
market of this country .    It was therefore decided that the normal value
should be established on the basis of constructed value .
The constructed value was established by adding cost of production and a
reasonable profit margin . The cost of production was computed on the basis
of all costs , both fixed and variable , in the ordinary course of trade , in
the country of origin , of materials and manufacture , plus a reasonable
amount for selling , administrative and other general expenses .
The producer in Trinidad and Tobago requested that amortization and
depreciation be excluded from the cost of production on the grounds that it
had recently started production of the product concerned and , therefore ,
that these costs should not be considered as being incurred in the ordinary
course of trade . This request cannot be granted because these items are
normal elements of the costs of production of a company in a market economy
country and reflect actual expenses . It was also requested that financing
costs relating to the construction of the plant be excluded because
otherwise the Community would be acting in contravention of Articles 129
and 185 of the third Lom6 Convention . However , such a request cannot be
granted because these Articles are not relevant for the purpose of
establishing normal value .    Account can only be taken of the stage of
development of the exporting country when examining what measures are most
                                                                              λΟ
 ---pagebreak---                                     - 6 -
appropriate in the Community 's interest , but not when determining dumping ,
for which objective criteria have to be applied . This interpretation is in
line with Article 13 of the Agreement on Implementation of Article VI of
the GATT .
The company also requested that part of the costs relating to the
construction of a pier used for the shipment of products including urea be
excluded from the final determination of normal value . Given that during
the on- the- spot investigation these amounts were found to have been
effectively charged to the urea plant during the period under investigation
and that afterwards no conclusive evidence to the contrary had been
received , such a request could not be granted .
As far as the profit margin was concerned , it was argued that it was
unreasonable to stick to the figure of 7% used for the preliminary
determination , mainly because market prices during the period under
investigation were depressed and urea producers throughout the world were
unable to make profits .     For the reasons set out in recital 8 it is
considered reasonable to add a profit margin of 2.5% to the costs of
production of the producer in Trinidad and Tobago .
d ) Yugoslavia
10 .  As a result of the lack of co-operation on the part of the Yugoslav
producer at the initial stage of the investigation , the provisional
determination of normal value was based on the facts available , i.e. the
price payable on the domestic market as alleged in the complaint . Although
at a later stage of the investigation the company concerned had offered to
co-operate with the Commission , no evidence with regard to normal value was
submitted . Therefore the Council confirms the provisional determination
made by the Commission .
 ---pagebreak---                                      - 7 -
e) Libya
11 . Given that no comments were made by the producer concerned after the
Commission 's provisional determination and in the absence of sufficient
co-operation and any better information , normal value is finally
determined, in accordance with Article 7(7)(b) of Regulation ( EEC ) No
2176 /84, on the basis of the facts available , i.e. the cost of production
put forward in the complaint . With regard to the rate of the profit margin
to be added to the costs of production , it is considered appropriate to use
the same figure as for the producers in Kuwait and Trinidad and Tobago (see
recital 8 ).
e ) Czechoslovakia , the German démocratie Republic and the USSR
12 . In order to arrive at a provisional détermination of normal value the
Commission took account of the fact that Czechoslovakia , the German
Démocratie Republic and the USSR do not hâve market économies .      For the
purposes of establishing whether the imports from these countries were
dumped , déterminations were therefore based on the normal value in a market
economy country .    In this connection the complainants had suggested the
Austrian market .
13 . The Commission , fop thè reasons set out under recital 16 of Regulation
(EEC ) No 1289 /87, considered, however , that for thè purpose of thè
provisionai determination , Saudi Arabia constituted, in this case , an
appropriate and not unreasonable choice as an analogue country .
14.    The producers in Czechoslovakia and the USSR did not contest this
choice after the imposition of the provisional anti-dumping duty .
The producer in the German Democratic Republic requested that normal value
be determined on the basis of its own costs of production structure rather
than on the normal value in a market economy third country . However , this
request could not be granted because such method does not fall within one
of the possibilities provided for under Article 2(5 ) of Regulation ( EEC )
No 2176 /84 .
The Council therefore confirms the Commission's provisional détermination .
 ---pagebreak---                                     - 8 -
i i ) Export pri ces
15 . Export prices were generally determined on the basis of the prices
actually paid or payable for the products sold for export to the
Community .
16 . With regard to exports to the Community of the product originating in
the USSR , it was found that the majority were made through a subsidiary
company in the Community . Although in such circumstances the export price
is normally reconstructed , pursuant to Article 2(8 ) ( b) of Regulation ( EEC )
No 2176 /84, the Commission considered it sufficient for the purpose of a
preliminary determination to determine the export price for these
transactions on the basis of the invoice value paid by the importer to the
exporter . Indeed there was reason to believe that the invoice prices were
not very substantially different from the level which would have been
reached by reconstructing the export price .
