CELEX: 51993PC0181
Language: en
Date: 1993-05-13
Title: Proposal for a COUNCIL REGULATION (EEC) imposing a definitive anti-dumping duty on imports of magnesium oxide originating in the People' s Republic of China

J             COMMISSION OF THE EUROPEAN COMMUNITIES
                                                          C0M(93) 181 final
                                                          Brussels, 13  May 1993
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                                           Proposal for a
                                      COUNCIL REGULATION (EEC)
                         inposing a definitive anti-dumping duty on imports of
                     Magnesium oxide originating in the People's Republic of China
is
                                    (presented by the Commission)
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  Sil'ÉI^''S|*fc
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 ---pagebreak---                                    A
                         Explanatory Memorandum
1.  Commission Regulation (EEC) No 2800/92(*•) imposed a provisional
    anti-dumping duty on imports of magnesium oxide (commonly called
    caustic magnesite) originating in the People's Republic of China.
2.  Council Regulation (EEC) No 105/93(2) extended this duty for a
    period of two months. The expiry date for this provisional duty was
    Thursday 26 March 1993.
3.  The Chinese exporters requested and were granted a hearing and made
    their views known in writing, as did other interested parties.
4.  A prolonged process of consultation was necessary in order to
    consider fully all views before the Commission was able to draw its
    final conclusion. This lengthy consultation has resulted in the
    provisional measures lapsing on 26 March 1993 before the imposition
    of definitive measures.
5.  With regard to normal value, following publication of the
    provisional measures    and the    subsequent disclosure    of the
    Commission's dumping calculation, the Chinese exporters showed that
    insufficient allowance had been made to take into account the ease
    of access to raw materials found in China when compared to Turkey,
    the reference country. The Commission modified its calculation
    acccordingly.
6.  With regard to the comparison between normal value and export price
    the Chinese exporters showed that insufficient adjustment had been
    made to normal value to allow for differences in the burning
    process in China compared with Turkey. The Commission modified its
    calculation accordingly.
7.  As a result of these changes to normal value, the dumping margin
    for all Chinese exporters is reduced to 27.09%.
8.  As far as other points in the provisional measures are concerned,
    particularly with regard to injury and causality, various arguments
    were put forward by the Chinese exporters, the Community importers,
    and users, as to why definitive measures should not be imposed.
    These arguments are discussed in detail in the attached regulation,
    however, the Commission has proposed that definitive anti-dumping
    measures should be imposed.
(1) OJ No L 282, 26.09.1992, p. 23
(2) OJ No L 15, 23.01.1993, p. 2
 ---pagebreak---                                  -4 ©^
9. With regard to the calculation of the definitive duty, the
    Commission has taken into consideration the contribution of the
    dumped imports to the poor economic situation of the Community
    industry. It considers that only a duty equal to the full dumping
    margin, which would bring the Chinese prices up to the normal
    value, is sufficient to remove the injury experienced by the
    Community industry.
10. As far as the form of the duty is concerned the Commission notes
    that the caustic magnesite market is very sensitive to the price
    instability generated by the dumped Chinese imports. The form of
    the duty should be such as to prevent further price decreases by
    the Chinese exporters. In these circumstances a minimum price at
    which the Chinese magnesite can be sold on the Comminity market has
    been established. This minimum price is 112 ECU per tonne for all
    grades. Consequently the duty shall be equal to the difference
    between this minimum price and the net free at Community frontier
    price before customs clearance.
 ---pagebreak---                           COUNCIL REGULATION (EEC) No
                                       Of
          imposing a definitive anti-dumping duty on imports of
      magnesium oxide originating in the People's Republic of China
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having   regard    to   the   Treaty  establishing  the  European   Economic
Community,
Having regard to Council Regulation (EEC)       No 2423/88 of 11 July 19 88
on protection against dumped or subsidised imports from countries not
members   of   the   European   Economic  Community(*)  and    in particular
Article 12 thereof,
Having regard to the proposal        from the Commission,   submitted  after
consultation within the Advisory Committee as provided under the above
Regulation,
Whereas :
                            A. PROVISIONAL MEASURES
(1)  The   Commission,    by  Regulation  (ECC) No  2800/92( 2 ), (hereafter
     referred to as the provisional regulation) imposed a provisional
     anti-dumping duty on imports of magnesium oxide (commonly called
     caustic magnesite) originating in the People's Republic of China
     and falling within the CN Code ex 2519 90 90.
(1) OJ No L 209, 02.08.1988, p. 1
(2) OJ No L 282, 26.09.1992, p. 23
 ---pagebreak---                                      - 2QL
                           B. SUBSEQUENT PROCEDURE
(2) Following   the imposition of the provisional anti-dumping            duty,
    five Chinese exporters and some independent importers requested
    and were granted an opportunity to be heard by the Commission.
    They also made written submissions making known their views on the
    findings as did other independent importers, some end users and
    the Chinese Authorities.
(3) Parties    were     also   informed    of    the   essential    facts   and
    considerations on the basis of which it was intended to recommend
    the imposition of definitive duties and the definitive collection
    of amounts secured by way of a provisional duty. They were also
    granted  a period within which they could make             representations
    subsequent to these disclosures.
(4) The  oral   and   written   comments   submitted    by  the  parties   were
    considered and, where appropriate, the commission's findings were
    modified to take account of them.
            C. PRODUCT UNDER CONSIDERATION - LIKE PRODUCT
(5) Certain  Chinese exporters, independent          importers  and end   users
    have repeated the argument that caustic magnesite originating in
    the  Community     and   elsewhere  is    not  a   like  product   to  that
    originating in the People's Republic of China. In this respect,
    the  Chinese    exporters    proposed   that   an   independent   technical
    expert be appointed by the Commission to determine the question of
    whether or not Chinese magnesite is a "like product" to any other
    caustic   magnesite,     in  terms   of   the   quality   of  its   mineral
    deposits, the extracting and processing methods, its chemical and
    physical characteristics and the application of the final product.
 ---pagebreak---                                   - 3 -
(6) The Commission accepts that       an   independent expert may     provide
    factual information as to any such differences between Chinese
    magnesite  and that from other       sources. The existence of these
    differences is, however, accepted by the Community Institutions.
    It is also not contested that these differences do not alter the
    fact that the basic physical and chemical characteristics of all
    types of magnesite are identical. Only if these basic physical and
    technical  characteristics    were    to  be  different,   could   it  be
    considered that the different types of magnesite are not similar
    products. The fact that caustic magnesite from whatever source can
    be used interchangeably by end users confirms that it is one like
    product. It was thus not considered necessary to appoint such an
    expert for these reasons and for those given in recitals 10 and 11
    of the provisional regulation.
    The Council confirms these findings and conclusions.
                                D. DUMPING
                          a) Reference country
(7) In its provisional regulation, the Commission found that Turkey
    was  an appropriate   reference    country   for the determination     of
    normal  value   for  the   People's    Republic   of  China.   After  the
    imposition of provisional duties some of the exporters objected to
    the   use  of    Turkey   as   a    reference    country  and    proposed
    Czechoslovakia as being more appropriate because of the nature of
    its reserves, its processing techniques, and the range of the MgO
    (magnesium    oxide)    grades.    They    argued    that   the    former
    Czechoslovakia, while    being   a market economy, has       an  economic
    structure closer to that of China.
 ---pagebreak---                                     - 4 -
    The Commission recalls however that, in conformity with Regulation
    (EEC) No 1765/82< 3 ), the former Czechoslovakia cannot be regarded
    as a market economy during the investigation period of July 199 0 to
    June  1991.  According    to   the  provisions  of  Article  2(5)  of
    Regulation (EEC) No 2423/88, prices and costs in such a non market
    economy cannot be used as a basis for establishing normal value.
    When selecting a market economy country in which normal value can
    be established, the Commission takes several factors into account.
    It considers the access to raw materials, the representativity of
    the market in relation to the quantities exported by the exporting
    country and whether cost and prices of the product in question in
    that country are formed by competitive market forces.
     After a full examination of conditions in Turkey in the light of
     the above considerations, the Commission concluded, as in recital
     15 of the provisional regulation, that Turkey is an appropriate
     reference country.
     The Council confirms these findings and conclusions.
                              b) Normal value
(8)  With regard to the price situation in Turkey, the Commission found
     that the high proportion of sales between related companies made
     it inappropriate to base normal value on selling prices. However,
     it  was  found,   as   shown    in recital  16  of  the  provisional
     regulation, that the costs of production of the Turkish producer
     are determined through a process of competitive tendering. Costs
     of production are thus established in the ordinary course of trade
     and form an appropriate basis for normal value.
(3) OJ No L 195, 05.07.1982
 ---pagebreak---                                 - 5-
(9) The Chinese exporters argued, after the imposition of provisional
    duties, that the normal value as constructed for each MgO grade
    and as adjusted to take account of differences in conditions
    between China and Turkey, did not fully reflect the natural
    advantages of China, where they claimed magnesite can be extracted
    and processed more easily than in Turkey.