After the imposition of the provisional anti-dumping duties an on- the- spot
investigation took place at the premises of the importer related to the
USSR exporter with the primary aim of verifying the prices at which the
imported product was first resold by this importer to independent
customers .     On the basis of these data export prices were finally
reconstructed pursuant to Article 2(8)(b) of Regulation ( EEC ) No 2176/84.
As for the remainder of the exports made during the investigation period by
the USSR exporter , i.e. those made to unrelated importers, export prices
were finally determined on the basis of prices actually paid .
 ---pagebreak---                                         - 9 -
iii ) Conparison
17 . In comparing normal value with export prices account was taken , where
appropriate, of differences affecting price comparability in conformity
with the rules laid down in Article 2(10 ) of Regulation ( EEC ) No 2176/84 .
a ) Differences in quantities
18 . The producer / exporter in Saudi Arabia requested that an allowance be
granted pursuant to Article 2 ( 10 ) ( b ) ( i ) of Regulation ( EEC ) No 2176 / 84 in
order to take account of the differences in the quantities sold on the
domestic market and for exports to the Community .             To this end it was
suggested that the quantity discount , which was granted on the domestic
market for sales of 5 000 tonnes or more , should be applied to all domestic
sales in order to make them comparable with the quantities exported .
This request was not granted because no convincing evidence was supplied
that all the criteria set out in Article 2(1 0 ) ( b) (i ) or ( ii ) of Regulation
( EEC ) No 2176 / 84 were met . The Council points out that account had already
been taken of differences in quantities when determining normal value on
the basis of the weighted average of all prices actually paid and when
making adjustments for the differences in the conditions and terms of sale .
b ) Differences in conditions and terms of sale
19 .   As far as differences in conditions and terms of sale were concerned,
allowances    were     limited  to  those      differences  which    bore  a   direct
relationship to the sales under consideration , such as credit terms,
banking charges , transport , insurance , commissions , warehousing, salesmen 's
salaries , packaging and handling .
                                                                                       0
 ---pagebreak---                                        - 10 -
20 .    Requests   for  other  adjustments   such   as differences   in  technical
assistance and publicity were not granted because satisfactory evidence
showing that differences in costs were directly related to the sales under
consideration was not submitted .
The   producer / exporter   in  Saudi   Arabia   also   requested  an   additional
adjustment for differences in level of trade on the grounds that all sales
on the domestic market were made to the end-users , i.e. individual farmers
or agricultural companies , except for supplies to one customer who was a
large industrial user of urea who was , in principle , entitled to an
additional discount , whereas more than 70% of shipments to the Community
were allegedly for industrial use to customers processing urea into other
types of fertilizers .
This request was not granted because it was considered that it was             not
proven in a satisfactory way that there was a difference in the level           of
trade since the bulk of the sales , both on the domestic market and on         the
export side , was made to end-users . Furthermore , it was admitted by         the
producer / exporter that the customer concerned in Saudi Arabia had            not
benefited from such discount during the period under investigation .
21 .   The comparison of export prices with normal value was made on the
following basis :
Saudi Arabia                                       ex-warehouse
Kuwait and Trinidad and Tobago                     FOB
                                                   F0B
Yugoslavia , Libya ,                   )
Czechoslovakia , the German            )           ex-works
                                                   ex-works
Démocratie Republic and the USSR       )
iv ) Dumping nargins
22 . The margin of dumping was calculated for each exporter as the amount
by which the normal value as established exceeds the price for each export
transaction to the Community .
 ---pagebreak---                                     - 11
The examination of the facts showed the existence of dumping in respect of
the producers/ exporters involved in this proceeding .
23 . These margins vary according to the exporter , the weighted average
margin for each of the exporters concerned being as follows :
                                    %
a ) Saudi Arabia
    SAMAV / SAFCO                   55
b ) Kuwait
    PIC                             36
c ) Trinidad and Tobago
    NEC                             37
d ) Yugoslavia
    INA                             78
e ) Libya
    NAPETCO                         58
f ) Czechoslovakia
    Petrimex                        36
g ) German Democratic Republic
    Chemie-Export -Import           51
h ) USSR
    Sojuzpromexport                 60
 ---pagebreak---                                      - 12 -
ι>.  ΐΝϋυκγ
24 .  With regard to the injury caused by the dumped imports the evidence
available shows that imports of urea into the Community from
Czechoslovakia , the German Democratic Republic , Kuwait , Libya , Saudi
Arabia , the USSR , Trinidad and Tobago and Yugoslavia increased from 95 188
tonnes in 1984 to 236 245 tonnes in 1985 , i.e. by 148% . During the first
nine months of 1986 these imports amounted to 722 455 tonnes . Over the
full year 1986 these imports amounted to 1 034 051 tonnes , representing an
increase of 338% compared with 1985 .
The imports ( in tonnes ) from each of the countries involved in these pro -
ceedings increased between 1984 and 1986 as follows :
                           1984         1985            1986           1986
                                                      (9 months )  ( full year )
Czechoslovakia             34 257        33 621        30 951          42 631
German Democratic
Republic                   33 771        26  180       72 274          89 739
Kuwait                     -
                                         11  212       46 709          46 710
Libya                        2 188       15  252      182 369         284 303
Saudi Arabia               -
                                         20  000      110 475         110 475
USSR1                        9 223       77  650      154 834         270 849
Trinidad and Tobago        -
                                         30  209       94 871         147 936
Yugoslavia                 15 749        22  121       29 972          41 408
25 . This development represented an increase in the market share held by
these countries in the Community from 2.45% in 1984 to 5.85% in 1985 and to
20.28% during the first nine months of 1986 .         If the quantity of urea
manufactured by the EEC producers and destined for captive use is deducted
from total consumption in the Community , this development represents an
increase in market share held by the dumped imports from 3.48% in 1984 to
8.20% in 1985 and to 26.29% during the first nine months of 1986 . If this
development is related to the use of urea in the agricultural sector only ,
assuming that 90% of the dumped imports are sold in this sector , such a
development represents an increase in market share from 4.06% in 1984 to
9.37% in 1985 and to 29% during the first nine months of 1986 .
lAccording to the figures submitted by the USSR exporter , the exports had
  been even higher , in particular in 1985 .   However , no conclusive evidence
  was received .
 ---pagebreak---                                      - 13 -
26 . It was argued by several parties that , when assessing the impact of
the dumped imports on the Community industry, account should be taken of
the fact that Community producers themselves purchased part of the dumped
products .
In this respect it was found that during the period under investigation
approximately 108 000 tonnes of urea originating in the German democratic
Republic , Libya , Trinidad and Tobago and the USSR had been imported
directly or indirectly by Community producers of urea .
a ) during the period under investigation the French producers purchased
    approximately 68 000 tonnes of the dumped products . These transactions
    took place mainly because one of the Community producers had closed down
    its main plant for nine months in 1985 in order to improve efficiency
    and this had resulted in insufficient material available for supplying
    domestic customers . According to the French producers they also wanted
    to prevent some of their customers from switching to another source of
    supply . On the basis of the information available the resale prices of
    the imported product were similar to the prices charged by the producers
    for their own product .
b) The Italian producers purchased the total quantity of urea originating
    in the USSR which entered Italy during the period under investigation ,
    i.e . 16 881 tonnes .
    Approximately 4 500 tonnes of this quantity was resold to regular
    customers at prices significantly lower than the sales prices charged
    for the product manufactured in Italy . With regard to the remaining
    quantity the resale prices were similar to those charged for the product
    manufactured and sold in Italy .
c ) In 1986 the Portuguese producer of urea purchased 17 182 tonnes of the
    product concerned originating in Libya and approximately 6 000 tonnes of
    urea originating in the German democratic Republic .     The reason for
    these transactions was a major breakdown at this producer 's plant .
 ---pagebreak---                                       - 14 -
Under    these    circumstances/   the    Commission /    in    its  preliminary
determination/ decided that the French and Italian producers who imported
and resold the dumped product should not be excluded from the Community
industry affected by the dumped imports .        The Council notes that the
quantity imported and resold by these producers represented a minor share
(0.61% and 5.34% in 1985 and the first nine months of 1986 respectively) of
total sales of agricultural urea by the complainant producers in the
Community and only a minor part / representing 0.29% and 2.06% respectively
of the total consumption in the Community / was resold at particularly low
prices . Insofar as injury was caused to Community producers by these low
priced sales/ the Council considered that this injury was self-inflicted .
Given the limited importance of the transactions in question and the fact
that the bulk of the imports made by Community producers were resold at
prices corresponding to the producers' own prices/ the Council took the
view that the producers in question should not be excluded from the
Community     industry    within    the   meaning      of    Article   4(5 )  of
Regulation 2176/84.       However / since the Portuguese producer had no
significant production of its own in 1986/ the Council considered it
appropriate to exclude this company from the injury assessment .
Several parties interested in the outcome of these proceedings argued that
account should be taken of dumped imports by Community producers after the
end of the investigation period . This argument has to be rejected since it
would be contrary to Article 7(1 )( c ) of Regulation (EEC ) No 2176/84/ which
provides that the investigation of dumping shall cover the period prior to
the initiation of the proceeding / to take into consideration dumped imports
made after the end of the investigation period .
27 .   It was found that between 1984 and 1986/ assuming that the trend
during the first nine months continued during the last three months of
1986/ consumption of urea in the Community increased from 2 737 503 tonnes
to 3 734 977 tonnes, i.e. by approximately 36% on the free market and from
2 108 503 tonnes to 3 054 009 tonnes , i.e. by approximately 44% for
agricultural purposes .