    The Commission, to some extent, agrees  with this argument. As far
    as the differences    in the mining and processing methods are
    concerned,  the  Commission  accepts  that  for  Chinese  produced
    caustic magnesite, due to the natural      advantages, some cost
    factors do not exist in China. In the provisional regulation
    normal value was adjusted to allow for beneficiation and sorting
    processes found in Turkey but not found in China. The Commission
    now considers that an additional allowance should be made for the
    ease of access to raw materials in China in comparison with that
    of Turkey. Therefore, taking into account the actual ore/spoil
    ratio found in Turkey and the level of adjustment suggested by the
    Chinese exporters, the costs of extraction have been reduced by
    20% as found in Turkey.
    On this basis, the normal value as established for the Turkish
    producer is considered to reflect the natural advantages in China.
    The Chinese exporters argued that a further allowance should be
    made in the light of the claimed proximity of the open cast mines
    to the kilns in China. In this respect it has to be recalled that
    only differences which stem from the different natural advantages
    of the product in China and in Turkey can justify adjustments to
    be made to the normal value based on the situation in Turkey. The
    location of kilns, however,    is not a natural advantage of the
    Chinese magnesite industy but is a result of commercial decisions
    made by the production organisation concerned. In any event the
    distance between mine and kilns varies constantly, as the mine and
    its resources are exploited.
 ---pagebreak---                                  _ 6 -
(10) The normal value thus established is confirmed by the council.
                            (c) Export Price
(11) The Council confirms the method used to establish export prices
     set out   in recital   19 of the provisional regulation     as no
     substantial comments in this respect were made by interested
     parties.
                    E. COMPARISON AND DUMPING MARGIN
(12) The Chinese exporters argued that Chinese producers use simple,
     low cost, coke burning, shaft kilns and that an adjustment of 10%
     should be made to reflect lower burning costs in China. The
     Commission established, however, that the Turkish producer also
     uses shaft kilns. By contrast the Commission accepted that an
     allowance should be made to reflect the higher cost of the fuel
     oil used by the Turkish producer and costs of production have thus
     been reduced by 3%. No other observation having been raised by any
     other party, the findings and conclusions in recital 20 of the
     provisional regulation are hereby confirmed by the Council.
     The  final examination   of the   facts showed the existence of
     dumping, the margin of dumping being equal to the amount by which
     the normal value exceeds the price for export to the Community.
     This margin is equal to ECU 24 per tonne, if calculated as a
     percentage of the weighted average CIF value of the imports
     concerned and expressed as an ECU value.
(13) For the purpose of the provisional findings the Commission has
     established a single dumping margin for all Chinese exporters. The
     co-operating Chinese exporters contested the single dumping margin
     and argued that the Commission should calculate a dumping margin
     for each co-operating exporter.
 ---pagebreak---                                             - 7 -
     The Commission recalls however that, with regard fo exports from *
     non-mark»?L economy,        individual        tieatment      must      i <=iuaiii a strict
     exception    to    be   applied        solely    in  cases       where      the     producer
     concerned    has provided          evidence     that   it     is   free to         establish
     export pricon without the influence of the titate authorities The
     state, through its control, could modify the pattern of production
     and trade, so as to take advantage of the lowest dumping margin
     and thus undermine the effectiveness of any measures. In this
     respect, as explained in recital 22 of the provisional regulation,
     these exporters could not demonstrate that they are independent of
     any State influence         and are free in fixing their export prices.
     Therefore only one dumping margin for all Chinese exports has been
     established.      The     Council        confirms     the       above       findings       and
     conclusions.
                                          F. INJURY
(14) T h e  Commission     «-one I utl«=>ri  in   i ta   pi. »v i s i<»im I    ic-..|nlnt i o n  (aoc
     recitals 23-33) that the Community industry had suffered material
     injury as a result of the dumped imports of caustic magnesite
     originating    in the People's Republic               of China. Imports of the
     product concerned from the People's Republic of China increased
     from    72.000 tonnes      in     1988 to over        120.000 tonnes during                the
     investigation period of 1 July 1990 to 30 June J9*J1, the market
     share of the Community producers decreased in a growing market and
     their prices were significantly depressed. All sales by Community
     pro<lue«»itt wui »« loon making          oi  at a    low profil          l«*vel. in this»
     respect no new arguments were put forward by interested parties.
     The    Council,    therefore,         confirms    the    Commission          findings      and
     conclusions as in recital 33 of the provisional r««|u I .-it ion.
(15) The Chinese exporters            argued     that there       can be no injury              for
     grades above 91% MgO as the Community producer of these grades
     has, allegedly, continually increased sales, production volume and
     capacity utilisation.