 ---pagebreak---                                      - 15 -
When examining the impact of the dumped imports on the Community market it
was found that the total production of urea fell from approximately
5 567 000 tonnes in 1984 to 4 870 000 tonnes in 1985 and to 4 313 000
tonnes in 1986 ( assuming that the rate of production for the first nine
months of 1986 continued during the remaining three months of 1986 ), i.e.
by 12.5% and 11.4% in 1985 and 1986 respectively . The production of urea
available for the free market ( i.e. total production minus captive use)
fell from an estimated 4 415 321 tonnes in 1984 to an estimated 3 710 000
tonnes in 1985 and to an estimated 3 228 000 tonnes in 1986, assuming that
the rate of production for the first nine months of 1986 continued during
the remaining months of 1986. This development would represent a decrease
of 16% and 13% in 1985 and 1986 respectively, in comparison with preceeding
years .
28.     As far as the capacity utilisation of the Community industry is
concerned, it decreased from approximately 85% in 1984 to approximately 77%
in 1985 and further to approximately 66% in 1986 . Separate data concerning
the capacity utilisation relating to the production of urea for the free
market only were not available because figures relating to production
capacity were not distinguished according to future uses of the product .
29 .   Total sales in the Community of urea manufactured in the Community
increased from approximately 3 587 000 tonnes in 1984 to approximately
3 615 000 tonnes in 1985 .        In 1986 they decreased to approximately
3 461 000 ( assuming that the trend for the first nine months of 1986
continued during the last three months of 1986), i.e. to a level 3.5% below
that of 1984 . The sales of the Community producers of urea destined for
the free market in the Community decreased from 2 435 771 tonnes in 1984 to
1 782 315 tonnes during the first nine months of 1986 . Assuming that the
trend of sales over the first nine months of 1986 continued during the
remaining three months of 1986, sales would have amounted to 2 376 420
tonnes in 1986 corresponding to a decrease of 2.44% compared to 1984 .
These companies' sales of urea for agricultural purposes remained stable
during the same period ( 1984-86 ).
 ---pagebreak---                                          - 16 -
Community producers’       sales of urea outside the Community fell from
approximately 1 901 000 tonnes in 1984 to approximately 1 492 000 in 1985
and to approximately 728 000 tonnes in 1986 ( asssuming that the trend
during the first nine months continued during the last three months ).
30 .   The share of the non-captive urea market in the Community held by the
Community producers amounted to 89% in 1984 .            In 1985 it decreased to
85.27%    and for  the   first  nine   months   of  1986 it  decreased further to
approximately 65% .    These producers' share of the market of urea used for
agricultural    purposes     decreased    from   approximately  87%   in  1984  to
approximately 83% in 1985 and to approximately 61% for the first nine
months of 1986 .
In France and Italy , which represented the main markets for agricultural
urea before the Accession of Spain and Portugal to the Community , the
Community producers' share of the agricultural urea market dropped from
approximately 95% and approximately 88% respectively in 1984 to
approximately 74% and approximately 71% during the first nine months of
1986 .
In the United Kingdom the market share held by the domestic producer of the
freely available urea market decreased from approximately 44% in 1984 to
approximately 39% during the first nine months of 1986 .            In Ireland the
market share held by the domestic producer decreased from approximately 78%
in 1984 to approximately 54% during the first nine months of 1986 . This
development reflects the fact that the Community producers could not take
advantage of the increased consumption which was totally absorbed by the
dumped imports .
31 . As far as prices and profitability are concerned , it was considered
appropriate to examine the following :
   i ) the development of the sales prices at which the complainant producers
       sold urea throughout the period from 1 July 1985 to 30 September 1986
       in the Community ;
 ii ) the relationship between these prices , the cost of production incurred
       by the Community producers of urea during this period and the
       profitability relating to their sales of urea in the Community;
 ---pagebreak---                                     - 17 -
iii ) the relationship between the prices charged by the complainant
      producers and the prices at which the dumped products were sold in the
      Community .
Considering that the findings relating to the Italian and French markets
laid out in recitals 31 to 32 of the provisional duty regulation were not
significantly disputed after the imposition of the provisional anti-dumping
duty, the Council confirms these findings .
32 . After the imposition of the provisional duty the Commission further
investigated the position of the Community producers in the United Kingdom
and Ireland representing 6.4% and 4% respectively of the agricultural urea
market in the Community .
With regard to the domestic producer in the United Kingdom, it was found
that costs of production (per unit) in 1985 were 15% higher than in 1984
whereas the average net sales price increased by approximately 13% within
the same period . It was also found that during the first nine months of
1986 compared to the first nine months of 1985, the costs of production per
unit remained relatively stable whilst the average net price per unit after
discounts had fallen by 17% .     It was also found that his sales prices
before discounts on the home market had fallen by 14.9% between 1 July 1985
and 30 June 1986, leading to a significant decrease in profitability . It
was found that this producer started incurring losses in 1985 and the
losses increased drastically during the first nine months of 1986.        In
addition a weighted average margin of price undercutting of 4.8% was found
with regard to sales during the period under investigation .
In Ireland the sales prices of the sole domestic producer fell by 14.3%
between January 1986 and June 1986, the period in which the dumped imports
first achieved a significant market share and the Irish producer 's sales
decreased correspondingly . Weighted average margins of price undercutting
varying between 18% and 23% were also found on this market .
 ---pagebreak---                                       - 18 -
For this producer / costs of production rose by 41.6% between 1984 and 1985
whereas net sales prices on the domestic market increased by 7.5% . During
the first nine months of 1986, the cost of production per unit had
decreased by 20.4% compared with the same period in 1985 whilst the average
unit sales price after discounts had fallen by 26.9% .
As far as the profitability of this producer is concerned, profits were
found to have fallen by approximately 17% in 1985 and approximately 7% in
the first nine months of 1986 .
33 . With regard to the prices and prof itabi lity of producers in Spain , the
Council confirms the position taken by the Commission in récital 33 of
Régulation ( EEC ) No 1289 /87 which has not been contested .
34 .  In establishing the impact of the dumped imports on the Community
industry the effects of all dumped imports from all countries concerned
were considered .     In analysing whether cumulation was appropriate , the
Commission considered whether the dumped imports in question contributed to
the material injury sustained by the Community . In reaching its conclusion
the Commission considered the comparability of the imported products in
terms of chemical and physical characteristics , the extent to which each of
the imported products competed in the Community with the like product of
the Community industry, the volumes imported and the increase in volume of
imports since 1984 from each of the exporting countries .
 ---pagebreak---                                      - 19 -
With regard to the comparability of the imported products, which were
mainly in prilled form, it was found that both within the agricultural and
technical sectors , the products were used interchangeably irrespective of
the country of origin, the chemical and physical characteristics of the
products concerned being very similar . It was also found that the product
originating in each of the exporting countries involved in these
proceedings competed with the Community product .
As to the imports of the product originating in Trinidad and Tobago , it was
argued that these did not compete with the product originating in the other
third countries involved in the proceeding since the material produced and
exported to the Community was of the granulated type used for blending into
mixed fertilizers , whereas the type originating in the other countries
involved in this proceeding and sold in the Community was the prilled
material . Furthermore, it was argued that granulated urea was generally
sold at prices higher than those charged for prilled urea .
However , it was found during the investigation that granulated and prilled
urea are like products .        Firstly, prilled and granulated urea are
chemically identical .    Secondly, the physical differences such as unit
size , crushing strength or abrasion resistance , do not significantly affect
the interchangeability of , both types . Also , no evidence was found to show
that during the period under investigation a premium was paid for
granulated urea . As far as import prices of the product originating in
Trinidad and Tobago are concerned, it was found that the average price
charged by the exporter in Trinidad and Tobago during the period under
investigation was not higher than that charged during the same period by
most other exporters involved in this proceeding .
                                                                              ÿ*
 ---pagebreak---                                      - 20 -
As far as the volumes of the dumped imports are concerned , and in
particular their increase between 1984 and 1986, the following development
took place :
Czechoslovakia                       +       24%
Germán Democratic Republic           +      165%
Libya                                + 12 893%
USSR                                 +    2 836%
Yugoslavia                           +      162%
With regard to the newcomers on the market , i.e. Kuwait , Saudi Arabia and
Trinidad and Tobago , who started exporting to the Community in 1985 , their
exports increased between 1985 and 1986 as follows :
Kuwait                               +      316%
Saudi Arabia                          +     452%
Trinidad and Tobago                  +      389%
On   the  basis   of  such  analysis the   Commission  concluded that  for  the
purposes of assessing the injury sustained by the Community industry regard
should be paid to the effect of the dumped imports cumulated from all
exporting countries concerned .
The Council confirms these findings and conclusions .
35 .    Under   these  circumstances  the   Council  finds  that the  Community
industry is materially injured by reason of the dumped imports .
36 .  Examination took place to see whether injury had been caused by other
factors such as the worldwide glut of urea which , according to a number of
exporters and importers , had led to overall price depression and to a loss
of export markets for the Community producers . Furthermore , some parties
suggested that , if it were established that Community producers were
encountering difficulties , these were due to severe competition amongst the
Community producers themselves and not to imports from third countries .
 ---pagebreak---                                     - 21 -
On the basis of the information available it appears that since 1984 there
has been a significant worldwide unused production capacity and an excess
of production over consumption of urea and other fertilizers which / even in
the absence of dumped imports / might have led to a fall in prices in the
Community/ particularly as the fertilizer market is a highly transparent
market in which information in general is readily available to buyers and
sellers .
It was also found/ that due to increased production capacity        in third
countries / Community producers lost part of their export            markets .
Therefore, the impact of the dumped imports has been even more       strongly
felt by the Community industry . In addition , account has to be    taken of
the fact that only the dumped imports captured entirely the increase in
consumption which took place within the Community over the last three years
( see recital 27 ).