 ---pagebreak---                                   - 8-
     As established in recital 35 of the provisional regulation, the
     Commission did not find, during its investigation, that this or
     any  other Community producer had      increased sales, production
     volume and capacity utilisation for these grades. In addition,
     this argument ignores the fact that according to Article 4(4) of
     Regulation EC No 2423/88 injury has to be established in relation
     to the Community production of the like product, which consists of
     all   types   and   grades   of    magnesite   which   are largely
     interchangeable. If   sales   in the Community by the Community
     producers of certain grades are not affected by dumped imports in
     an identical way to other grades, this has to be seen in the
     global context of the Community industry•s performance on the
     Community market for the like product as a whole, which means all
     types and grades. This argument has, therefore, to be rejected.
     The Council confirms the above findings and conclusions.
                         G. CAUSATION OF INJURY
(16) As set out in recitals 34 and 35 of the provisional regulation,
     the Commission found that the Community industry had suffered
     material injury through the effect of dumped imports within the
     meaning of Article 4(1) of Regulation (EEC) No 2423/88. However,
     after  the   imposition  of    provisional   measures, the Chinese
     exporters and some importers argued that the rising costs of
     production incurred by Community producers indicated that injury
     was self inflicted and not attributable to imports from China.
     They also argued that injury had been caused by imports from North
     Korea.
 ---pagebreak---                                  - 9 -
(17) With regard to the first argument, the commission     did not find
     that Community producers• costs had risen significantly between
     1988  and  the  investigation   period.  The  worsening   financial
     position of the Community industry was the result of the downward
     pressure on prices from dumped imports from China while costs
     remained stable. The Commission, therefore, cannot accept that
     there was any self inflicted injury on the part of the Community
     industry due to rising costs of production and this argument,
     therefore, has to be rejected.
(18) With regard to imports from North Korea the Commission notes that
     China is by far the largest source of imports of caustic magnesite
     into the Community. North   Korea accounted for 8% of imports of
     caustic magnesite into the Community during the reference period,
     whereas China accounted for 54% of the imports. Accordingly, while
     it cannot be excluded that factors other than dumped imports from
     China also had negative effects on the Community industry, it must
     be concluded that the very substantial expansion in volume and the
     low prices of the dumped Chinese exports have been responsible for
     the fall in market share and deteriorating financial position of
     the Community producers. These exports taken in isolation, must,
     therefore, be considered to have caused material injury to the
     Community industry.
(19) The pulp and paper producers and liquid fertiliser producers
     argued that imports from China used by them had not caused injury
     to the Community producers as the Community producers did not
     offer for sale caustic magnesite with the appropriate chemical
     profile.
 ---pagebreak---                                  - 10
     In this respect, the Commission recalls that all the products
     imported and the magnesite produced by the Community industry are
     like products having the same basic and identical physical and
     chemical characteristics and the same applications. The commission
     found in addition, that the Community industry is able to provide
     all   types  of   magnesite,   including   those   which  meet  the
     requirements of the above mentioned users. The fact that, in this
     specific case, the Community industry could not sell these types
     of magnesite to these users, while the Chinese exporters could,
     due to their    low prices, is a further indication        that the
     Community industry was injured by the dumped imports from China.
     The Council confirms the above findings and conclusions.
                                H. DUTY
(20) As far as the amount of the duty is concerned, the Commission
     established in recital 45 of the provisional regulation that only
     a duty equal to the full dumping margin (as established in recital
     12) which would bring the Chinese prices up to the normal value,
     is sufficient to remove the injury, caused by dumping, experienced
     by the Community industry. No arguments concerning this duty
     amount were put forward, subsequent to the imposition of the
     provisional   duty,   the    Council,    therefore,   confirms  the
     Commission's findings and conclusions in this respect.
     As far as the form of the duty is concerned, the Commission
     considers that the structure of a state controlled economy gives
     the Chinese exporters considerable room for manoeuvre to further
     decrease their export prices and such falls in price by Chinese
     exporters have indeed taken place since 1988. The magnesite market
     is very sensitive to price instability thus the form of the duty
     should be such as to prevent further price decreases by the
     Chinese exporters. Therefore, neither a fixed amount of duty nor
     an ad-valorem duty seem to be appropriate.
 ---pagebreak---                                  - 11 -
     In these circumstances it is considered that a minimum price at
     which the Chinese magnesite should be sold on the Community market
     should be established. This minimum price has been calculated on
     the  basis  of  the  weighted   average  normal value   of  caustic
     magnesite as established in recital 9 and as adjusted to CIF
     Community frontier  value. This minimum price is 112 ECU per tonne
     for all grades, consequently, the duty should be equal to the
     difference  between  this minimum    price  and  the  net  free  at
     Community  frontier  price   before   customs  clearance.  This  is
     confirmed by the Council.