With regard to intra-Community sales it was found that significant
quantities of urea for agricultural applications were sold on the French
market by Community producers established in other Member States . Since
urea is a very price sensitive product , these producers had also to align
their final sales prices on those of the dumped imports by retroactively
granting rebates . No significant sales by other Community producers took
place in Italy .
As to imports from third countries not involved in these proceedings which
took place prior to the initiation of these proceedings , the Commission
examined the shares held by each of these exporting countries on the
Community market , on the basis of the prima facie evidence submitted by the
complainants . It was found that these countries did not hold market shares
important enough to contribute significantly to the alleged injury and
they, therefore , were not included in the original proceedings .
It was also argued that account should be taken of imports from third
countries not involved in the proceedings, but which had significantly
increased after the initiation of the present proceedings . In this respect
 ---pagebreak---                                      - 22 -
the Commission received, in September 1987, a request from the complainant
asking that imports from Austria , Hungary, Malaysia , Romania , the USA and
Venezuela be included in the present anti-dumping proceeding . To this end
the Commission published a notice (OJ No C 271      , 9.10.1987 ) extending the
proceedings .
37.    With regard to the export prices charged for supplies to the
Community, several exporters argued that they had no choice but to sell at
the low prices found by the Commission during the investigation because of
the worldwide depressed price level of this product .
In this respect the Commission found contradictory information which showed
that prices outside the Community were sometimes higher and sometimes lower
than within the Community . In any event , the Council confirms the fact
that , although prices for a particular product are depressed outside the
Community, that does not constitute any justification whatsoever for
exporters to sell their products at dumped prices within the Community nor
does it constitute a reason for not protecting the Community industry if
and when it has been established that it suffered material injury because
of dumped imports .
38 .    The   Council  took into  account   the   facts   mentioned  above  and
considered that the substantial increase in dumped imports and the
particularly low prices at which they were offered for sale in the
Community were major factors in forcing the Community industry to align its
prices downwards to levels insufficient to enable it to cover its costs .
In particular for a commodity such as urea , for which the purchase price
appears to be the determining factor and for which the loyalty between
supplier and customer appears to be of little or no importance , low priced
offers   from  outside  are bound  to  have  serious   adverse effects on the
domestic industry, more especially in this case as producers are deprived
of the benefit of an increased consumption .         This led the Council to
determine that , despite the existing over-capacity and glut , the effects of
the dumped imports of urea originating in the countries concerned in this
proceeding, taken in isolation, have to be qualified as constituting
material injury to the Community industry concerned .
                                                                                &
 ---pagebreak---                                     - 23 -
E.   COMMUNITY INTEREST
39.    Farmers' associations argued that it was not in the Community 's
interest that action be taken as it would increase the purchase price of
urea to be paid by farmers . However, no evidence was submitted to show
that protective measures would have a significant impact on the costs of
production of farmers or that they would be prevented from passing on such
an increase to the consumers .
Spanish users of the technical type of urea ( used for the production of
glues and resins) put forward that technical urea should be excluded from
any definitive measure because protective measures would have a serious
impact on the production of glues and resins in Spain as well as on the
users of these derived products such as the manufacturers of particle
board . However , the present proceedings concern imports into the entire
Community and not only into Spain .      Similar submissions from users of
technical urea in other Member States had not been made .          Also , the
exclusion of imports of a particular type of the product concerned in one
Member State would be very difficult , if not impossible , to do for reasons
of customs control .
Furthermore , it has not been proven that the disadvantages to users of urea
( agricultural and technical ) which might result from taking protective
measures would outweigh the benefits to the Community which would result
from the introduction of protective measures aimed at creating market
conditions under which Community producers of urea would be able to produce
and sell the product concerned in the Community without incurring major
losses due to significant imports at dumped prices .
 ---pagebreak---                                     - 24 -
40.  It was also argued that protective measures would discourage Community
producers of urea from reducing their sales prices of the product concerned
to reflect the substantial fall in the price of gas , the main raw material
in the production of urea , which has occurred since the beginning of 1986 .
However , it was found that during the period under investigation the prices
of Community producers generally decreased by much more than the reduction
in their costs of production .
One exporter argued that anti-dumping measures might , in the present case ,
have a counter-productive effect because , due to the expected reduced
imports into the Community competition on third markets would increase and
therefore lead to a further loss of exports for Community producers . The
Council considered that it was difficult , if not impossible , to predict
whether or not protective measures would have negative effects on the
export activities of Community producers .
41 .   Furthermore , it was argued that it was not in the Community 's
interests to take protective measures against certain countries such as
Trinidad and Tobago , Yugoslavia , Kuwait and Saudi Arabia in the light of
the special features of the relations between the Community and these third
countries .
The Council considered that , although good relations with these countries
represent a great interest to the Community , normal trade relations imply
that sales do not take place at dumped prices . Also , the Community would
be acting in a discriminatory manner if it took protective measures against
exporters from some countries which sold at dumped prices in the Community
but not against exporters from other countries which were engaged in the
same practices .
42. In view of the particularly serious difficulties facing the Community
industry the Commission has come to the conclusion that it is in the
Community 's interest that definitive action be taken .
The Council confirms this conclusion .
 ---pagebreak---                                      - 25 -
F.   UNDERTAKINGS
43 .   The following producers / exporters offered undertakings pursuant to
Article 10 of Counci l Régulation ( EEC ) No 2176/84 :
- Czechoslovakia :                   Petrimex    Foreign    Trade    Company  Ltd
                                     ( Bratislava)
- the German Démocratie Republic     Chemie- Export - Import ( Berlin )
- Trinidad and Tobago                National Energy Corporation of Trinidad
                                     and Tobago Ltd ( Port of Spain )
- Kuwait                             Petrochemical Industry Company ( Kuwait )
- the USSR                           Sojuzpromexport ( Moscou )
- Yugoslavia                         INA-Petrokemi ja (Kutina) and
                                     INA Commerce ( Zagreb )
These undertakings were acceptable to the Commission on the grounds that
they were considered to bring adequate relief to the Community industry
because they will reduce future imports of urea from these countries to a
resonable share of the Community consumption of urea .          Furthermore, such
remedies are also, in so far as they relate to developing countries, in
conformity with Article 13 of the GATT Anti-Dumping Code .
G.   DUTY
44. With regard to the product concerned originating in Libya and Saudi
Arabia , the action should take the form of definitive anti-dumping duties .
Having regard to the extent of the injury caused, the rate of such duty
should be less than the dumping margins finally established but adequate to
remove the injury caused .
 ---pagebreak---                                      - 26 -
45 . In order to determine the amount of duty necessary to eliminate the
injury suffered by the Community industry , the Council considered, in
particular , the selling price necessary to cover the cost of production
incurred during the period from 1 July 1985 to 30 September 1986 and to
provide an adequate profit margin to the Community industry and the gap
between this target and the import prices of dumped urea in the Community .
Having given these elements careful consideration , the Commission found it
appropriate for the provisional duty regulation to determine the amount of
the duty at such a level that a representative Community producer was
enabled to reach breakeven level on the basis of the costs of production
incurred during the period from 1 July 1985 to 30 September 1986 . The
Community industry argued, however , that this was unjustified because in
order to make new investments a producer of urea or a similar product would
normally need a profit margin of at least 15% . In view of the nature of
the product concerned, the Council considered, however , that it would not
be justified to add such a profit margin to the cost of production . It was
therefore considered reasonable to add a profit margin of 2.5%, which
appears necessary to enable a producer of urea to maintain a plant in
up- to-date technical conditions . The representative Community producer was
chosen by taking into consideration the company 's size , the variety, the
age and the efficiency of the production installations and the overall
production costs . On this basis the Commission calculated the following
rates of duty of» the net f ree-at-Community frontier price , before duty :
     Czechoslovakia :              19.5%
     German Democratic Republic :  17.5%
     Kuwait :                      17.5%
     Libya :                       34%
     Saudi Arabia :                40%
     USSR                          45.9%
46 .    Since the above-mentioned exporters in Czechoslovakia , the German
democratic Republic and the USSR are the exclusive exporters of urea from
these countries, and their undertakings cover all exports of the product
originating in these countries , all imports of urea originating in
Czechoslovakia , the German democratic Republic and the USSR can be excluded
from the definitive duty .
 ---pagebreak---                                         - 27 -
As far as imports of urea originating in Kuwait , Trinidad and Tobago and
Yugoslavia are concerned, it was found that the exporters investigated
actually constituted the sole exporters to the Community and that it is
unlikely that in these countries other exporters will start exporting to
the Community . Therefore , these countries may also be excluded from the
definitive anti-dumping duty .
H.    COLLECTION OF PROVISIONAL bUTY
47.      In view of the importance of the dumping margins found and the
seriousness of the injury caused to the Community producers, the Council
considers it necessary that amounts secured by way of provisional
anti-dumping duty shall be collected , either in full or to a maximum of the
duty definitively imposed in these cases where the amount of the definitive
duty is less than the amount of the provisional duty . However , collection
is considered inappropriate with regard to the products originating in
Trinidad and Tobago and Yugoslavia in order to provide for special and
differential treatment contemplated by Article 13 of the GATT Anti-dumping
Code .
I.    RETROACTIVITY
48 .   With regard to the allegations made by the complainants in connection
with the conditions under which anti-dumping measures may be taken with
retroactive effect , it is considered appropriate not to take protective
measures with retroactive effect with regard to the countries below for the
following reasons :
- since the imports of urea originating in Czechoslovakia , the Germán
     bemocratic Republic , Kuwait , Trinidad and Tobago , the USSR and
     Yugoslavia are excluded from definitive duties , they cannot be subject
     to measures with retroactive effect ;
- since the imports of urea originating in Saudi Arabia ceased several
     months prior to the initiation of the present proceedings, the Council
     considers that the conditions for the imposition of anti-dumping duties
     with retroactive effect as required by Article 13(4 ) ( b),_ first indent ,
     of Regulation ( EEC ) No 2176 /84 are not fulfilled .