                         I. COMMUNITY INTEREST
(21) In assessing the community interest, two basic elements have to be
     taken into account. The first is that to prevent distortions of
     competition arising from unfair commercial practices and thus to
     re-establish open and fair competition on the Community market is
     the purpose of anti-dumping measures and is fundamentally in the
     general Community interest. The second is that, in the particular
     circumstances of the present proceeding, to refrain from re-
     establishing a fair market situation would endanger the future
     existence of the caustic magnesite industry since the Community
     industry is at present unable to generate the profits necessary to
     continue trading. The Community caustic magnesite industry would
     cease to be a source of technical expertise, employment and
     investment, see recital 43 of the provisional regulation.
(22) Certain importers and end users argued that any increase in costs
     for end users in the pulp and paper industry would seriously
     affect their ability to compete with other manufacturers outside
     the Community.
 ---pagebreak---                                        - 12 -
      The Commission accepts that these industries are currently facing
      a  difficult     trading    situation    both   within    and    outwith   the
      Community which could be exacerbated by increases in the price of
      caustic magnesite. The Commission considers, however, that the
      impact of the duty in the form of a minimum price per tonne, as
     established     in   recital   20  above, will     be   such    as  to  enable
      industrial users, such as those in the pulp and paper industry, to
     buy caustic magnesite at prices which are not significantly higher
     than those of their competitors outside the Community and thus
     maintain   their    competitive    position. In     addition,     in general,
     while there might be a short term price advantage to end users if
     no duty is imposed, to refrain from establishing fair competition
     on the Community market would, in the longer term, lead to less
     competition and higher prices.
(23) Some   importers    argued   that   there   was  no  need    to   protect  the
     Community    Industry in respect of supplies of caustic magnesite
     which it cannot deliver. They suggest that the current capacity of
     the Community      industry   is not sufficient to supply          the entire
     Community demand.
     While it is true that production in the Community is, at present,
     insufficient     to   meet   demand   for   the   product    concerned,    the
     Commission     found    that   the   Community    industry      is   currently
     operating below a reasonable capacity utilisation level and has
     large   reserves    available.    It was    only   the   low   priced   dumped
     imports from china which prevented the community industry                 from
     utilising existing capacity and expanding production facilities.
     In addition, this argument is based on a mistaken view of the
     effects   of   anti-dumping    duties. Even with       the   application    of
     duties, Community consumers will still be able to buy                  Chinese
 ---pagebreak---                                     - 13 -
     magnesite at competitive prices. Indeed, as in this proceeding,
     where the duty is equal to the dumping margin, but lower than the
     amount required to fully remove the injury, it is only the unfair
     element   of   the   exporters'    price   advantage    which  will  be
     eliminated. In such a situation, the exporters can fully compete
     on the basis of their true comparative advantage. There are also
     many other non Community suppliers of caustic magnesite on the
     Community market. The Commission sees no danger of any shortage of
     supply.
(24) The Chinese exporters repeated the argument that it was not in the
     Community interest to impose ineffective measures in that anti-
     dumping duties imposed on Chinese caustic magnesite would result
     in a large increase in low priced imports from North Korea. As
     indicated   in   recital   42  of   the  provisional    regulation, the
     Commission would be made aware of Chinese imports being replaced
     to a large extent by allegedly dumped imports from North Korea and
     in such circumstances appropriate action would be considered.
(25) For the reasons     given above and in recitals        41 to 43 in the
     provisional    regulation,    the    commission   concludes   that  the
     Community   interest   calls   for   intervention   in   this case. The
     Council confirms the above findings and conclusion.
                     J. COLLECTION OF PROVISIONAL DUTY
(26) The Council considers that it is not appropriate, in view of the
     change  in the    form  of  the duty,    in this   particular  case, to
     definitively collect the provisional anti-dumping duty,
 ---pagebreak---                                    - 14 -
 HAS ADOPTED THIS REGULATION
                                 Article 1
 1. A definitive anti-dumping duty is hereby imposed on imports of
    magnesium  oxide   falling within CN    Code ex 2519     90  90 (Taric
    Code 2519 90 90 10) originating in the People's Republic of China.
2. The amount of the duty, shall be the difference between ECU 112 per
    tonne and the net, free-at-Community-frontier price before customs
    clearance, if this price is lower.
3. The provisions in force concerning customs duties shall apply.
                                 Article 2
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,                                For the Council
 ---pagebreak---  ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM(93) 181 final
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