 ---pagebreak---                                             - 28 -
49 .     However , it is considered that thè conditions Laid down in Artide
13(4)(b)(i ) of ReguLation No 2176 / 84 are fulfilled with regard to thè
imports originating in Libya for thè following reasons :
- given the Level of the dumping margin finally established , i.e. 58%, the
     importers should have been aware that the exporter practiced dumping and
     that such dumping would cause injury ;
-    the allegation made by the complainants that the importers of products
     originating in Libya was , or should have been , aware that the exporter
     practised dumping and that such dumping would cause injury was not
     contradicted by the importers ;
-    a significant increase of the dumped imports originating in Libya took
     place during a relatively short period of time , in particular in the
     period following the publication of the notice of initiation”' of the
     présent proceedings and that of the notice^ concerning the allégations
     made      by  the    complainants   with  a   view to imposing  measures with
     rétroactive effect :
     Ju l y / August / September 1986 : 42 116 t
     October / November / December 1986 : 95 879 t corresponding to an increase
     of 127%
     February / March / April 1987 :     123 134 t corresponding to an increase of
     another 28% .
Therefore , it is considered appropriate to impose the anti-dumping duty on
imports from Libya with                 retroactive effect in conformity with
Article 13 (4 ) Cb ) of Regulation ( EEC ) No 2176 / 84 .
50 .    Objections to this course were raised in the Advisory Committee .
HAS AüOPTEt» THIS REGULATION :
lOJ No C 254, 11.10.1986 .
20J No C 34, 12.2.1987 .
 ---pagebreak---                                        - 29 -
                                       Article 1
1 . A definitive anti-dumping duty is hereby imposed on imports of urea
falling within Common Customs Tariff subheadings 31.02 B and ex 31.02 C
corresponding to NIMEXE codes 31.02-15 and 31.02-80 and originating in
Libya and Saudi Arabia .
2.     The rates of the definitive anti-dumping duty on the net price ,
f ree-at -Community-f rontier , before duty, are as follows :
    Libya :   34%
    Saudi Arabia :  40%
3.   The provisions in force concerning customs duties shall apply .
                                       Article 2
1.    The undertakings offered by the companies listed below are herewith
accepted :
- Czechoslovakia :                     Petrimex    Foreign    Trade    Company Ltd
                                       ( Bratislava )
   the German Démocratie Republic      Chemie- Export - Import ( Berlin )
- Trinidad and Tobago                  National Energy Corporation of Trinidad
                                       and Tobago Ltd ( Port of Spain )
- Kuwait                               Petrochemical Industry Company (Kuwait )
- the USSR                             Sojuzpromexport ( Moscow )
- Yugoslavia                           INA-Petrokemi ja (Kutina ) and
                                       INA Commerce ( Zagreb )
2.     The  investigations with regard to imports of urea originating in
Czechoslovakia , the German Democratic Republic , Kuwait ,            Trinidad and
Tobago , the USSR and Yugoslavia are hereby terminated .
 ---pagebreak---                                        - 30 -
                                       Article 3
1 . The amounts secured by way of a provisional anti-dumping duty under
Régulation ( EEC ) No 1289 / 87 with regard to imports of urea originating in
Libya and Saudi Arabia shall be collected up to the amounts defined in
accordance with Article 1(2 ).
2.    The amounts secured by way of a provisional anti-dumping duty under
Regulation ( EEC ) No 1289 / 87 with regard to imports of urea originating in
Czechoslovakia , the German Democratic Republic , Kuwait and the USSR shall
be collected up to the amounts not exceeding the following percentages on
the net price , f ree- at-Communi ty frontier , before duty , are as follows :
    Czechoslovakia :                 19.5%
   German Democratic Republic :      17.5%
   Kuwait :                          17.5%
   USSR :                            45.9%
3.   The duty defined under Article 1 of Regulation ( EEC ) 1289 / 87 shall be
collected retroactively up to the amounts determined in accordance with
Article 1(2 ) with regard to imports of urea originating in Libya released
for free circulation in the Community between 10 February 1987 and 10 May
1987 .
4 . The amounts secured by way of a provisional anti-dumping duty under
Régulation ( EEC ) 1289 /87 with regard to imports of urea originating in
Trinidad and Tobago and Yugoslavia shall be released .
                                       Article 4
This Régulation shall enter into force on the day following its publication
in the Official Journal of the European Communities .
This Régulation shall be binding in its entirety and directly applicable in
ail Member States .
Done at Brussels ,                                For the Counci l